Before You Start

This guide is for CFOs, controllers, and business owners committed to tracking non-financial performance metrics to establish a foundational ESG reporting framework.

Overview

50 min
Setup Time
Advanced
Difficulty
Ongoing
Maintenance

What You’ll Learn

  • Understand core ESG principles and their relevance to SMEs
  • Identify key ESG metrics applicable to your business
  • Implement efficient data collection methods for ESG
  • Learn how to structure your first ESG report

1. Initial Preparation Steps

Before diving into reporting, identify your focus areas and preliminary metrics:

Core Areas for Tracking

  • Environmental KPIs (e.g., energy consumption, waste generation)
  • Social KPIs (e.g., employee diversity, safety incidents)
  • Governance KPIs (e.g., board diversity, ethics training)
  • Resource Allocation (e.g., budgets for sustainable initiatives)

Recommended for Deeper Impact

  • Supply Chain ESG performance
  • Customer satisfaction and privacy metrics
  • Community engagement and investment initiatives
  • Ethical sourcing policies

2. Why ESG Reporting Matters for SMEs

You have two main drivers pushing the need for ESG reporting.

Driver A: Growing Investor and Customer Demands

Meeting expectations from stakeholders.

Pros:
  • Attracts ethical investors.
  • Enhances brand reputation.
  • Meets customer expectations.
Cons:
  • Initial setup effort.
  • Requires data transparency.
  • Can be resource-intensive.

Driver B: Regulatory and Supply Chain Compliance

Proactively preparing for future mandates.

Expert Tip: Proactive ESG reporting for SMEs isn’t just about compliance; it’s about future-proofing your business. It opens doors to new partnerships and helps mitigate risks before they become regulatory burdens.

3. Key ESG Pillars and Metrics

Here is a high-level overview of the three core pillars of ESG and what they entail.

Environmental (E): Focuses on a company’s impact on nature. This includes energy consumption, waste management, greenhouse gas emissions, water usage, and sustainable resource management. Metrics might track CO2 emissions per revenue unit or percentage of recycled waste.

Social (S): Addresses how a company manages relationships with its employees, suppliers, customers, and communities. Key aspects include labor practices, diversity & inclusion, employee health & safety, data privacy, and community involvement. Metrics could cover employee turnover, gender pay gap, or training hours.

Governance (G): Deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. It ensures ethical behavior, transparency, and accountability. Metrics often include board diversity, independent board members, and anti-corruption policies.

Here is a sample code block to show how an ESG data point might be structured.

{
  "metric_id": "ENV_ENERGY_CONSUMPTION",
  "period": "2024-Q3",
  "value": 15000,
  "unit": "kWh",
  "scope": "Facility A",
  "notes": "Electricity usage from utility bill."
}

4. Building Your ESG Data Foundation

  1. 1

    Define Materiality

    Identify the most significant ESG issues for your business and its stakeholders. This helps prioritize data collection.

  2. 2

    Establish Data Collection Methods

    Determine how and from where you will gather relevant ESG data. This could involve existing systems, surveys, or new tracking tools.

  3. 3

    Choose a Reporting Framework

    Select a suitable framework (e.g., GRI, SASB, TCFD) to guide your reporting structure, or develop a custom approach tailored to your SME.

Common Error: Data Silos

ESG data is often spread across various departments and systems. Centralize your data collection efforts to avoid inconsistencies and improve reporting accuracy.

5. First Steps to Reporting

Initial Report Checklist

  • Consolidate identified ESG metrics and data
  • Prepare a draft internal ESG report
  • Seek feedback from key internal stakeholders
  • Plan for external communication strategy (website, investor deck)

Need Help?

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Navigating ESG reporting can be complex. Our experts can help streamline your data collection and reporting process.

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