Report

Path for
growth: Making
sustainability
reporting work
for SMEs

In partnership with
Table of Page 3
Forewords
contents Page 6
Executive summary

Page 8
Sustainability reporting for SMEs

Page 16
Developing better standards
for SMEs

Page 17
Guidelines for SME-friendly
sustainability reporting

Page 23
Detailed recommendations

Page 25
Conclusion

Page 26
Appendix: Methodologies

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 2

Foreword by
Steve Hare,
CEO of Sage
As the world gathers in Dubai
for COP28, the need to tackle
the climate crisis is more
urgent than ever. We know that
participation from small and mid-
sized enterprises (SMEs) is crucial
for a credible path to net zero.

SMEs are the backbone of the global economy and play a

vital role in creating jobs and driving growth. As our existing
research shows, this means they are also responsible for a
significant proportion of global carbon emissions, but less
likely than larger companies to have the resources to
measure and reduce those emissions.

At Sage, we are committed to knocking down barriers for

SMEs, and enabling them to progress on their sustainability
journey, while continuing to drive growth.

This new study, building on our contributions to COP26

and COP27, provides fresh insights from SMEs about their
motivations, goals, and challenges. It also sets out the steps
needed to create more effective sustainability reporting
standards for SMEs that will help them better measure their
sustainability impacts, including taking action to reduce
their environmental impact.

We’re proud to have partnered on this study with PwC and the
International Chamber of Commerce, who represent SMEs at
COP. And we will continue to work with our customers, partners,
governments, and other stakeholders to advocate for actions
that help SMEs become more sustainable and realise their
ambitions to help the world reach net zero.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 3

Foreword by
Lynne Baber,
sustainability
practice leader
at PwC UK
The critical contribution SMEs
will make to how the world
meets sustainability goals must
be grounded in clear, reliable
reporting. At PwC, we see a close
link between accurate reporting
and effective action.

This study highlights that many SMEs are facing increasing PwC is committed to helping SMEs become more sustainable.
pressures to report, particularly from large enterprises they We are working with industry leaders, governments, and other
supply to or service. Failure to measure and report impact stakeholders to develop tech-powered solutions to make
is excluding some from winning business where sustainability sustainability reporting more accessible. We are particularly
is embedded into procurement strategies. Just 7.7% of global focused on building infrastructure that enables SMEs to
SMEs say that they are undertaking sustainability reporting, manage and report on their sustainability data.
indicating the need for support in navigating a complex and
expensive process. This requires market-wide collaboration. By bringing together
diverse perspectives and capabilities, PwC plans to facilitate
This report explores these challenges and proposes practical a move towards solutions that enable early adoption of
solutions for industry leaders, governments, and standard sustainability regulations and greater transparency
setters. Our review highlights: around global progress on sustainability goals.
• A complex and fast-evolving regulatory landscape, driven
Our hope is that what gets measured gets managed, thereby
by limited consistency in language, methodology, and
driving sustainability action from SMEs, ensuring they can
interoperability between standards and regulation.
win business, attract and retain talent, access funding, and
• A unique challenge for SMEs to determine what is material meet customer expectations.
for reporting and access accurate information.
• Opportunities to support SMEs at a systemic level We are grateful to Sage and the ICC for partnering with us
in gathering data and communicating their ESG on this important report. By raising awareness around the
performance accurately to stakeholders. challenges and opportunities facing SMEs we can work
together with policy makers and industry stakeholders
to drive action.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 4

Foreword
by John W.H.
Denton AO,
secretary
general of the
International
Chamber of
Commerce
We see every day the potential of
SMEs to lead the way in creating
a more sustainable future. This
report provides new evidence to
recognise the increased action
SMEs are already taking, but also
the untapped potential for them
to go further.

Bold action is needed to ensure that SMEs can tackle the Second, we must build more automated tools and infrastructure
obstacles in their way to understanding, managing, and to support SMEs in their sustainability reporting. SMEs need
ultimately improving their sustainability performance. Chiefly, more affordable and user-friendly tools to help them to collect
this report identifies the complexity and cost associated with and report on their data.
sustainability reporting.
Third, we must raise awareness among SMEs of the importance
While we firmly endorse the many benefits of sustainability and benefits of reporting. This can help SMEs to understand
reporting for SMEs, it’s evident that they need appropriate how they will benefit from reporting and to see it as a
tools to navigate this landscape effectively. There are 3 main valuable investment.
things this report reveals that are needed to help SMEs:
Delivering fully on the promise of a more sustainable and
First, we encourage standard setters to create reporting prosperous future for all requires providing SMEs the right
standards which make sustainability reporting both achievable policies and incentives, effective tools, and most importantly,
and beneficial for SMEs. This study goes into some detail a collaborative effort to transform business practices. This
on what that reporting could look like and how we can make report is a significant step in identifying what SMEs need to
it easier and less time-consuming for SMEs to report on further advance this agenda.
their impact.
The ICC is committed to playing a key role in advancing this
debate and more broadly to accelerating action to ensure
a sustainable and prosperous future for all.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 5

Executive
Key findings from our global survey of SMEs

summary
Over 8 in 10 SMEs (83%) say that
sustainability is important
to their business, up from 76%

83% among those surveyed in 2022,

and just over half (58%) are

There is rising concern that making commitments about

their sustainability.
the world is not on track to
meet its crucial 1.5°C target1
nor its Sustainable Development
Goals (SDGs), with only 15% on Just 7.7% of SMEs say that
track to be achieved by 2030.2 7.7% they are undertaking
sustainability reporting.

This is a stark reminder of the increased urgency for

sustainability action across all organisations, big and small.
Building on the insights from our COP26 and COP27 reports,
this study has found: of SMEs are concerned about
the upfront costs of reporting
2023 has been an important year for SME and 65% of SMEs describe the

73%
•
sustainability action. In comparison to last year’s current reporting standards
survey, more SMEs describe sustainability as being as complex. These present
important to their business and report having the 2 key “upfront” barriers to
sustainability policies in place. Over 6 in 10 SMEs say sustainability reporting.
that they are currently taking steps to become more
sustainable, especially through their products and
services (51%), reducing energy use (48%), and through
are highly engaged with the
the circular economy (16%).
1 in 5 sustainability agenda—including
talking about their sustainability
• There is a strong connection between an SME’s ability
to report on its sustainability performance and its
capacity and willingness to take meaningful action.
SMEs impacts externally—but are not
yet reporting on them.

