The business landscape has changed significantly over the past few years. Gone are the days when profitability was the primary aim of corporate entities. In the modern world, businesses also have to ensure sustainability and profitability. It is why corporate entities have started taking ESG (Environmental, Social, and Governance) factors seriously. You might live under a rock if you have not heard about ESG yet.
At the end of 2020, more than 80% of public companies had taken ESG initiatives. Currently, many private equity-backed companies and mid-caps have started taking ESG initiatives. It is time for small businesses to start using ESG solutions and enhance their longevity.
Read on to understand the role of ESG-centric digital solutions for small businesses.
What is ESG for Small Businesses?
In 2023, companies want to enhance their longevity and make long-term profits. Small-scale companies want to remain in the market for a longer period. With the help of ESG initiatives, a small-scale company can become sustainable and remain competitive for a long period. ESG-centric companies do not mistreat their employees, harm the environment, or hurt society. Such companies are better equipped to handle different risks and market disruptions. An ESG-centric company will have a good reputation in the eyes of consumers, clients, and investors.
ESG is no more a choice for small-scale companies around the world. Many countries have strong laws in place to ensure ESG compliance. Each country has its law, enacted occasionally. Authorities can reprimand a small-scale company for polluting the nearby water bodies due to its business activities. Since there are fewer compliance risks associated with ESG-centric companies, they last longer. In addition, ESG-centric companies find it easy to raise funds in today’s high-risk business environment. In today’s era, an investor looks for a longer investment horizon, low risk, and long-term profit. An ESG-centric company can fulfill all these things and more. Start now if you haven’t adopted ESG practices for your small business!
ESG Solutions for Small and Medium-sized Enterprises
Small and medium-sized enterprises rely on several digital solutions for ESG processes. These digital solutions help them check the effectiveness of their ESG practices.
Here are some ESG solutions used by small and medium-sized enterprises:
Climate Change Solutions
Many small and mid-sized companies rely on climate change solutions for the net-zero alignment of their portfolios. Private equity, venture capital, and other investment firms play their role in combating climate change with these solutions. Climate change solutions can measure carbon emissions, pollution levels, and other factors related to the portfolio companies. If net-zero alignment is impossible due to some portfolio companies, the climate change solution will inform the analysts about it. Such a digital solution can also help with climate change engagement research, climate finance, opportunity analysis, and risk assessment. Remember, it will reduce the manual burden on ESG analysts trying to combat climate change.
Corporate entities have started taking SDGs (Sustainable Development Goals) seriously. SDGs are a collection of seventeen interconnected goals launched by the UN for the betterment of the planet. Many other international organizations have emphasized the importance of SDGs to make the planet a better place. Some sustainable development goals apply to small and mid-sized enterprises. With the help of SDG solutions, enterprises can track their progress anytime. Performance analysis, benchmarking, and responsible finance become easy with the help of SDG solutions. If the business activities of an enterprise do not lead to SDG goals, the implemented digital solutions will let you know.
ESG Scoring Solutions
These are the most-common ESG solutions for small and mid-sized enterprises. The ESG score of any enterprise will be between 0 and 100, calculated after analyzing several environmental, social, and governance factors. Relevant authorities can use environmental factors like greenhouse gas emissions, carbon footprint, water usage, and energy efficiency to calculate the ESG score. Similarly, social factors like forced labor, child labor, equal representation, and workplace health help calculate the ESG score. Both quantitative and qualitative metrics help get the ESG score of an enterprise.
Since many factors are involved in ESG scores, more than a manual calculation is needed. You will need several ESG experts to calculate the score manually. It is better to use ESG scoring solutions to measure the performance of your enterprise. Independent ESG rating organizations usually find scores of Fortunes or S&P companies. Small and mid-sized enterprises will have to find their ESG scores themselves. Many ESG scoring models and software solutions are available for small businesses.
Besides the ESG solutionsmentioned above, small and mid-sized enterprises rely on external support. An enterprise can partner with a third-party research firm to achieve ESG goals. Start using digital solutions to achieve sustainable development goals now!