The aim of this guide is to help small and medium-sized companies (SMEs) improve their corporate sustainability and responsibility in the environmental, social and governance (ESG) fields in practice. With the development of the ESG market, legislative updates and changes in the expectations of customers, partners and investors, the field of sustainability plays an increasingly important role in building a strong and competitive business.
In part 9, Preparation of an ESG report: standards and frameworks, we explored how to align your ESG reporting with key guidelines. Part 10, Guiding questions & ESG glossary, brings together a set of crucial questions for SMEs to consider in each ESG area, along with a comprehensive glossary of terms. This final part is designed to refine your understanding and application of ESG principles in your business.
Guiding questions
Below is a list of recommended ESG activities for SMEs to focus on in each of the E, S and G areas.
Checklist of recommended ESG activities
Consumers & End-users
- Do you regularly engage with consumers and end-users and collect their feedback?
- Do you have any policies to manage potential impacts on customers and end-users, such as health and safety, social inclusion or information-related impacts (e.g. greenwashing)?
- Do you have a loyalty program?
- Have you reached some quality standards (e.g. ISO 9000)?
- Have you held open days, panel discussions and testing of new products?
- Have you implemented activities to educate consumers & end-users?
Own Workforce
- Do you regularly engage with your workforce and collect their feedback?
- Do you have any policies to manage potential impacts on your workforce, such as diversity and inclusion, working conditions, worker rights and collective bargaining?
- Do you collect data about the number of temporary, permanent, part-time and full-time workers?
- Do you provide diversity training for your employees?
- Do you collect data about employee diversity and the gender wage gap?
- Do you pay adequate wages according to relevant national benchmarks?
- Do you have a system for managing health and safety?
- Do you provide health services?
- Do you train your employees in health and safety?
- Do you have a pension system?
- Do you provide other employee benefits (e.g. sponsor sports activities)?
- Do you support the reconciliation of work and private life (flexible working hours, child care, parental leave)?
- What kind of help do you offer for redundant employees (job search assistance, retraining)?
Affected Communities
- Do you regularly engage with communities affected by your business and collect their feedback?
- Do you have any policies to manage potential impacts on affected communities, including their economic, social and cultural rights, their civil and political rights and the rights of indigenous peoples?
- Do you support local/regional/national events, projects or organisations?
- Do you include your employees in helping decide on charities to fund?
- Do you reward employees for voluntary work?
- Have you measured the impact of your business activities on society?
- Do you work with secondary schools or universities?
Environment
- Have you conducted an environmental impact assessment?
- Do you have an environmental management system?
- Do you have any policies to manage the potential environmental impacts of climate change, water, resource use, biodiversity or pollution?
- Have you measured your carbon footprint?
- Do you have a program to control/overview energy consumption, water and other resources?
- Do you reuse or recycle used materials?
- Do you have a waste management policy?
- Do you recycle?
- Does your company comply with national and international standards (ISO, EMAS)?
- Do you communicate your environmental policy with employees?
- Do you provide environmental training for your employees?
Business Conduct
- Do you have a system to detect and prevent corruption and bribery?
- Do you train your management and employees on ethics and anti-corruption?
- Do you use social or environmental criteria for the selection of partners or suppliers?
- Have you encouraged your partners and suppliers to create ESG reports?
- Do you provide information regarding your ESG activities to your partners and suppliers?
- Have you engaged your partners and suppliers in your ESG activities?
- Are you involved in political lobbying or other forms of political engagement?
- Do you have a system in place for whistleblower protection?
- Does your business have any impact on animal welfare?
Glossary
Employee Engagement: Ensuring employees are fully engaged in their work, feel good about it and enjoy it, and have a real dialogue with managers. Engagement levels can be measured using an annual employee survey.
Benchmarking: This compares a company's performance and activities with similar companies of the same focus.
Supply Chain: The interconnected relationships that bring goods and services to market. It is often challenging for companies to ensure suppliers adhere to acceptable standards. For example, child labour and unacceptable working conditions persist despite the high efforts of many owners of world-famous brands to prevent it.
Dow Jones Sustainability Indices: The indices were created in 1999 and track the financial performance of companies on the Dow Jones World Index that have been selected as leading socially responsible companies. The index provides asset managers with reliable and objective benchmarking, which is important for managing sustainability portfolios. More on www.sustainability-indexes.com.
