Can small startups become hugely successful multinational giants because they pursued sustainability-first strategies from the get-go?
Businesses are increasingly expected to integrate sustainability, marry profit and purpose, and strive to "do well by doing good." While big companies may have the resources, small companies and start-ups often cite the lack of resources as a hindrance. So, how should a small company navigate sustainability?
Does size really matter when it comes to sustainability? No, it does not. Here’s proof:
The Tata Group’s empire started with a humble cotton mill founded by Jamsetji Tata in 1874. It became a laboratory where he experimented with technology and labour welfare in a way never seen in India. Polluted water was a common cause of illness, so he installed a water filtration plant and arranged sanitary huts. He then opened a grain depot and a dispensary before introducing a provident fund and pension schemes for his employees. He did all this while the business was still in its infancy, and never stopped.
In 1761, just outside the city gates of Nuremberg, Germany, cabinetmaker Kaspar Faber set up his own pencil business, a common activity of the carpenter trade at that time. But much of Faber-Castell’s modern success is due to its fourth-generation leader, Baron Lothar von Faber. While quality and innovation were his hallmarks on the way to market leadership, his bigger legacy was to combine business success with social good. His crucial achievement was setting up one of Germany's first company health insurance schemes almost forty years before the country’s statutory health system was introduced in 1883. Again, Lothar did this long before his company became the global multinational it is today.
Howard Schultz bought the then tiny little Starbucks company for US$3.8 million in 1987 after knocking on over 200 investors’ doors as he had no capital. From day one, he instituted a policy of providing full healthcare benefits even to part-time employees. Today, the company is one of the largest employers of people with special abilities, and in many markets, it spends more money on benefits than raw materials.
Could these small startups become hugely successful multinational giants because they pursued sustainability-first strategies from the get-go?
Many start-ups and small businesses’ growth strategies are built purely on solving environmental and social challenges. In India, for instance, the business proposition of Avtar Group, which was founded in 2000, is to create job opportunities for underrepresented talent groups and enable large employers to implement diversity, equity and inclusion (DEI) measures in their workplaces. Towards this vision, Avtar instituted corporate India’s largest diversity analytics exercise called Avtar & Seramount Best Companies for Women in India (BCWI) in 2016. The initiative lists the 100 best companies alphabetically to encourage more companies to participate in the study and learn from best practices and market benchmarks without fear of public ranking.
While Avtar’s growth strategy has been based on social inclusion from the beginning, Marico, one of India’s leading consumer goods companies, which started in 1971, began its sustainability journey at a later stage. It set up copra collection centres in 2003 to procure directly from farmers, increasing their margins and improving their lives. Its social value creation programme, Parachute Kalpavriksha, equips farmers with scientific and climate-resilient farming methods to promote sustainable agriculture while enhancing their productivity and income generation opportunities. Both companies, as well as Tata Consultancy Services, are part of the 2022 Steward Leadership 25 (SL25) list, an initiative started in the same year by Stewardship Asia Centre to showcase 25 top projects that have enabled their organisations to “do well by doing good.”
Other examples include Singapore-based reach52, whose business model is built on providing healthcare to rural areas in Asia. The company is a SL25 2022 and 2023 honouree. In fact, our SL25 lists for both years spotlight many small organisations and start-ups in the Asia Pacific region that have been able to marry purpose and profit through environmental and social sustainability achievements.
While the lack of resources is often cited as hindering sustainability at small companies, being small is advantageous, too. Smaller companies and start-ups are typically more agile and flexible than larger corporations, allowing them to adapt to changing market demands and implement sustainable solutions and strategies more efficiently.
Importantly, small companies and start-ups are often hubs of innovation and creativity, unencumbered by the rigid structures and legacy systems that can stifle innovation in larger corporations. This innovative mindset enables small businesses to experiment with novel approaches to sustainability and develop unique solutions to environmental and social challenges.
If the success or failure of an organization’s sustainability strategy does not depend on company size, then what is the most important driver? It is leadership. Ensuring profitable and sustainable growth that is inclusive, environmentally friendly and equitable for all stakeholders requires a distinct leadership orientation.
To achieve the triple bottom line of people, planet and profit, the leaders mentioned above prioritized sustainability-first strategies that align profit with purpose. They exemplify steward leadership. The discerning factor here is the ethos and the values of the company, and how it is translated by the leader’s vision. It would be impossible to achieve sustainability goals if firms failed to embed a values-based approach into the heart of their culture and strategy.
Therefore, size should not dictate a company's capacity to embrace sustainability. Whether an enterprise is a fledgling startup or a corporate behemoth, prioritizing and committing to sustainability in its core values and operations can pave the way for enduring success. While small companies may grapple with resource limitations, a steward leader would be able to leverage their agility and innovation as a force for good. Ultimately, enterprises of all sizes possess the potential to flourish when they harmonise profit with purpose, but the first step is to embrace steward leadership.
(The article is written by Rajeev Peshawaria, CEO of Singapore-based Stewardship Asia Centre and Uday Chawla, Managing Partner, TRANSEARCH India)
(The opinions presented belong solely to the authors)