How SMEs Can Incorporate ESG into Their Business

How SMEs Can Incorporate ESG into Their Business

More business proposals call for SMEs to incorporate ESG into their business models. According to a study, 72% of wealthy Malaysian people and 86% of high-net-worth individuals have a high interest in sustainable investments that contribute to the restoration of the environment. It’s no wonder that more companies are looking for ESG strategies for SMEs.

SMEs try to understand this “task”, investigate technologies enabling a smooth adoption and marry it with their own objectives. It’s because what once was thought to be a good-feeling fad is here to stay. Investors and regular consumers are also interested in the sustainability movement. In fact, 90% of consumers in Asia-Pacific are willing to pay more for sustainable products.

The benefits of good ESG strategies for SMEs are reputation, profitability, and durability. Small businesses paying attention to this sector will see an increase in client retention, and their favourable interactions with suppliers or investors may improve.

  1. Environment

The first letter of ESG refers to your company’s environmental impact and the details of how you intend to have more sustainable ESG strategies for SMEs. Start measuring your environmental data, like how much water and energy you use every month or how you manage the waste in and from your business. These practices will benefit both your company and your staff.

  1. Social

The social aspect of ESG examines social connections in your business on a fundamental level, both in numerical and qualitative methods. Developing a talent-friendly culture as part of your business’ ESG initiatives will help maintain a low staff turnover rate. You can also plan how the organization interacts with customers and gives back to the community.

  1. Governance

The last part of ESG strategies for SMEs focuses on your company’s governance. This strategy talks about how your business manages risks. Paying special attention to this question will attract your investors, consumers, and supply chain.

Effective risk management techniques will also result in cost reductions for insurance coverage and premiums. Prepare and enforce essential policies, such as sustainability, discrimination, and ethics.

  1. Other Steps

For your company to start its ESG initiatives, build a passionate team of people who are enthusiastic about ESG for SMEs. Then equip them with the resources and authority.

Decide what to measure and what the benchmarks for your industry look like. Identify and acquire data to help develop a framework and measurement scale. See if you can find inspiration from companies in your sector that can be considered leaders in the ESG race for SMEs.

Don’t forget to monitor progress regularly while being aware of value-adding changes in certifications, standards, regulations, etc. Communicate what you are doing to people who have similar interests. Do this internally to clients, agents, your bank, and potential clients. It’s better to be open with them—appreciate achievements and not sugarcoat failures. That way, you can build positive rapport for ESG initiatives as well.

The journey to incorporate ESG is an ongoing process. Now and then, government agencies, academia, associations, and even banks will produce guides for SMEs. Moreover, the Malaysian economy is supported by SMEs, which comprise 97.2% of all business establishments, create 38.2% of the GDP, and employ 7.3 million people.

Once you embark on the journey of becoming aware of ESG for SMEs, please continue to keep at it. ESG-friendly businesses typically appeal better to investors and employees thanks to their high brand value. These businesses also frequently have better financial results because of a stronger emphasis on innovation, operational effectiveness, and risk management.

The success of any firm, even SMEs, will ultimately depend more and more on their ESG initiatives. Today’s corporate environment is more complex and competitive, and customer expectations regarding ESG are rising. Businesses need to implement ESG strategies for SMEs to avoid becoming irrelevant. They will also alienate customers and investors, significantly younger Gen Z groups.