See the Green Light: How Sustainability Efforts Boost SME Profits and Strategy

Discover how sustainability practices boost SMEs’ bottom line and market position. Resource management and ESG reporting help cut costs and attract and retain customers.

The evidence is clear – adopting sustainability practices supports commercial success and competitive advantage in small and medium-sized enterprises (SMEs).

Most research has shown a positive link between sustainable behaviors and financial performance in SMEs. This means such practices are no longer just an ethical choice. They are a strategic imperative.

So let’s explore how taking a stance on environmental, social and governance (ESG) issues; managing resources; and sustainability reporting can be game changers for SMEs, enabling them to cut costs, increase efficiencies and win more business.

Save costs by managing resources

Adopting sustainable practices can enable substantial cost savings. Businesses can cut expenses by optimizing energy consumption, reducing waste and streamlining operations. For example, energy-efficient technologies like LED lighting and smart appliances help shrink carbon footprint and electricity bills.

Sustainable practices often help improve resource management and productivity. Efficient use of raw materials and supplies minimizes waste, reducing disposal costs and procurement expenses.
The drive to go green also encourages SMEs to reevaluate their processes, sparking innovative ways to achieve more with fewer resources.

Gain new business and market position

Sustainability is not just a buzzword – it drives consumer decisions, as they increasingly seek eco-conscious brands and products that align with their values.

A growing number are also willing to pay a premium for products and services from sustainable companies. By showcasing their commitment to sustainable practices, SMEs can tap this burgeoning market, expanding customer base and boosting revenue.

So positioning your firm as environmentally responsible can be a powerful way to attract new customers, build brand loyalty, increase bottom line and gain a competitive edge.

Encourage repeat business

Sustainability practices also help retain existing customers. Showing genuine concern for the environment and society helps build trust, increase customer loyalty and establish long-lasting client relationships.

Transparent communication about your sustainability efforts – through various channels such as social media, newsletters and sustainability reports – also fosters customer loyalty. When customers see their favorite SMEs taking a stand on environmental issues and backing it with action, they are more likely to remain loyal and advocate for those brands.

Boost competitive advantage through transparency and disclosure

Transparency is a fundamental part of sustainable business practices. SMEs that disclose their ESG efforts demonstrate authenticity and build credibility with stakeholders, including customers, investors, employees and business partners. It shows a commitment to corporate social responsibility, setting the company apart from less transparent competitors.

As sustainable practices become an expectation rather than an exception, many investors prioritize businesses that incorporate ESG factors into their decision-making. Access to capital and partnerships can significantly improve for SMEs with strong sustainability records.

In contrast, SMEs with unclear sustainability reporting could be denied vital financing, stifling innovation and growth, according to the Sustainable Business Guide.

Enhance decision-making with the power of ESG reporting and data analytics

As part of this transparency, ESG reporting has become a vital tool for SMEs to track and communicate their sustainability efforts. These reports provide stakeholders with a comprehensive view of the company’s ESG practices and impacts. The data produced is critical for internal decisions and external communication.

SMEs can also use data analytics to gain insights into their sustainability performance. By tracking metrics – such as energy consumption, waste generation and carbon emissions – they can set realistic sustainability goals and identify areas for improvement. Analyzing such data also helps SMEs benchmark themselves against industry peers and understand the impact of their efforts on the bottom line.

How can Rimm help?

For SMEs, sustainability is a business opportunity as well as a moral responsibility. Embracing eco-friendly practices brings cost savings, enhances market position, drives repeat business and opens new opportunities.

At Rimm, we take care of all your company’s sustainability needs across data management, analytics, reporting and compliance. Rimm is an all-in-one sustainability platform that guides SMEs in managing, tracking and reporting their sustainability performance. It offers digital sustainability management tools to help you put sustainability at the heart of your firm in compliance with evolving regulations.

Tracking and evaluating your ESG performance through Rimm helps you keep improving practices and impacts to generate sustainable value and make ESG a cornerstone of the business strategy. And through its analytical tools, Rimm also enables you to gain powerful insights into strengths and weaknesses, and benchmark against industry peers.

Sustainability is a driving force behind success. By managing resources efficiently, taking a stance on environmental issues, and disclosing ESG efforts, SMEs can thrive in a competitive world and secure a brighter future for their business, their customers, and the planet.

Want to learn more about Rimm’s solutions?

