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Navigating the ESG Landscape: Guide for EU SMEs

In this blog you will discover:

  • The top 6 ESG-related acronyms you should know (out of the countless ones out there)
  • 6 actionable steps for constructing a solid ESG roadmap
  • Key sustainability reporting systems and company certifications

Essential acronyms to know

Essential acronyms for ESG
  • CSRD (Corporate Sustainability Reporting Directive): An EU directive mandating impact reporting for listed and large companies meeting specific criteria. The initial group of companies must start reporting for the financial year 2024, with the first sustainability report due in 2025.
  • ESRS (European Sustainability Reporting Standards): Standards established by the CSRD, outline the structure and disclosure requirements for reporting. The reporting standards adaptation for non listed SMEs is currently in the consultation phase and can be accessed here.
  • GRI (Global Reporting Initiative): An international organisation offering the most widely adopted impact reporting standards. The ESRS was developed collaboratively with GRI, which remains the prominent global impact reporting standard. Here you can access all the GRI standards.
  • EFRAG (European Financial Reporting Advisory Group): Responsible for ensuring that International Financial Reporting Standards align with European requirements and concerns. They’ve served as technical advisors to the EC in developing the ESRS, making this abbreviation commonly associated with the ESRS.
  • LCA (Life-cycle assessment): Evaluation of a product’s environmental impact (e.g., CO2 emissions, water usage) across its entire life-cycle, from production to disposal. CO2 assessment is just one facet of an LCA.
  • EPD (Environmental product declaration): An independently verified document showcasing a product’s environmental impact. This certification can be pursued only after completing an LCA.

Key Steps to building a strong ESG plan

ESG strategy, plan and brainstorming
  1. Assess your current ESG status and your context: Evaluate your company’s current ESG practices against your mission and long-term vision to find initial gaps. In parallel explore external factors such as policy trends and the competition. As part of your competitor analysis, examine how they report their impact (e.g., through certifications) to determine your reporting strategy that fosters relevance and competitive advantage. Lastly, identify which business models, products and services innovation will be aligned with future policy trends.
  2. Stakeholder Mapping and Materiality Assessment: Engage stakeholders (e.g., employees, investors, customers) in developing your plan to ensure its resilience. After mapping your stakeholders, conduct a double materiality assessment with them. “Materiality assessment” refers to the identification of those topics that the company needs to report on, and “double” to be material/relevant either from the impact perspective or from the financial perspective or both. To conduct the materiality assessment you can follow the guidelines provided by EFRAG.
  3. Define ESG Goals and Strategy: With a clear understanding of your starting point, market trends, and stakeholder needs, establish your goals and draft your strategy. Depending on your current position, consider maintaining, enhancing, or optimising your efforts. Clearly defined goals facilitate the selection of impact assessment methods and indicators.
  4. Conduct an Impact Assessment: To translate the environmental aspect of your strategy into actionable steps, identify your impact and hotspots (aka areas of highest impact) through an LCA, which as mentioned earlier assesses the environmental product’s impact, from farming to product disposal. There are also analyses with a narrower scope like CO2 impact assessments which may work well in certain cases, depending on your goals. For the social and governance aspects we instead suggest simply following the ESRS guidelines.
  5. Finalise ESG Strategy and Roadmap: Now you’ve got all the information you need to finalise your ESG strategy and translate it into a roadmap. Incorporate eco-design principles (aka designing your product or service based on environmental impacts) and ensure the goals part of the roadmap are Specific, Measurable, Achievable, Relevant, and Time-bound (SMART).
  6. Report and Communicate: Finally, utilise the ESRS disclosure system and/or seek certifications to communicate your company or product impact. Make sure you have a clear definition of your audience in order to define the right certifications.

Key reporting Systems and certifications

Reporting system ESG

For the majority of scale-ups, and certainly for any startup, compliance with CSRD is not (yet) mandatory, meaning impact disclosure remains voluntary. However, it is undeniably significant for consumers, customers, and investors. So, what are the ways for communicating your impact?

Choice 1: Utilise ESRS and create an impact report based on this standard. You can then feature this report, and perhaps some infographics, on your website. Many companies are doing it already.

Choice 2: Seek certifications that validate your commitment to sustainability. These may include product-specific certifications such as organic or Rainforest Alliance, or broader company-wide certifications. There are still not many company-wide certifications, but one that is getting some traction among consumers is B Corp, whereas if your goal is to communicate with investors, EcoVadis could be the preferable option.

Interested in getting support to navigate the complexity of ESG? Click here and send us a message to schedule a complimentary 1-hour workshop in which we will identify the needs for your company.