Having an Environmental, Social, and Governance (ESG) strategy in place is a priority for SMEs
This analysis is based on bespoke market research commissioned by Barclays and conducted by Censuswide among more than 800 directors in SMEs. The sample covered UK companies with a turnover of £6m-£50m and the research was conducted in June 2022.
Having an Environmental, Social, and Governance (ESG) policy in place is a priority for SMEs. Almost two thirds (63%) said they consider it very important to their business and overall, an overwhelming 98% of all SME owners surveyed said that an ESG strategy was either very important or important for their business.
However, SMEs are going further than saying ESG is important to them. Almost all of the directors questioned have already taken steps when it comes to ESG.
Barclays research found that some 95% of SMEs have an ESG strategy in place for their business. Respondents with the smallest and largest turnovers are most likely to have a strategy: 98% of SMEs turning over £6-10m, and 97% of those with turnovers of £40-50m.
With such enthusiasm almost across the board from SMEs for ESG, there are not vast regional differences. Yet in certain regions, 100% of SMEs said an ESG strategy was very important or important for their business. This was the case in (SMEs located with the closest city as) Birmingham, Brighton, Cardiff, Glasgow, Leeds, Liverpool, Manchester, Newcastle, Plymouth, Sheffield and Southampton.
So, what are the drivers behind adopting an ESG strategy?
Some 55% of those surveyed (including those who stated ESG was important to their SME) said they felt ESG was important to their employees.
With high-quality employees increasingly able to choose where they work, many SMEs may well be aware that good ESG credentials can increase their appeal.
ESG strategy is one thing that candidates may well be looking for. And so, having a strong ESG strategy can play a part in an ongoing challenge many SMEs are facing - that of getting and retaining talent.
Among SMEs in the smaller category (£6m–£10m company turnover) the emphasis on importance of ESG to employees was even higher – with 60% saying this was a reason ESG was important to their SME.
Another big driver behind having an ESG strategy in place is believing it is the right thing to do. Almost half of those who said ESG was important to their SME (48%) said this was one reason why ESG was important to them.
Some 44% cited supply chain pressure as a factor. Among SMEs in the £10m–£20m company turnover group, this figure rises to 60%. Perhaps this is because these mid-range SMEs are more likely to be in the middle of supply chains – using suppliers as well as being suppliers themselves.
Among those SMEs that have an ESG strategy in place, who is responsible for the strategy?
Barclays research showed that 25% have a dedicated ESG employee or team responsible for this. Meanwhile, 47% said that this responsibility was taken by staff working in the operations department.
At Barclays, we are supporting many SME businesses with their sustainability transition.
We also have our own ambition to become a net zero bank by 2050.
Find out what Barclays can do to help your SME with ESG. With our connected thinking on sustainability, you can benefit from funding, expertise and more.
Developing an Environmental, Social, and Governance (ESG) strategy can be tricky for SMEs. You might not have a dedicated team or individual to manage the process yet and knowing what to include in your ESG strategy can be difficult with so many aspects to consider. Yet this is a vital area for SMEs.
This simple checklist can help you reflect on what sorts of things to consider in building in your ESG strategy – and also how you might deliver it:
Defining ESG
ESG might well mean different things to different people – so start by defining exactly what you mean by ESG. You should also communicate this to your staff and your customers – don’t assume they know what ESG means or what ESG means to you.
Consider all the elements of E, S and G
It can be easy to focus only on the element of E, S and G which is most relevant to your SME in building your ESG strategy. Many SMEs that produce lots of emissions, such as hauliers, may well focus on the ‘E’. But remember to consider all the elements of E, S and G and reflect on how these may impact your overall business. You’ll probably find that the different elements of E, S, and G will naturally flow into and influence one another. Improve one area, and you’ll likely see the impact in, or have ideas for, the next.
Measure where you are now
The old adage that you can’t manage what you don’t measure stands strong here. Decide what to measure – for people, operations, products, services and processes – and find out what the benchmarks for your industry and your peer group are. Work out what data you need to gather and how you will collect this. Decide what systems you can put in place to do this in an efficient way.
Set some targets and activities to achieve
An effective way to improving ESG can be through incremental steps. Taking into account where you are now as the baseline, set some clear and objective targets that you want to reach as a company. Include a clear timeline. Maybe it’s a step-by-step reduction in GHG emissions, or improving equality and diversity in your business by certain percentages. Set clear milestones and track and report on progress on a regular basis. By achieving small steps, you will gain momentum, and should be able to build on your progress.
Tell your story
As our research shows, SMEs are embarking on ESG strategies because it’s the right thing to do, because ESG is important to their employees, and because of supply chain expectations. Whatever your driver is, once you see some success, it’s important to tell your story clearly. Doing so can help others learn from you, and it can help you become an employer, supplier or customer of choice.
Find out how SMEs are tackling three key issues
More from Barclays
SMEs are in optimistic mode, investing in growth, on the hunt for new talent and have sustainability in mind.
Barclays has a range of dedicated Industry Specialists to support your sector needs.
Explore our hub to gain the tools and insights to understand the bigger picture.
See how you can realise your company's environmental and sustainable ambitions with flexible funding from Barclays Green Solutions.