Browse our catalog or book a free demo today.

ESG Ratings today undermine sustainability: how to move towards holistic sustainability

Explore the pitfalls of relying solely on Western-centric ESG assessments and ESG ratings, uncover the disconnect between these and sustainable business practices, and discover why it might be time for a transformative shift in the evaluation of corporate sustainability.

Is the current use of ESG ratings in the world of finance yet another tool to oppress developing countries and companies operating in those markets? As it is today, it certainly looks like it.

An ESG rating agency based in NYC, London or Paris issues an ESG rating for a company operating in Indonesia. It is done in an automated way and the sector weightings are applied as well as a benchmarking evaluation compared to peers. Local context is not taken into account, nor have any residual local impacts been taken into account.

The company gets a CCC rating due to lack of disclosure and lack of stringent Anglo-Saxon corporate governance practice. With that ESG rating, this Indonesian company will most likely never become a worthy member of the ESG investable universe and as such will remain in the shadows if possible.

The company may have significant local presence and have a number of social aspects to their business that enable a number of people to secure their livelihood, yet, simply because ESG rating agencies are measurement stock, i.e. a Western one, they don’t fit. We rule the world and as such we decide the rules. You obey or you are out.

There is something scary, very scary about this. ESG is becoming a tool that upholds the system of the 10%. It is not and never was the intention of ESG. The current ESG ratings provided to the financial markets are simply not only wrong, they are also not really helping us to develop the markets and companies where ESG measures would most likely make the biggest difference.

The need to move away from ESG ratings as they are

There are several reasons why we should say goodbye to ESG ratings as they are. It is a goodbye that’s long overdue, an easy goodbye, almost like a walk in the park, because we’ve seen enough.

The current ESG ratings, provided by a number of firms around the world, are hurting the very intent of ESG investing. Why? Well, because today’s ESG ratings tell you nothing about how sustainable the business model of a firm is, or about how sustainable its products and services are.

What they tell you is whether the company ticks the boxes of reporting on its own corporate conduct. There is no link, and I mean it, no link between a company’s corporate business growth strategy and their sustainability ratings.

Whoever views the current ESG ratings as nothing more than an annual indicator on corporate conduct, and nothing more than that, is right. And for the rest, and for the companies themselves, they shouldn’t even look at the ESG ratings. They are not only misleading, but also costly.

It costs a lot to have access to these ratings, and if you are running a company, well, then you will find yourself reporting on a zillion indicators that do not mean a single thing for the investor who is making the investment decisions. An absurd reporting task bound to discourage anyone working with it.

As ESG ratings are constructed today, they give you a false and, in many ways, severely incomplete picture of how sustainable the business model of a company is.

At the same time, I do understand why they are used. The financial industry loves lazy scalable solutions, the ones you can lean on without taking any responsibility. “This company has been given an A-rating by XXXX.” But that very company might be depleting natural resources faster than the Silicon Valley tech guys are playing the roulette in Vegas.

The financial industry loves to pretend that it all makes sense as long as it does not impact the real intent with the investments, and that is to make money and a lot of it. If it is packed as sustainable, very fine. “We have external ratings we use for informing our investments decisions”. Sayonara, Goodbye, Arrivederci, Hejdå. Time to move on. For real.

How can Rimm help?

In the pursuit of global sustainability and equitable development, it is essential to recognize the significance of supporting transitions in developing markets. Rather than relying solely on standardized ESG ratings, a more nuanced approach involving robust data analysis can provide clients with a far better understanding of both the risks and opportunities inherent in these markets.

At Rimm, we take care of all your company’s sustainability needs across data management, analytics, reporting and compliance. By comprehensively assessing factors like local context, cultural nuances, and the specific challenges faced by companies, a more accurate picture of sustainability can emerge. This approach doesn’t just serve the interests of investors seeking returns; it also aids in fostering genuine economic growth, social progress and environmental stewardship in the regions that need it most.

It’s time to move beyond the confines of current ESG ratings and embrace a more inclusive and insightful evaluation framework for a brighter and more sustainable global future.

Want to learn more about Rimm’s solutions?

Browse our solutions catalog or book a free demo today!

Sasja Beslik
Senior Advisor, Data Analytics

With 20 years of experience in advising multinational companies, Sasja Beslik is an expert in data analytics and creating strategies for integrating ESG into asset management. He also currently sits on Rimm’s esteemed advisory board.

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