By strengthening their reporting, SMEs will access a huge

range of benefits, from being able to better attract new
Digital technologies could
customers to accessing green finance and sustainability
play a key role in helping these

•
conscious employees.

SMEs are increasingly being asked by stakeholders

70% SMEs to report, 70% identified
them as having the potential
to make reporting easier.
to demonstrate their sustainability performance.
58% SMEs said that they are already making statements
and commitments to their key stakeholders about their
We see the potential to triple
sustainability performance. Our analysis of reporting
the number of SMEs who report
frameworks demonstrates that sustainability requests
to SMEs are increasing in frequency and complexity. 51 in the coming years. Globally,
this could represent 51 million

• Yet, this study shows that most SMEs find it hard

to evidence their commitments and progress with
million extra SMEs proactively taking
measured and effective action
on sustainability challenges.
appropriate data. The lack of time, expertise, and budget
means that many SMEs are not able to measure and track
their sustainability performance appropriately. This report
Note: Across the report we use technical sustainability
sets out concrete recommendations which will enable
reporting terms which we have defined on page 33.
millions more SMEs to more effectively report on their
sustainability performance and unlock the associated 1
IPCC Special Report, “Global Warming of 1.5c”
benefits of doing so. Global Warming of 1.5 ºC—(ipcc.ch)
2
https://unstats.un.org/sdgs/report/2023/progress-chart/

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 6

Executive summary
recommendations
Standard setters Industry and government
• Proportionality • Build data infrastructure to support SMEs with
Ensure the number and type of data requests being sustainability reporting
made of an SME are proportionate. All requests Create collaboration between government and
need to be realistic for a business with limited industry leaders to support the development of
resources to comply with. robust and trusted data. This will enable companies,
both large and small, to transition to report on
• Consistency actual data instead of using proxies and sector-
Establish consistent sustainability terminology. averages. This could include developing shared
It is important to clearly define and simplify tools and datasets, establishing common and
key terms, topics, and metrics across the accessible data models, and leveraging existing
reporting landscape. data repositories.

• Materiality • Raise awareness of the importance of

Provide clear rules to easily determine material sustainability reporting among SMEs
topics and metrics for SME reporting. Reporting Industry organisations, businesses, and
requirements should enable SMEs to prioritise governments should showcase the potential
the most relevant and essential topics, so that benefits of reporting, such as access to markets,
SMEs with limited capacity can focus their data funding, and cost efficiencies.
collection, processing, and reporting efforts on
what matters most. • Promote the use of digital technologies for
sustainability reporting
• Convergence Companies should develop and promote the use of
Continue to ensure that there is convergence affordable and user-friendly digital technologies
of standards. There must be more convergence to help SMEs automate reporting.
across standards and greater clarity on how
the requirements of one standard meets the • Incentivise SMEs to invest in their
requirements of selected other standards. sustainability reporting
Further financial incentives are necessary to
• Accessibility encourage SMEs to invest in their sustainability
Ensure standards are user-friendly and easy to reporting, especially given the upfront costs
understand. Reporting requirements should be associated with collecting and reporting on
accompanied by supporting visuals and examples. this data.
Accessible standards paired with industry led
digital solutions will be key to efficient reporting.

• Accuracy
Prioritise data accuracy in reporting guidance.
There is a critical need to guide SMEs on how
to report “actual” sustainability data on their
performance rather than relying on proxies and
sector averages.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 7

Sustainability
reporting for
SMEs: Key
challenges and
opportunities
Our existing research has found
that on aggregate, the opportunity
for SMEs to take meaningful action
on sustainability is huge.

For example, our previous study in the UK found that SMEs are However, SMEs report facing key barriers in their ability
contributing 160 million tonnes of non-household Greenhouse to understand, measure, and ultimately report on their
Gas (Scope 1), equating to 44% of total UK non-household sustainability performance. For example, less than 2%
emissions. Meanwhile, their contribution to Gross Domestic reported having a designated employee who is responsible
Product (GDP) is estimated at £1 trillion, or 50% of the UK’s for this reporting. This may limit their ability to track and
total GDP (Sage, 2022). demonstrate their progress to stakeholders and understand
which actions will be most effective.

While the opportunity for SMEs to take effective action towards

net zero and wider sustainability goals is significant, this
report recognises the challenges they face.

Key challenges and opportunities of

sustainability reporting for SMEs

Challenges Opportunities

• Limited resources and expertise • Improved access to finance and investment

• Complex and inconsistent sustainability • Improved access to customer supply chains
reporting frameworks • Increased eligibility and preference in public
• Difficulty in collecting and analysing data sector contracts
• Cost of reporting • Enhance innovation and competitiveness
• Reduced operational costs and risks
• Attract and retain top talent

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 8

Who is asking SMEs about their As the correlation between sustainability and business
resilience and performance continues to strengthen, SMEs
sustainability performance are making more commitments on their impacts to internal
and why? (e.g. employees) and external (e.g. customers) stakeholders.
Increasingly diverse stakeholders are requesting evidence
of sustainability from SMEs. These include:

Regulators
Governments around the world are increasingly passing
regulations that require private and public enterprises to
report on their sustainability impact. Although a relatively
small proportion of SMEs will initially fall in the scope of
regulations such as the EU Corporate Sustainability Reporting
Directive (CSRD) and many standards such as the International
Sustainability Standards Board (ISSB) are currently only
voluntary, there is a drive for transparency and pressure for
companies to increase disclosures, which tends to trickle
down to smaller organisations.

Large customers
Many large companies are requiring their suppliers to report on
their sustainability performance. This is, in part, because they
are under pressure from their own regulatory obligations as
well as their customers and investors to improve sustainability
impact across their value chain.

Financial institutions
Financial institutions are taking sustainability factors into
account more often, when making lending and investment
decisions. They are under pressure from their own investors and
regulators to reduce their exposure to sustainability risks and
showcase sustainability action to access more capital.

SMEs
Many SMEs are choosing to report on their sustainability
performance in order to communicate company values,
improve their reputation, attract and retain customers
and employees, and obtain financing.

The public
As awareness about sustainability continues to grow,
consumers are increasingly prioritising businesses that
operate sustainably and ethically. They often seek transparency
about the sustainability performance of the businesses they
purchase from, putting pressure on companies, including
SMEs, to demonstrate responsible practices and
contribute to positive societal change.

