How medium businesses can take small steps for big ESG impact
Head of Sustainability Governance
Virgin Media O2
29th September 2023
Share this article:
74% of UK CEOs now say environmental, social and governance (ESG) is equally as important as financial performance, according to ECI.
And ESG topics have dominated UK headlines in recent years.
So what’s driving this rise in importance?
There are plenty of reasons, from the very real impacts of climate change to the growing issues associated with social inequalities.
And there is growing evidence the British public expects businesses to demonstrate responsible and sustainable practices.
74% of consumers say a business should have a net zero strategy, for example, according to research from the Lloyds Banking Group Centre for Responsible Business.
ESG regulations are increasing all the time and while company strategies are largely an embedded practice at large enterprises and public sector organisations, when it comes to small-to-medium businesses (SMBs), there are still a lot of questions that need answering.
We wanted to answer some of these questions to demystify ESG and help you get started on your own journey.
What is ESG?
ESG stands for environmental, social and governance. It’s a set of criteria that businesses, stakeholders and investors use to evaluate a company’s impact and sustainability performance beyond just financial measures.
Tackling all three elements at once may appear daunting at first. Like all transformational processes, it’s about taking small steps that build towards the big picture over time.
In fact, our recent research, surveying over 1,200 UK workers and conducted through Censuswide, suggests many businesses are focusing on improving one aspect of ESG for the year ahead.
29% of small and medium-business respondents said they were focusing more on environment, 20% said they were focused more on social, and 17% more focused on governance.
Here’s a brief overview of each element of ESG.
- Environmental considers how a company safeguards the environment – corporate policies addressing climate change, energy efficiency or biodiversity, for example
- Social examines how an organisation manages relationships with employees, suppliers, customers and the communities where they operate
- Governance deals with a company’s leadership, executive pay, reporting, audits, internal controls and shareholder rights
How can I move my business towards being net zero?
The saying goes, “You can’t manage what you can’t measure.” The first step in moving your business towards net zero carbon emissions is understanding your current carbon footprint, i.e. collecting data on electricity use, fuels, wastage and other factors that affect your carbon emissions.
Fortunately the UK government updates its emission factors annually so you can see exactly what you need to keep track of.
There are plenty of online calculators you can use to work out your business’ greenhouse gas emissions and start your journey to net zero. We recommend using the Carbon Trust calculator, designed specifically for SMBs.
The next step is setting goals. You’ll want to focus on commitments that have clear, achievable targets. Using a tool such as a carbon calculator means you can set data against these goals, giving you clear measurements to understand your year-on-year progress and how near – or far – you are from success.
What UK regulations do I need to be aware of?
For the time being, SMBs have relatively few ESG regulations to meet. But this is set to change. The Corporate Sustainability Reporting Directive (CSRD) came into force in January 2023.
The CSRD requires in-scope companies to report on sustainability-related issues and extends to large and listed EU companies. But the new rules also apply to medium-sized businesses that are listed on EU regulated markets or non-EU parent companies with a listed SMB subsidiary.
Under the regulations, businesses will be required to report on which 'sustainability matters' affect or apply to the company as well as the impact the company has on said sustainability matters. This could impact the resilience of your company's business model or your strategy towards sustainability risks.
Want more detailed information about what companies will need to report on? Read the full requirements here.
It pays to be prepared. And sustainability reporting is fast becoming the norm among UK businesses. So being aware of what’s required means you can plan ahead.
We’ve already seen the criteria expand beyond large enterprises and public sector organisations. And with SMBs forming 99.2% of the total business population in the UK, it’s likely that SMBs will soon need to follow suit.
How can I get started with ESG reporting?
As an SMB, you don’t legally need to report emissions yet. But legal requirements and customer expectations are two different things. And staying ahead of the curve is a great way to remain competitive and show you’re committed to creating positive change.
Here are a few steps to help you get started.
Step 1: conduct an ESG audit of your business. Who are you as a business? What is your mission? What matters most to your stakeholders? The topics you report on will vary depending on your industry and sector.
Step 2: define your KPIs and goals. The most widely-recognised, material sustainability reporting KPI set is your company's Scope 1, 2 & 3 greenhouse gas (GHG) emissions. For small-to-medium companies, the B Corp framework is the most widely adopted framework.
Step 3: create your report. This might be a full ESG report or a more focused report on your most material impacts. These reports are the main tool businesses use to publicly communicate their environmental risks, opportunities and practices to stakeholder groups, partners and customers. They’re an opportunity to lay out your commitment as a business and potentially win more investment and customers.
If you’re unsure on any of the above, it’s best to work with an experienced sustainability leader or manager (or a consultant if you don’t have one internally) who can help you develop your reporting strategy.
Ready to make measurable progress with ESG?
If you’re not sure where to start, the right partners can help you track, manage and reduce your environmental impact at no extra cost.
“We’ve got to work together. It’s about building partnerships - we’re not going to do this solo, especially in the current economic climate, so we’ve got to support each other. Partnerships are the key to getting this delivered properly.”
Lindsay Harling, Head of Commissioning and Procurement at Fedcap
We’ve developed our carbon calculator - based on a model that has been verified by the Carbon Trust as conforming to the Greenhouse Gas Protocol Product Lifecycle Standard* - to help customers quickly and easily understand the carbon footprint of some of our most popular business solutions. This means you can use this data to back up your environmental reporting.
We’re also able to help you reduce your electronic waste and give back to your community through our O2 Recycle for business programme. We’ll take your old devices and recycle them for you, with our zero-landfill policy meaning the vast majority of phones will be reused, repaired or recycled. This programme allows you to take an easy and meaningful step towards your ESG goals.
Ready to make measurable progress with ESG? Visit our sustainability landing page to find out more about how we can help get you started.
* Model outputs do not constitute a verified product/organisation footprint.