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Show 149 – #GreenToGrow – Helping smaller businesses start their journey towards net zero

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This episode was produced in partnership with the British Business Bank to support their #GreenToGrow campaign, recently launched with the aim of demystifying and alerting small businesses to the commercial benefits of investing in decarbonisation. This podcast is part of a wider series of guides and information about sustainability issues and how smaller businesses can start their journey towards net zero provided by the bank on its Finance Hub.

Russell Goldsmith was joined online by two small business owners who are at slightly different stages of their business growth. Aoife Doherty, founder of Floris, a UK based sustainable stationery company. Aoife is Cardiff Business Awards Young Businessperson of the Year 2021. Also, Wing Chan, Co-founder, and CEO of Sourceful, a sustainability platform that helps businesses source more sustainable products and Wing’s company has raised over $12 million in funding to date. Richard Reed completed the online panel, co-founder of Innocent Drinks and JamJar Investments. Russ also caught up with Shanika Amarasekara MBE, the British Business Bank’s Chief Impact Officer, to hear more about the campaign and the research the bank has done around the transition to net zero for SMEs.

The British Business Bank recently released research which showed that the majority of senior decision makers in small businesses in the UK don’t understand how increasingly commonly used sustainability terms such as net zero, carbon neutral, and carbon footprint apply to their businesses.

Rich said the findings did make him gently but firmly, repeatedly bang his head on his desk. He said your job as a person running a business is to be intuitively in line with what your consumers are thinking and if you’re a businessperson that is not engaging with these topics, you will not be a businessperson for that much longer. Rich said he has a high degree of confidence that even if the senior people aren’t thinking about it, new generations of consumers most certainly are and they’re the ones that are going to be funding and supporting the businesses of the present and the future. He said it’s real, it’s happening and most importantly of all, it presents a fantastic opportunity, for businesspeople to really go after these concerns and they will find competitive advantage in having done so.

Innocent Drinks and sustainability

Rich explained that at Innocent they had a very clear sense that they set up the business to make it easy for people to be healthy. The in going hypothesis was about wanting to make it so people could do themselves some good and from the beginning they had 10% of profits going to charity. He said it was only in year two that his co-founder Adam said, ‘What’s happening to all the plastic bottles after people have drunk them?’ And Rich said it’s embarrassing to say they hadn’t thought about that, but the actual early success of the business made them suddenly think they’re now responsible for the creation of hundreds of thousands of plastic bottles. He said once you’ve had that moment and asked that question, you start unpicking everything. The desire to be healthy and charitable was in the DNA from the beginning, the wider sense of environmental responsibility came after 12 months, but then became essentially one of the great organising principles of the business and how they differentiated and attracted top-grade talent. Rich said one of the best benefits of becoming a more socially aware company is you get more intelligent, committed people working for you, and that’s how you win long term.

Rich explained that Coca-Cola took ownership of Innocent in 2013, because of their ethos. Although Coca-Cola signalled an interest in investing in the company from their second year of business, they sold to Coca-Cola after 15 years of business and they loved what the brand stood for. He explained that Coca-Cola even asked for some of Innocent’s sustainability team because they built probably the best sustainability team in Europe back then, but the money going to charity was a done deal. Rich explained that using Coke’s money, Innocent has now built the single most environmentally efficient manufacturing site on the planet. However, he said you always must understand that, yes, they bought the business, but the running of the business remains by the people at Innocent, it’s a totally standalone venture and continues to be led, by its mission, its values and by this quest.

Aoife explained that she owns Floris, which is a sustainable stationery brand. She said her GCSE teacher in graphic design first introduced sustainable product developing processes and put that thought in her mind about what happens to products after they’ve been used, and she never let go of that thought. Every project she did, she was always thinking, when this is thrown away, what happens to it, and does it end up on landfill and create this problem? Or can we recycle it? Can it biodegrade? So, when she thought about starting a business, she knew that sustainability was going to be a key part of that.