Colleagues
Employees are expecting and encouraging their
employers to take effective action.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 9

SME interest The number of SMEs interested in
and engaged with the sustainability
and action on agenda is rising rapidly, as shown
in the results of our studies of
sustainability SMEs in 2022 and in 2023.

is rising
rapidly
Today: Furthermore:

have made a public

58%
commitment on
their sustainability
performance, up
from 53% in 2022.
65% are taking sustainability
actions.

are currently taking

62% steps to improve

their environmental
performance.
56% have a sustainability-
related policy.

Compared to last year, more SMEs say that they have Only 7.7% of SMEs currently report on their sustainability
sustainability-related policies in place and more describe impacts and only 0.7% report on their Social and Governance
sustainability as being important to their business. A majority (ESG) impacts, leaving SMEs at risk of being perceived as
are now trying to reduce their environmental impact. not taking the necessary actions. This study finds that a
further 21% of SMEs are “ready and willing” to report. With the
For SMEs, their sustainability performance was increasingly right frameworks and support in place, there is potential to
important to attracting and retaining customers. 65% of SMEs dramatically increase the number of SMEs reporting in the
said that they are feeling more pressure from customers to coming years.
reduce their environmental impacts. Although interest in
the topic is rising, few SMEs are currently reporting on their Beyond the listed benefits, there is the broader advantage of
sustainability performance in their own operations, let alone increasing fairness and transparency in markets and enabling
broader sustainability impacts in their supply chain. better capital allocation towards a more sustainable and
resilient global economy.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 10

A profile of the 1 in 5 “ready Typically, SMEs that are “ready and willing” to report
said that they:
and willing to report” SMEs • Believe that sustainability is important to their business.

This study has identified a clear group of SMEs • Have at least some sustainability policies in place.
(21% of SMEs surveyed globally) who are highly engaged • Have made an external commitment (e.g. to customers)
with the sustainability agenda—including talking about about their environmental impact.
their performance externally—but are not yet reporting on
• Have heard of sustainability reporting but haven’t
their impacts.
yet begun it.
• Currently take other measures to improve their
environmental impact, e.g. have mapped the
environmental impact of different business processes.

On their readiness and skills, they were also:

6% vs. 29% 10% vs. 21%

Much less likely to say that they don’t have Much less likely to say that they lack the
management buy-in (6% “ready and willing” skills or knowledge (10% versus 21%).
versus 29% overall).

say that they have a say that they have a

82% strong knowledge of the

environmental impact of
their operations.
84% strong knowledge of the
environmental impact of
their products.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 11

 And they were more likely to say that
they are already taking action:

said that their business has taken

84% vs. 65% measures to learn more about climate

change (versus 65% overall).

67% vs. 51% 79% vs. 58%

Were much more likely to say that they are currently Were more likely to say that they are encouraging
cutting their businesses’ environmental impact their customers to use their products more
(67% versus 51% overall). sustainably (79% versus 58% overall).

Key barriers for “ready The size of the prize

and willing” SMEs: This study illustrates the significant number of SMEs who could
report on their sustainability impacts with the right tools and
regulatory environment. If we could triple the number of SMEs

66% reporting on their sustainability performance globally, from 7.7%

to 23.1%, it would represent 51 million more SMEs reporting on
their sustainability performance.3 Based on our survey insights:

believe that upfront

costs are too high

71% 51 $789
million billion
believe that it is 51 million additional We could unlock $789
too complex businesses could accurately billion in green finance
report on their sustainability opportunities for these SMEs.4
performance.

3
Global SMEs 2021 | Statista
4
Natwest, “Springboard to Sustainable Recovery” report, which includes economic modelling on the value of climate and sustainable finance to SMEs.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 12

Reporting
challenges
The sustainability requests being
made of SMEs are increasing in
volume and complexity.

This complexity is the primary barrier to SMEs’ reporting,

leading to upfront costs, which can be insurmountable for a
small organisation with limited cash flow. These costs include
upskilling, collecting data, and developing and implementing
a reporting system.

• 73% of SMEs are concerned about the upfront

costs of reporting
This includes costs to upskill, reallocate, or hire staff,
purchase technology solutions, and engage with third-
party vendors. This suggests that there is a need to
simplify reporting standards and tailor them to the
needs of SMEs.

The key reporting challenges leading to increased upfront

costs include:
• Complexity of reporting standards
Reporting standards can be complex and difficult
to understand. SMEs are navigating a wide range of
inconsistent and technically challenging data requests
from multiple stakeholders. They are trying to determine
what topics are relevant and applicable to their business.
65% of SMEs state current reporting standards are too
complex and that they would be more likely to engage if
standards were tailored and simpler.
• Lack of capability or knowledge
The vast majority of SMEs lack sustainability specialists
within the organisation. This means they may struggle to
understand or respond accurately to requests for data.
• High volume of data requests and lack of capacity
SMEs are often restricted in their capacity and capability
because of their size, meaning they can lack the internal
resources necessary to meet data demands. They often
miss the tools and resources needed to collect the
large quantities of sustainability data in order to
meet requirements and develop and implement
a reporting system.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 13

The “Green
There is pressure on businesses to publicly report on
ESG and balance the necessary investment to showcase
returns while minimising regulatory risks for investors

Finance”
and increasing client appeal
• “A key factor driving investor interest in sustainability is

opportunity
regulatory risk. More than three-quarters (78%) of investors
say that managing regulatory risks is an important factor
in including sustainability in their investing decisions,
second only to client demands that their portfolios have an
ESG lens (82%).” (PwC Global investor survey 2022).

Financial institutions and • “81% of investors say they would accept only 1% or less
reduction in overall returns for companies in their
investors across various portfolios that take sustainability actions.” (PwC Global
global partnerships have investor survey 2022).

made commitments to reduce Institutional investors are seeing greater returns from
their financed emissions. ESG investing
• A majority of institutional investors, 60%, reported that
ESG investing has already resulted in higher performance
This means that investor yields, compared to non-ESG equivalents. (PwC Global
funds are increasingly tied investor survey 2022).

to sustainability performance. There are increasing funds focussed on sustainability

Measuring and reporting of outcomes. SMEs that report on ESG action will have
greater access to them
accurate sustainability data • “Asset managers globally are expected to increase
will thus be essential for SMEs their ESG-related Assets under Management (AuM) to
US$33.9tn by 2026, from US$18.4tn in 2021. With a projected
to continue securing funds as compound annual growth rate (CAGR) of 12.9%, ESG assets
the sector moves towards are on pace to constitute 21.5% of total global AuM in less
than 5 years.” (PwC Asset and Wealth Management
green finance. Revolution 2022).

