Do local businesses need support to be greener?

Kasiri

Small and medium-sized enterprises (SMEs) are the backbone of the U.S. economy in terms of job creation and generation of economic growth. Small Business Administration data shows that small businesses represent 99.7% of all employer firms and have generated 64% of new jobs since 1995. Perhaps ironically, SMEs are responsible for most of the pollution made by all businesses; they are collectively culpable for approximately 60% of the total carbon dioxide emissions and an alarming 70% of the total pollution. Prior research shows that helping small businesses to become more environmentally friendly can provide greater overall impact than a narrow focus on fewer larger businesses.

Regulations and government support, social trends, education, and businesses’ self-motivation are among the major drivers behind small businesses’ decisions to undertake sustainable solutions. For example, regulations can push businesses toward ecological sustainability through imposition of fines for polluting the environment or provide stimuli such as tax incentives for saving energy in operations. Social trends such as consumers’ desire to purchase more sustainable products can also encourage businesses to adopt sustainable solutions and increase market share.

Movassaghi

In a survey of hundreds of SMEs spread across metropolitan areas and rural counties of New York state, 72% of the owners/managers reported that they had adopted sustainable solutions. The most widely adopted solutions were recycling waste, replacing old equipment with more environmentally friendly alternatives, reducing energy consumption, and reducing waste.

Recycling waste topped the list of the adopted solutions; nearly 47% of the SMEs engaged in this practice. That was followed by replacing old equipment (37%), reduced energy consumption (36%) and reduced waste (33%).

Regulatory compliance not key consideration

Regulatory compliance was a consideration for some (39%) of the responding SMEs but not an influential consideration by most (61%). More specifically, about 45% of the SMEs regarded regulatory compliance as having moderate to very high impact in such decisions, while 55% viewed it as having slight to no impact. For those who viewed such regulations as consequential, regulations imposed at the state and federal levels seemed to matter more than those at the county and municipality levels.

Costs constrain sustainability adoption

Implementation costs certainly influenced responding SMEs’ decisions to adopt sustainability solutions, with about half of the businesses agreeing or strongly agreeing with cost being a hurdle. Small businesses also reported the various types of financial incentives for adopting sustainable solutions, namely, tax credits/deductions (27%), rebates (24%), and grants/awards (15%).

These incentives were offered mostly by the state (39%) and/or local municipalities (26%), though federal (18%) and counties (16%) also offered such incentives to many of our responding SMEs.

We also offered survey participants the opportunity to share comments in this area. One small business expressed that “In NYS we were eligible for a tax credit for manufacturing, so that was nice. I think it was like 4% of our build-out. And that was like really helpful. I am so thankful for that.” Another business noted how grants were helpful: “We also got a grant to do some new construction on the property, so we are going to build two more buildings, and they are going to be LEED gold certified [an environmental accreditation], so we are excited about that.”

Some businesses shared difficulties they experienced learning about financial incentives available. One SME said: “Incentives (Tax) are too complicated and time consuming to follow. There are 96 agencies providing incentives, including city of NY. It is hard to find the appropriate program. They need to be better/easy to understand.”

Promoting sustainable operations among businesses should start with small businesses because of their share numbers and contributions to the US economy. Government assistance at the state, county and local municipality levels should continue to provide financial incentives to promote sustainability efforts through loans, grants, and tax incentives. One key element though is to make all such incentives easy to navigate and understandable by small businesses.

Narges Kasiri is Associate Professor, Management Department, School of Business, Ithaca College. Hormoz Movassaghi is Professor and Chair, Department of Finance and International Business, School of Business, Ithaca College.