With its roots in the language of finance and investment it’s a common misconception that ESG is only of real concern for large, global businesses. However, SMEs account for 99.2% of the UK’s total business population so there’s no ignoring the fact that small to mid-sized companies have the power to make a huge collective impact when it comes to driving positive environmental and social change.
Most SME founders, owners and directors I speak to understand the importance of ESG to their business and employees, the potential they have to drive positive change, and the value of having an ESG strategy. Even with this level of understanding SMEs can be reticent to put a formal strategy in place, with many relying more on ad hoc and employee-led initiatives.
The challenges holding many of them back are two-fold – a perceived lack of resources and not knowing where to start. These blockers will only get harder as a business grows, however. Investing the time to develop an ESG strategy while teams are still agile and closer to the purpose of their businesses will serve SMEs better in the long term. Whether they work with a consultant or choose to go it alone, here are some tips for SMEs leaders to help get their ESG strategy off the ground:
Align your thinking: it is essential that your ESG strategy aligns with the overall business goals. I often hear that ESG is an ambition for SMEs but that it is viewed as separate from growing the business and making money. Avoid this trap of isolating ESG from the business by making these elements integral from the start. Align your ESG success with that of your business and measure both through metrics and goals that are part of everyone’s KPIs.
Start small and scale up: it can be quite daunting for an SME to commit to huge goals – and spend – from the start, so it’s best to put a plan and structure in place that scales with the business and grows as you do. This approach proved successful for Salesforce.com which started giving 1% of product, equity and time at the very outset, and which has now matured to cover all aspects of ESG for all of its stakeholders, with comprehensive metrics.
Benefit from larger players: SMEs may not have the same level of resources or influence as larger companies to drive ESG objectives through their supply chains, but they can benefit from the work the larger players in their markets have done as part of their own ESG commitments. For example, SMEs can use these larger players’ supply chains as a bellwether to ensure they partner with suppliers that adhere to best practice when it comes to low carbon and ethical working practices.
Owned by one, resourced by everyone: while ESG implementation should not be one person’s role, someone does need to own the strategy and be responsible for ensuring goals and objectives are met, and ESG considerations are included in decision-making across the business. Do not fall into the trap of having this person be solely responsible for its success. Someone on the senior leadership needs to have oversight of the goals, just as with any other part of the business.
Be honest: be careful of committing to bold objectives that you can’t achieve – people will see through these from the start. Never overstate what you’ve achieved nor announce your intentions without following through. Create a baseline and stick to reporting those metrics, they will show your progress over time. Remember, ESG is a journey …