Small Business, Big Impact: Environmental Responsibility and the Small Business Sector
By Carla Higgs
One powerful group of stakeholders affecting the environmental performance of corporate enterprises are Small, Medium and Micro-sized Enterprises (SMMEs) who are often the main
Small Business, Big Impact: Environmental Responsibility and the Small Business Sector
By Carla Higgs
One powerful group of stakeholders affecting the environmental performance of corporate enterprises are Small, Medium and Micro-sized Enterprises (SMMEs) who are often the main contractors in industrial supply chains. Though small, SMEs have an enormous impact on social and environmental issues and play an important role in sustainable development, SMMES drive economic development, job creation and skills development opportunities.
Their impact on the environment however, particularly on local ecosystems, can be calamitous. The National Small Business Act1 describes Small, Medium and Micro- sized Enterprises (SMMEs) as separate and distinct business entities of any sector of the economy that are classified as either micro, very small, small or medium by their number of employees, annual turnover and asset value. SMMEs are not restricted to formally registered enterprises, but include informal enterprises, such as survivalist street traders and informal manufacturing, services and home-based enterprises.
SMMEs are commonly recognised as the most important sector of an economy. It is estimated that, in South Africa, 2.8-million SMEs make up approximately 91% of formal enterprises, contribute between 52% and 57% to the national GDP, and constitute 61% of formal employment. Their role in the financial economy and employment creation has heralded SMMEs as key to driving South Africa’s economic growth, equity acceleration and social development. Small business contributes significantly to the provision of productive employment opportunities as the providers of the majority of jobs, and the creators of a large number of new jobs that generate income and ultimately result in the reduction poverty. This, coupled with their role in encouraging entrepreneurship, stimulating local and regional development and creating resilient economic systems, means that SMMEs are important contributors to sustainable development. In contrast to their economic and social contribution, the environmental impact of SMMEs has not been quantified, is poorly understood and is presumed to be substantial.
When compared to their larger counterparts, smaller firms in their individual capacity may have a lesser environmental impact. However, since they represent such a large percentage of economic activity, collectively, the large number of SMMEs means that their environmental impacts are substantial. SMMEs, especially those in developing countries, are characterised by the use of older technologies which are generally less energy efficient and contribute to pollution. Some studies have indicated that SMMEs’ contribution to local pollution levels can be as much as 70%, generating as much as 60% of commercial waste and contributing between 40 and 45% to industrial water and energy consumption. The agricultural, manufacturing and service sectors have been identified as having the largest environmental impacts.
The agricultural sector is a source of water pollution and land contamination. Manufacturing SMMEs consume energy and natural resources, and generate waste and pollution. The service sector, particularly petrol stations and repair shops, pose
a risk of routine pollution or accidental releases. Further, it has been found that environmental management among small business is in its infancy and there is a general problem of non-compliance with environmental legislation. Characterised
by resource constraints, SMMEs lack awareness of environmental responsibility, environmental legislation and their own environmental impacts. In the absence of relations with stakeholders, SMMEs are also less susceptible to reputational risks.
Under the banner of corporate social/ environmental responsibility, many large corporate enterprises are implementing pollution prevention measures, material and energy efficiency initiatives, waste management, and product stewardship (to name a few) in an effort to mitigate their environmental harm and improve their environmental performance. While mitigating one’s own environmental harm is indeed noble, and can result in many positive spin-offs such as reputational benefits and cost savings, it would be erroneous to set operational efficiencies as the boundaries for an enterprise’s environmental responsibility. From a regulatory perspective, The Waste Act2 establishes Extended Producer Responsibility—an important policy approach for env