The importance of ESG for SMEs
Updated: Jul 4
Getting to grips with environmental, social and governance (ESG) factors as the building blocks of a sustainable business was the topic of discussion at a recent Board meeting here at Premier IT. So what is the importance of ESG?
The fact is, we all need to make a living today, tomorrow, and in ten years. This crucial point of sustainability is not just the environment but also the durability of the business model which is the key issue and why ultimately companies should take ESG seriously.
So ESG is not the latest business think fad! It is a fact that our clients today (and tomorrow especially) increasingly want to partner with sustainable companies that have good business models. Integrating ESG factors will hopefully set us on this journey – a journey that our customers will want to see evidence of in our tender responses and our daily mode d’emploi.
The good news is that getting the basics of ESG right isn’t difficult – we consider it a voyage where there are clear benefits at every stage post:
Environment – once we started measuring our environmental data, this got us thinking of ways to cut energy, water, and waste usage. So we are now on a cost-saving exercise.
Social – this will certainly help us in today’s war for skills and talent. Having an attractive business culture should help us to maintain low staff turnover and will also attract more easily the bright talent we constantly need to stay on top of client expectations and secure growth. So we are still firmly on that cost-saving exercise.
Governance – focusing on the governance of our business – and in particular devoting focus to risk management – will appeal to our stakeholders, our customers, our ISO, and other important auditors. Good risk management practices will also bring their own cost savings in terms of insurance coverage and premium pricing.
A key fact is that SME investors will always look for investment returns where risk mitigation is strong. A few years ago only a minority of investors considered ESG factors. Today, around two-thirds of investors take into account ESG factors, according to a recent independent Global Private Equity Survey 2021. Investors predict these numbers to grow in the future.
Furthermore, as a business that is looking to expand internationally, Premier IT recognises that ESG is a huge global issue. For the global community, incorporating ESG into a decision process is now essentially mainstream, so global supply chains will in turn be applying huge importance to ESG factors. It starts with the big corporates and filters down across their supply chains; what they have to comply with in terms of investor demands will impact our business in the short and mid-term.
We’re already seeing evidence of this in the bids we’re responding to…
There are some key steps any small company can take to get on the ESG ladder and will make you a better company from the point of view of customers and future employees:
Obtain key environmental data points – energy consumption, recycling efficiency, and waste production.
Prepare and apply the most important policies – sustainability policy, discrimination policy, ethics policy, etc
Address diversity across the workforce
To be honest, only recently ESG looked like yet another headache to face in 2023 – but we are probably doing much of what’s needed already and with the NHS (where ESG is huge) as our biggest client – it’s a topic we’re determined to take seriously.
“If it’s a job worth doing, it’s worth doing well!”