Small and Medium Enterprises (SMEs) play a pivotal role in Pakistan’s economy, contributing significantly to its Gross Domestic Product (GDP). As of 2021, nearly 5.2 million SMEs operated in Pakistan, representing 90 percent of private businesses. SMEs account for 25 percent of manufacturing exports and employ 78 percent of the non-agricultural workforce, contributing 30 percent to Pakistan’s GDP.
However, small businesses in Pakistan face mounting challenges, from limited access to capital to bureaucratic hurdles. A rising concern, particularly impactful in recent years, is the threat posed by climate change, which increasingly jeopardizes the resilience and survival of small businesses in Pakistan.
The climate crisis introduces two primary risks for businesses: physical and transition risks. Physical risks stem from climate-related damage to assets, people, and property due to extreme events like floods. Transition risks arise from the shift toward a low-carbon economy, which demands adaptation away from fossil fuels. Unlike multinational corporations, which often incorporate comprehensive climate strategies and employ sustainability experts, SMEs lack the resources to set and achieve net-zero goals swiftly. For most small businesses in Pakistan, the primary concern is economic survival rather than implementing low-carbon technologies. Yet, by adopting a “triple bottom line” approach, these small businesses can work toward resilience and growth by balancing profitability with social and environmental considerations.
The triple bottom line maintains that businesses should not only focus on the financial gains but also the social and environmental concerns a specific business can pose. The main rationale is that companies need to think long-term beyond profits to also cover the environmental and social issues, accounting for the full cost of the business. In the simplest term, the triple bottom line covers people, planet, and profits. People refers to every individual that is in touch with the company, like employees, vendors, customers, and so on. For employees, it is important to ensure that workers receive a fair wage. For vendors, it is important that a business ensures that diverse suppliers are used that use locally sourced products, for instance, if it is a food business. For customers, the triple bottom line can ensure that customers have fair access to products and that their feedback is seriously considered.
Several indicators can be used to measure the ‘people’ bottom line like average employee payroll, employee benefits per employee or average number of vacation hours earned. The ‘planet’ bottom line ensures that a business has an eco-friendly impact. This can be measured from indicators such as amount of waste generated in pounds, reductions in greenhouse gas emissions, amount of fossil fuel consumption, etc. The ‘profit’ bottom line can be measured through gross margin, historical income tax payment, and so on.
In Pakistan, many small businesses still lack awareness of how sustainability supports long-term profitability. As sustainability slowly gains recognition, the government must amplify efforts to educate the public on the value of the triple bottom line. It is important to understand that the triple bottom line does not promote social and environmental impact at the expense of profitability. In fact, many businesses have reported experiencing financial benefits by committing to sustainable business practice. The good thing about triple bottom line is that it does not need very technical knowledge of sustainability but the awareness of how valuing environment and social impacts can be potentially beneficial for the business.
However, while large businesses are able to implement such mega scale projects, for small businesses, survival is key. Tending to enhance the triple bottom line can help in survival in the market alongside ensuring long-term sustenance for small businesses. A 2023 report published by Deloitte showed that 84 percent of business leaders agree that economic growth can be achieved while also reaching climate goals.
Consider a Karachi bakery, which grapples with inflation, high utility costs, and food waste. Reducing costs could involve donating unused but nutritious food to local charities, thereby lowering waste and bolstering the bakery’s reputation among customers. Likewise, adopting water-efficient measures, such as using silicon kitchen faucet filters available on e-commerce sites, can lower utility bills. Recognizing employees, for instance through “Employee of the Month” awards with incentives, can reduce turnover. Sourcing ingredients from sustainable suppliers can also attract eco-conscious consumers. Research by IBM and National Retail Federation research has found that 79 percent of consumers emphasized the importance for brands to ensure guaranteed authenticity when they purchase goods. Essentially, enhancing the triple bottom line for small business means cutting down on costs, saving money, and making money.
In Pakistan, Corporate Social Responsibility is more widely understood, but there are no separate rules to cover the model. Triple bottom line is still not very prevalent in the context of small business in Pakistan. Large businesses, though, have set some examples in Pakistan; PTCL Razakaar programme is a volunteering programme where employees can do humanitarian activities. TATA Pakistan has installed solar water pumps in Thar for irrigation which served to serve as a clean source of energy but also led to employment of people.
However, while large businesses are able to implement such mega scale projects, for small businesses, survival is key. Tending to enhance the triple bottom line can help in survival in the market alongside ensuring long-term sustenance for small businesses. A 2023 report published by Deloitte showed that 84 percent of business leaders agree that economic growth can be achieved while also reaching climate goals.