SMEs that report on ESG action will have more access to

green finance in general
There is increasing institutional investor interest in • “Global sustainable finance product issuance totalled
businesses demonstrating ESG performance $717bn in the first half of 2023” led by issuance of green
bonds, followed by sustainability-linked loans. (ING 2023).
• “Environmental, Social, and Governance (ESG) outcomes
appeared among investors’ top 5 priorities for business: • “Direct funding available through government agencies is
Data security and privacy rank third (51%), effective also significant” with around $82bn for grants and $40bn
corporate governance is fourth (49%), and reducing for loans. (ING 2023).
greenhouse gas emissions (44%) rounds out the top 5.”
(PwC Global investor survey 2022) . The financial services industry’s collective influence over
global capital has an enormous impact on the economy.
It therefore has a pivotal role in driving change to ESG
reporting and thereby performance. Industry leaders are
uniquely positioned to not only incentivise SMEs sustainability
journey through opportunities in green finance and ESG
investing but also support efforts to report and manage
their sustainability impacts.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 14

 Case study The NatWest Carbon Planner, powered by Sage Earth, is a free
tailored solution that provides personalised actions based on
NatWest Carbon Planner customer data designed to help UK businesses manage their
powered by Sage Earth future fuel and operational costs and reduce their carbon
footprint more quickly. As well as cutting emissions, the
platform has the potential to reduce inefficiencies, save time
The financial services sector is stepping up to support SMEs
and money, and help businesses become more competitive.
in a range of ways, especially in encouraging proportionate
and effective requests for data, and in providing tools to
The NatWest Carbon Planner also provides information and
make it easier and more cost effective to report.
useful resources to help businesses on their journey to net zero.
The planner is available online to all UK businesses and
NatWest’s Carbon Planner is automating a key part of the
is not limited to NatWest customers. This example
process of calculating a company’s greenhouse gas emissions.
demonstrates how collaboration across sectors can make it
It does this by processing data from a company’s accounting
possible to reduce the burden of reporting for SMEs.
software and matching transactions to emission factors in
order to create an estimate of the climate impact of those
purchases. The software then guides the business to refine
their emissions estimate by submitting additional data (e.g.
energy usage, employee commuting patterns).

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 15

Developing
better
standards
for SMEs
The sustainability landscape
is complex and overwhelming
for many SMEs, who are constrained
by lack of time, funding,
and resources.

Sage and PwC conducted a detailed review of the We hope this provides input to the ongoing market-wide
sustainability regulatory landscape to identify guidelines collaboration to establish the most appropriate reporting
for standard setters to make sustainability reporting standard for SMEs, building on the work done by ISSB and
accessible and beneficial for SMEs. the European Financial Reporting Advisory Group (EFRAG).

We reviewed over 50 global cross-sector standards and We have identified 6 guidelines and 7 key topics
frameworks that would affect SMEs, whether directly or for standard setters to consider, aiming to:
indirectly, such as through value-chain requests from • Enable policymakers to standardise and simplify
larger entities. sustainability regulations.

Below are our key guidelines with illustrative examples and • Drive early adoption of voluntary standards by SMEs.
initial key topics that policy makers and regulatory authorities • Accelerate sustainability action by focusing SMEs’
should take into consideration so that they can simplify and reporting efforts and providing practical guidance
standardise reporting requirements directed towards SMEs. beyond commitments.
• Support progress towards global sustainability goals
by increasing accuracy and comparability in reported
sustainability data.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 16

Guidelines for
SME-friendly
sustainability
reporting

1. Proportionality

2. Consistency

3. Materiality

4. Convergence

5. Accessibility

6. Accuracy

Below is a summary of our

reporting guidelines.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 17

1. Ensure the number and type of data requests being
made of an SME are proportionate
Even within the SME category, one size doesn’t fit all, and Key question: Does this disclosure requirement
requests need to be proportionate. There is a significant consider the feasibility of reporting for varying
difference in the reporting capabilities of a business with types and sizes of SMEs, offering practical
over 200 employees and significant turnover compared options for SMEs to meet requirements?
to a micro-enterprise.

Potential implementation steps Illustrative examples in the market4

ISSB recommends a transition relief allowing companies to

report only against the Climate-related Disclosures Standard
Staggered reporting requirements and the climate components of the General Sustainability-
related Disclosures Standard in the first year of application
(IFRS S1, Appendix E, E4)

The ISSB recommends exemptions for specific sectors

Flexibility on the boundaries covered within a disclosure topic
on Scope 3 emissions disclosure in the first year
for smaller SMEs (e.g. focus on own operations only)
(IFRS S2, Appendix C, C4)

The ISSB has considered what requirements can be reasonably

met. For example, qualitative disclosures will be allowed where
an entity is unable to provide quantitative information.
Scaled reporting requirements and allowances from 3 key areas where such allowances are appropriate:
basic to advanced based on company resources Identifying sustainability-related risks and opportunities
(SROs); considering the current and anticipated effects of
these SROs; and determining the scope of the value chain.
(IFRS S1, B6 onwards)

2. Establish consistent sustainability terminology

It is important to clearly define and simplify key terms, topics,
and metrics across the sustainability reporting requirements. Key question: Is the language detailed within this
This reduces the burden and potential for SMEs to misinterpret disclosure requirement driving consistency across the
disclosure requirements and strengthens comparability and voluntary and mandatory sustainability standards?
understanding of metrics in the market.

Potential implementation steps Illustrative examples in the market4

CSRD and the GRI “In keeping with the requirement

formulated in the CSRD to adopt a double materiality
Alignment of sustainability terms and approach and to take account of existing standards,
language between standards the ESRS have adopted the same definition for impact
materiality as GRI and have leveraged GRI’s expertise.”
(EFRAG-GRI joint statement of interoperability)

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 18

3. Consider how SMEs can practically determine
material topics and metrics Key question: Does the standard assist
Materiality is a fundamental concept for all sustainability SMEs to prioritise business activities that
reporting. It can be complex and time consuming. SMEs need have material sustainability impacts?
clear rules on how to prioritise the most relevant and essential
sustainability topics and would benefit from flexible timelines
to accommodate their limited resources.

