Sustainability Reporting
Sustainability is today an integral part of the business strategies of many large companies, and with the EU’s new CSRD directive, which came into effect in May 2024, it will only become more prominent. Companies covered by CSRD must document their non-financial data, which requires extensive data collection, including the company’s CO₂ footprint – and therefore also an increased focus on the supply chain.
Legislation in this area is complex and constantly evolving. At present, only large listed companies are legally required to publish a sustainability report. However, SMEs should still prepare to provide data, even if they are not directly affected by the directive, as many larger companies, investors and public-sector actors increasingly request ESG data from their business partners. In this context, VSME (Voluntary Sustainability Reporting Standard for SMEs) is a natural option for SMEs looking to begin working with sustainability.
ESG
ESG stands for “Environmental, Social, and Governance” and refers to a set of criteria used to evaluate a company’s sustainability and societal responsibility. Below is a brief overview of the three components:
Environmental: This covers the company’s impact on environmental and climate-related matters, such as CO₂ emissions, climate change and climate adaptation, pollution, water and marine resources, biodiversity, ecosystems, and the circular economy.
Social: This concerns the company’s impact on social matters, such as working conditions for its own workforce and workers in its value chain, affected communities, consumers, and end users.
Governance: This includes aspects related to corporate conduct, such as company culture, whistleblower protection, anti-corruption measures, and political engagement.
The purpose of sustainability reporting
Legislation in this area is complex and constantly evolving, and although SMEs are currently not legally required to publish a sustainability report, they should still prepare to be able to provide data, as many larger companies, investors and public-sector actors increasingly request ESG data from their business partners. In this context, VSME (Voluntary Sustainability Reporting Standard for SMEs) is a natural option for SMEs looking to begin working with sustainability.
What does an SME gain from a stronger focus on sustainability?
Although SMEs are not yet required to prepare a sustainability report, both voluntary reporting and the development of a strategy for collecting the underlying data can be beneficial for the company. When it comes to sustainability reporting, there are many strong reasons to integrate it into the company’s strategy:
Reputation
A focus on sustainability will promote the company as a socially responsible business to both customers and employees. The company should not be ruled out simply because it cannot provide data.
Trust
Sustainability reporting builds greater trust in the company, as it creates transparency in the company’s processes related to ESG, similar to financial reporting.
Increased efficiency
Analysing the company’s data can reveal processes that can be made more efficient, as well as new opportunities that can be leveraged.
Risk management
By preparing a sustainability report, your company will be ready to deliver ESG data to your customers and thereby avoid potential customer loss.
How do you get started with sustainability?
If, as an SME, you want to be ready when your customers request ESG data for their own reporting, the first step is to gain an overview and conduct a preliminary analysis.
Contact
You are always welcome to contact us if you have questions about sustainability reporting. Together, we will find the right solution for your specific needs.
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