There are currently 5 million family businesses in the UK employing 14 million people, an often overlooked subset of the SME sector that makes a significant contribution to GDP. 

Beyond that however, it’s quietly ahead of the game when it comes to the ‘S’ part of ESG. Many have been thinking about their impacts on local communities and employees for years, explains Fiona Graham, Director of External Affairs and Policy for the Institute for Family Business, which has run Family Business Week (21-25 November) for two years in a row to publicise the benefits that family businesses bring to the economy and the communities they operate within. 

“We felt that, given all the challenges that many businesses have gone through during the pandemic, and the fact that the sector isn’t particularly well recognised, we wanted an opportunity to bring together stories and examples of what businesses are actually doing,” she says. “There are some very compelling facts about the economic contribution that family businesses make.”

Trust in business has remained low since 2008, but many family businesses embody the characteristics of what people want to see from business, Graham explains. For example, many support local sports teams, provide donations to schools and partner with local environmental charities. 

“They’ve been doing those kinds of things forever. Because of that, they often don’t shout about it themselves. To them, it’s what they’ve always done,” says Graham.

The owners of family businesses are much more likely to live in the community they operate in. Because of that personal investment, they’re more aware of their social responsibilities. “It’s very personal to them,” says Graham. “It means that they understand their responsibility to the community and the impact that decisions they make have on that community.”

Some family businesses, particularly those that take on public sector contracts or are involved in supply chains that require more of a focus on ESG, are thinking about how to bring attention to the work they’re doing. However, many are not communicating their social impacts effectively.

“I think there is more awareness, but I think it’s a time issue, particularly in a small business,” says Graham. “How do you find the time to put something together that talks about this?”

There’s an authenticity and modesty within family businesses, Graham explains. They don’t want to be seen to be bragging. “We’re trying to encourage people to celebrate the good work they’re doing. It’s exceptional and it’s important that people know about it. They may encourage other people to do something interesting.”

Family businesses are incredibly agile and purpose-driven, so in that sense, they’re well placed to respond and adapt to ESG demands. Where the environmental factor can be a challenge is carbon reduction, where information that is accessible and appropriate for a business their size is difficult, and they may be limited in what they can do within their premises. 

“The challenge is going to be retrofitting older businesses in older premises,” says Graham. “But many businesses absolutely see the importance of getting to net zero and tackling climate change. They are so long term in their thinking anyway, so they’re thinking about the impacts that this has on people, the planet, their families and their community.”

Accountants are important partners for family businesses, who look to create groups of trusted advisers they can work with in the long term. Many family business owners are very time poor, and they often look to accountants to advise on more than just tax. 

“If you’re talking to your accountant about sustainability, where the accountant can point them towards a course that they can go through, or which organisations offer support in that area, they can help to be a pathfinder for family businesses.”

Family businesses tend to fare better than others during economic downturns, says Graham. During COVID-19, they were less likely to make people redundant, she adds. Partly, that’s linked to their long-term outlook. “They know it will be difficult to get there, but they can see an endpoint. If they make people redundant, they’re going to lose valuable skills.” 

Graham cites a conversation she had with a number of family businesses in Yorkshire towards the end of October. Despite facing a perfect storm of challenges including inflation, instability and energy prices, they all said they were optimistic for the future. 

“The businesses in that room have been through wars,” says Graham. “They’ve been through recessions. They’ve been through pandemics. And they have always made it out the other side.”