Have you ever come across the buzzwords “ESG” without fully grasping its implications within the business landscape?

In this article, we aim to demystify ESG and explain why it’s an important part of the ‘growth model’ by shaping reputation, resilience, and long-term viability of your SME.

What Is ESG?

ESG stands for Environmental, Social, and Governance. It’s a way to evaluate how your business performs in three key areas:

  1. Environmental: This relates to your business’s impact on the environment. Think about your energy usage and supplier, waste management, and efforts to reduce your carbon footprint. How ‘green’ is your company?
  2. Social: This focuses on how your business interacts with people, including your employees, customers, and local community. Are you treating everyone fairly, within legal parameters and making a positive contribution to society?
  3. Governance: Governance is all about the rules and practices that guide your business. Are you following ethical business practices, being transparent, and ensuring accountability?

The United Nations Sustainable Development Goals (SDGs), are a universal call to action to end poverty, protect the planet, and ensure prosperity for all, comprising 17 interconnected goals addressing various global challenges, from poverty and inequality to climate change and environmental sustainability. They have been recognised as a useful framework for assessing ESG, though there is some global variation.

At WRM, we now opt for the following categories when planning and evaluating ESG strategies: Energy use & efficiency; Greenhouse gas emissions & carbon reduction; Water Use; Biodiversity; Pollution; Materials, chemicals & waste; Product Lifecycle; Climate adaptation & mitigation; Stakeholder environmental practices; Fair pay & living wages; Equal employment opportunities; Employee benefits; Community & social value; Responsible supply chain practices; Employee & customer health, safety & wellbeing; Employee professional development; Adhering to labour legislation; Ethical business practices; Corporate governance; Stakeholder communications; Regulatory compliance; Risk management; and Reporting transparency.

For each category we ask our clients: ‘what are you already doing to positively contribute to this?’ and ‘where might improvement be needed?’. In this way, we can determine the potential gaps and support in developing a clear and manageable approach of improving performance in those areas.

So, Why Does ESG Matter for SMEs?

A robust ESG strategy acts as a key selling point for customers who are looking to support businesses with strong environmental and social values. This selling point also extends to an increasing pool of potential investors, many of whom see greater potential in SMEs that have strong track records in ESG.

Maximising impact in the social category by committing to improving staff well-being and promoting responsible employment practices, will increase employee satisfaction and, consequently lead to greater productivity and retention.

Moreover, ESG strategies when implemented frequently lead to cost savings in the long term. By focusing on your environmental footprint and resource consumption, such as energy and water efficiency and waste reduction, you can significantly lower operational expenses. These savings can be redirected to other areas of the business and improve overall financial health.

Equally important is the role of ESG in risk reduction. Promoting ethical governance helps shield your business from legal implications, preserving a credible and trustworthy reputation that nurtures customer and investor trust.

How to Get Started with ESG:

  1. Assess Your Current Situation: Take a close look at your business operations to identify areas where you can improve in the ESG categories mentioned above. Understand what you’re doing well and where there’s room for growth.
  2. Assess What Your Clients Want: Work out what is important to your customers by reviewing their online publications and declarations. By doing so, you can mirror your ESG actions against those which matter most to the people you are aiming to attract.
  3. Set Clear Goals: Create achievable ESG goals for your SME. Whether it’s reducing energy consumption, promoting diversity and inclusion, or enhancing governance practices, having clear targets will guide your efforts.
  4. Involve Your Team: Encourage your employees to get involved. They can provide valuable insights and help implement ESG initiatives.
  5. Communicate Your ESG Efforts: Let your customers and stakeholders know about your ESG initiatives. Transparency builds trust.
  6. Measure and Improve: Regularly monitor your progress and adjust your ESG strategy as needed. Improvement is a journey, and you won’t meet your targets overnight.

At WRM, we help organisations of all sizes plan and implement their ESG goals. If you’re not sure where to start, or need some help in kickstarting your journey, reach out to us for a free consultation (enquiries@wrm-ltd.co.uk).