Aoife explained that she did her dissertation at university on printing technologies and vegetable-based inks came up as part of her research. She said there’s not many stationery businesses who use vegetable-based inks and therefore she was keen to learn more about it. Aoife said she found UK manufacturers who use this technology, and wanted to manufacture in the UK, as close to home as possible to reduce carbon emissions. She said they also use recycled paper or FSC approved paper if they can’t use recycled.

Aoife said she started her business in the month of August and when you own a business, you must start thinking about Christmas pretty soon. So, she got in touch with the British Business Bank for a loan to help her invest in wrapping paper and a few other things. She said at Floris they also invested in handmade journals, manufactured in the UK, which are refillable, so used the investment for that too. She then got a further loan for a pop-up in John Lewis and to invest in expanding product range again.

Wing explained that at Sourceful, they help brands design more sustainable products, starting with packaging. He said there are three things that businesses are trying to achieve from a brand side.

  1. They’re trying to build a customer experience that needs to look good, feel good and tell a good story in a world where there are a million brands that need to tell a better story.
  2. Operationally, they need to think about costs.
  3. Sustainability, which finally with data, they’re starting to differentiate terms like plastic free. What does recycling look like? How does the whole journey look?

With these three problems, Wing explained that they’re provided the data through the manufacturing logistics journey to have one place on their platform where you can see price, design and the carbon footprint of the packaging of the products that you’re designing. He said this data allows you to make better decisions because not every business can have a world class sustainability team like Innocent built and Coca-Cola bought.

Wing explained that consumers are looking for brands that they can trust, so, they’re building the platform to help them get that data and to make those decisions together. He said before this, you’d have a design team on one side, an operations team on the other and then a sustainability team, operating in silos. But with their solution, they can have one place for them all to come together.

Wing explained that they’re working with businesses that have raised their first round of funding and are scaling up and trying to find a way to now bring sustainability to everything that they do, as well as brands that are just starting and want to start with their brand ethos of a footprint light way of bringing products to market.

Rich added that Innocent was blessed up with this fantastic sustainability team, but they couldn’t have afforded it from the beginning. So, the ability to have a resource you can go to, to make those decisions easier and skip to the last page is tremendously useful. He said everything makes a difference and really the big changes are the summation of small changes, whether it’s the ink you’re using or the fact that you don’t have to throw away your diary, but you can replenish it, these things at scale add up. Rich saic if everyone does their bit, we’re going to really move the dial.

Inspiring other small businesses

Rich said you can either do it for hardcore capitalist commercial reasons or you can do it for great spiritual, social reasons because the truth is, it pays dividends in whichever thing you’re motivated by. He added that Innocent saved money by going down the environmental footpath and it created value in terms of brand equity. However, he said in addition to that, you’ve got this personal sense of satisfaction from doing it in the right way and that translates into a more engaged, committed, and high performing workforce. Rich explained that you’re going to get rich by doing the right thing and if you’re not interested in getting rich by doing the right thing, then leave it alone but don’t expect the rest of the world to stay static. He added that consumer’s expectations, because we’re human, they’re progressive and whatever we’re given today, we expect it to be better tomorrow. He said you’re going to create greater brand value, have a better team and save some cash and he’s yet to find a good counter argument.

Rich explained that at JamJar, when investing in a business, the first thing they ask themselves, using the original language they used at Innocent, is, is this a business that they would be proud of being associated with?

By being proud of, they mean two things.

  1. Is it going to make money? Is it going to be big? Is it going to be profitable?
  2. Are we going to be proud of it in terms of the inherent nature of what it does?

He said they have absolutely passed on businesses that irrespective of how much money there was potentially made in it, it did not sit right with them in terms of the nature of its thing. However, Rich explained that sustainability and environmental awareness is not the biggest thing. The biggest thing is the actual innate nature of the products and service that you’re bringing to markets. He said you’ve firstly got to ask yourself, is the thing itself of a positive contribution to the world? And then is it environmentally and socially efficient? And then does it engage and treat its workforce well? And ideally, does it also share some of the value it creates with the communities in which it has extracted that value from? So, it’s a fourfold decision.

