Environmental, Social, and Governance (ESG) has rapidly become the global buzzword among a vast majority of investors and customers alike. The significance of ESG cannot be overstated, because it has emerged as a crucial agenda that businesses must address promptly. Businesses that adopt robust ESG practices can gain a competitive edge and future-proof their growth.
For small and medium-sized businesses (SMBs) seeking to expand and flourish, ESG reporting is not only pertinent but also imperative. The investor survey by PwC revealed that:
● Before investing, 79% of investors look at how a company manages ESG risks and opportunities
● 84% of investors want ESG reporting to explain the relevance of ESG factors in the business model
● Only 33% of investors believe the current quality of ESG reporting is good enough
The Role of Data in ESG Reporting
The insights above suggest that ESG reporting is crucial to attracting investors. However, it is not the only reason SMBs should gather structured real-time data. Clarity about ESG data and how it impacts business longevity can help these entities operate more efficiently and with better foresight. Granular data allows companies to:
1. Gauge Impact - Data used for measuring a company's performance in various ESG areas, such as carbon emissions, water usage, diversity and inclusion, women on the board etc. allow us to accurately measure their impact on the environment and society, and provide us with a view into the robustness of their governance practices.
2. Benchmarking: ESG data allows companies to compare their performance with industry peers, competitors, and best practitioners. This benchmarking enables companies to identify areas of strength as well as set targets for improvement.
3. Trend Analysis: Data can help identify trends and patterns over time. Trend analysis helps companies track their progress towards ESG and other goals, identify areas that need improvement, and make data-driven decisions on resource allocation.
Data Challenges in ESG Reporting & And How to Overcome Them
Despite the importance of ESG data, it remains the foremost challenge for businesses. Take a look at the data below reported by OCEG:
● Only 9% of the surveyed companies actively used software for data collection, analysis and ESG reporting.
● Less than 10% of the respondents believed their ESG programs were well-documented
Many small businesses are still not reporting ESG data comprehensively and promptly. However, with increasing pressure from large customers, SMBs will certainly need to revisit their ESG reporting approach and process (or lack thereof) and prioritize ESG data disclosure.
One of the most effective solutions to these issues is the automation of ESG reporting. SaaS platforms like Treeni’s resustain™ SMB make this possible. Through the resustain™ SMB platform, Treeni helps businesses measure, monitor, manage and track their data. Automated ESG reporting has multiple benefits such as:
● Data standardisation and easy transformation
● Access to a real-time data dashboard
● Easier and more efficient decision-making using visual data
● Adopt actionable strategies using the data unearthed in ESG reports
● Simple and convenient usage with built-in templates & standardised formats with no manual labour or Excel sheet processing
● Build capacity, facilitate skill development, and train employees to collect data and interpret reports accurately
● Facilitates evidence maintenance for various KPIs like electricity consumption, waste generation, diversity and inclusion, etc.
For SMBs eager to tap into the vast potential of ESG data, Treeni also offers managed services that help overcome bandwidth and domain skills limitations and facilitate the measurement, monitoring, management and tracking of ESG data by manually collecting and digitizing the relevant data.
Unlocking Clarity and Visibility in ESG Reporting Driving
When used well, data gathered in ESG reports can provide small and medium-sized businesses with the clarity and visibility needed to drive business growth and longevity. Quantifying various ESG metrics makes it possible to identify areas in which a business needs to improve. It helps them become more environmentally friendly, adopt socially inclusive business practices, or strengthen their governance. Above all, data from ESG reporting empowers SMBs to take prompt corrective actions where required.
Here are the Opportunities created because of the clarity gained:
ESG risk reduction and increased attractiveness to investors using an ESG lens for investment decisions
ESG risk reduction in SMBs is possible because ESG reporting makes it easier for them to
● Identify the risks they face
● Take measures to counter any risks or threats to their ESG goals
● Improve performance, set goals & targets and attract stakeholders including clients, investors and employees
Investors also tend to favour companies whose ESG practices do not pose any significant financial risks. Globally, more and more investors are using an ESG lens to evaluate companies they want to invest in. According to the ESG Global Study 2022, 59% of global investors use ESG integration as a key implementation strategy.
Data clarity through ESG reporting in SMBs thus attracts investors and banks. SaaS platform like Treeni's resustain™ SMB enables growing companies to report their ESG achievements, attract funding from investors, and experience accelerated growth.
Expansion of the customer base
Like investors, customers are also increasingly choosing businesses with good ESG practices. As one PwC report noted, over 60% of millennials and Gen Z customers check social media to identify where a business stands on the ESG spectrum before buying a product or service. This means large corporations have to align to consumer demands and align with suppliers and partners who prioritise ESG goals.
What does this mean for SMBs that are suppliers to large companies?
To begin with, it is not enough if SMBs only adopt ESG practices. To attract and retain established conglomerates and future-proof their business, SMBs must also ensure that the data is reported and easily available in the public domain for potential customers to find while making vendor/supplier choices.
Benefits from Sustainable Practices
Sustainable practices can benefit SMBs in the long run. While it is critical to strengthen governance and transparency with clear policies and accountability mechanisms, it is equally crucial to record and reports these findings.
For example, farm produce and food export businesses may already be inching towards lower carbon emissions. However, without accurate and auditable data, they will fail to prove this. ESG reporting and subsequent data clarity make it easier for such SMBs to show concrete results and benefit from them in multiple ways, including more business from customers and potentially monetizing their carbon footprint.
Summing it Up
The bottom line is that SaaS platform-driven ESG reporting gives SMBs a significant competitive edge. With Treeni’s SaaS platform, small and medium-sized businesses can automate data collection using templates, obtain insights for decision-making, and report to key stakeholders including customers, investors, employees and regulators in the reporting and disclosure standard of choices such as CDP, Ecovadis or BRSR. The platform simplifies data management for growing companies using a zero-touch, zero-code, zero-deployment fee approach.
If you are an SMB and are keen to take the next step towards a more sustainable future, you can begin by streamlining ESG reporting with resustain™ SMB. That way, you can focus on your business while we at Treeni take care of your ESG data management and reporting.