ue to the European Union’s Corporate Sustainability Reporting Directive (CSRD), medium-sized companies in particular increasingly need to address their social and environmental strategies and measures. However, the obligation to prepare a sustainability report in accordance with the European Sustainability Reporting Standards (ESRS) (which are derived from the CSRD) is only the most prominent—because most discussed—part of ESG management for SMEs.
Further regulations such as CSDDD, CBAM or EUDR ensure that both emissions and supply chains must be managed in a structured way and continuously optimized. We share with you our know-how from over 700 ESG matchings for SMEs and provide guidance in today’s ESG jungle.
If you already know ESG inside out, have heard about our free matching service, and want to start the selection process for a tool based on your criteria right away, here’s a shortcut.
Structure and efficiency in ESG management
ESG is complex—especially for beginners. Building internal expertise, distributing responsibilities, setting up reporting processes, and selecting the right external service providers are just a few examples of what you, as an SME, will be facing. This MUST be managed!
Reporting and compliance
Those who do not prepare the various reports, or do not do so in a legally compliant manner, will have to expect noticeable penalties and reputational damage. The key is to set the course in good time in order to remain economically successful.
Risk management
Those who ignore environmental, social and governance risks are playing with fire—not just for compliance reasons. In addition to the direct costs that arise, ESG will significantly influence your customer relationships in the future. To identify and monitor the relevant risks from the various ESG areas, legal registers from specialized ESG management tools or risk management software solutions are a helpful support.
Reputation and image
Stakeholders have become more demanding! They don’t just want to hear empty promises—they want to see real action and figures when it comes to social responsibility and sustainability. A strong commitment in the area of ESG leaves a positive impression on investors, customers and potential cooperation partners.
Attracting and retaining employees
Realizing personal values in the workplace is playing an increasingly important role for employees. But beware: actions speak louder than words! Anyone engaging in greenwashing or allowing a lack of transparency will quickly fall behind in the race for talent and established skilled professionals!
Step by step, the EU wants to pave a green path through new directives (keyword: Green Deal). Responsible action with regard to the environment, social issues and corporate governance is the order of the day, and no company can escape it anymore! Those who are already focusing on ESG management now are ahead of the curve and secure advantages over their competitors:
ESG management in the SME sector is facing a remarkable tightrope walk. Small and medium-sized enterprises are increasingly opting voluntarily for environmentally conscious, socially responsible and sustainable action to ensure long-term success, but also to meet their societal obligations. Unlike large corporations, however, resources are limited, which calls for creative solutions.
The challenge is to integrate ESG principles organically into the existing structure without impairing competitiveness. From adapting the supply chain to strengthening employee retention – SMEs can prove that sustainable business is not a question of size. This requires flexibility in order to find tailored approaches that meet both business objectives and ESG requirements.
As just described, it is a major balancing act when it comes to scaling ESG management. If a company is primarily focused on expansion and growth, those involved may feel uneasy because extensive documentation and reporting are perceived as an obstacle to achieving the next revenue targets.
It is also problematic that access to specialist knowledge and experts is more limited than it is for large companies. Acquiring sound ESG knowledge and professional external expertise therefore largely depends on the available budget. Anyone who acts half-heartedly will soon come under time pressure. Many import-intensive SMEs, for example, have simply slept on the constantly updated obligations surrounding CBAM or EUDR and are now being jolted awake by threats of fines.
The various ESG reporting requirements are a major hurdle. When resources are scarce, it becomes difficult to collect and analyze the extensive and complex ESG datasets. Implementing supportive ESG software as a central platform for collecting all data, risk and performance management, and all ESG compliance topics should be tackled in good time.
Tip: Do you work at municipal utilities? You can find everything about ESG and CSRD at municipal utilities here.
How you approach implementing ESG management depends primarily on your available resources. As a rule, the budget determines whether you bring in consultants, which software is used, or whether you determine and report on your own. The following steps will help you get started:
First, review your internal ESG know-how. Do you know the legal requirements (read more about the CSRD here) that apply to your company? Which laws affect you?
Identify the most important stakeholders and their expectations and concerns with regard to ESG.
Stocktake: Analyze and assess where your company currently stands in terms of environmental impacts, working conditions, and corporate governance. These are the benchmarks you can use to measure your progress later on.
Set clear ESG goals that are aligned with your other business objectives. Priorities matter!
Develop a plan for how you want to achieve the ESG goals—with concrete measures, responsibilities, and a timeline.
Implement the measures and let actions speak!
Don’t leave your stakeholders out, and use proactive communication to keep them continuously up to date. In both the end-consumer and B2B segments, green business practices are becoming an increasingly important purchase criterion.
Stay on top of it and regularly check whether your measures are having the desired impact on your carbon footprint.
If you’d like to know how other medium-sized companies manage their sustainability activities, take a look at their sustainability reports! They not only show where they currently stand, but also what goals and measures they have set for themselves.
A very good example is the Cologne-based clothing company ARMEDANGELS! In the Action Report they demonstrate how they combine their corporate values and goals with their ESG management.
The sensor technology manufacturer elobau took first place in WirtschaftsWoche’s ranking “The ESG Pioneers”. Congratulations! On its website, the company presents its strategies, goals, and measures transparently and in detail. Very interesting: The expertise built up over the years led to the founding of the subsidiary elocompanion, which advises companies on their sustainable transformation.
As the first company, the outdoor manufacturer VAUDE from southern Germany passed the more stringent audits for the state textile label “Grüner Knopf”. In the Sustainability Report, VAUDE shows what sets the company apart in ESG management. VAUDE has implemented its goals and measures impressively. There’s plenty you can take a leaf out of their book.
Becoming a sustainability pioneer as a family business in the automotive industry? Long before Witte Automotive (a technology leader for mechatronic locking systems) actually falls under reporting obligations, the company has been making its strategy and progress public in sustainability reports.
Gentle use of resources, the introduction of organic foods, or ensuring a respectful approach: ESG management is versatile and has more to offer than you might initially think. Freigeist & Friends show how it’s done and have clear sustainability goals in mind.
These examples show, on the one hand, the impact sustainability has on important KPIs such as, for example, image—and thus directly on revenue. On the other hand, they also show the interplay of data and processes behind it.
If you want to get started with ESG management or set up your processes efficiently right away, there’s no way around external support in the form of ESG consulting or software. Bringing together all the necessary service providers who will accompany you on this journey as partners will be one of your first important decisions. And right here lies a huge challenge: the service provider market has become extremely opaque due to the ESG boom of recent months.
And this is exactly where you can benefit from Matchilla’s know-how. With over 700 ESG matchings carried out for SMEs (and large corporations), we have built up unique expertise in the areas of software solutions and consulting. Depending on where you are in the process, you can find further information on the selection process on the following pages.
There are now more than 160 providers of ESG software solutions on the DACH market for the various reporting requirements. How do you manage the process from defining criteria to making the final selection?
External consulting is helpful for regulation, transformation, process definition, and much more. But which industry competencies are required, and what level of understanding of SMEs is needed?
Are you currently trying to get to grips with the various ESG topics? An interactive check gives you an overview of whether laws such as CSRD, CBAM, EUDR, LCA & Co. affect you now and in the future.
Ulrich Theves is Head of ESG Matching at Matchilla and is deeply involved with software solutions and consulting in the sustainability sector. He has one of the best overviews of the market and shares his expertise from the many conversations with SME owners and managers in MatchZINE.
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