Bringing innovation to existing approaches to influence the behaviour of small businesses

Final report by

The National Centre for Business and Sustainability

for

The Department for Environment, Food and Rural Affairs

Defra has commissioned and funded this study, but the views expressed in the report do not necessarily reflect Defra policy

The National Centre for Business and Sustainability

Fourways House, 57 Hilton Street, Manchester M1 2EJ

Tel: 0161 247 7979;

March 2006

Bringing innovation to existing approaches to influence the behaviour of small businesses

Final report by

The National Centre for Business and Sustainability

for

The Department for Environment, Food and Rural Affairs

Prepared by:Lee Allman, Andrew Loynd and Penny Street

NCBS Reference:2400

Date:March 2006

Contents

Executive summary

Introduction

Background and methodology

Project findings and implications

1Introduction

1.1Background

1.2Aims and objectives

1.2.1 Organisations or initiatives that actively engage with SMEs

2Methodology

2.1Initial review and in-depth assessment of approaches

2.2Analysis of case study SMEs

2.3Research framework

2.3.1 Questionnaire framework for ‘enabling’ organisations

2.3.2 Questionnaire framework for case study SMEs

3Effectiveness of different approaches

3.1Findings

4Implications

4.1Implications for policy and delivery

4.2Implications for stakeholders

4.3Implications for research

Annexes

Annex 1:

Summary of enablers used to influence SME behaviour

Acorn Trust

Business Crime Direct

Business in the Community

Business Link

Carbon Trust

Cumbria Rural Enterprise Agency

Envirowise

Enworks

Farming and Wildlife Advisory Group

Greenwich Environmental Management Services...... xv

Groundwork

NetRegs

North West Food Alliance

SkillWorks Programme

Waste and Resources Action Programme

Annex 2: Summary of SME case studies

The Alpaca Centre

Barnes Blasting

Kestrel Films and Packaging

Manchester Rusk Company

Modern Mix Concrete Supplies

Penkeths

Permanoid

Thorpe’s General Store

NCBS/Influencing the behaviour of small businesses/Final Report for Defra/ March 2006

Executive summary

Introduction

This project investigated how the UK’s Small and Medium sized Enterprise (SME) sector is influenced by existing ‘enablers’ such as intermediary organisations, service delivery organisations and specific initiatives that work with SMEs on issues such as business strategy, health and safety, crime and environmental performance. The aim was to understand how such enablers affect SME behaviour in different policy areas and how they can be utilised more effectively to bring about behaviour change on both environmental and wider sustainability issues. The work was carried out by the National Centre for Business and Sustainability (NCBS) under the Department for Environment, Food and Rural Affairs’ (Defra) ‘innovative methods for influencing behaviours and assessing success’ responsive research theme.

Background and methodology

The SME sector in the UK accounts for 99.9% of UK businesses and therefore has a significant impact on both the environment and society at large. Survey findings made by the Environment Agency suggest that three-quarters of SMEs are unaware of their environmental obligations. The challenge is therefore is to reach this significant number of SMEs to bring about behaviour change in a way that will result in positive economic, environmental and social impacts.

Engagement and involvement of SMEs in environmental management and sustainability issues is, however, complex. A significant body of research on SMEs has been carried out in Europe and the UK, which has concluded that a range of barriers currently hinder effective management of environmental and social issues by SMEs, including:

  • Inappropriate language
  • Lack of appropriate support services
  • Inadequate support for existing business networks and groups
  • Lack of time and resources and short-term business-planning horizons
  • Lack of appropriate information
  • Fear of doing things wrong
  • Supply-chain procurement barriers.

This project builds on these findings and reviews the effectiveness of different enablers and approaches in order to identify the key factors that are helping to bring about behaviour change in SMEs and how existing enablers can be used more innovatively to increase their impact.

The research was carried out through two main tasks:

  • Reviewing existing approaches to influencing changes in practice amongst businesses and interviewing selected enabling organisations
  • Interviewing selected SMEs that have changed their business behaviour as a result of support or advice from an external organisation.

Project findings and implications

SMEs identified seven key factors in helping them change their behaviour:

  • Individual tailored support
  • Mentoring
  • Marketing opportunity
  • Funding
  • Industry leadership
  • Networks
  • Manageable steps

Enablers identified a number of additional factors leading to success in influencing SME behaviour including:

  • Long term relationships
  • Sustaining relationships
  • Accessible information with appropriate language
  • Flexible support

Based on the research and analysis, six key policy and delivery implications were identified:

  • Using established links and forming partnerships: It is essential that existing links with small businesses are fully utilised to stimulate the desired behaviour change in a group as large and diverse as SMEs. This requires partnerships between business intermediaries and specialist organisations, strategically supported by government agencies.
  • Building capacity on environment and sustainability: Organisations that engage with SMEs need to build their sustainable development capacity so that they can ensure that they are provided with information on appropriate specialist support.
  • Making the issues and support accessible: Issues need to be raised in ways that SMEs can easily relate to and support and advice provided in manageable steps in times and locations that are convenient to them.
  • Enabling the enablers: Enabling organisations require the credibility, linkages and funding to allow them to develop long-term relationships with SMEs and have the flexibility to provide assistance in the manner that SMEs require.
  • Encouraging business networks and leadership: Peer support through business networks and pressure through the supply chain is highly effective in generating positive behaviour change and should be encouraged and supported.
  • Promoting partnership across government, delivery agents and local authorities: National, regional and local government agencies and delivery agents should be supported to understand the range of enablers in their sphere of influence and signpost SMEs to appropriate support services.

