| Summary: | As business organisations, Small and Medium Enterprises (SMEs) constantly strive to achieve success in the form of good financial performance, expansion and growth, and positive corporate reputation. However, growing concerns about climate change and other environmental and social issues require companies to have a socio-environmental response as well. The term ‘Environmental Business’ describes the concept of a commercial organisation that provides environmental goods and/or services in such a way that it addresses intended environmental and social problems whilst avoiding the creation of new ones. The built environment is a major location of energy conservation and carbon emissions reduction efforts, and companies are expanding to take advantage of this market. To expand as environmental businesses, these companies need to develop their business capacity whilst minimising environmental and social problems caused by their operations. This requires a significant adjustment of the traditional capacity development process in order for companies to become more environmentally and socially inclined. In order to study this adjustment, research was conducted on SME business organisations that provide sustainable energy services for the built environment. This involved an investigation of these companies’ approach to capacity development in relation to their realisation of being an environmental business. The research first investigated via participant observation and interviews the values, consequences and barriers associated with the development of capacity in this manner. Using these results, scenario planning cases for major capacity development situations were created, and the extent to which companies were willing and able to function as environmental businesses in these scenarios explored. The research findings show that companies that provide sustainable energy services implement environmental business values and practices mainly due to potential economic benefits, rather than out of particular regard for environmental protection and social accountability. Companies were found to view capacity development as a singular, economic-led process. Nevertheless, these companies were found to have latent socio-environmental potential in a number of capacity development activities. To exploit this potential, the research utilises systems modelling to describe how companies can adjust traditional capacity development to become more inclusive of environmental business values and practices. Activities that aid adjustment include the localisation of supply chains, sharing of capacity development to similar organisations through collaboration, and using partnerships in their supply chain that pay similar attention to socio-environmental responsibility. The research proposes that an adjusted capacity development process can be achieved by companies understanding these actions better (e.g. through the use of the systems model produced in the research), thus presenting social and environmental business practices as a strategy, rather than simply as a symbolic, goodwill or publicity gesture.
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