Good ESG credentials are no longer a ‘nice to have’ (Part 1 of 3)

May 8, 2021

When you think about the world’s largest employers, you may consider the oldest and most well-known companies, or perhaps those with a strong global heritage.

 

In fact, the majority of working-age people today are not employed by any of the big brands that come to mind.

 

The biggest employer in both the UK and US is the thriving small-to-medium enterprise (SME)ecosystem, which in 2020 was made up of 6 million and 31 million SMEs respectively.

 

According to industry statistics, SMEs make up 99.9% of the business population in the UK and the US and naturally, with that comes significant social and financial influence over the national economies.

 

However, SMEs are under a huge amount of pressure. While SMEs have had to ride many turbulent waves over the years – from the 2008 recession to the Covid-19 pandemic – these have generally been relatively short-term and the SMEs that have managed to stay afloat have gone on to thrive.

 

The pressures facing SMEs today are somewhat different though. Today these pressures are much more structural affecting every part of the business and replacing the quick, reactive changes that businesses have historically made in response to a crisis.

 

Most importantly, these changes are shaking the very foundations of businesses and don’t show signs of letting up anytime soon.

 

In this three-part blog series, we will dive deeper into these pressure points. This week it’s about people on the ground – the general public, consumers and employees.

 

The spotlight has turned to SMEs

 

There was a time when sustainability, climate change and social issues such as mental health and diversity were big, distant problems that only the largest companies had the time – and resources – to worry about.

 

The picture today looks very different with the same issues under the spotlight almost daily and a common topic of conversation within and outside of organisations across all age groups.

 

Whether speaking as consumers, employees or influencers, people are calling on SMEs to be transparent about their Environmental, Social and Governance (ESG) credentials and commit to helping create a happier and healthier world.

 

The business case for ESG

 

All of that said, it’s worrying that a survey from earlier this year revealed that while 53% of SMEs want to do their part in helping the UK achieve its 2050 emissions targets, 30% have no intention of developing a sustainability strategy at all.

 

The reasons for this encompass everything from limited budgets and resource, to a lack of knowhow. DiginexESG was created to address these exact barriers.

 

The number of consumers buying from companies aligned to their personal values has been increasing over recent years and reached 71% in 2020, while 42% of consumers said they would leave a brand if it did not act with speed, authenticity and sincerity on important social issues.

 

This trend is likely to continue, particularly as more and more spending power sits with Gen Z, often referred to as ‘the most socially conscious generation’.

 

Meanwhile, the public is putting pressure on businesses to become transparent about their operations – internally and externally – so they can make informed decisions about the ones they choose to interact with.

 

This interaction is important as it extends beyond purchasing behaviours to include social media support and word-of-mouth brand advocacy. Businesses need to make their sustainability data easily accessible and understood.

 

Although many are yet to do this in practice, one study found that 9 in 10 business leaders expected consumers to hold them accountable for their environmental footprint. It’s clear business owners know things need to change – the question is when.

And then there’s the employer perspective where good ESG credentials affect everything from the employee value proposition, to retention and productivity.

 

Purpose-driven SMEs face a 49% lower attrition rate, while 65% of people said that they would be more likely to work for a company with a strong environmental policy than one without.

 

It is no coincidence that global certifications such as Global Reporting Initiative (GRI) for sustainable and ethical business are becoming more widely recognised and understood and we can only expect to see more scrutiny of SMEs from the ground up.

 

The public are communicating loudly and clearly about what they expect from businesses – the savvy ones would be wise to take note.

 

Not only is it the right thing to do, but it makes business sense to take ESG seriously.

 

We have created DiginexESG as an accessible and affordable digital platform that lowers the barrier to entry to ESG reporting for organisations of all sizes. Starting at only $99 USD per month including a 30-day free trial, DiginexESG can help you future-proof your business model and accelerate growth, while contributing to abetter future. Click here to find out more.

 

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