CSR: Corporate Social Responsibility (CSR) represents the behaviour of organisations that act responsibly towards the environment and the surrounding society in which they do business as part of their operations. It is a term that was used before the terms "ESG" and "sustainable corporate behaviour", but in essence, they all mean the same thing.
ESG: ESG stands for environmental impact (E), respect for social values (S) and aspects of beneficial corporate governance (G). ESG follows on from the term CSR and is a set of standards that investors and other stakeholders currently use to screen the social and environmental responsibility of companies.
Eco-efficiency: Producing the same quality of goods and services with more efficient use of resources, less waste and pollution - includes energy efficiency and efficient water and materials management.
Fair trade: Consumers of fair trade products pay a higher price for the product, where part of the price is then returned to farmers, artisans, and local communities in developing countries, contributing to their social and environmental development. Fair Trade International operates the most recognised and widespread trademark for products that meet its standards. More at www.fairtrade.net.
Green management: A philosophy and procedure aimed at optimising the organisation's operation concerning the environment as a whole. Green management focuses mainly on carefully handling energy and natural resources and tries to reduce negative environmental impacts. The goal should be to connect ecology, economy and human awareness and create an integral part of the company's philosophy and management.
Greenwashing: Disingenuous communication based on exaggerated claims about a company's positive environmental impact. This must be avoided at all costs; otherwise, the company's reputation will be ruined.
Promoting products/services with added value (cause-related marketing): Promoting products or services connected to ESG activity. For example, a certain amount of money goes to charitable purposes for each product or service.
Business ethics: Doing business in accordance with moral values. Primarily through fair and honest principles and values reflected in the company's actions and organisational culture.
Environmental Impact Assessment: A systematic approach, often detailed in legislation and codes, that is used to assess the environmental impacts of a project over its life cycle. Social impacts are also often evaluated.
Social entrepreneurs: People who connect solving social problems with their business, for example, employing people with disabilities or developing a product or service that directly addresses a social problem such as homelessness or lack of access to clean water
Socially Responsible Investment (SRI): Considering social and environmental issues in investment decisions. Currently, investors are increasingly interested in whether a company is socially responsible.
Stakeholders: Stakeholders, or interested parties, are all persons, institutions or organisations that influence the company's operation or are affected by its operation. The group of stakeholders in the broadest sense includes customers, shareholders, employees, business partners, suppliers, representatives of state and local governments, interest groups, media, trade unions and international organisations. It is in cooperation with them that companies implement their ESG programs or define their ESG strategy.
Corporate Governance: How the company is managed internally, especially how the interests of shareholders are protected from abuse by the board and/or CEO. Regulatory frameworks are often set directly in government regulations. For example, in the US, it is The Sarbanes–Oxley Act of 2002. More at www.soxlaw.com.
Triple bottom line: The assertion that companies must manage their operations on three equal pillars: people (care for human resources, their performance), planet (environmental impact) and profit (financial performance).
Sustainable development: The kind of development that preserves the ability of current and future generations to meet their basic life needs while not reducing the diversity of nature and preserving the natural functions of ecosystems.
Carbon neutrality (or net-zero): Carbon neutrality means that the state or company removes the same amount of greenhouse gasses from the atmosphere as it emits into the air. In other words, this state or company does not add or remove any greenhouse gasses through its activities, so we say that it is carbon neutral.
Carbon footprint: The carbon footprint is a measure of the impact of human activity on the environment and especially on climate change. The carbon footprint (similar to the ecological footprint) indirectly indicates energy consumption, products and services. It measures the amount of greenhouse gases corresponding to a particular activity or product. The carbon footprint can be determined at various levels - national, municipal, individual, or the company and product level.
Community Engagement: How companies interact with the communities in which they operate. This usually involves supporting community projects near the business and being interested in the community's views and needs.
Benchmarking: This compares a company's performance and activities with similar companies of the same focus.
Supply Chain: The interconnected relationships that bring goods and services to market. It is often challenging for companies to ensure suppliers adhere to acceptable standards. For example, child labour and unacceptable working conditions persist despite the high efforts of many owners of world-famous brands to prevent it.
