Covid 19 Will Drive SMEs (Small- and Medium-Sized Enterprises) to Sustainability Certification
By David Goodman, of Edenark Group
Common sense already tells us this, but various studies confirm the top challenge for any organization is achieving competitive differentiation. Convincing the buyer that you are different, and better, than your competitors is the Number One key to your success.
We’ve all seen the performance data tied to sustainability. Organizations with credible sustainability programs (i.e., a sustainability program the market has accepted as legitimate) are performing materially better. They are reporting higher revenues, profits and valuation. They also have more productive and engaged employees than their non-sustainable peers.
We’ve also seen the “competitive differentiation” cause of the above:
- +$1 trillion in consumer/corporate spending looking to move to credible sustainable brands;
- Consumers willing to spend 10 – 15% more for credible sustainable products; and
- 87% of the largest buying group willing to purchase from, and be loyal to, credible sustainable companies.
In all forms of commerce the buyer defines demand. Successful organizations are rewarded for satisfying that demand. Sustainability is no different. Consumers are demanding it and rewarding organizations that differentiate from the pack and credibly show they are sustainable.
Up until now this relationship has mostly occurred between consumers and large organizations. SMEs (small to medium sized enterprises) have historically not embraced sustainability as much as their bigger brothers. Why?
- Because sustainability certification has historically been viewed as too costly (both money and time) for a SME to pursue; and
- SMEs have historically been more reliant on sales (i.e., price, discounts, direct sales, personal relationships) than marketing (brand image, corporate image, community relationships) to grow.
Covid 19 will change that
The post-virus recovery will be, for most SMEs, a cat fight. Most industries will face (for an undetermined period);
- Lower client/consumer demand;
- credit terms will be tightened (reducing float);
- Debt/financing will be harder and more expensive;
- Restarting operations with (often) a loss of key personnel, will reduce quality and efficiency;
- Social distancing rules will often create costs and reduced production, that will produce lower margin;
- Direct one-on-one selling will be reduced; and the historical sales growth tool (sacrifice margin by dropping price to drive sales) will be less effective, as everyone will be trying to ramp at the same time and you will have less margin to work with.
No current corporate leader has ever faced this daunting of a task. Like all market corrections, many organizations will fail as their leaders will be unable to adjust to the newest New Normal.
For many SMEs, whose point of difference has historically been a person (ie, leader, sales rep) or a price point, finding a new, non-individual, non-price/margin differentiation tool will be the key to survival and capturing market share. In other words, SMEs are going to have to find a way to get buyers to like them more than the other guy. This will be accomplished without depending as much on one-on-one personal relationships and/or a cheaper product, as there will be less direct sales and more competitive discounting.
Custom, one-off, sustainability programs remain cost-prohibitive for SMEs. But we now have globally-recognized, SME-designed/priced, sustainability certification programs. They are a fraction of the custom program cost (time and money). This allows a SME to become certified sustainable via a credible/legitimate program, at a price that any SME can afford.
With a sustainability certification in hand, the SME can augment its traditionally sales-heavy strategy with a corporate/brand differentiation promotion/marketing program. This will be just like it has seen its bigger brothers successfully do.
Many SMEs will become sustainable because it has become cost-affordable and is the right thing to do. Others will do so because they have to – it will deliver the biggest competitive bang-for-the-buck in a post-virus environment that will require a new way of showing you are different.
About the author:
David Goodman is the Chairman/CEO of Edenark Group (https://edenark.com/), which, since 1997, has been providing performance enhancement services to organizations throughout the world.