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 were operating in Pakistan, representing 90% of private businesses. SMEs also account for 25% of manufacturing exports and employ 78% of the non-agricultural workforce, contributing around 30% to Pakistan's GDP. However, small businesses in Pakistan face mounting challenges, from limited access to capital to bureaucratic hurdles. A rising concern, particularly in recent years, has been the threat posed by climate change, which increasingly jeopardises 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 towards 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 (TBL) maintains that businesses should not only focus on the financial gains but also on the social and environmental concerns a specific business can pose. The main rationale is that companies need to think long-term, beyond profits, to cover environmental and social issues, accounting for the full cost of the business. In simple terms, the TBL covers people, the planet, and profits. 'People' here refers to every individual who comes in touch with the company, such as employees, vendors, customers, etc. For employees, it is important to ensure that workers receive a fair wage. As far as vendors are concerned, it is important that a business ensures that diverse suppliers are used which use locally sourced products; for instance, if it is a food business, it must source locally grown products. For customers, the TBL 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, such as average employee payroll, 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 the 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, etc.
Enhancing the triple bottom line for small businesses means cutting down on costs, saving money, and making money
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 TBL. It is important to understand that the TBL 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 practices. The good thing about the TBL is that it does not need very technical knowledge of sustainability, but the conscience of how valuing the environment and social impacts can potentially benefit the business.
Consider a Karachi bakery, which is grappling 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, which are easily available on e-commerce sites, can lower utility bills. Recognising 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 the National Retail Federation found that 79% of consumers emphasised the importance of brands to ensure guaranteed authenticity when they purchase goods. Essentially, enhancing the TBL for small businesses means cutting down on costs, saving money, and making money.
In Pakistan, Corporate Social Responsibility (CSR) is more widely understood, but there are no separate rules to cover the model. TBL is still not very prevalent in the context of small businesses in Pakistan. Large businesses, though, have set some examples in Pakistan; the PTCL Razakaar programme is a volunteering programme where employees can volunteer for humanitarian activities. TATA Pakistan has installed solar water pumps in Thar for irrigation to serve as a clean source of energy but also led to employment of people. However, while large businesses are able to implement such large-scale projects, survival is key for small businesses. Tending to enhance the TBL can help in the survival of small businesses in the market alongside ensuring long-term sustenance for such businesses. A 2023 report published by Deloitte showed that 84% of business leaders agree that economic growth can be achieved while reaching climate goals.
Adopting the triple bottom line approach offers Pakistan's small businesses a sustainable path to resilience, profitability, and growth. As these enterprises face mounting economic pressures and environmental challenges, integrating social and environmental considerations into their business models is not just a survival strategy but a means of thriving in the long term. By valuing people, planet, and profit, SMEs can enhance their reputation, attract eco-conscious consumers, reduce operational costs, and even improve employee loyalty—all factors that strengthen their foundation in an increasingly competitive market. With the government's support in promoting awareness and accessibility, the triple bottom line can empower small businesses across Pakistan to drive positive change while securing their future in a more sustainable and interconnected world.