Organization for Economic Cooperation and Development (OECD) whose member countries account for 63% GDP works on promoting economic growth and sustainable development. The OECD states that SME’s account for 60-70% of jobs in most OECD countries with high concentration of SMEs in Japan and Italy. There is a need for growth economy young or old to provide new jobs and innovative solutions. SMEs are often in a better position to offer these ideas and services. (Small Business Job Creation 2014)
Sustainability is important to SMEs to think about for a number of reasons. Innovation opportunities for new sustainable products and services in clean tech and green tech for example offer SMEs ideal position to gain advantage entry to new markets. Build stronger business by using sustainability to cut costs, explore new revenue opportunities and retain productive staff.
SMEs have greater flexibility and speed allowing them to integrate sustainability into business plans efficiently. (Weybrecht 2010)
Some key concepts for entrepreneurship are: Social and environmental ventures, Intrapranuership, generating ideas and funding. Entrepreneurs start SMEs in response to a new opportunity. A social Venture company should be financially sustainable and profitable as well as self sufficient on its earned revenue. It also has a bottom line that relates to social or environmental practice. The Skoll Foundation, started by Jeff Skoll, founding member and first president of ebay has pursued a mission to achieve sustainable world of peace and prosperity. Skoll Foundation describes a social entrepreneur as:
“Society’s change agents: creators of innovations that disrupt the status quo and transforms our world for the better.”
To date the Skoll Foundation has awarded 413 million, including investments in 108 social entrepreneurs and 87 organizations on five continents. (Skoll Foundation 2015)
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selling a sustainable product or service. This can be a business that sells clean technology or innovative green service. A few examples of social SMEs that offer products and services sustainably are D Light, M Paani and Synergy.4.1. Examples of Social Enterprises
Product: D-Light: D-light is a global leader in off-grid solar energy products delivering sustainable solar home and power solutions designed for the two billion people in the developing world without access to reliable energy. The product is portable and designed for home or work; the lighting units can also charge mobile phones. Larger units also offer modern grid like power systems for home and business. Their social impact is large since the first solar product was introduced into the market place in 2008 D-Light has empowered 47 million people with their products with 4 million tons of Co2 offset. (D-light 2015)
Service: M. Paani: M. Paani focuses on innovation in development financing and future of mass-market customer loyalty. M. Paani groundbreaking project works with major telecommunication companies and leverages customers to enter a loyalty program. The telecom benefit from increase in customers and in turn agrees to contribute a small percentage of revenues back into services such as water infrastructure or health care for underdeveloped communities. M Paani has a strong partnership model working with major Indian telecoms, local retail shops, local education and health partners. M Paani was the winner of the 2011 Hult Prize social business competition. After receiving one million dollars to start the company M Paani also received support and funding from companies like Unilever Ltd. India. (M Paani 2015)
Service/Product: Sanergy: Sanergy founded in 2011 with office HQ in Kenya Sanergy works on addressing the problem of sanitation in developing countries. Sanergy website describes the problem as;
“2.5 billion people lack access to hygienic sanitation. Inadequate and unhygienic sanitation is the second largest cause of disease in the world. It leads to contaminated waterways and food supply, as well as infections like diarrhea, caused by direct contact with human waste.”
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(Sanergy 2015)
Sanergy uses a sustainable business model that generates revenue through a waste collection service. The waste is turned into bioenergy or fertilizers and sold to farms and utility companies.
Sanergy builds the low cost sanitation facilities and then franchises the system to local residents who can earn income from maintenance and operation of public toilets. The waste is collected and transported at a centralized facility and turned into biogas and fertilizer products for resale.
This closed loop process is sustainable and address a major need towards UN millennium goals.
Below is the sustainable illustrated process.