Potential implementation steps Illustrative examples in the market4

The ISSB Standards require entities to only report on the

sustainability-related risks and opportunities that are
considered to be material to that specific entity. (IFRS S1, B13 -
B37, “Materiality”)
Staggered reporting requirements that consider
what are minimum mandatory requirements in the
The European Sustainability Reporting Standards (ESRS) for
first year of reporting
Listed SMEs also considers the diversity of target groups and
proposes to take a sector-agnostic approach for SMEs in the
first phase and move simplified requirements to the sector-
specific layer of ESRS. (ESRS for Listed SMEs—Issues Paper)

Guidance on how to identify material sustainability topics with GRI provides easy user-friendly guidance to determine
underlying criteria that can be used to assess materiality and material topics broken down into “understand, assess,
examples of what might be deemed high versus low materiality identify, & prioritise.” (GRI 3: Material Topics 2021)

ESRS allows companies to omit disclosure requirements

of a topical standard if the assessed topic is deemed
Flexibility for omission of topics that are not immaterial. (ESRS, Appendix E)
deemed material to an SME
GRI allows organisations to provide a permitted set of reasons
for omission over most commitments. (GRI 1: Foundation 2021)

4. Continue to ensure there is convergence of standards

Regulatory bodies need to consider opportunities for
convergence, highlighting within the standard where meeting Key question: Does this standard allow an
disclosure requirements will enable an SME to satisfy the organisation to disclose against other standards
requirements of another standard, reducing an SME’s burden using similar information?
to make this assessment themselves and potentially duplicate
reporting efforts.

Potential implementation steps Illustrative examples in the market4

EFRAG has created a linear table detailing the level of

Alignment of scoping and calculation methodologies of a interoperability between ESRS and ISSB requirements
disclosure metric against leading market disclosures (ESRS Mapping table: Climate change). Additional joint
guidance is expected

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 19

5. Ensure that standards are user-friendly and
easy to understand
Key question: Is the standard as easy
Reporting requirements should be displayed in an easy-to-
to follow as possible for SMEs with
digest format and accompanied by supporting visuals such as
varying knowledge levels?
examples for methodology calculations and “best practice”
disclosures. An accessible standard paired with market-led
automation solutions will enable SMEs to better report.

Potential implementation steps Illustrative examples in the market4

The GRI Universal Standard clearly outlines the structuring

Create “How to” guides to facilitate navigation
of the System of GRI Standards and how to navigate.
of an SME standard
(GRI 1 Foundation 2021)
The Science Based Targets initiative (SBTi) provides tools
Tools and pro-forma templates for SMEs to input
for companies to develop appropriate emissions reductions
information into or model disclosures after
targets. (SBTi-target-setting-tool)

The GHG protocol provides illustrative examples of

how to calculate each category of emissions included
Illustrate examples of calculations in practice
in its guidance with separate examples by methodology
(GHG protocol, Category 1)

6. Prioritise data accuracy in reporting guidance

There is a critical need for SMEs to report “actual”
sustainability data rather than relying on proxies and sector
Key question: Does this standard provide
averages. Their ability to provide more accurate information
practical guidance for an SME to report the most
to key stakeholders will contribute to increased transparency
accurate data available?
on sustainability data and enable better capital allocation and
competitive advantage. Standards should enable this accuracy
of reporting by providing clear guidance that supports SMEs.

Potential implementation steps Illustrative examples in the market4

Clear guidance on what data inputs qualify as GRI lays out a number of “Accuracy Principles” for users
accurate information to apply. (GRI 1: Foundation 2021)

The GHG protocol’s Scope 3 standard highlights how companies

should “prioritise data quality improvement for activities that
Positive language prioritising actual data for an
have relatively low data quality and relatively high emissions.”
SMEs’ material ESG reporting topics
(Corporate Value Chain (Scope 3) Accounting and
Reporting Standard)

Requiring transparency over modelled calculations, The GHG protocols Scope 3 Standard Appendix B provides
highlighting uncertainty levels and where actual guidance on uncertainty. (Corporate Value Chain (Scope 3)
data versus estimated data is used Accounting and Reporting Standard)

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 20

Key topics
We have identified a series of cross-sector sustainability
topics that are covered most frequently in the current reporting
landscape. This paints a picture of what the market has already
deemed significant for SMEs to act on and report against.

Existing reporting standards A sector-specific view on material topics requires

collaboration between policy makers and industry leaders.
highlight what key topics policy While this has not been done as part of this review, it is a
makers can direct their focus to. critical and a natural next step after establishing a
baseline of cross-sector disclosures.

Key topics3 Example disclosure sub-topics1 Why are these topics key?

• An ESG strategy and a plan in place

ESG strategy
help companies to focus and
5% SMEs are reporting • Business model
operationalise action
water usage and conservation • Environmental policies & conditions
• Clarity and transparency about a
efforts whilst 4% are reporting • Key Performance Indicators (KPIs) on
company’s ESG strategy also helps build
waste generation and material ESG topics (non-emissions)
confidence and trust with stakeholders
management strategies
(internally and externally)

Net zero strategy • Achieving net zero requires a plan and a

6% SMEs are reporting energy • Net zero targets strategy in place to guide action, allocate
consumption and efficiency • GHG reduction strategy resources, monitor progress, and identify
measures areas where technology can support

Roles, responsibilities, • Being clear on roles and responsibilities

• Stakeholder engagement
and accountability is critical for delivering on the company’s
• Stakeholder management
1% SMEs are reporting ESG strategy. Externally, it demonstrates
• Ownership
corporate governance and commitment while internally, it drives
• Engage with industry
ethical business practices accountability and ownership

• Investors and lenders consider it crucial

• Risks from climate change and transition
for a company to understand the risks
to low carbon economy
associated with environmental, social,
• Quantitative indicators with respect
ESG risk management2 and governance (ESG) factors, foresee
to targets, risks, and opportunities
how these could affect the business in the
• Risks from human rights issues
future, and develop strategies to enhance
• Biodiversity
resilience against such risks

Supply chain management

• Diverse supply chain
and responsible • Awareness and consideration of the
• Internal carbon prices
procurement subject is essential for improving
• Sustainability accreditation
3% SMEs are reporting supply business’s resilience to climate change
• Sustainable procurement policy
chain sustainability
• Key topic for investors and other
stakeholders such as customers
• Diversity, Equity, & Inclusion (DEI)
• These topics are also closely linked to
Ethical labour practices • Executive pay
the broader United Nations Sustainable
1% SMEs are reporting • Pay equity
Development Goals (UN SDGs)
corporate governance and • Protection of rights of vulnerable groups
• Transparency over organisational policies
ethical business practices • Health & safety
and practices to meet social requirements
• Ethical code of conduct
is critical to deliver progress against the
UN SDGs

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 21

 Key topics3 Example disclosure sub-topics1 Why are these topics key?

