Who doesn’t like the idea of a family-owned business? There’s something heartwarming about the notion of a family starting a business and relying on it to pay their bills, generation after generation. So, given their drive to support the family and be sustainable over time, are family-owned companies kinder to the earth than their publicly owned counterparts?
To find the answer, we need to dig down into the very DNA of what makes family-owned businesses thrive.
Sustainability: A Primary Focus for Family Businesses
The notion of sustainability is at the very core of family businesses. While this may include environmental sustainability, we’re talking about it in a much broader sense.
When compared with public companies that are primarily committed to delivering positive financial returns to investors and stockholders, family businesses are wholly focused on building a profitable company that can be passed down from generation to generation — a business that’s sustainable over time.
Family business owners are typically concerned about responsible stewardship. They feel a duty to manage the resources they have, not just for themselves, but also for future generations.
“This sense of commitment — including a long-term focus on customers, employers, suppliers and the greater community — are principles that fit in well, and align with a focus on sustainability,” explains Leesa Muirhead, who works with businesses to help them with corporate social responsibility initiatives.
Large publicly owned companies may also have a commitment and long-term focus, but it usually isn’t something that’s woven into its DNA — and certainly not the DNA of every CEO and owner that takes charge. Profitability is the name of the game, and a dollar today is much more enticing than a dollar for someone else 25 or 50 years down the road.
Then there’s the idea of working within the constraints of limited resources — financial and material. Most family businesses don’t have the luxury of wasteful practices, so they’re compelled to conserve and sustain.
When you look at factors like these, family-owned businesses seem to be predisposed to a mind-set of stewardship. Sometimes this mind-set transfers to environmental sustainability and eco-friendly actions, and sometimes it doesn’t. The framework for preservation certainly exists. However, statistically speaking, there’s not much data that addresses whether this is the case — and there are concerns about the true sustainability of family businesses.
A 2014 research paper on this topic, “Are Family Firms Really More Socially Responsible?,” shows inconclusive evidence regarding the sustainability of family businesses (in comparison to nonfamily businesses).
As the paper’s authors hypothesize, family businesses “are likely to be more responsive to external stakeholders’ demands (more specifically, the environment, the community and their customers) than nonfamily firms. However, their concern with control and influence within the company and their strong emotional attachment to it … are likely to deter social actions related to internal stakeholders (namely, employees and governance).”
In other words, it’s the researchers’ theory that family businesses are more eco-friendly in their outward posture — as a way of building rapport with external stakeholders — while less socially conscious internally, due to concerns over profitability.
This is an interesting hypothesis that shows just how variable this issue can be when viewed across a wide swath.
How Family Businesses Can Put the Earth First
“Family businesses are often called upon to be the caretakers of their communities and their environment. They are usually considered the main job creators and innovation drivers in their respective economies,” Muirhead points out. “It is widely demonstrated that family businesses take these responsibilities seriously, but there is rarely a formalized approach to if, and how, these goals are part of their corporate strategy, and whether they are aligned with core business activities.”
In order for a family business to put the earth first and be more environmentally friendly and socially conscious, some sort of strategy must be developed and cultivated. In practical terms, here are some ways this may play out:
- Working with other local, family-owned businesses is a way to support like-minded companies, but it’s also considered to be more resourceful and less harmful to the environment.
- Fully vet supply chains and look into accreditation like Fair Trade certification, which indicates a commitment to treating both the environment and people fairly and humanely.
- It sounds rudimentary, but putting the earth first is all about prioritizing the three Rs: reduce, reuse and recycle.
The Pursuit of Green
“We tend to believe the stereotypical schism of consumerism vs. the environment,” small-business owner Brian Linton says. “The notion used to be that monetarily successful businesses and environmentally friendly practices could not coexist. This old mode of thinking is coming to an end for big and small companies alike.”
Family-owned businesses aren’t the only ones participating in this new mode of thinking, but they’re certainly playing a catalytic role in the shift. So, the answer to the question of whether family-owned businesses are kinder to the earth isn’t crystal clear. But it is clear that they have distinct advantages that allow them to be good stewards of the resources they manage.