Figure 5. Sanergy Sanitation value chain
(Sanergy Model. 2015)
4.2. Bottom of Pyramid
Dlight, M-Paani and Sanergy are all examples of Entrepreneurs who are focusing on serving a new kind of market that Consultant, Corporate Strategist and University Michigan Professor CK Prahalad calls the BOP. (Bottom of the Pyramid). In his book The Fortune at the Bottom of the Pyramid Prahalad states a simple proposition:
“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity
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CK Prahalad believes that entrepreneurs, large MNC firms, civil society and local governments can combine to create economic and social transformation. To achieve this companies must use innovations in technology, products, services and business models to attract and grow BOP consumers. Sustainability can play a part by helping to focus on products and services that are affordable, simple and low environmental impact for the BOP.
Economically the world can be divided into three sectors.
1. The consumer economy (1 billion people) 2. Emerging Markets (2 billion people) 3. The survival Economy (3 billion people).
Business in the past usually focuses on the first two and does not think much about the survival economy or the BOP. While BOP does not have large amounts of money they do have large demand for products and services. Products packaged and marketed to BOP segment can be a viable business model.
Figure 6. Economic Pyramid by segment including BOP
Source: (Indian Institute of Excellence IIOE. 2013)
One example of MNC corporations who have been able to have success in the BOP market is Unilever Corporation subsidiary HLL.
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4.3. Hindustan Lever Limited
HLL (Hindustan Lever Limited) is a Subsidiary of Unilever Corporation. HLL is the largest soap and detergent manufacturer in India. In 2001 it had $2.4 billion in sales. (Prahalad 2005) HLL success has been promotion of Soap as health benefit in reduction of germs and equally important in its effectiveness to adapt soap products from large quantities as consumed by top pyramid users to smaller quantities, making the product more affordable and accessible to BOP customers in rural and urban areas. HLL established manufacturing and distribution capabilities to provide its products in India. There are 100 factories in India with 7,500 redistribution stock lists (Prahalad 2005).
To achieve market penetration HLL has used innovative ideas such as Project Shakti, which employs women to occupy nontraditional role selling HLL products in their villages. Project Shakti is an example that allows for rural market access. HLL willingness to perform product adaption and distribution is a good example of sustainability by reducing costs and improving efficiency. HLL reduces production and labor costs through packaging and quantities using fewer resources and materials to produce the product. Distribution becomes more beneficial through project Shakti by providing local jobs and improved market penetration for HLL. This shift has helped lead HLL from gross sales of 10.8 million rupees in 2004 to 28.9 million rupees in 2013-2014. (Hindustan Lever Limited 2014) Below is more information on HLL sustainability milestones.
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Figure 7. HLL Sustainable Impact to Date
Source: (Hindustan Lever Limited. Annual report 2013-2014)
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Sustainability is important in marketing because bad news can spread quickly and good news of your company work can also spread quickly. Marketing managers should know that sustainability could build your brand value and build increased trust with consumers. By incorporating sustainability both inside and outside your company you can have a consistent messages. This creates long term impact by educating consumers on how to use product and dispose of products to reduce life-cycle effects.
5.1. Identify who your customer is – people
The majority of consumers are ready to purchase green but isolating green consumer can be challenge: Consumers are not always familiar with green/sustainability. The potential market for sustainable products can be overlooked by only focusing on existing products. This results in ignoring demand for new products that do not yet exist.
Relating customer’s environmental concerns with purchase is in fact the wrong place to look altogether because the consumer can have much more impact on the environment through proper use of the product maintenance and disposal. Business can make more impact through Design for the Environment. (DFE). This is done through designing products that can be reused and recycled and evaluating the human health and environmental impacts. (United States EPA 2015).
Overall its better to focus on what consumers really want and need and let them do their part to be more sustainable through proper use and disposal. Most consumers buy a product because of factors like performance, price, personal benefit, convenience and proper information.
5.2. Identify what your customer wants—products
A sustainable product should provide environmental, social and economic benefits over its full life cycle. Reducing impact of a product across its life-cycle is the ultimate goal. The company uses fewer resources like water and energy to quickly regain materials though proper end of