Environmental, Social and Corporate Governance (ESG) data for Small to Medium-sized Enterprises (SMEs) is a growing priority. Whereas smaller companies may not have previously cared about their ESG credentials, the pressure from European banks and investors, as well as larger businesses at the top of the supply chains, have made sourcing and showcasing this information a greater focus. Jessica Camus, Head of ESG at diginex provides some pointers.
However, with so much discussion, emphasis, and focus on the data itself, many SME leaders would be forgiven for thinking the job was done once the data has finally been sourced. The reality is that companies need to put their findings into action in order to reap the benefits that effective ESG reporting provides.
Beating that post-reporting fatigue
The time, money and expertise needed to craft a compelling ESG report can take a lot out of a small business. Many will have to pull on external resources or take time out from the day-to-day to get the job done. Thanks to tech-enabled solutions, SMEs are no longer solely dependent on big, costly consultants. However, the task of ESG reporting can still be tiring for those involved – especially if it’s the first time this data is being produced.
Having the data alone is not enough. For investors, the public and the bigger companies further up the supply chain, there will be an expectation that businesses act on these findings. SMEs need to show positive progress in their sustainability efforts – whether they are reducing carbon emissions, creating a more transparent supply chain, or implementing new technology that is better for the environment.
A significant undertaking
However, improving things can feel like an overwhelming process – for example, there may be ingrained business practices that have a huge impact on the environment. Perhaps the company has supply chain issues where there’s not a significant amount of visibility or maybe the business is lagging behind in terms of its current certification – such as the hugely important ISO standard.
Improving these areas will likely be large-scale initiatives that may take years to implement. As a result, there will be no immediate positive impact on the company’s ESG credentials and will only negatively impact public perception of the SME despite their best efforts.
All good changes big and small
However, the reality is that SMEs can also make more minor improvements to immediately showcase their commitment to sustainability. Although it may seem relatively minor compared to the ‘big picture’ initiatives that will take years to roll out, these small adjustments can show immediate gains in a company’s ESG data and appease stakeholders.
In practice, these can look like reducing or removing paper waste in the business, and shifting to more digital-focused ways of communicating. Alternatively, companies can begin investing in in green energy or green office equipment – like timed LED lighting. These small changes can be rolled out in a short timeframe and will still show an immediate impact when it comes to the company’s next ESG report.
Marginal gains can sometimes be hard to envisage. When there are large scale projects that would make a huge dent in a company’s carbon footprint it’s easy to think that reducing paper waste won’t make a huge difference. However, an SME at the start of its ESG journey can find these minor adjustments demonstrate that the company is acting on the findings of its report. This will show banks, governments and larger businesses in the supply chain that the company is taking ESG seriously and acting on their data findings. All the while, the long-term initiatives can continue to be put into action so that the business will be able to ensure it is purpose-built for the future – able to meet regulation, consumer demand and present themselves favourably in term sheets.