• Understanding and mapping a company’s

GHG emissions is an important step
GHG emissions • Absolute emissions & emissions intensity
towards managing these and delivering
6% of SMEs are reporting • GHG methodology
on net zero commitments. This is an area
GHG emissions • GHG assurance
where innovation and technology can help
streamline and simplify reporting further

1
These metrics are not all inclusive and are intended to provide examples of the kinds of metrics that may be included.
2
This topic was not included as an option for SMEs when asked what they were already reporting, however, it was the second most
frequently occurring topic across the ESG regulatory review. This suggests an emphasis for SMEs to consider risks associated with ESG.
3
Key topics are defined as topics or subject matters that represents an organisation’s most significant impacts on the economy,
environment, and people as generally defined by GRI.
4
These examples are not prescriptive or all inclusive. They are intended to highlight examples in the market that illustrate our
identified guidelines. Standard specific examples may be subject to additional sectoral or regulatory considerations.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 22

Detailed recommendations for
industry leaders and government
Successfully encouraging
Case study
millions of SMEs to start reporting Bankers for Net Zero (B4NZ) is an initiative
on their sustainability impacts working to create a “nexus of industry commitments,
policy development, regulation, business, and civil
will require concerted effort society”. Through Project Perseus, B4NZ alongside
from governments, industry, and Icebreaker One has identified how inaccurate
and incomplete data is a major challenge for SME
standard setters. Industry leaders reporting, which it aims to tackle by developing
and government need to create market solutions to ease the flow of accurate data
through cross-sectoral collaboration.
the right environment for SMEs
to accurately and efficiently Banks are already supporting this effort, as it
directly benefits them by providing a level of
report on sustainability. certainty on energy data they don’t currently have.
The coalition is working with energy and smart
meter providers to streamline the process and is
establishing a leading example of best practice for
the rest of the market.

They can do this by building the data infrastructure needed to By creating market infrastructure to capture actual Scope 2
support SMEs with reporting, raising awareness of the benefits energy and emission data, such as smart meters for energy
of reporting including financial incentives, and promoting the use with easily accessible usage information, there will be
use of digital solutions. More details on each recommendation a trickle-down effect for companies submitting this data to
are included in the sections below. stakeholders within their supply chain.

Build data infrastructure to support SMEs with Raise awareness of the importance of sustainability
environmental reporting reporting among SMEs
Given the limited data-gathering capacities and capabilities Governments, businesses, and industry organisations can
many SMEs have, there is a critical need for data infrastructure work together to raise awareness of the importance of
at a systemic level to enable SMEs’ access to accurate data sustainability reporting among SMEs. This can help SMEs to
instead of relying on proxies and sector averages. This will not understand the benefits of reporting and to see it as a valuable
only enable SMEs to practically meet sustainability reporting investment. Industry needs to showcase the potential benefits
demands but also aid in de-risking businesses by providing that sustainability reporting can provide. These benefits are
more accurate information with which to make decisions. diverse, and will come not only from cost efficiencies (e.g.
due to reduced energy consumption) but also from access to
Creating open-source sustainability databases that interact markets (e.g. green certification) and access to additional
with existing data repositories will be critical to enabling a funding if they are seen to be aligned with sustainability and
seamless flow of data to businesses. This may look similar ESG agendas.
to open banking platforms where there is a common data
repository that communicates with, energy providers, stock For example:
exchanges, or data analytics firms to obtain real-time
• SMEs can decide to publish sustainability information
sustainability data. We need to find greater harmony
to make themselves more appealing to investors and
between existing systems with simple, open, and
showcase ESG action e.g. SMEs reporting against the
transparent data models.
Global Reporting Initiative.
• The benefits of certifications like the internationally
recognised specification for carbon neutrality PAS2060,
are available to SMEs to certify carbon neutrality in
operations or products.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 23

Promote the use of digital technologies for Incentivise SMEs to invest in their
sustainability reporting sustainability reporting
SMEs are trying to address a growing amount of complex Financial incentives are necessary to reduce the impact of
data demands despite restrictions in capacity and capability. upfront costs associated with the infrastructure necessary to
To address this data challenge, it is important to build report. Some of these include:
affordable and user-friendly tools to help SMEs collect and • Government
report on their sustainability data. This should also involve Tax incentives: Governments and businesses can provide
providing training and support to SMEs. financial assistance to SMEs to help them with the costs of
sustainability reporting. This could include grants, loans,
Digital technologies can automate the data collection or tax breaks.
and reporting process, making it easier and less time-
consuming for SMEs to produce reports. • Private institutions
Supply chain opportunities: Large businesses can
There are also a number of software programs available that encourage companies in their supply chain to report
can help businesses to track their environmental performance. on sustainability. They can offer support and resources
These programs can generate reports that can be used to as well as new revenue opportunities for compliance
comply with environmental reporting requirements. with procurement criteria. Large businesses should
highlight the value creation opportunities for SMEs that
63% of SMEs report that digital technologies are important demonstrate progress in sustainability and remain a part
for making the environmental reporting process easier for of their supply chain.
them. This suggests that there is a need to promote the • Access to funds via financial institutions e.g. loans
use of digital technologies to help SMEs. Financial institutions can provide clear incentives, such as
better terms on loans or financing to invest in reporting,
to motivate SMEs to report on their sustainability impact.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 24

Conclusion
The challenges facing SMEs in sustainability reporting are
substantial. Our report has detailed both the potential benefits
of effective reporting—such as attracting new customers,
gaining access to green finance, and recruiting employees—
as well as the significant barriers that must be overcome. To
Our study underlines the huge break these barriers, we have set out a series of guidelines for
standard setters to ensure that standards are SME friendly.
opportunities for SMEs to play a
pivotal role creating a sustainable Unlocking these opportunities requires collaboration from
governments, industry leaders, and standard setters. This
world. The positive shift in SMEs report has also detailed the specific actions each of the
recognising the importance of above stakeholders can take, from industry promoting digital
reporting solutions for reporting to standard setters ensuring
sustainability and implementing that reporting requirements are proportional for SMEs.
related policies in 2023 is a Beyond this, it is essential to raise awareness of the importance
testament to their growing of sustainability reporting, from how it benefits SMEs to how it
commitment. helps to drive progress on sustainable action.

