Learn actionable Sustainability Reporting Strategies tailored for SMEs in this insightful guide.
Sustainability reporting has become increasingly important for SMEs as a resource for showcasing transparency, gaining a competitive advantage, and measuring and communicating their contribution towards the transition to a more sustainable world.
A sustainability report provides a comprehensive overview of an SME’s environmental, social, and governance (ESG) performance, highlighting its impact on society and the environment. It also offers valuable insights into an SME’s operations, enabling it to identify and address potential risks and opportunities related to ESG factors. This proactive approach can lead to improved decision-making and long-term business resilience.
This article provides a guide to the key steps of an effective sustainability reporting practice for SMEs. These steps can be used as a starting point and a basic framework on which to base your sustainability reporting practice.
Defining Material Sustainability Issues
Sustainability reporting begins by identifying and prioritizing the material sustainability issues that are most relevant to an SME’s operations and stakeholder expectations. Material sustainability issues are those that have a significant impact on the organization’s environmental, social, and governance performance. They are also those that are highly relevant to the interests of stakeholders, such as investors, customers, employees, and communities.
Identifying material sustainability issues is an iterative process that involves analyzing internal and external factors that are integral to the organization’s sustainability performance and goals. Internal factors include the SME’s operations, products, services, and supply chain. External factors include industry trends, regulatory requirements, and stakeholder expectations.
Once material sustainability issues have been identified, they must be prioritized based on their relative importance and impact. This prioritization allows the SME to focus its sustainability efforts on the areas that will yield the greatest benefits for both the organization and its stakeholders.
Selecting and Tailoring Sustainability Reporting Frameworks
Sustainability reporting frameworks provide guidelines and standards for organizations to report on their ESG performance in a consistent and comparable manner.
Popular frameworks for SMEs include the Global Reporting Initiative (GRI) Standards and the Sustainability Accounting Standards Board (SASB) standards. The GRI Standards are more commonly used and cover a wider range of sustainability topics, while the SASB Standards are more industry-specific and provide more detailed guidance on key performance indicators (KPIs) relevant to specific industries.
When selecting a sustainability reporting framework, SMEs should consider their size, industry, and reporting objectives. It is also important to tailor the framework to the specific needs of the organization by selecting the most relevant KPIs and focusing on the material sustainability issues identified in the materiality assessment. Additionally, companies can also choose to combine multiple standards to suit their needs.
Tailoring the sustainability reporting framework allows SMEs to create more meaningful and concise reports that effectively communicate their sustainability performance to stakeholders.
Measuring sustainability is crucial for tracking progress, identifying areas for improvement, and demonstrating an organization’s commitment to ESG (environmental, social, and governance) performance. ESG encompasses three key dimensions:
Environmental (E): This focuses on the organization’s impact on the natural environment, including its resource consumption, waste generation, and emissions. Key performance indicators (KPIs) for environmental sustainability may include energy consumption, water usage, waste generation, and greenhouse gas emissions.
Social (S): This includes the organization’s impact on society, including its labor practices, community engagement, and human rights record. KPIs for social sustainability may include workplace safety, employee diversity and inclusion, community investment, and human rights compliance.
Governance (G): This focuses on the organization’s corporate governance practices, including its board composition, executive compensation, and risk management. KPIs for governance sustainability may include board independence, executive compensation ratio, and anti-corruption policies.
SMEs can implement a variety of tools and methods to measure their ESG performance, including data collection, reporting, and benchmarking. In practice, these can include regular emissions calculation and reporting, life-cycle assessments, stakeholder engagement data, etc.
Implementing Sustainability Reporting
Implementing sustainability reporting involves a structured approach that ensures the organization collects, analyzes, and communicates relevant information comprehensively and consistently. Once the materiality assessment has been done and a reporting framework or set of frameworks selected the process typically involves the following key steps:
- Establishing a sustainability team or designated professional: Creating a dedicated team or individual professional responsible for managing sustainability reporting initiatives.
- Gathering and analyzing data: Collecting and organizing relevant data on ESG performance indicators.
- Leveraging technology: Utilize technology tools to streamline data collection, analysis, and reporting.
- Working with external experts: A common way companies approach the sustainability reporting practice is by working with sustainability reporting professionals such as Askel Sustainability Solutions who work with the company to ensure that the reporting process is accurate and comprehensive and the resulting report meets the required criteria.
- Preparing the sustainability report: Crafting a clear and concise report that communicates the SME’s sustainability performance to stakeholders.
- Reviewing and improving: Regularly review and enhance the sustainability reporting process to reflect the SME’s evolving business and sustainability goals.
Effective communication is crucial for ensuring that sustainability reporting resonates with stakeholders and conveys the SME’s sustainability efforts clearly and engagingly. Several key principles can guide effective communication in sustainability reporting:
Clarity and Conciseness: Use simple and straightforward language that is easy to understand for a wide audience. Avoid jargon and technical terms unless absolutely necessary.
Visual Representation: Integrate visuals, such as graphs, charts, and images, to enhance comprehension and make the report more appealing. Common examples include materiality matrix and stakeholder mapping.
Data-Driven Approach: Support sustainability claims with concrete data and metrics to demonstrate the SME’s impact on ESG issues.
Targeted Communication: Tailor the communication approach to the specific needs and interests of different stakeholder groups, such as investors, customers, employees, and community members.
Transparency and Accountability: Be open and transparent about the SME’s sustainability efforts, acknowledging areas for improvement and demonstrating a commitment to continuous improvement.
Effectively Sharing the Report with Stakeholders:
- Make the report freely available and easy to find: It is of vital importance that the report is easily accessible to the stakeholders it is meant for. The best way to do this is to share it on your company’s sustainability page.
- Select the Right Channel: Choose the most appropriate communication channels to reach your target stakeholders. Consider traditional channels like press releases, website updates, and investor presentations, as well as emerging channels like social media and online forums.
- Utilize Multimedia Content: Supplement the sustainability report with engaging multimedia content, such as infographics, videos, and interactive elements, to enhance audience engagement and understanding.
- Foster Stakeholder Dialogue: Engage with stakeholders through surveys, feedback mechanisms, and social media interactions to gather their input, address their concerns, and demonstrate the SME’s commitment to continuous improvement.
- Share Updates Regularly: Provide regular updates on sustainability initiatives and progress to maintain stakeholder interest and demonstrate the SME’s ongoing commitment to sustainability.
- Promote the Report: Utilize marketing and public relations strategies to promote the sustainability report and ensure it reaches a broad audience of stakeholders.