Aoife agreed and said it’s like if a UK based fast fashion brand was using recycled materials, but fast fashion encourages this throwaway culture. In that respect, she said we also must teach consumers about the importance of sustainability and the information just isn’t getting out there enough.

Wing said what’s changed is the tangibility of the value side. He said most of us, when we went to businesses, it’s all about growing the value of the business. But it was very intangible because before things like net zero and carbon footprint, these externalised costs remained externalised, he said they were things you did for marketing reasons, but they weren’t core to your brand. Wing said we’ve seen this rise of brands that would tick Richard’s criteria, where the core thesis is to take a category which was doing something in a certain way and replace it fundamentally. He explained that this change of value to being something that now is intrinsic is a great shift but it’s still far away from a lot of people’s minds, and that needs to change.

According to the British Business Bank’s ‘smaller businesses and the transition to net zero’ report, released in October 2021, only 5% of smaller businesses say reducing their carbon footprint and environmental impact is their number one priority for 2022, with more than a third citing costs as a barrier for reducing their carbon emissions, particularly the upfront capital costs.

Wing explained that people think in order to get something more sustainable, it’s going to cost you a lot more which is a myth, and the main issue is knowledge and access. He said it’s not that the solutions don’t exist it’s that you don’t know how to find them. There’s a challenge for businesses to find trusted sources where they can find better suppliers. He added that if you have two suppliers and they both say that they make sustainable packaging, sustainable materials, sustainable products, how do you tell them apart? What is the way that you understand that? He said with their platform, they have a live carbon footprint score. He said knowing know your suppliers and where that stuff comes from ultimately is going to be important.

Aoife agreed with Wing and said people don’t have the knowledge about sustainability and don’t understand certain aspects of it. So, she said maybe they do buy into false marketing and so it is just a case of getting more knowledge out there. Aoife said she has a lot of small business owners ask her about certain plastics and how they can improve their packaging and a lot of businesses start with that and that is crucial. Packaging is a huge part of a product and a lot of it is plastic. She said it’s not just about having the knowledge of who to go to, to find your supplier. She said people think it’s a daunting task and it’s going to take them a lot of time and research.

Rich said although only 5% of smaller businesses say environmental impacts is a number one priority, he would support it. He said your number one priority is to essentially make sure you’re looking after your consumers better than the competition and doing so in a way that’s profitable to you as an organisation. He said we’re businesses, we’ve got to get the money in before we pay it out and these are the fundamentals of having an organisation which is sustainable financially. So, he doesn’t advocate putting number one, but as a primary concern because of the opportunity, it directly serves all the basic business agendas of saving money and creating value.

Rich explained that they realised their cases of smoothies were being stacked ten high on the pallets in the back of the truck which had two levels, but there was space between the ground floor and top floor to fit an extra three layers of cases. He said this cost no more money but suddenly they were transporting the better part of 30% more for the same truck on the road. He said it was incredibly simple but transformational in terms of money and carbon. Rich added that if you can find a way to reduce the carbon used in your business, you’re going to save money and then you’re going to have a positive story to tell, it’s going to help your brand in the eyes of the consumer marginally. He believes that anyone who is sane and intelligent, will want to work for companies that are alive to them, and it doesn’t happen overnight. Rich said it’s an accelerating trend and there’s so much opportunity to be reaped by being the people that go early. It’s the classic first mover advantage of business.

Russ caught up with Shanika Amarasekara, Chief Impact Officer at the British Business Bank.

Shanika explained that smaller businesses are such a pivotal part of the UK economy, they make up 99% of UK’s nearly 6 million enterprises. The British Business Bank’s, ‘smaller businesses and the transition to Net Zero Report’, which they published in October last year, found two key findings about smaller businesses and the role that they play in driving to net zero.

  1. Smaller businesses, often on an individual level, have relatively low emissions footprints but collectively, account for around half of all UK business greenhouse gas emissions. Therefore, we can’t really reach net zero without a step change in how smaller businesses operate.
  • Half of smaller businesses believe that a reduction in their carbon emissions won’t make a significant difference to the environment and almost three in four believe that larger corporations are responsible for most of the business carbon emissions, and that’s not correct.

