A businesswoman in smart attire walks through a rural field of crops, with trees in the background, as she stares at the screen of the laptop she is carrying.

Green means go: Rural firms that invest in sustainability are more likely to grow

As climate change speeds up and resources become increasingly scarce, businesses are realising that innovation and sustainable practices are not merely nice things to have.

They are necessities for survival and catalysts for growth.

Customers and governments are demanding higher environmental standards, businesses are keen to select eco-friendly suppliers to minimise their own Scope 3 emissions, and investors are interested in firms with circular business models.

Companies that invest in sustainable operations (for example, waste management and net zero practices) are setting themselves up for resilience and long-term success.

However, prioritising Environmental, Social, and Governance goals (ESG) is more difficult for some businesses than others.

Many rural companies need particular help in this quickly evolving environment.

These businesses make up nearly a quarter of all firms registered in England – more than 549,000 enterprises including small-scale manufacturers, farms, and rural service providers like independent shops. Between them, they employ 3.8 million people.

The economic and geographical landscapes that these firms operate in often create additional pressures they must contend with.

Protests by UK farmers highlighted the need for fair inheritance tax legislation that considers the unique financial challenges of farming, such as being asset rich but cash poor.

For rural firms more broadly, their limited access to markets, infrastructure and resources, means they are more vulnerable to changes in taxes or severe weather events than their urban counterparts.

Rural firms face barriers to innovation

My recent review paper on business innovation in rural areas highlights the innovation gaps that rural firms deal with compared to competitors in more urban settings.

This disparity is frequently the result of rural firms being overlooked both in terms of policy and research.

For instance, my research showed rural businesses are less likely to invest in sustainable solutions like solar energy or waste management systems, or adopt the latest technologies.

This is because rural businesses frequently have less money and fewer options available to them because of their location. Adopting smart systems and AI technology can improve their efficiency and their connection to suppliers and customers.

But their growth is often restricted by the increasing costs of buying new tech or the firms’ own resistance to change and adapting to the digital era.

This makes them more vulnerable to environmental stressors and economic shocks. Addressing these issues, and investing in innovation, is essential if they want to grow.

Things like advanced energy storage systems and investment in renewable energy technologies can help rural enterprises to reduce their dependency on fossil fuels and provide more energy stability.

Similarly, environmentally friendly farming methods like circular waste management (where waste materials are reused, repurposed or recycled) and precision agriculture using satellites and automation can increase output while reducing environmental harm.

These developments not only improve rural businesses’ long-term competitiveness, they also help the environment.

For instance, energy-efficient procedures reduce operating expenses, and implementing sustainable branding might draw in eco-aware clients.

How green innovation makes firms more resilient

According to my study, innovation in digital technology, waste management and energy can completely transform rural businesses and give them the tools they need to prosper in a changing global environment.

Cutting greenhouse gas emissions has become a primary environmental challenge for businesses. Transitioning to renewable energy sources like solar and wind is becoming increasingly important.

Businesses that adopt these practices can reduce their carbon footprint and eventually lower their energy costs. But what is clear from my research is that rural firms need support to become more innovative.

Critical barriers to innovation include a lack of skilled labour, inadequate infrastructure and restricted access to funds like grants. Rural firms frequently operate in remote locations, which may limit their opportunities to collaborate and share knowledge.

The Government can help rural businesses overcome these barriers by creating innovation hubs in rural areas, and investing more in rural infrastructure.

Partnerships between colleges, universities and rural companies are also important for sharing ideas and best practice. Grants to businesses in those sectors and investment in better transport operations are also critical to their expansion.

Here are some steps rural businesses can take to become more sustainable:

1 Invest in a culture of sustainability

Building a culture that focuses on environmental sustainability doesn’t just happen. It requires a concerted effort by company leaders and buy-in from staff.

But visible progress towards more sustainable practices can help to create an environmentally-friendly culture.

This could include taking steps to increase recycling, decrease energy consumption, and lower carbon emissions. It could even include choosing more sustainable suppliers and introducing more eco-friendly products.

It is important to make sure staff understand what you are doing and why.

Clearly communicating the social and economic benefits of these sustainable measures can help to build a sense of pride and purpose among staff.

 

2 Set SMART goals

As with all goals, you need a robust plan to turn your sustainable ambitions into reality.

The best way to do this is to set SMART goals which are Specific, Measurable, Achievable, Relevant, and Time-bound.

Pay particular attention to ensuring your environmental measures are achievable and relevant. Some initiatives may be better suited to certain sectors than others.

Prioritising sustainable practices that align with your operational model will minimise the risk of failure. It should also maximise your impact and the benefits for your business.

 

3 Encourage remote work

Household names such as Amazon and Goldman Sachs may be summoning workers back to the office, but that doesn’t mean that smaller, rural businesses should follow suit.

For rural businesses that are not well served by public transport or motorway networks, allowing staff to work from home can give you access to a wider pool of talent.

It can also help to reduce emissions produced during the daily commute and lower on-site energy consumption, further reducing your carbon footprint.

 

4 Invest in environmental training

In a recent article, my colleagues Jacky Swan, Davide Nicolini, and Charidimos Tsoukas outlined the importance of providing staff with the framework and training they need to make more ethical decisions. Simply aspiring to ethical behaviour was not enough.

The same principle applies to sustainable behaviour. When it comes to an issue like sustainability, we might expect 15 per cent of the workforce to be actively engaged, with a similar proportion unlikely to get involved.

The remaining 70 per cent are much more likely to buy into sustainable practices and decision-making if they are engaged in the right way.

Adopt a strategic approach to training your workforce. Identify key individuals who need to be involved in designing and delivering that training, and how best to reach employees depending on their location and the time and resources they have at their disposal.

 

5 Prove your green credentials

There is a growing expectation for firms to demonstrate their performance on sustainability – including Scope 1, Scope 2, and Scope 3 emissions – to investors and regulators.

Publishing ESG reports, or including the relevant data in your annual report, can be a good way to share that information with key stakeholders.

Earning environmental certifications can be another valuable way of demonstrating your commitment to sustainable practices.

The key is to make sure you have the evidence to back up any claims you make, otherwise you may leave yourself exposed to damaging accusations of greenwashing.

 

Overall, it is clear from my research that when rural businesses invest in environmental sustainability, growth becomes far more likely.

In addition to making the companies themselves more resilient, the firms also support wider regional growth with new products, services and processes.

Supporting rural businesses in implementing sustainable practices is a vital pillar of the UK Government’s ambitions to build a greener economy and its emphasis on economic growth. Investing in innovation in rural businesses is not a choice, it is a necessary path to growth.

By overcoming their particular difficulties and embracing sustainability, rural businesses can realise their full potential as engines of environmental and economic advancement.

Further reading:

Beyond the balance sheet: Accounting for sustainability 

Why firms need to start measuring Scope 3 emissions now

What does AI think about sustainability

Why imitating innovation can be a successful strategy

 

Learn to lead your business through grand challenges with the executive education programme Leadership for a Complex World at WBS London at The Shard.

Panagiotis Kyriakopoulos is a former research fellow at Warwick Business School and current Postdoctoral Research Associate at King's College London. He has published several policy reports for the National Innovation Centre for Rural Enterprise (NICRE).

Discover more about Sustainability and Innovation. Receive our Core Insights newsletter via email or LinkedIn.