Minimising your business risk with ESG

With ESG strategies growing in significance, businesses can no longer ignore the importance of ESG to their business growth. Although there’s no necessity for SMEs to report on their ESG metrics like larger organisations, any business that embarks on an ESG journey could reap early benefits, such as increased staff retention, improved customer loyalty and reputation, and even a rise in profits.

ESG strategies are comprehensive, embracing everything from processes and procedures to objectives and opportunities. It can be challenging for SME enterprises to even know where to start. Due to the increased awareness of these concerns among both employees and the general public, if an ESG strategy is not well thought out, risks could impact a company’s reputation, such as claims of ‘greenwashing.’ However, with so many upsides to those who do ESG the right way, what do businesses need to know about building a successful framework?

It’s crucial that an ESG strategy aligns with your business needs and its activities. This can become complex with ESG planning tools due to the various frameworks available and their exhaustive list of tasks to complete. Before planning an ESG strategy, it’s important to remember not all businesses are the same. Understand that each organisation is unique, and while one framework may work for some, it won’t work for all.

Here’s a guide on how businesses can de-risk their growth the ESG way:

Understand why a business needs an ESG strategy

This is a key question for any business looking to correctly implement an ESG policy. Companies need to understand where their pressure points originate from and how to suitably resolve them. It will also help businesses avoid making mistakes, such as taking on too much at once, finding inadequate solutions that don’t resolve their issues, or failing to secure ‘buy-in’ from their workforce.

Increased staff turnover could be one risk facing a business. A number of factors could be the source of this risk, including poor company culture. If business leaders decided to handle this with short-term solutions, such as basic online training courses, then employees could feel undermined and feel that their concerns aren’t being addressed, with the business taking a ‘tick-box approach’.

Building an ESG strategy that seeks to understand the underlying cause of employee dissatisfaction will improve the business’s culture than providing a ‘sticking-plaster’ solution that damages employer-employee relations further.

Implement an ESG strategy that you can track

Use metrics, such as staff surveys to track and assess employee satisfaction, gender pay or diversity year-on-year. Surveys are a great way to generate insights that demonstrate whether employer initiatives have been successful or not, prompting further improvements. Businesses should also start tracking environmental outputs like carbon emissions and assemble a data collection that can be used to create KPIs on a six-month or yearly basis.

Conducting due diligence will help companies identify their weaknesses. By doing so, they can make the necessary adjustments or begin to track results that’s unique to their business. Again, every company is unique and where one organisation may need to address gender pay gaps, another may not. Some businesses may even begin undertaking social responsibility inspections throughout their supply chain, where others haven’t thought this far ahead.

An ESG strategy requires time and patience – it isn’t a quick fix


Businesses on their growth journey should understand that ESG takes time. Implementing a successful ESG framework can take between 18 months to two years. Sure, this is a lengthy time, especially given the challenges that many firms are currently facing. However, decision makers should keep in mind that new reporting regulations could be introduced at any time. Any company that begins to assess and monitor its ESG performance may discover that it avoids a surprise scramble for this information in the future.

It should be noted that any business with an existing ESG strategy should monitor it closely, assessing its findings from its inception to its current state. Reviewing ESG strategies are vitally important for businesses as what may have worked two years ago may be outdated and not relevant today, consequently adding to the business’s risk.

Understand that ESG is a benefit and not a hindrance

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ESG should be considered a way for businesses to future-proof their company, innovating while minimizing risk along the way. An ESG strategy that is maintained with continual improvements can help reinforce stakeholder relationships, from customers and suppliers, through to investors, lenders, and employees. Customers and prospective clients will look favourably to businesses that treat their workforce appropriately, make responsible decisions whether it’s through their supply chain or internally, and those who work towards reducing their environmental impact. By acknowledging these steps and adopting it as business culture and practice, SMEs will gain a valuable ESG advantage.

If you would like to contact us with any queries, please get in touch with Richard Singleton, Finance & Sustainability Director, or contact us via the form below:

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