Concern about next generation drives sustainability in family businesses

October 5 2021
Research

Family-owned businesses invest in sustainability because they feel responsible for future generations. In comparison to non-family businesses, they are less likely to be led by external factors such as financers, legislation or competition. This is the outcome of research conducted by accounting and tax consulting organization RSM and Nyenrode Business University. Today, Prof. Dr. Roberto H. Flören  (RSM Professor Family Businesses & Business Transfer at Nyenrode) presents the results. The research shows that the motives behind sustainability at family businesses stems mainly from inner passion and not from a forced sense of urgency. That is why family businesses put their clear mark on the sustainability policy of enterprising Netherlands.

Family businesses are characterized by long-term perspective, stewardship and a close-knit relation with their staff and the region. This ties in well with running a sustainable business. The research, in which 239 directors of Dutch businesses participated, shows that mainly good management (dealing with unethical behavior and exemplary behavior by management and owners) and social sustainability (employee health, diversity and social initiatives) play an important role in the business operations. Family businesses find it significantly more important to contribute to social initiatives such as sponsoring and supporting good causes than non-family businesses. Especially the owners of family businesses play an important role in this. To them their business represents symbolic value, which makes them feel highly socially responsible and makes them wanting to give back to society.

Less dividend

The owners distinguish themselves for example because a large number of them (68.9%) is prepared to settle for less dividend in return for use of the funds for investments in sustainability. Laura Bles-Temme, partner at RSM and co-author of the research report, states: “Most family businesses recognize the long-term advantages and experience little obstacles to implement a sustainability policy. They do lack knowledge at times, mainly when it comes to subsidy possibilities and measurability of the return on sustainability. They also find it hard to deal with the transition of becoming a sustainable business in a structured way.”

Sustainability index

There are differences in success in sustainability between family businesses. Roberto Flören, Professor at Nyenrode, explains this phenomenon as follows: “As part of the research, we have developed a sustainability index that allows us to distinguish the family businesses that are well advanced and successful with sustainability (frontrunners) from the less successful (laggards). Among the frontrunners, the sustainability policy is more driven by the importance that customers and employees attach to it, the connection to the family values of the owners and because they feel connected to their region. In addition, the frontrunners state that sustainability leads to better (financial) performance in the long run.”  

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