Author: Leeya Hendricks

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.

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!

Our 2023 report covers emerging sustainability trends in UK SMEs. Learn how small and medium-sized firms are committing to sustainability, and taking action. Find out what challenges they face and how to overcome them.

A new report has revealed an exciting level of interest and activity around sustainability in UK SMEs. Four in five SMEs are committed to sustainability action and reporting – an impressive figure given the challenges involved and the size and resources available in some firms.

Over 50% of small and medium-sized enterprises (SMEs) are even reporting their sustainability commitments externally, according to the 2023 report by Rimm Sustainability. And over 60% are sharing the information internally. This shows the critical role sustainability communication has in many small and medium-sized organizations.

But the report revealed an urgent need for more support as only 35% of SMEs have a manager to oversee sustainability activities and reporting.

Rimm’s survey covered 500 C-suite executives from SMEs across the UK, and explored the awareness, commitment and action SMEs have taken to embed sustainability into their businesses. It also looks at how they have acted to improve performance on sustainability metrics.

The results paint a positive picture of understanding, awareness and interest in sustainability among UK SMEs. But it also shows how important sustainability support solutions have become as they look to improve performance on key metrics. Rimm’s report shows SMEs still face many pain points. Plugging gaps with external support has become necessary for most firms navigating these challenges.

Let’s dive into some of the main takeaways from the report.

UK trends

Commitment to sustainability
Rimm’s survey reveals a strong emphasis on sustainability among SME executives, with eight in 10 expressing their organization’s commitment to it. For example, an impressive eight in 10 UK SMES calculate their carbon footprint, gaining insights into their environmental performance and ways they can decarbonize.

Sustainability reporting
Four in five SMEs participate in sustainability reporting, embracing this crucial step in their journey.

Reporting channels
Over 50% of SMEs already report their sustainability commitments to stakeholders across three main channels – internally with employees (62%); in annual reports for stakeholders (56%); and on websites and social media (56%).

The top reasons for reporting are to:
– Communicate a commitment to sustainability (30%)
– Facilitate greater transparency (29%)
– Comply with regulatory requirements (27%)

Who is driving sustainability in UK SMEs?
35% of SMEs identified a sustainability manager as the key person driving sustainability in their organization. Such a dedicated manager is becoming essential in managing overall sustainability strategy for organizations, and establishing a roadmap to convert their commitments into action. But Rimm’s research shows many SMEs have not yet established this role or found someone to fill it.

Technology reliance
77% of UK SMEs use technology and a sustainability platform to facilitate their goals. Firms are increasingly harnessing the power of technology to help embed sustainability across their organization, provide guidance on regulations, and improve sustainability action and education.

What challenges do SMEs still face?

Disruption deters UK SMEs from translating commitment into action
39% of SMEs committed to sustainability said the risk of operational disruption is a top concern, followed by the risk of making a loss. These figures suggest that, while they appreciate the value of sustainability, negative perceptions linger about how it could interfere with business operations and profits.

Cost is the top reason for not reporting on sustainability
31% of respondents said sustainability reporting costs too much.

The top three pain points around sustainability
1. Understanding what to report (36%) – SMEs are concerned about the complex web of standards and frameworks companies have to navigate
2. Verifying data (35%), which adds a layer of activity for resource-constrained SMEs
3. High prices for most sustainability services (34%).

Sustainability initiatives may help your reputation. But they may also seem expensive and time-consuming for many SMEs focused on survival and growth.

How SMEs can be better supported

SMEs expressed interest in various support in achieving sustainability goals
Different SME types prioritize slightly different factors in support partners. For those with revenue above £20 million, quality and trust are the two most sought-after traits in providers. Improving sustainability performance tops the support wish list for firms with revenue under £20 million.

SMEs want support in these areas:
– A sustainability report that helps with external marketing (40%) and internal marketing (38%)
sustainability standards and frameworks (40%)
– Educational resources (38%)
– External benchmarks to compare performance (36%).

Some are also looking for a one-stop shop for everything around sustainability.

Inclusive, accessible, low-cost solutions are key

Each SME has its distinctive context, hurdles, and prospects. Each must adapt an approach to sustainability that aligns with their requirements, capabilities and readiness levels.

However, a common theme is that it is essential to lower the barriers for SMEs to voluntarily disclose sustainability information by alleviating the high costs involved. They also need more high-quality guidance on standardized metrics to help them gather relevant data.

Sustainability needn’t be a lonely and daunting journey for SMEs if they are supported with the right resources and guidance. When looking for a place to start their sustainability journey, an inclusive and accessible solution that enables them to track, measure and manage performance is vital. These tools should also support data collection and provide quality guidance, allowing SMEs to pursue their sustainability journey with minimal struggle.

Want to learn more insights from our report on UK SMEs?

Download our UK market research report today!

