Even that giant of unfettered capitalism Henry Ford knew there was more to business than just trying to beat the competition and amass profit. “A business that makes nothing but money is a poor business,” he wrote.
But doing business in a responsible or ‘good’ way – that is, treating customers, employees, suppliers and the planet well, ensuring you do not increase human misery and/or environmental destruction – does not have to reduce profitability. Indeed, it may help to increase it by boosting employee morale, improving relationships with suppliers and enhancing the reputation of your business.
Treating people well
Many First Voice readers who have employees may feel the company lacks the resources to offer them much more than a reasonable wage and pension contributions. But there are other ways to be a ‘good’ employer. Arguably the most important is to help employees access training opportunities. FSB recognises this can be difficult for small businesses and has asked the Government to change policy to help small business owners identify more training opportunities for staff.
Ensuring employees are in good physical and mental health is also important. FSB offers members access to medical support through the FSB Care programme. Businesses may also want to consider buying staff health insurance, which is available for even the smallest employers, although it can be costly.
Small business owners may feel they lack the resources to provide an extensive package of employee benefits, but there are many inexpensive benefits that could significantly affect the way current and prospective employees view the business. These include offering flexible working and maternity/paternity leave options beyond the statutory minimum, childcare vouchers, the option of buying extra holiday, season ticket loans, cycle-to-work scheme membership and discount deals with gyms and local businesses.
“If you’re investing in people, they want to work harder, and you get more out of people when you’re creating an environment that is more positive,” says Heidi-Louise Griffiths, founder of ethical fashion firm Maykher.
This should also extend to ensuring staff are kept safe at work – FSB’s Health and Safety Service offers advice, document templates, factsheets and online training for employers, including how to carry out risk assessments.
More attention is now paid to unethical practices within supply chains, such as the abuse or exploitation of vulnerable people. Ben Rutledge, senior advisor at the Ethical Trading Initiative (ETI), says that any business without a clear view of where goods and materials come from below the first tier of the supply chain should investigate to identify risks to workers and to the reputations of companies in the supply chain.
“Responsible businesses have better visibility of their supply chains,” he says. “That can lead to a more secure supply of goods, less risk related to labour unrest, and higher productivity. You might not feel a benefit on the bottom line immediately, but it’s better to take that action before there’s a scandal. And if there is a scandal you can point to what you’ve done to prevent harm.”
Meltemi, a garment manufacturer that has been trading for 30 years, supplying uniforms to the healthcare sector, has worked with the ETI. The company employs 57 staff in the UK but manufactures most of its garments in Laos, Morocco, Bangladesh and Mauritius. “In all these countries there are some great practices around ethical trading and some not so good practices, but that would be the case in the UK too,” says Managing Director Sue Brothers.
The company increased its focus on these issues about four years ago, when the NHS began to develop the Labour Standards Assurance System. Meltemi was not immediately mandated to report on its supply chain, but the management team decided to take a proactive approach.
“We changed the documentation and the evidencing and made them both much stronger,” says Ms Brothers. “You can go through this process and just tick boxes but we didn’t do that. We thought if we were going to do it, we would do it as well as we could.
“You get a much better understanding of your suppliers: you can build up a really good relationship that has other benefits when you talk about other issues, like quality, or when you’re negotiating price.”
Huge business benefits can be gained from reducing energy consumption and carbon emissions. FSB research conducted at the end of 2016 for its report The Price of Power suggests this is a subject in which most member firms are engaged on some level.
Of those member firms that have taken steps to improve energy efficiency, 70 per cent said one reason to do so was to protect the environment, but 78 per cent said they were doing so in an attempt to reduce costs. Another 12 per cent were generating at least some of the electricity they used, largely through the use of solar panels.
Some businesses have gone much further. John and Celia Whitehead run a carbon-neutral ‘eco guesthouse’, Bryn Elltyd in Snowdonia, North Wales, which is surely the most eco-friendly place to stay in the UK. Eco-friendly features include solar panels, a hydro-electric installation, a wood gasification boiler that burns locally produced renewable wood pellets, and a lot of high-performance insulation. The site also has a range of electric vehicle charging points, turf roofs, rainwater harvesting and sewage recycling.
Anya Ledwith runs an environmental consultancy, Eshcon. She says every organisation’s first step should be to assess how they use energy, water and raw materials. “Understand what you’re using, then focus on key impacts and where you’re going to see the best improvements,” she says. “The cost of energy and resources is going to rise. Even if you don’t care about the environment, you need to be thinking about financial planning.” She notes that a growing number of tender documents now include environmental performance specifications.
One company Eshcon has worked with is Bath-based HPH Commercial Property, which manages industrial, office and retail space for occupier businesses. “We’ve always been driven by a desire for resource efficiency,” says Managing Director Lindsay Holdoway.
The business has been measuring and reducing its carbon footprint for some years, initially with support from Eshcon, and has been carbon-neutral since 2008. HPH’s work on the fabric of properties and energy use means some refurbished office buildings now have carbon footprints 50 per cent lower than in the past.
Transport also has an environmental impact. FSB has called for Government to protect small businesses against the costs they face when clean air zones are introduced, by extending diesel scrappage schemes and by accelerating the roll-out of National Grid infrastructure and charging points for electric vehicles.
“Small business owners want to do the right thing, but sometimes they are very constrained,” says FSB Environment, Water and Energy Chairman Allen Creedy. He cites another example: the proposal to extend compulsory charging for plastic bags to small retail businesses in England. Business owners may be happy to ask customers to pay for plastic bags, in part because it reduces their own costs, but they don’t want to be bound by regulation forcing them to record exactly how many bags they have used, he explains.
Regulation is clearly a major reason for small businesses to reduce their environmental impact – but Government policy is also strongly influenced by the wider public. “The Government is only able to make those changes because it knows they play well with consumers,” says Mr Creedy.
That makes it even more important for small business owners to publicise the work they do to improve their environmental performance, says Ms Ledwith. “Set targets, act on them and then shout about your achievements,” she says. “If you’ve set a target to reduce your use of carbon by 10 per cent and you’ve cut it by 20 per cent, shout about it. It’s a great way of improving your reputation and building your brand.”
But the opposite is also true: failing to be a good employer, acting in an unethical way and having a poor record on the environment will all damage the business.
Being small is not an excuse to avoid your responsibilities to people inside and outside the company, or to the environment. There are benefits to becoming a more responsible business, and the dangers facing those that don’t are only going to increase in future.
Maykher was founded in 2016 by Heidi-Louise Griffiths and her partner Jonathan Dawkins, in part as a reaction to the increasing dominance of mass-produced clothing manufactured in ways that harm workers and the environment.
“Massive retailers order significant volumes of garments from factories that have very low labour costs, and you can see that someone, somewhere, is not getting paid what they deserve,” says Ms Griffiths. “As products become more disposable, that’s causing significant problems for the environment with waste. I believe there is a better way to do things that is fair to people and to the planet.
Maykher sells a small but impressive range of handmade bags, hats, purses, scarves and jewellery created by women in Guatemala, Haiti and India. “Each of our items are handmade in ethical working conditions,” says Ms Griffiths.
“We have the opportunity to grow the range by bringing in more worker groups. There is also an element of exclusivity: everything is going to be more limited edition in comparison to the rest of the high street.”
There are also business benefits to this way of operating: “We have had fantastic engagement from customers and a really good returning rate. People are talking
about us on social media too.”