Why ESG is No Longer Just for Big Corporations

By Sarah Shannon

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A Beginner’s Guide to ESG Strategies for SMEs

For a long time, ESG (Environmental, Social, and Governance) strategies were mostly associated with big corporations and financial institutions. But now, the ripple effects of international sustainability standards and policies are reaching small and medium-sized enterprises (SMEs) too. Thanks to global supply chains and increasing regulatory expectations, SMEs are feeling the pressure to step up their sustainability game. Large companies and financial institutions want more transparency from their suppliers, and that means SMEs need to rethink how they approach ESG.

So, what’s the big challenge?

✅ Customers and partners expect SMEs to take ESG seriously.

❌ But many SMEs don’t have the resources or structured processes that bigger companies do.

The real struggle isn’t just identifying ESG gaps—it’s figuring out what to do next. Too often, businesses stall after a gap analysis because there’s no clear action plan. Without a well-thought-out approach, ESG becomes just another compliance checkbox rather than a real business driver.

However, SMEs that embed ESG into their overall business strategy instead of treating it as a reporting requirement are setting themselves up for long-term success. When ESG efforts align with business goals, SMEs gain a competitive edge—especially as larger clients and supply chain partners demand more sustainability measures. And here’s a tip: framing ESG in terms of risk, impact and opportunity (known as double materiality) gets the attention of executives and board members.

The good news? In December 2024, the European Financial Reporting Advisory Group (EFRAG) introduced the Voluntary Sustainability Reporting Standard (VSME) for non-listed SMEs. This new standard makes ESG reporting more accessible without the complexity of larger corporate regulations like the Corporate Sustainability Reporting Directive (CSRD).

Before we get to the reporting let’s get back to basics and understand why ESG really matters for SMEs today.

What is ESG?

ESG boils down to three key areas:

  • Environmental: Sustainable resource use, carbon footprint reduction, waste management.
  • Social: Employee well-being, diversity and inclusion, community engagement, ethical sourcing.
  • Governance: Transparent decision-making, regulatory compliance, ethical leadership.

Why ESG Matters for SMEs

Here’s why prioritising ESG is a smart move for SMEs:

  1. Investors Are Watching – About 40% of venture capitalists now consider ESG factors when making investment decisions. If you’re a mission-driven business, this could make you more attractive to funding.
  2. Consumers Care – Around 70% of consumers are willing to pay more for sustainable products, and that number keeps growing.
  3. Operational Efficiency Pays Off – Sustainability efforts like energy efficiency and waste reduction lead to cost savings.
  4. Stronger Market Position – A solid ESG strategy can enhance your brand reputation and attract more customers.
  5. Regulatory Readiness – Compliance with ESG regulations isn’t just about avoiding penalties—it’s about staying ahead of industry trends.

How to Get Started with ESG

1. Measure Your Impact

Start by assessing your carbon footprint and social responsibility efforts. Tools like Pulse Market can help manage, track and improve your ESG metrics. Even small changes—like reducing energy use or choosing responsible suppliers—can lead to meaningful results.

2. Set Practical Goals

Your ESG goals should be specific, realistic, and aligned with your business strategy. Avoid vague commitments and aim for measurable targets.

3. Integrate Sustainability into Daily Operations

  • Cut down on energy consumption and waste.
  • Opt for eco-friendly suppliers and materials.
  • Promote workplace diversity and inclusion.

4. Build a More Inclusive Workplace

  • Conduct diversity audits and set clear targets.
  • Foster a company culture where every employee feels valued.
  • Remember that inclusive teams drive innovation and better decision-making.

5. Strengthen Your Governance Practices

  • Establish clear ethical guidelines and transparent decision-making processes.
  • Develop an ESG task force to ensure alignment with business goals.
  • Make governance a proactive, not reactive, effort.

6. Engage with Stakeholders

  • Keep employees, customers, suppliers, and investors informed about your ESG efforts.
  • Show tangible progress to build credibility and trust.

7. Track and Report Progress

  • Use key performance indicators (KPIs) to measure ESG success.
  • Regularly publish updates on your sustainability initiatives.

Overcoming Common ESG Challenges

💡 Limited Resources? Start with small, cost-effective changes and expand over time.

💡 Lack of Awareness? Educate employees and stakeholders about ESG benefits.

💡 Regulatory Complexity? Stay informed on laws and best practices to avoid compliance risks.

Time to Take Action!

Financial stability and ESG alignment go hand-in-hand. When ESG becomes part of your commercial strategy rather than just a compliance burden, you create real business value and long-term success.

Final Thoughts

Adopting ESG isn’t just about ticking boxes—it’s about future-proofing your business. By taking small but meaningful steps today, SMEs can contribute to a more sustainable world while staying competitive in an evolving market. The key is to start now and build from there!

Why not check out our ESG Discovery designed for SMEs like yours.