1

NCBS/Influencing the behaviour of small businesses/Final Report/ March 2006

1Introduction

This report sets out findings from a project to investigate ways of influencing small and medium-sized enterprises (SMEs) to behave more sustainably. In particular, the study explores how intermediary organisations, service delivery organisations and specific initiatives are influencing small business behaviour on a range of policy issues, and how these can be used more effectively to bring about behaviour change on environmental and social issues.

A wide range of approaches are currently used to try and influence the behaviour of SMEs across a range of issues and policy agendas (see Section 1.2.1). For example, ‘enablers’ such as intermediary organisations, service delivery organisations and specific initiatives are used to work with SMEs on issues such as business strategy, health and safety, crime and environmental performance. They use a range of approaches such as onsite visits, events, mentoring, helplines and publications to try and influence the behaviour of SMEs. By exploring the factors contributing to the success of these organisations, initiatives and approaches, the project aimed to identify whether they could be used more effectively to bring about behaviour change on environmental and social issues.

The project was carried out by the National Centre for Business and Sustainability (NCBS) under the Department for Environment, Food and Rural Affairs’ (Defra) ‘innovative methods for influencing behaviours and assessing success’ responsive research theme. The work took place between September 2005 and February 2006.

This report sets out:

  • The background and context for the project (Section 1.1)
  • The study approach and methodology (Section 2)
  • A summary of the findings from the review of organisations, initiatives and approaches, and key factors in their effectiveness (Section 3)
  • Policy implications (Section 4).

1.1Background

The SME sector in the UK is significant and makes an important contribution to the national economy through both the turnover and employment that is generated. SMEs account for 99.9% of UK businesses, generating an annual turnover of £1.23 trillion and employing almost 13 million people.[1] It therefore stands that, collectively, SMEs will also have significant impacts on both the environment and society at large. For example, in 2003, the Environment Agency reported that SMEs were responsible for ‘up to 80% of all pollution incidents and more than 60% of the commercial and industrial waste produced in England and Wales’.[2] Furthermore, survey findings made by the Agency suggest that three-quarters of SMEs are unaware of their environmental obligations.[3]

The key challenge therefore is to reach this significant number of SMEs to bring about behaviour change in a way that will result in positive economic, environmental and social impacts. The effect of all SMEs acting in this way would not only be a major contribution to sustainable development in the UK, but would also contribute to improved organisational, national and regional competitiveness.

Engagement of SMEs in environmental management issues is, however, inherently complex. Substantial research on European and UK SMEs[4] has been carried out and concludes that a range of barriers currently prevent SMEs from effective management of environmental and social issues. For example, a survey of over 7,600 European SMEs[5] found that the main reason for not getting involved in socially responsible activities was simply that they had never considered the possibility of engaging in such activities. A further 17% of respondents argued that external community responsibilities were not related to their activities, while 19% and 16% of SMEs respectively identified lack of time and financial resources as their main barrier to involvement. Only 8% of SMEs stated that the main reason underpinning their inactivity was because they did not expect any benefits from these activities.

The NCBS and its sister organisation, Sustainability Northwest (SNW), have considerable experience relating to the engagement of SMEs in environmental management and corporate responsibility (CR) issues. In 2004, SNW carried out phase 1 of the Responsibility Northwest initiative. Work under Responsibility Northwest highlighted a number of barriers which prevent businesses, in particular SMEs, from integrating CR practices into their activities.[6] These barriers can be summarised as follows:

  • Inappropriate language. The terms ‘corporate social responsibility’ or ‘corporate responsibility’ are simply the wrong words to engage and/or support smaller businesses in understanding and managing their key social, environmental and economic impacts. Use of the word ‘corporate’ can be alienating for SMEs who consider the term more appropriate for multinationals or larger businesses. Also, there is a misunderstanding about the implications of using the word ‘responsibility’.
  • Lack of appropriate support services on CR. Few of the support services most valued by and accessible to SMEs (such as Chambers of Commerce and Business Link Organisations) are geared up to provide advice on CR issues. Specialist CR services tend to focus on larger companies and have little experience of accessing SMEs or targeting their advice and support to SMEs’ needs. Chambers of Commerce and other existing business networks represent a key underused mechanism by which SMEs can be engaged on managing risks and realising opportunities from their social, environmental and economic impacts.
  • Inadequate support for existing business networks and groups on CR. While many of the regions’ business support organisations/networks are keen to engage with CR issues, they feel they lack the resources and support to do so effectively. Consequently very few CR activities are being carried out.
  • Lack of time and resources and short-term business-planning horizons. Many SMEs are often willing and able to allocate time and resources to CR activities. However they lack the expertise required to prioritise key elements of CR management for their business, or to make an accurate assessment of the time and resources required.
  • Lack of appropriate information. SMEs feel that there is a lack of well-produced information aimed at the SME sector to help them improve their understanding of CR issues. In particular, there is demand for SME-focused case studies that illustrate the business benefits of managing CR issues and the risks associated with not doing so.
  • Fear of doing things wrong. Some businesses fear that if they implemented environmental and social programmes poorly, or in the wrong way, they would expose themselves to increased problems.
  • Supply-chain procurement barriers. Public and private sector procurement has an important role to play in terms of raising the CR agenda among the region’s SMEs, thereby increasing benefits to the local economy. However, SMEs can feel that such criteria exclude them from competing for such contracts.

