Rajat Panwar, Ph.D., Author at Global Trade Magazine

When major corporations tout their contributions to social or environmental initiatives, the world takes note. As just one example, Microsoft, Apple, Facebook, and Google all drew attention at different times this year when they announced plans to work toward becoming carbon neutral.

But, despite the hype that gets associated with these big-business efforts, it may be that small businesses operating in quiet anonymity are the ones that have the greater impact on the environment, both good and bad.

“Large corporations are more motivated to use these initiatives as a means to achieve their financial objectives, whereas small businesses are more serious about making a real difference in their communities,” says Rajat Panwar, Ph.D. (www.rajatpanwar.com), an associate professor of Sustainable Business Management at Appalachian State University.

“Given that smokescreening and greenwashing are big problems in sustainability, we will be better off enabling small companies to own sustainability more so than large companies.”

That’s one reason why government-sponsored environmental initiatives need to include small businesses as critical partners if they hope to succeed, Panwar says. For example, he says, presidential candidate Joe Biden’s $2 trillion climate plan that sets a target for achieving net-zero emissions by 2050 should take into account the role small businesses can play in environmental protection.

Panwar says a few facts worth knowing on the issue include:

Small businesses’ impact is a story of numbers. Although large corporations get more attention, the vast majority of businesses are small. “In the United States, about 99% of all firms are classified as small,” Panwar says. “Even though their individual contribution to pollution is small, collectively it is enormous, which is why it should be addressed. In fact, large corporations often pollute through small firms because it is a network of numerous small firms that feed into value-chains and supply chains of large corporations.”

Grassroots initiatives need to be targeted. A tremendous gap exists between large corporations and small businesses in terms of the resources they can allocate for environmental initiatives. “That’s why climate investments like those Biden is proposing should target grassroots initiatives,” Panwar says. That would include local food production, support to small landowners for sustainable forestry, grants for circular economy initiatives, grants for businesses that would promote fixing and repairing things, local recycling, and sustainable food systems.

Small businesses are inspired by different motivations. Panwar has been involved in research into the social and environmental impact of small businesses, and he and his colleagues produced intriguing results with their study, especially as it related to what motivates businesses to be good stewards. “Small businesses are motivated to pursue social and environmental initiatives mainly to be good community citizens and generate local reputation,” he says. “Large corporations are typically inclined to pursue these initiatives to enhance shareholder wealth.”

Some people may argue that climate initiatives need to take a backseat right now while the country focuses on getting people back to work. But Panwar says economic stimulus can easily be aligned with environmental protection.

“The initiatives I am talking about will produce new jobs that would support the local economy,” he says. “If we only focused on giving energy grants, then I can see the rationale in pitting job creation versus climate consequences. But climate investments can be done very strategically so that small businesses, entrepreneurs, and landowners get the money to revamp their operations.”

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Rajat Panwar, Ph.D. (www.rajatpanwar.com), is an associate professor of Sustainable Business Management at Appalachian State University. He previously was an assistant professor at the University of British Columbia. He also has been an Affiliate Faculty member in the College of Forestry at Oregon State University, and with the Governance, Environment, and Markets program at the School of Forestry and Environmental Studies at Yale University. Panwar holds two doctorate degrees, one in Corporate Sustainability from Grenoble École de Management in France, and one in Forestry from Oregon State University.

Corporations around the world love to promote their environmental bona fides, touting their at-times Herculean efforts to minimize their carbon footprint.

But desiring to be environmentally friendly and truly accomplishing that goal are two different things, as illustrated recently by Amazon’s acknowledgment that its carbon footprint grew 15% last year despite efforts to curb its impact on climate change.

As it turns out, the details about many companies’ eco-friendly accomplishments are often enveloped in mystery, in some cases even for the businesses themselves.

“The Amazon situation is just an example of the bigger problem surrounding corporate claims of environmental responsibility,” says Rajat Panwar, Ph.D. (www.rajatpanwar.com), an associate professor of Sustainable Business Management at Appalachian State University.

“Most global corporations now make such claims, but the reality is that half of the carbon emissions since the industrial revolution have happened within the last 30 to 35 years. It seems that corporate environmental disclosures hide more than they reveal.”

Why is it so difficult for many companies to achieve their goals of reducing their carbon emissions or otherwise limit the damage they do to the environment? Panwar says one problem is corporations often outsource much of their work, which not only reduces their control over the environmental impact they have, but also their very knowledge of that impact.

Panwar says one study analyzed reports that 1,300 firms submitted to the Securities and Exchange Commission. That study revealed 80 percent of those firms could not even determine the country of origin of their products, much less any information about their carbon footprint.

“My research has found that firms that are more socially and environmentally responsible tend to perform their functions themselves rather than outsource those functions to third-party vendors,” he says.

For companies that truly desire to have a positive impact, Panwar says three issues are critical:

How companies measure emissions makes a difference. Companies’ carbon commitments and pledges should be about absolute emissions, not emissions per unit of revenue or sales, Panwar says. But too often companies link their emission-reduction goals to how much money they are bringing in, at least partially negating what should be the ultimate goals.

Eco-friendliness can’t stop at the corporate door. Carbon commitments should encompass all operations across supply-chains. In the case of companies such as Amazon, the majority of emissions actually happen offsite and can be reduced only through concrete steps taken at the supply chain level. “This is a serious issue because many companies don’t even know who their downstream suppliers are.” Panwar says. “Companies like Amazon can gather applause for their pledges, but the actual impacts are hidden in the supply chains.” Consumers who want a true reckoning of how well a company is reducing emissions need to ask companies to provide those numbers,

Supply networks should not be far-flung. In late June, Amazon announced creation of a $2 billion Climate Pledge Fund to invest in companies that make products and technology that help protect the Earth. But the details of how such a plan will play out are important, Panwar says. A good approach, he says, is to promote local supply networks so that emissions are minimal, visible and monitorable.

“I am glad that we are beginning to see through the discrepancy between corporate pledges and corporate environmental impact,” Panwar says. “When it comes to emissions and especially the effects of a global supply chain, I believe we are entering a new era in which transparency has to be made more transparent.”

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Corporations Boast, But Small Businesses Are Key To Cleaner Environment

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