A sustainability report is no longer a document reserved for large corporations. For Small and Medium-sized Enterprises (SMEs), it has become a fundamental strategic tool for communicating their commitment to environmental, social, and governance (ESG) issues. Preparing a sustainability report allows companies to understand and communicate their performance, building trust with stakeholders and gaining a significant competitive advantage.
This guide provides a clear and practical framework for SMEs on how to structure an effective sustainability report, from defining objectives to reporting results.
What is a Sustainability Report?
A sustainability report, also known as a non-financial statement, is an official document through which a company discloses its performance and impact in three key areas: environmental, social, and governance (ESG). It is not merely a collection of data but a strategic narrative that illustrates the company's commitment to responsible and sustainable development.
- Environmental (E): This dimension covers the company's impact on the planet. It includes data on energy consumption, greenhouse gas emissions, waste management, water usage, and biodiversity protection policies.
- Social (S): This area focuses on the company's relationship with its employees, suppliers, customers, and the community. Topics include workplace health and safety, training, diversity and inclusion policies, and community initiatives.
- Governance (G): This aspect concerns the company's internal rules, processes, and controls. It covers topics like business ethics, anti-corruption policies, board composition, and accountability.
For an SME, a sustainability report is a powerful tool for transparency and a means to structure its sustainability strategy.
Why is a Sustainability Report Important for SMEs?
While not always mandatory, drafting a sustainability report offers SMEs numerous strategic benefits that go far beyond simple regulatory compliance.
- Improved Access to Credit: Financial institutions are increasingly incorporating ESG criteria into their risk assessments. A solid sustainability report can facilitate access to financing and improve credit conditions.
- Competitive Advantage: Companies demonstrating a tangible commitment to sustainability are often preferred by customers, suppliers, and potential partners. This is particularly true in value chains where large corporations require their SME suppliers to adhere to specific sustainability standards.
- Risk Management: The reporting process helps identify and manage ESG-related risks, such as those linked to climate change, regulations, or supply chain interruptions. Proactively addressing these risks enhances business resilience.
- Talent Attraction and Retention: Employees, especially younger generations, prefer to work for companies that share their values. A clear commitment to sustainability can help attract and retain top talent.
- Brand Reputation: Communicating ESG efforts transparently and effectively strengthens the company's reputation and builds trust with all stakeholders, including customers and the local community.
Key Frameworks: ESRS, GRI, and SASB
To ensure credibility and comparability, sustainability reports are prepared following internationally recognized standards. The main frameworks are:
- ESRS (European Sustainability Reporting Standards): Developed to support the Corporate Sustainability Reporting Directive (CSRD), these standards are becoming the benchmark in Europe. They are based on the principle of "double materiality," which requires companies to report on both their impact on the environment and society (impact materiality) and how sustainability issues affect their financial performance (financial materiality). Although primarily for large companies, ESRS provides a robust framework that SMEs can adapt.
- GRI (Global Reporting Initiative): The GRI standards are the most widely used globally. They offer a flexible and modular structure, allowing companies to choose the topics most relevant to their business and stakeholders. The GRI framework is particularly suitable for companies beginning their sustainability reporting journey.
- SASB (Sustainability Accounting Standards Board): SASB standards are industry-specific and focus on financially material sustainability information. They are designed to help companies communicate ESG information relevant to investors and financial markets. An SME might use SASB standards to focus on the most critical issues for its specific sector.
Which Framework to Choose?
- For SMEs operating within European supply chains, aligning with ESRS is a strategic choice.
- For a comprehensive and globally recognized report, GRI is an excellent starting point.
- For SMEs focused on communicating value to investors, SASB provides the most direct and financially-oriented guidance.
Structure of a Sustainability Report
A well-structured sustainability report should be clear, concise, and easy for all stakeholders to navigate. Here is a recommended structure:
- Introduction and CEO Letter: A brief presentation of the company, its mission, and a letter from the CEO or founder outlining the company's commitment to sustainability.
- Sustainability Strategy and Materiality Assessment: This section describes the process used to identify material ESG issues for the company and its stakeholders (materiality assessment). It also outlines the company's long-term sustainability goals.
- Performance and KPIs: This is the core of the report. Here, the company presents data and Key Performance Indicators (KPIs) for each material topic identified in the ESG areas.
- Goals and Future Actions: The company sets clear, measurable, and time-bound improvement targets for the future.
- Conclusion and Contacts: A summary of the key results and contact information for stakeholders who wish to provide feedback or request further information.
Practical Examples by Sector
The material topics for a sustainability report vary significantly depending on the industry. Here are some practical examples for different types of SMEs.
Food SMEs
- Environmental: Emissions-intensity and traceability of raw materials, reduction of food waste, sustainable packaging, and responsible water management.
- Social: Fair working conditions along the supply chain, food safety, and clear communication with consumers about ingredients.
- Governance: Certifications (e.g., organic, fair trade) and transparent supply chain management policies.
Logistics and Transport SMEs
- Environmental: Reducing CO2 emissions from the vehicle fleet (e.g., transitioning to electric vehicles), route optimization to lower fuel consumption, and managing packaging waste.
- Social: Driver safety, employee training on eco-driving, and managing the impact on communities (e.g., noise reduction).
- Governance: Policies against corruption in customs operations and fleet management transparency.
Battery Manufacturing SMEs
- Environmental: Responsible sourcing of critical raw materials (e.g., lithium, cobalt), energy efficiency in production processes, and end-of-life battery management (recycling).
- Social: Worker health and safety, particularly regarding exposure to hazardous materials, and human rights in the supply chain.
- Governance: Traceability of minerals and policies for managing conflicts of interest.
Manufacturing SMEs
- Environmental: Energy efficiency of machinery, waste reduction and recycling, and control of polluting emissions into the air and water.
- Social: Workplace safety, continuous employee training, and management of relationships with local suppliers.
- Governance: Quality management systems (e.g., ISO 9001) and product safety policies.
Simplify Reporting with an ESG Software
The process of collecting, managing, and reporting ESG data can be complex and time-consuming. An ESG software solution is designed to simplify these activities by centralizing data, automating calculations, and generating reports compliant with the main international standards. This allows even SMEs with limited resources to produce a high-quality sustainability report efficiently.
Ready to transform your sustainability commitment into a strategic advantage? Discover how our ESG software can simplify your reporting process.
Book a demo today and discover how our ESG software can streamline your sustainability reporting, ensure compliance, and help your company achieve its strategic goals.
