ESG Management Best Practices for Small and Medium-Sized Enterprises
7 mins read

ESG Management Best Practices for Small and Medium-Sized Enterprises

Small and medium-sized enterprises (SMEs) can be the most viable vehicle for growth opportunities. With enthusiasm marked by trust, these companies have established themselves as rising market players.

They have proven to develop and deliver sophisticated solutions that are fit for the future. These fast-growth businesses can contribute to the larger economy and at all likelihood can become the global leaders of tomorrow in their business domains. 

A few years ago, Innosight’s Corporate Longevity Forecast showed that 50% of S&P 500 companies will no longer exist in ten years’ time. As shocking as it may seem, the reason for this will be a technological revolution as technology continues to transform business.

In this disruptive landscape, adopting digital, automated solutions is the only way for businesses to perform unharmed and deliver impactful and lasting change.

But another disruption has gained momentum in the last decade: With a focus on sustainability and reducing environmental impact, organizations are increasingly recognizing the need to adopt a green business model.

As such, ESG is a solid path for businesses to thrive in a rapidly evolving economic and environmental landscape. In today’s sustainability-driven business world, prioritizing ESG can make all the difference in the organization’s business performance. So, small and medium-sized businesses would do well to develop an ESG-forward roadmap for long-term success and resilience. 

Investors are interested in putting their money in companies that prioritize ESG factors. But what are the best practices to get started? Because businesses need to create a common language to report on their sustainability in a consistent and credible way, it is important to adhere to the standard roadmap to get the ESG journey going.

Providing actionable insights on the environmental, social, and ethical risks of a company can attract different stakeholder groups—investors, employees, customers, etc. In view of this, organizations should strategically design reporting frameworks to communicate their ESG performance along with financial metrics. 

Preparing an ESG-Ready Enterprise

Without understanding what is at stake for a small company in terms of ESG compliance, they will not have an accurate understanding of the best practices. The foundational need is to identify which ESG issues are relevant to the organization and address how they are going to prepare themselves for it.

A typical small company may not have to worry about carbon emissions as large-scale companies do, but they might have to report on working conditions or diversity. 

This groundwork of identifying the applicability of ESG in a certain setting is the first step. After this, the company can pursue ESG initiatives and find a way to implement the ideal ESG principles. 

Who is Going to Shape the Company’s ESG Priorities?

For companies that are on the cusp of growth, the approval of the stakeholders is very important. This is something they cannot afford to compromise. To continue to gain the investors’ money, suppliers’ materials, partners’ support, and customers’ favor, organizations should plan an all-inclusive ESG strategy. 

At the same time, the strategy should also meet the requirements of each of these entities. For this, implementing the right ESG management tool is crucial. WNS-Vuram’s ESGHall, for example, comes packed with 4 different modules to efficiently manage all 4 important people.

ESGHall – Customer, ESGHall – Vendor, ESGHall – Employee, and ESGHall – Sustainable Supply Chain can be of great help to align ESG initiatives and the stakeholders. 

What are the Sustainability KPIs?

Choosing which ESG KPIs to report on and how to provide a clear picture of ESG performance to investors can be a difficult endeavor for most small-size companies.

But it deepens the investors’ understanding of the company’s progress towards ESG goals when the sustainability reports are transparent and designed to keep the enterprise accountable. Knowing how best the key sustainability indicators should be presented is essential here. 

To achieve this, businesses can take advantage of insightful and actionable sustainability dashboards that can help track and improve organizational performance measures.

By monitoring the organizations’ strategic ESG objective, they can have an integrated view of the company’s commitment towards, for example, reducing carbon footprint, inching towards renewable energy, and effective waste management programs. 

Realign your ESG Priorities

Producing a mechanism for managing ESG goals is one thing. And preparing your organization as a whole is an entirely different challenge. When companies start to take ESG seriously, it is equally important to be able to position themselves to manage and report on their sustainable actions across climate change, social welfare, and inequality. 

Choosing and aligning to an ESG protocol or framework can establish a company as a leader and guide them for transparent and data-driven management. When aligned with the robust framework, the organization can steer its ESG efforts effectively and maximize the impact.

Don’t Neglect the Third Party Risk Management

Regardless of how well-intentioned the company’s sustainability goals are, it can come to nothing if third-party incidents damage its reputation. So businesses cannot afford to underestimate the need for solid third-party relationships not just focused on profitability but also on sustainability. 

The need to develop more resilient supply chains should be a priority as gaining a more thorough oversight of sourcing and contracting can be a critical milestone in the journey towards end-to-end ESG management and compliance. Despite the integral benefits of third-party services, they come with an added risk of poor oversight and governance.

So, a good practice for SMEs is to protect their organization from the reputational damage that can incur actions from regulators. The actions of a third-party supplier can directly reflect upon the company itself. 

A good ESG tool can help you avert all these issues by assessing these third parties based on their services. It can come packed with robust modules to monitor and review on an ongoing basis.

ESG supply chain management tools are very good at standardizing these assessments across business functions. It can efficiently automate the due diligence processes and perform the oversight programs with clarity. Now businesses can monitor their third-party relationships more closely than ever.

Sustainability Journey for the Long Run

Building a more sustainable future is the responsibility of all of us. But this is something that is not unachievable as previously thought. With the right approach and custom-built tools, even small and mid-size companies can keep up with their decarbonization commitments and accelerate climate action in value chains. 

Seven in ten investors agree that businesses should have initiatives to reduce emissions and should develop products and processes that are climate-friendly. In this new reality, SMEs can demonstrate their shared values in prioritizing sustainability and thus generate better Returns on Investments. 

While ESG-related risks can be an emerging concern for many organizations, SMEs strongly armed with effective corporate governance and well-constructed supplier management can ensure compliance with evolving regional and global regulations and remain resilient for years.