ESG Reporting for small and medium-sized businesses: building sustainable success

Today, sustainability is a key factor for the growth and long-term success of businesses. At the same time, there is increasing pressure on companies to take responsibility for their environmental, social and governance performance. In order to identify and measure these factors, ESG (Environmental, Social, and Governance) reporting is entering the scene. In this article, we will focus on explaining the concept of ESG and provide guidance for small and medium-sized companies on how to approach it.

What is ESG?

ESG stands for the three key areas that are assessed in ESG reporting:

1. Environmental (Environmental): this area deals with the environmental impact of the business. It includes factors such as greenhouse gas emissions, waste management, energy efficiency, use of renewable resources and biodiversity conservation.
2. Social: Social aspects include the company's relationships with its employees, customers, suppliers, the community and wider society. These factors may include human rights, working conditions, diversity and inclusion, employee health and safety, as well as support for community initiatives and charitable activities.
3. Governance: Governance is concerned with the management and control of the business. It assesses transparency, ethics, equal treatment of shareholders, risk management, disclosure of information and compliance with legal and ethical standards.

Why is ESG important for companies?

ESG factors have a direct impact on the financial performance of businesses and their reputation. Research shows that companies with better ESG performance are more likely to achieve better financial results and attract investment. In addition, customer preferences are also changing, with more and more customers preferring companies with sustainable and responsible practices.

SMEs should also pay attention to ESG factors and implement ESG reporting. While it may sound complex and challenging for smaller companies, the right approach to ESG can help them create a competitive advantage and increase their long-term sustainability.

How should small and medium-sized businesses approach ESG?

1. Create a strategy: Before you start ESG reporting, it's important to have a clear strategy that defines your ESG goals and commitments. Identify the areas where you can make the biggest positive impact and incorporate them into your business plan.
2. Identify relevant ESG drivers: each sector and business has specific ESG drivers that have a greater impact on their operations and stakeholders. Identify these factors and determine which are most relevant to you. For example, these may be CO2 emissions, energy consumption, resource management, employee rights or community relations.
3. Get relevant data: For proper ESG reporting, you need to collect and analyze relevant data regarding ESG factors in your business. This may include energy consumption, emissions, waste, employee satisfaction surveys, etc. It is important to have a reliable system to collect and process this data.
4. Create transparent and reliable processes: ESG reporting requires transparency and reliability. Create internal processes to monitor and manage ESG factors in your company. Make sure you have a system for data collection, regular checks and measurable targets.
5. Engage in stakeholder dialogue: Communication and dialogue with stakeholders such as employees, suppliers, customers and the local community are important for ESG reporting. Get feedback and engage in discussions to better understand their expectations and concerns.
6. Use existing frameworks and tools: there are several established frameworks and tools that can help you with ESG reporting. For example, the GRI (Global Reporting Initiative) provides standards for sustainability management and reporting. Another well-known tool is SASB (Sustainability Accounting Standards Board), which provides recommendations for specific industries and their relevant ESG drivers. These frameworks and tools can provide guidance and structure for your reporting.
7. Ensure proper risk management: ESG reporting is also concerned with risk management. Identify potential ESG risks to your business and implement measures to mitigate them. For example, if you are in the manufacturing sector, it may be important to focus on managing environmental risks such as water pollution or waste.
8. Monitor and evaluate your progress: ESG reporting is a long-term process. Monitor and evaluate your progress at regular intervals. Assess what is working well and identify areas for improvement. Measurable targets and indicators will help you track your progress and maintain focus on ESG factors.
9. Communicate your results: once you have ESG reports and assessments in place, be sure to communicate them to your stakeholders. Publish them on your website, share them through news and communication channels. Customers, investors and other stakeholders will appreciate transparency and information about your ESG initiatives.

ESG reporting is becoming an essential tool for companies in today's business environment. Small and medium-sized companies should not neglect this trend, as ESG factors have a direct impact on their performance and competitiveness. The right approach to ESG reporting can help companies build sustainable success and gain the trust of customers, investors and other stakeholders. Implementing an ESG strategy, collecting relevant data, engaging in dialogue with stakeholders and leveraging existing frameworks and tools are key to successful ESG reporting. SMEs can use these practices to create a sustainable culture and corporate model that is responsible to the environment, employees and society as a whole.

At the same time, it is important to understand that ESG reporting is not just about generating reports and statistics. It is a process that requires commitment and a continuous effort to improve performance on environmental, social and governance factors. Small and medium-sized businesses should keep the following points in mind when approaching ESG:

• Start with what you have: you may not have the funding or resources to create a comprehensive ESG program. Start with what you have and gradually expand your initiatives. Even small steps can have a big impact.
• Get management support: ESG responsibility should be integrated into your company's strategy and values. Ensure leadership is engaged and supportive of ESG initiatives. Create an internal culture where responsible and sustainable behaviour is seen as important.
• Collaborate with external partners: SMEs can benefit from working with external partners such as suppliers, sustainability experts and local communities. These partnerships can help share knowledge, resources and best practices in ESG.
• Seek financial support: There are various funds and programmes that provide financial support for companies that focus on sustainability and ESG factors. Explore ways to get financial support to implement ESG initiatives in your company.
• Be open to improvement: ESG reporting is not a static process. It is important to be open to improvement and innovation. Keep an eye on ESG trends, respond to new requirements and stakeholder expectations. Improve your processes and approach ESG as a long-term commitment.
• Set the scene for long-term sustainability: ESG reporting should not be a short-term project. Small and medium-sized companies should build a foundation for long-term sustainability. Include ESG in your strategy, management and business processes. Create a system that enables continuous monitoring, evaluation and improvement of ESG performance.
• Monitor and respond to customer expectations: customers are increasingly interested in ESG factors and prefer businesses that are responsible and sustainable. Monitor and respond to customer expectations. Improve your ESG performance based on feedback and surveys.
• Create a communication strategy: communication is key in ESG reporting. Create a communication strategy to effectively communicate your ESG efforts and results to stakeholders. Publish transparent and credible information through a variety of channels such as websites, social media, news, etc.
• Leverage employee education and awareness: Employees are important stakeholders in the implementation of ESG initiatives. Provide education and awareness to your employees on the importance and benefits of ESG. Encourage their active participation and involvement in the company's ESG processes.
• Don't forget about location and community: Small and medium-sized companies often have close relationships with local communities. Consider local needs and expectations in your ESG initiatives. Support local projects and get involved in initiatives that contribute to the development of the local environment and community.

ESG reporting is important for small and medium-sized businesses because it helps build sustainable success and gain stakeholder trust. Implementing an ESG strategy and taking the right approaches to ESG factors enables companies to identify and manage their environmental, social and governance impacts. SMEs should have clear objectives, collect relevant data, develop transparent and reliable processes and engage in dialogue with stakeholders.

It is also important to use existing frameworks and tools such as GRI and SASB that provide guidance for sustainability management and ESG reporting. Collaborating with external partners and seeking financial support can be beneficial for SMEs.

ESG reporting is not just a one-off task, but a continuous process. SMEs should have a commitment to continuously improve their ESG performance and be open to new trends and requirements. Communicating with customers and employees, developing a communication strategy and being considerate of the local community are other key elements of successful ESG reporting.

Today, as interest in sustainability and social responsibility grows, ESG reporting is an essential tool for small and medium-sized businesses to achieve a competitive advantage and build sustainable success. With the right approach and the implementation of ESG factors into corporate strategy, these companies can strengthen their market position and attract customers, investment and talented employees.

ESG reporting is not only a duty, but also an opportunity for small and medium-sized businesses to achieve long-term sustainability and contribute to a better world for all.