Findings such as these provide a clear indication that there are many obstacles to overcome if SMEs are to improve the way in which they manage their social and environmental impacts. Despite the range of existing advice and support services providing information on sustainability and environmental issues, however, it appears that they are still peripheral issues for many SMEs. We need to look again at the best ways of raising awareness and changing environmental and sustainability behaviour among the SME sector. This project focuses on one possible approach – making more effective use of existing organisations and approaches to influence SME behaviour.

1.2Aims and objectives

The specific aim of this study is to identify how Defra can utilise existing organisations and approaches more effectively to influence behaviour change on environmental and social issues amongst SMEs.

In order to realise this aim, the study had the following objectives:

  • To review the external organisations and approaches used to bring about behaviour change in SMEs, both in the context of environmental and other policy areas.
  • To review a variety of case study SMEs that have effectively changed their behaviour on environmental or other issues as a result of engagement with a particular organisation or initiative.
  • To determine key factors in helping bring about behaviour change in SMEs.
  • To develop recommendations as to how Defra can use existing approaches more innovatively to influence behaviour change among SMEs.
  • Organisations or initiatives that actively engage with SMEs

For the purposes of this study, we looked ‘enablers’ which engage with SMEs on a range of issues. These include intermediary organisations, delivery organisations and specific programmes of activity or initiatives (see Box 1). We have chosen to look at enablers which engage with SMEs across a range of issues including crime, health and safety and environmental issues as well as sustainability, in order to learn from a range of experiences.

Enablers use a range of different approaches to engage with SMEs on specific issues. For example, they can try and influence SME behaviour through:

  • Provision of literature. This can be written or web-based, and varies in content and form from basic information on technical issues, legislation, etc, to detailed guidance and interactive toolkits to help change behaviour on specific issues.
  • Research and provision of case studies. This approach can be used to demonstrate and help bring about best practice.
  • Training and events. Some organisations use bespoke training or events (such as workshops, seminars, conferences) to try and influence SMEs.
  • On-site visits. Initiatives such as Envirowise and the Carbon Trust offer on-site support (e.g. environmental audits) in order to highlight actions SMEs can take to reduce their environmental impacts and save money.
  • Helplines. These can be a simple signposting service or a more specialist advice service used to address a range of issues.
  • Networks. Some organisations establish business networks (virtual or face-to-face) to encourage the exchange of information and ideas between members.

Box 1. Enablers and approaches

Enablers covered in this study include:

  • Intermediary organisations – offering basic information and advice, and/or providing a signposting service to more specialist organisations (e.g. Business Link).
  • Delivery organisations – actually providing specific support or services to SMEs such as training and audits (e.g. Greenwich Environmental Management Service).
  • Programmes of activities or initiatives – set up as a separate programme of activity within an umbrella organisation or government department, or are established as a short/medium-term initiative under a particular funding stream (e.g. Envirowise, WRAP or Enworks). They can act as intermediaries and/or delivery bodies.

The enablers use a variety of approaches or ways to engage with SMEs to enable them to change their behaviour, including:

  • Providing written or web-based literature.
  • Developing case studies.
  • Running training and events.
  • Carrying out on-site visits.
  • Hosting helplines.

2Methodology

The focus of the study was an investigation of the ways in which existing organisations, initiatives and approaches are currently being used to influence SME behaviour, in order to look at ways of using them more effectively. To achieve this, the NCBS carried out the following main tasks:

  • A review of the range of existing approaches currently being used to influence SMEs, both in the context of environmental and other policy areas.
  • An in-depth assessment of a selected number of these different approaches.
  • An investigation of SME case study organisations which have successfully engaged with one of the organisations or initiatives on a particular issue.

2.1Initial review and in-depth assessment of approaches

The initial review of organisations and approaches was primarily web and literature-based, using information already in the public domain such as websites, promotional literature and the NCBS’s own experience of working with SMEs and organisations nationally and regionally. The objective was not to provide a comprehensive national review of approaches, but to provide an overview of those currently operating, including information which would aid in the selection of a limited number for in-depth review.