Shanika explained that over half of the decision makers they surveyed believed that the language, terminology, and information around carbon emissions reductions are overly complicated. Around 61% said they’d find it helpful to have more information and advice about taking action to measure and to reduce their business carbon emissions. Half of those wanted advice on measuring their businesses carbon footprint and half of them wanted advice and information to help work out if reducing their carbon emissions made financial sense for their business or not. Shanika added that 44% don’t know where to get the information on reducing carbon emissions or how best to approach related commercial or financial opportunities.

Shanikaexplained thatthe top terms that were misunderstood by businesses included greenhouse gas emissions, where nearly 90% of businesses didn’t have a full understanding of the term or what it meant for their business. Followed closely by decarbonisation, which 78% didn’t understand and net zero with 74%. She said terms like carbon neutral or carbon footprint, over half of the businesses didn’t understand what it meant. She added that too often smaller businesses are put off by the over complex carbon jargon that comes with reducing their emissions and what they’re trying to do by helping to decipher some of the terminology around decarbonisation is to show smaller businesses that simple and incremental changes can really make a big difference in their net zero transition.

Shanika explained that it’s becoming an increasingly important business requirement for smaller businesses, most consumers now consider sustainability when they make a purchase, as do bigger businesses who smaller businesses are part of supply chain with. By becoming greener, smaller businesses can enhance their competitive edge and expand their customer base as well. So, there is a business imperative behind smaller businesses starting their journey of transitioning to net zero.

British Business Bank’s new guide to support businesses on their journey to net zero

Shanika said they’re excited about the new guide because it tackles the problems around terminology. She said their new online glossary of terms, the Green Decoder, was co-created with the Nottingham Business School at Nottingham Trent University, to help smaller businesses decipher the terminology around decarbonisation and support the transition to net zero for the smaller businesses. It’s part of their Green to Grow campaign and along with other content for small businesses and is available on their online finance hub which can be accessed at www.british-business-bank.co.uk/finance-hub, part of the wider content on the sustainability section on the finance hub. They also provide a series of guides and information about sustainability issues and how smaller businesses can start their journey towards net zero.

Aoife said the stats Shanika shared don’t surprise her, there’s a lot of confusion around sustainability terms, and it just comes back to existing business owners viewing sustainability as this complex thing when you can just start with one change and it will make an impact, you don’t have to change your whole business. She said if you can make changes on parts of your business that you understand and know about, you’ll learn more about these terms as you go. Aoife said for a business like herself, she started as a sustainable business, she knew about carbon footprint, and it was something she considered throughout the whole process, and it took her a long time. She said she researched for months, maybe even a year or two before she started her business. Aoife said it’s going to be daunting but it’s okay, just change as much as you can for now and then build on it over time, it’s manageable.

Wing added that there’s a lot of inertia from businesses that have been operating in a certain way and they had a way to run their business, then you introduce these new terms. However, he said the stats show that small businesses do drive half of the emissions. Whether you’re a small business or a large business, if you’re doing a physical business of any kind or a product, you’re using carbon in logistics, in energy and how you make it. Wing said a lot of the difficulty is because that carbon footprint and carbon usage is in the supply chain where you’re not directly seeing it, but it’s real and there’s two things that come out of that.

  1. There is demand for the information, so, it’s good to see that more people are looking for that knowledge and trying to educate themselves.
  2. There still is this misunderstanding that all businesses have a part to play and that they can do something about it.

Rich said that 20 years ago, you could have the excuse that it’s a bit complicated, but that excuse is wearing thin now. He said there’s been countless documentaries, films, articles, books, and it’s not actually that complicated. He gave the example of switching to a green electricity to a supplier, which you can do it online in a few seconds. Rich explained that we have to, at some point, move from being really understanding to realising that if you’re running an organisation, you’ve easily got the mental bandwidth to understand this stuff. He said it’s not some weird niche topic anymore, it is mainstream and it’s here and it’s happening.