Explore the untapped potential of ESG integration as we challenge traditional economic models and financial analyses with ‘true materiality.’ Learn more about what true materiality entails and how your organization can strategically benefit from adopting this moving forward.

Currently, economic models and financial analyses do not incorporate ESG in any core financial driver for companies. ESG activities conducted by companies as risk management and opportunity aspirations have no bearing on the core financial growth strategy or the key cost drivers for any company analyzed.

ESG analysis today

In general, ESG analysis focuses on understanding how Company X manages sector-specific risks and opportunities, with risk management taking priority. Sector risks are assigned based on subjective understanding and interpretation of potential ESG risks that may have a significant or limited potential impact on the company’s financial performance and/or valuation.

Most of the ESG data we have access to today is self-published by companies. It’s only very seldom verified by a 3rd party and do not – in 99% of the cases – include any alternative datasets that could be remotely interesting for an investor. It is plain-vanilla ESG data, minus the vanilla.

The core question investors are really interested in is not answered. What is the center of gravity for sustainable business? Where does it really make a difference for a company, move mountains, break chains, disrupt and evolve capacities?

Well, to find this center of gravity you will need some very daring people who question the conformity of the current financial thinking as well as the current sustainability thinking, which by the way is dominated by the Anglo-Saxon world view.

The disconnect between financial assessments and sustainability

Financial metrics are not assigned in terms of percentage of revenue affected by a “bad” or non-existent Human Rights policy or lack of Scope 3 emissions. Limited information is available on product and/or service levels in terms of potential revenue streams aligned with the EU taxonomy. Exact numbers or appreciation of financial impact, both positive and negative are currently not available, and often estimates are used in many cases as a proxy for investment decisions.

A company is assigned a certain risk and opportunity profile, which is translated into an alphabetic or a numerical rating. Depending on the analytical model used by an asset manager (passive, active, bottom up, thematic, quantitative, etc.) ratings and/or underlying ESG data can be trenched, skewed, or extracted and transformed (with a large portion of estimates) into the portfolio management decision-making process.

All investment decisions are forward-looking, based on expectations that Company X will reach or exceed certain targets, and, in that process, the investor will gain certain profit relative to the starting point of the investment. In principle, investors using current ESG datasets are making forward-looking investment decisions based on ESG datasets covering past ESG (mostly risk) management performance of the company.

Certain ESG data relating to information on products and services are limited, and, when available, they are often unconnected to the company’s overall growth strategy for specific client, market or geography segments. In other words, there is no connection between what, where and how a company plans to grow and how ESG measures deployed by the company will enable, hinder or prevent further growth.

A holistic approach to ESG integration

In the world of ESG these are so-called “ESG-unknowns” and addressing these questions should lead to further integration of ESG into the core of any company’s business and core of financial analysis. “Sustainable” companies and financial institutions selling ESG funds need to be able to answer questions on the financial relevance of ESG as they pertain to:

• Product and service development
• Market and client segments
• Mergers and acquisitions
• Pricing and sales strategy
• Volume segments of products and/or services provided by a company
• Biggest shareholders of the company
• Balance sheet
• Climate risk accounting (incorporated in overall financial accounting, not only related to companies’ own emissions, but also their products and services and core business offerings of the company)

At Rimm, we believe in what we call “true materiality,” which refers to the need to see what ESG factors can disrupt a company’s business model and how the company is managing these ESG externalities. This assessment will vary by industry and country.

The starting point of this analysis is to examine the key cost drivers in the business, including both the cost of the goods sold and operating expenses. Once these cost drivers are identified, each one needs to be tagged to a set of ESG KPIs that would impact that cost. After isolating the ESG KPIs by cost category, (what we call true materiality), we need to rate the company’s performance for each ESG KPI to determine both an absolute rating and a rating within each cost category. The rating can be developed through a combination of absolute scoring, relative scoring based on industry benchmarking or “alternative” data that provides a third-party view on the company’s ESG performance for a certain KPI.

We have to stress that true materiality is not an endgame. It is an analytical framework that allows companies and investors – and indeed all stakeholders – to engage and dig deeper between the ESG and financial connections that are so crucial to all companies. The reality is that public disclosure, even with the big push towards ESG reporting, does not give us enough to really get to the bottom of “true materiality”. It is only a point of departure to more honest discussions within companies and with their stakeholders.

Want to learn more about Rimm’s solutions?

Browse our solutions catalog or book a free demo today!

Discover the key insights from our event, as experts delve into the power of sustainability in shaping the new generation workforce. Gain practical tips on leveraging employee engagement for positive environmental and social impact through disclosure, reporting and analytics.

As the world continues to evolve, so do the values and aspirations of the new generation workforce. Millennials and Gen Z individuals are increasingly driven by a passion for sustainability and a desire to work for organizations that align with their ethical beliefs. This highlights the importance around the ‘S’ factors in ESG and the need to ensure proper measurement and management of organizations’ data around these factors.