We call on governments, industry leaders, and standard

However, while SMEs are setters to work together to address the challenges and
opportunities of sustainability reporting for SMEs.
increasingly integrating We need to make it easier for SMEs to report on their
sustainability into their operations sustainability performance and most importantly,
to enable them to benefit from doing so.
and are eager to communicate
their progress to stakeholders, By acting on these recommendations, we can help to
harness the full potential of SMEs in achieving our
they often lack the resources and shared sustainability goals.
expertise to effectively measure
and report their actions.
Appendix
Survey
methodology
Strand Partners’ specialist research team surveyed 16,423 SMEs
in 16 markets between 01.09.2023 and 07.09.2023, capturing
all major business demographics (from size to sector) as well
as detailed information about geography (Nomenclature of
Territorial Units for Statistics—NUTS 1 region). With these
results, we were able to analyse data by sector and geography.

SMEs were defined as those employing less than 250 people

in the UK, US, Germany, France, Italy, Spain, Poland, Romania,
Netherlands, Belgium, Brazil, South Africa, Thailand, Canada,
Australia, and Kenya.

The survey was 21 minutes long. Only 12% of respondents

described the survey as being “difficult” to take. Responses
were targeted by quota groups to achieve representativeness.
Poor quality responses were removed.

Sampling
The survey was conducted using a stratified random sampling
method. SMEs were stratified by size, sector, and geography. A
random sample of SMEs was then selected from each stratum.

Survey
The survey was designed to measure SMEs’ attitudes
and perceptions towards a variety of topics, including
sustainability reporting, innovation, research and
development, and access to finance. The survey was
pilot-tested with a small group of SMEs to ensure
that it was clear and easy to understand.

Response rate
The response rate for the survey was 35%. This is comparable
to other surveys of SMEs.

Data analysis
The data was analysed using IBM SPSS statistical software.
A variety of statistical tests were used to analyse the
data, including chi-square tests, t-tests, and analysis
of variance (ANOVA).

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 27

Regulatory
PwC and Sage teams conducted a review of cross-sector
sustainability reporting standards (see Table C) and
frameworks to understand the character and depth of reporting

research
requirements SMEs are facing.

A list of relevant global ESG reporting standards and

methodology frameworks was generated. Relevancy was determined by

assessing the subject matter addressed within the standard,
its significance in the global reporting landscape, and its
applicability to SMEs.

Then each standard was reviewed through the lens of 4

reporting drivers: Regulatory requirements, value chain
requests, access to funds, and voluntary reporting (see Table A)
to determine the ways in which the requirements of a particular
standard may trickle down to an SME. For example, while parts
of a standard may be directly applicable to an SME (regulatory
requirements driver), other reporting requirements within a
standard might reach an SME through large enterprises within
an SMEs value chain (value chain requests driver).

Standards were tagged to 1 or more drivers, detailing the scope

of how an SME triggers reporting requirements and/or what
stakeholders are requesting information from an SME.

Key topics which an SME would have to provide data points

on were documented for each standard (see Table B). The
sustainability reporting standard or framework was then
assessed for additional unique aspects impacting an SME.
Once this was all considered the standard was then assessed
to determine key challenges that would be relevant to an SME
when considering the standard.

Table A: Reporting driver definitions

Reporting driver1 Opportunities2 Parties expected to request data3

Mandatory or expected mandatory

reporting requirements for small
Regulatory 1. Local or national regulatory bodies (i.e. independent and/or
and medium sized enterprises
requirements executive governmental agencies, financial agencies)
(SMEs) on ESG information as
enforced by regulatory bodies

1. Large entities (LE) that have mandatory (regulatory)

or voluntary supply chain reporting rules that trickle
down ESG data requests to SMEs
2. LEs that have Scope 3 targets and are requesting SME
Requests for ESG related ESG data in order to manage and externally report their
Value chain requests information by upstream and supply chain decarbonisation
downstream value chain parties
3. Entities with procurement strategies that make SME ESG
data requests to qualify as a supplier
4. Government bodies requesting SME ESG data to qualify
for government contracts

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 28

 Reporting driver1 Opportunities2 Parties expected to request data3

1. Banks that require SME ESG data in order to qualify for

lending options

Financial institutions requesting 2. Asset managers (i.e. private equity) that have built in ESG
Access to funds ESG information as part of the indicators into their screening and due diligence process
lending and investment process to meet regulatory requirements, fund classification
requirements, or internal strategic goals. This may require
reporting of data during both pre-deal and holding period
phases of the investment cycle

1. SME (self) having identified value creation opportunities

in the market to differentiate against competitors and/or
meet consumer demands
Voluntary collection and external
reporting of ESG information 2. SME (self) with internal value system and/or mission
Voluntary reporting by the SME; that is the SME is around sustainability
primarily motivated by 3. SME (self) that has committed to an ESG target and/or policy
internal factors (i.e. SBTi)
4. National or public policies that are driving a
sustainable agenda

1
The following categories are intended to broadly capture how the market is driving SMEs to collect and report on ESG data. Drivers are not mutually exclusive and more
than one may be applicable to an SME.
"Reporting" relates to the collection and external publication of Environmental, Social, and/or Governance (ESG) related information upon which a third party
has reliance.
3
The following list of parties are intended to broadly capture stakeholders who are interested in data from an SME in order to guide identification of relevant reporting
metrics. This list may not be all inclusive. "SME ESG data requests" will include: submission of ESG data to rating agencies (i.e. Ecovadis) or third party disclosure
platforms (i.e. CDP) or direct provision of information by requesting party (i.e. bespoke data request forms).

