By Jessica Camus, Head of ESG at diginex
These days, Environmental, Social and Corporate Governance (ESG) is not just the concern for large world-leading companies – Small to Medium-sized Enterprises (SMEs) need to step up and address these sustainability issues. Pressure from European banks and investors, along with larger businesses at the top of supply chains, have made sourcing and showcasing this information a greater focus. However, the job isn’t over once ESG data has been sourced, recorded, and neatly packaged into a report. In order to reap the benefits, companies need to put their findings into action.
You don’t have to reinvent the wheel to be sustainable
SMEs don’t have to make seismic shifts to their operations to demonstrate sustainability objectives. Smaller improvements can immediately showcase commitment to sustainability, and are still effective. 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.
From investing in green energy or green office equipment (like timed LED lighting), to reducing or removing paper waste, or shifting to more digital forms of communication, 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.
When there are large scale projects by big companies that would make a huge dent in carbon footprint, it’s easy to think that reducing factors such as paper waste won’t make a difference. However, when an SME is at the start of its ESG journey, these adjustments will show progress in future reports and demonstrate that the company is working to change practices for the better. All the while, long-term initiatives can and should continue to be put into action so that the business will be able to ensure it is purpose-built for the future. As a result, SMEs will be able to meet regulation, consumer demand and present themselves favourably in term sheets.
Reducing the burden of reporting
Suggesting small steps to reducing your business’ footprint is easy, but this still leaves the question of, “how do we begin?”. Acting on the findings of your ESG report can be made far easier and more efficient by improving the processes of ESG reporting themselves.
Gone are the days when external, expensive consultancies were needed to craft a compelling ESG report – this can take a lot out of a small business. Now, tech-enabled solutions can be utlitised to produce the same outcome without stretching the budget.
It is through tech-enabled solutions that businesses of all sizes can efficiently collect and share ESG reports, even if it’s the first time this data is being produced. However, these reports are not enough and ESG objectives need to be met. There is still the expectation for businesses to act on these findings, but this is certainly made easier if the burden of reporting is reduced in the first place.
The question of greenwashing
To avoid being accused of misleading stakeholders or ‘greenwashing’ its business practices, it’s vital that SMEs start thinking about external data assurance. Large regulatory bodies such as the EU have already started this conversation, as seen in the new Corporate Sustainability Reporting Directive (CSRD). This will require all companies to record more detailed ESG reports and improve accessibility to their ESG information, SMEs included. However, this is only the first step. SMEs must act on their data by implementing initiatives that support progress towards set KPIs, such as reaching net zero carbon emissions by 2020.
Whilst this may seem a significant undertaking, this does not have to be an overwhelming process. Indeed, larger initiatives are important, but smaller and incremental improvements will not only show immediate gains, but also satisfy stakeholders in the ESG boom.
The first step to successfully implementing ESG initiatives for any business is to gather the data, making use of tech-enabled solutions. At a time when there is increasing pressure from banks, investors and the public, acting upon ESG data could be the difference between company growth or stagnation.