The benefits of ESG for smaller businesses

Sustainability is an increasingly pressing topic for small businesses in the UK.

Consumer trends reveal that consumers are increasingly assessing a company's environmental credentials, while business supply chains are under scrutiny to minimise environmental, ethical, and social impacts.

Smaller businesses must also consider their compliance with applicable ESG-related regulation and guidance.

Even small changes can help move UK businesses towards a greener future.

With a renewed focus on climate change and the environment, sustainability should be increasingly at the heart of business operations.

Benefits of ESG 

Adopting a sustainability action strategy and putting sustainable practices and policies at the heart of your business may result in significant business benefits including cost savings and an enhanced reputation.

1. Attract more eco-aware customers

Consumers are increasingly eco-conscious, meaning that adopting a sustainable strategy can boost your reputation and give you a competitive edge against other businesses.

2. Supply chain requirements

Companies supplying government bodies, large organisations, and other businesses may need to strengthen the environmental, social, and ethical robustness of their business.

Organisations are placing supply chains under renewed scrutiny as environmental management gains traction in a bid to tackle climate change and sustainability issues.

SMEs that don't hold environmental standards, such as ISO 14001, may find themselves unable to demonstrate that they meet regulatory or contractual requirements.

3. Employee engagement

Green-spirited companies could benefit from attracting and retaining staff. 

According to research from Deloitte, 27% of respondents indicated they would factor a potential employer’s stance on sustainability into their decision to accept a job offer.

If your business has green credentials, you'll attract like-minded employees who will help the company embed its green practices.

4. Reduced waste and lower operating costs

Reducing waste, being more energy efficient, or complying with local environmental regulations may help save you money in the long term.

Less waste may often be the result of more efficient manufacturing processes, improving efficiency, and lowering the cost of storing and processing excess waste.

5. Comply with regulations, taxes and other measures

Regulations, taxes and other measures are put in place to encourage sustainable practices and future legislation is likely to help Government meet any climate change pledges.

Existing measures include:

• a landfill tax
• ultra-low emission zones
• a single-use plastic ban

These measures attempt to reduce waste and carbon emissions; non-compliance may lead to fines and harm a business’ reputation.

6. Investment attractiveness

As a company with green credentials, your business may be increasingly attractive to investors.

Even if you haven't yet made the step to be greener, creating a plan to do so in the future may draw investors in to help you make improvements.

Businesses that are less reliant on fossil fuels may be seen as more resilient against fluctuations in energy prices, for example.

7. Drives innovative ways of working

Change, new legislation and shifting customer demand may be a driver for innovation within a business.

The need to be more sustainable can spark new ways of operating, new processes and new products – all with the potential to drive efficiencies, open alternate markets and attract new customers.

8. Financial resilience 

Sustainability-related risks, such as extreme weather events or reputational risks from greenwashing, could have an impact on cash flow, access to finance and much more.

The International Sustainability Standards Board’s educational material suggests an ‘inextricable link’ between a business’ ability to generate cash flow, and its interactions with stakeholders, society, the economy and the natural environment throughout its value chain.

By employing ESG into your practices, you’re building the foundations for your business to be able to adapt to sustainability-related risks.