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June 12, 2023

Dear SMEs, ESG reporting is important to you, too!

New legislation in the UK has made the disclosure of ESG data mandatory for certain businesses. However, there is some confusion as to who is affected and what is to be done by the businesses not currently mandated to disclose.

But what is ESG?

ESG is a framework used to assess a company’s performance on environmental, social, and governance issues.

There is not currently an internationally accepted ESG framework, but Omnevue has created The Omnevue Scorecard which consists of 24 measures – 7 environmental, 11 social, and 6 governance – to comprehensively measure a company’s ESG impact. The Omnevue Scorecard is compliance ready. It has the highest alignment with the EU Taxonomy (71%) providing the best coverage of the required data points from the fewest number of measures (31) – an ‘efficiency per metric’ of 2.3%.

For example, a business’ environmental record will consider their CO2 emissions, waste recycling, and water usage. A business’ social record will consider their gender and ethnic diversity, CEO and gender pay gaps, and data security. And, a business’ governance performance will consider their board gender diversity, business ethics and values, and whistle-blower policy. 

These examples are not exhaustive, but they give an idea as to how a company can be scored on their ESG performance.

There are real benefits to becoming ESG-ready

Uncovering your company’s ESG data can be a laborious task that saps energy, time, and money. Yet there is great value in becoming ESG-ready.

The UK government’s electric vehicle infrastructure grant is an incentive to adopt green business models. Certain banks offer loans exclusively to sustainable small and medium sized enterprises (SMEs). Businesses who prioritise ESG have experienced double the sales growth of businesses with a lesser commitment. And, in a recent study, 84% of companies reported that a focus on ESG factors had improved their ability to attract external investment. 

Simply put, getting ESG-ready has been proven to be a sound business decision

But why are SMEs being made to disclose?

SMEs are businesses with fewer than 250 employees. So why should they be made to report their non-financial data when the consequences of their actions are less than that of large businesses?

Essentially, SMEs account for 99.9% of the UK economy. They are the bedrock of any economy and contribute importantly to national growth. SMEs cannot be dismissed, then, because of their smaller size relative to larger businesses. Assessed collectively, SMEs account for 50% of business emissions in the UK and 60-70% of industrial pollution in Europe. The SME sustainability transition is a key milestone in the pathway to the UK’s net-zero 2050 mission.

This is why businesses of all sizes need to integrate ESG factors, not simply large household name brands.

ESG reporting is important for SMEs

In the UK, only public companies with more than 500 employees, or private companies with more than 500 employees and a turnover of more than £500m, have to report their climate-related financial data.

However, to comply with their disclosure requirements, large companies are contacting the SMEs in their value chain to collect their ESG data. Our research shows that 63% of SMEs have received such a request in the last six months.

Further, SMEs are going to be directly affected by SME-specific ESG legislation due in 2025. Now is the time for SMEs to get ESG-ready and collect all of the information that they will need when the time comes to disclose.

Get ESG-ready with Omnevue

Company taxes shouldn’t be left until the night before the deadline, and the same rule should be applied to company ESG data. ESG integration cannot be achieved overnight.

Purpose built for SMEs, Omnevue helps small businesses to collate their non-financial data and reap the business benefits of ESG. By removing the time, cost, and effort, Omnevue helps SMEs to generate valuable insights about their ESG performance in order to make impactful and smart business decisions.

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