Dow Jones Sustainability Indices: The indices were created in 1999 and track the financial performance of companies on the Dow Jones World Index that have been selected as leading socially responsible companies. The index provides asset managers with reliable and objective benchmarking, which is important for managing sustainability portfolios. More on www.sustainability-indexes.com.
CSR: Corporate Social Responsibility (CSR) represents the behaviour of organisations that act responsibly towards the environment and the surrounding society in which they do business as part of their operations. It is a term that was used before the terms "ESG" and "sustainable corporate behaviour", but in essence, they all mean the same thing.
ESG: ESG stands for environmental impact (E), respect for social values (S) and aspects of beneficial corporate governance (G). ESG follows on from the term CSR and is a set of standards that investors and other stakeholders currently use to screen the social and environmental responsibility of companies.
Eco-efficiency: Producing the same quality of goods and services with more efficient use of resources, less waste and pollution - includes energy efficiency and efficient water and materials management.
Fair trade: Consumers of fair trade products pay a higher price for the product, where part of the price is then returned to farmers, artisans, and local communities in developing countries, contributing to their social and environmental development. Fair Trade International operates the most recognised and widespread trademark for products that meet its standards. More at www.fairtrade.net.
Green management: A philosophy and procedure aimed at optimising the organisation's operation concerning the environment as a whole. Green management focuses mainly on carefully handling energy and natural resources and tries to reduce negative environmental impacts. The goal should be to connect ecology, economy and human awareness and create an integral part of the company's philosophy and management.
Greenwashing: Disingenuous communication based on exaggerated claims about a company's positive environmental impact. This must be avoided at all costs; otherwise, the company's reputation will be ruined.
Promoting products/services with added value (cause-related marketing): Promoting products or services connected to ESG activity. For example, a certain amount of money goes to charitable purposes for each product or service.
Business ethics: Doing business in accordance with moral values. Primarily through fair and honest principles and values reflected in the company's actions and organisational culture.
Environmental Impact Assessment: A systematic approach, often detailed in legislation and codes, that is used to assess the environmental impacts of a project over its life cycle. Social impacts are also often evaluated.
Social entrepreneurs: People who connect solving social problems with their business, for example, employing people with disabilities or developing a product or service that directly addresses a social problem such as homelessness or lack of access to clean water
Socially Responsible Investment (SRI): Considering social and environmental issues in investment decisions. Currently, investors are increasingly interested in whether a company is socially responsible.
Stakeholders: Stakeholders, or interested parties, are all persons, institutions or organisations that influence the company's operation or are affected by its operation. The group of stakeholders in the broadest sense includes customers, shareholders, employees, business partners, suppliers, representatives of state and local governments, interest groups, media, trade unions and international organisations. It is in cooperation with them that companies implement their ESG programs or define their ESG strategy.
Corporate Governance: How the company is managed internally, especially how the interests of shareholders are protected from abuse by the board and/or CEO. Regulatory frameworks are often set directly in government regulations. For example, in the US, it is The Sarbanes–Oxley Act of 2002. More at www.soxlaw.com.
Triple bottom line: The assertion that companies must manage their operations on three equal pillars: people (care for human resources, their performance), planet (environmental impact) and profit (financial performance).
Sustainable development: The kind of development that preserves the ability of current and future generations to meet their basic life needs while not reducing the diversity of nature and preserving the natural functions of ecosystems.
Carbon neutrality (or net-zero): Carbon neutrality means that the state or company removes the same amount of greenhouse gasses from the atmosphere as it emits into the air. In other words, this state or company does not add or remove any greenhouse gasses through its activities, so we say that it is carbon neutral.
Carbon footprint: The carbon footprint is a measure of the impact of human activity on the environment and especially on climate change. The carbon footprint (similar to the ecological footprint) indirectly indicates energy consumption, products and services. It measures the amount of greenhouse gases corresponding to a particular activity or product. The carbon footprint can be determined at various levels - national, municipal, individual, or the company and product level.
Community Engagement: How companies interact with the communities in which they operate. This usually involves supporting community projects near the business and being interested in the community's views and needs.
Thank you for joining us through this 10-part ESG guide for SMEs. We hope the insights and guidance provided have been valuable in shaping your ESG strategy. Stay tuned, as a full downloadable version of our guide will be available shortly, offering you a consolidated resource to revisit and utilize in your sustainable business journey.