Recognizing the profound implications of this trend on businesses, Rimm recently hosted an enriching online webinar titled “Sustainability: Boosting Talent Attraction and Retention in the New Generation.” We had the pleasure of having Ravi Chidambaram (Founder & CEO, Rimm), Angie Wakefield (Learning and Development Lead, Nextwave), Vi Nguyen (Principal Strategist – Sustainable Finance, Forum for the Future) and Dr. Kim Schumacher (Associate Professor of ESG and Sustainable Finance, Kyushu University) on our panel, moderated by Rina Neoh (Co-Founder and Managing Partner, Ficus Capital).

Our diverse panel of sustainability experts and practitioners came together to explore how organizations can harness sustainable practices to attract and retain top talent while fostering a positive impact on the environment and society.

Let’s delve into the key takeaways from this thought-provoking discussion and explore the strategies that businesses can employ to thrive in this new era!

Empowering Employee Engagement for Sustainable Impact

There are greater expectations placed on managers and businesses from the newer generations’ perceptions around work-life balance and culture change. The digital ability to work and work longer hours has allowed people to work longer or be more entrepreneurial and find something they enjoy doing and have higher expectations, Angie shares. For many recruiters, this means they “have to be showing the purpose and mission of your business back to the people who are coming through the door” and “through the recruitment process… finding people who are mission-aligned.”

Within the ESG and sustainability space, there is a strong, growing demand for skills and talent. This, however, comes with some challenges for recruiters as sometimes they may take “the quick route… without there being a lot sufficient material competence behind [the applicants’ credentials],” adds Kim. He highlights the importance of employers formulating what they need materially, as well as weighing training and a proper mix of expertise, as “greenwashing is the next big thing that regulators are looking at.”

Furthermore, within the industry, Vi highlights the greater importance and pressure around the “need to walk the talk,” and shares from experience that “people come to work for us with the expectation that our culture reflects the message that we are sending out there to the market… [which] has to be reflected in the hiring process all the way to internally… that has to be fair and equitable.” She also points out the opportunity to lead by example and the importance of inclusive team dynamics and employee engagement so that “every employee feels valid, safe to express their views and to do their work.”

Challenges in Navigating Sustainability Engagement

With regard to employee engagement, “the biggest challenge is scaling a company culture and ensuring that strong culture is felt,” says Angie. She highlights that there is a responsibility from both employers and employees to show the culture in their day-to-day, allow room for career development, and for there to be an engaging culture that allows for open and honest communication to better facilitate empathy and understanding in the workspace.

Ravi adds that “a lot more data and analytics could be added to this particular field and delivered to clients.” Ravi and Kim highlight the importance of materiality in understanding an organization’s sustainability performance, as well as highlights the strengths and weaknesses to gain clarity on how to strategize more effectively moving forward. For SMEs constrained by resources, there is still a necessity, global expectation and regional regulations for better management of sustainability and ESG performance. While “there is a global push for more sustainability and ESG regulation,” says Kim, if aligning with sustainability frameworks seems too resource-intensive, SMEs can conduct a materiality analysis that can help to reveal gaps and areas for improvement. “If you identify these gaps, then the next step would be to… go out and seek external ways of capacity-building, getting additional resources… It’s never too late to do a materiality analysis,” says Kim.

Measuring and Evaluating Progress: The Path to Success

“A big part of purpose is also how your company is externally making a difference, and those are things we can track better. There’s more client engagement around the S issues, particularly at larger companies,” shares Ravi.

At Rimm, we offer a very strong materiality map to map out material factors to analyze, benchmark and report on for all companies. Often in service-driven companies, the S issue becomes prominent, and these issues can be highlighted in materiality maps and tracked and benchmarked quite carefully through our assessments. We collect a lot of data on key ‘S’ metrics, including in terms of employer performance, salaries, diversity, benefits and workplace culture. We then benchmark this against our database and provide a performance analysis. As part of the process, we also tap into alternative data sources, such as Glassdoor ratings, to reinforce the overall perception of companies’ records as employers.

From this analytical framework, “companies can see how important the employer performance issue is to their industry, how that starts to affect their business and operations, and how they can benchmark themselves and set targets and objectives,” says Ravi.

In a world where sustainability has become a critical factor in talent attraction and retention, organizations must embrace these changing dynamics to thrive in the new generation workforce. Our online webinar, “Sustainability: Boosting Talent Attraction and Retention in the New Generation,” offered a wealth of insights and best practices to help organizations leverage employee engagement as a powerful sustainability strategy. By empowering their workforce, navigating regional nuances, and measuring progress, businesses can align with the values of the new generation and create a positive impact on both their people and the planet.

Interested to learn more about sustainability and leveraging employee engagement through disclosure, reporting and analytics in attracting and retaining talent?

Watch our full webinar recording to understand how you can make a positive environmental and social impact.