Table B: Key topics and their definitions

Key topics Broad definition

How an entity addresses the effects and management of air

quality impacts resulting from stationary (e.g., factories, power
Air quality
plants) and mobile sources (e.g., trucks, delivery vehicles,
planes) as well as industrial emissions

How an entity implements policies surrounding compliant and

Behaving ethically and legally lawful corporate conduct and competition in the marketplace
including meeting regulatory requirements

How an entity implements policies to sustainably manage

impacts on ecosystems and biodiversity through activities
Biodiversity including, but not limited to, land use for exploration, natural
resource extraction, and cultivation, as well as project
development, construction, and siting

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 29

Key topics Broad definition

Efforts made to reduce carbon impact including carbon

capture, reduction, and credits outside of a net zero
Carbon reduction activities
commitment. This can include efforts to meet a carbon
neutral commitment

How an entity manages its model of production and

consumption, which involves sharing, leasing, reusing,
Circular economy
repairing, refurbishing, and recycling existing materials and
products as long as possible
How an entity manages the physical and transitional risks
Climate change adaptation and resilience
arising from climate change
How an entity ensures that the company’s culture, hiring,
and promotion practices embrace workforce differences
and promote actions and behaviours that deliver a diverse,
Diversity, Equity, and Inclusion (DEI)
inclusive, and supportive work environment that is reflective
of local talent pools and customer base. Includes the
measurement and management of employee diversity metrics

How an entity is proactive and systematic in monitoring,

Energy management controlling, and optimising its energy consumption to
conserve use and decrease energy costs
The continual assessment and management of ESG risks, and
ESG risk management
assurance through internal controls

The strategy used by an entity to demonstrate the

environmental, social, and governance factors that the entity
believes to be intrinsically important to consider within their
ESG strategy and commitments
current and future business operations. This also includes
externally communicated ESG commitments (outside of
quantitative GHG targets)
Policies and procedures to increase transparency and fair and
Ethical labour practices ethical treatment of employees and contractors within the
business and its supply chain
How an entity is transparent and fair in the setting of
remuneration packages specifically designed for business
Executive pay
leaders, senior management, and executive-level employees
of a company

Processes an entity is taking to assess their current and future

Finance planning financial situation, goals, and impacts, and how to achieve
them as it relates to ESG issues
How an entity measures and manages its direct and indirect
GHG emissions emissions of greenhouse gases across business operations and
the value chain. This does not include targets and reductions
The strategy used by entities to eliminate carbon emissions
across its business operations and value chain with a goal
Net zero strategy
towards net zero and related metrics to measure and
manage strategy
How an entity approaches waste reduction and waste
management through the reduction of total waste arisings,
Packaging material and waste diversion of waste from disposal (through preparation for
re-use, recycling and other recovery activities), and
regulatory compliance

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 30

Key topics Broad definition

Disclosure under various policies to increase gender

Pay equity equality and inclusion of minority groups through equal
and fair pay practices

How an entity clearly defines its roles and responsibilities on

Roles, responsibilities, and accountability its sustainability journey and increasing transparency and
traceability across its business operations and value chain

How an entity identifies, involves, and communicates with

Stakeholder engagement certain groups of people who may impact or be impacted by
business activities, and building trust-based relationships

How an entity addresses issues associated with environmental

Supply chain management and social externalities created by suppliers through their
operational activities including business conduct

How an entity manages its life-cycle impacts of products

and services, such as those related to distribution, use-
Sustainable product design and life-cycle management phase resource intensity, and other environmental and social
externalities that may occur during their use-phase or at the
end of life

How an entity sets policies, controls, and market incentives

throughout its value chain to procure goods, raw materials, and
services that have been produced respecting the environment,
Sustainable supply chain
workers, and communities. Includes efforts to have a positive
impact and ensure alignment by suppliers and distributors
with ESG policies

How an entity makes commitments internally or externally to

Target setting reach specific targets and goals around environmental and
social metrics
How an entity ensures all colleagues have opportunities to
develop their skills and reach their full potential. Engaging
a productive and talented workforce through engagement
Training and education
programmes, development opportunities, and promoting a
culture that fosters learning and development and
empowers employees
How an entity reduces water use and practices responsible
Water conservation and stewardship water stewardship, particularly in water-stressed regions,
ensuring clean water access for local communities

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 31

Table C: Regulations assessed
In total 60 regulations were assessed, including:

Driver Regulation

Regulatory requirements Basic Law of Governance, Article No 32

Regulatory requirements CBAM

Value chain requests CSDDD

Regulatory requirements / value chain requests CSRD

Value chain requests EU Deforestation Act

Regulatory requirements EU Pay Transparency Directive 2023

Value chain requests German Supply Chain DD Act

Value chain requests GHG protocol

Voluntary reporting GRI

Indian Business Responsibility and Sustainability
Voluntary reporting
Report (BRSR)
Access to funds Indonesia Green Taxonomy Edition 1.0-2022

Voluntary reporting Integrated reporting

Voluntary reporting ISAE 3410

Voluntary reporting ISO Certifications (i.e. ISO 26000, ISO 50001)

Access to funds / voluntary reporting ISSB S1 and S2

Access to funds JSE Sustainability Disclosure Guidance

Voluntary reporting PAS2060

Access to funds PCAF

Value chain requests / access to funds Rating agencies (i.e CDP Sustainalytics)

Voluntary reporting SASB

Value chain requests and voluntary reporting SBTi Near-Term and Net-Zero

Regulatory requirements / access to funds SDR

Voluntary reporting SECR

Regulatory requirements / access to funds SFDR

Regulatory requirements / voluntary reporting TCFD

Voluntary reporting TPT

Regulatory requirements UK FCA TCFD

Regulatory requirements UK MCD

Regulatory requirements USA SEC

Value chain requests USFLPA

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 32

Key terms used
What is sustainability reporting?
Sustainability reporting refers to environmental,
socio-economic, and governance (ESG) disclosures made in

in this study
response to regulatory or voluntary frameworks and standards.
It enables companies to track progress and engage with
stakeholders. It further informs strategy by identifying the
sustainability impacts, risks, and opportunities associated
with the business’s operations and relationships. A well-
For the purpose of this research, crafted sustainability report can help enhance reputation,
meet investor and supply chain expectations, and continually
we have used the following motivate organisations and their employees to improve
terminology and definitions: sustainability performance.

ESG—ESG reporting is often used interchangeably with the

term sustainability reporting. In its entirety it represents
environmental, social, and governance impacts, risks, and
opportunities to the business. Among stakeholders, it is often
used by rating agencies and investors, particularly within
the financial sector, to evaluate and screen businesses’
ESG performance.

Supply chain—A “supply chain” refers to the system and

resources required to create and move a product or service
from supplier to customer (i.e. cradle to gate).

Value chain—The “value chain” considers the activities,

resources, and relationships an enterprise uses and relies on to
create its products or services. This ranges from conception of
a product or service, to its delivery, to its disposal (i.e. cradle-
to-grave). From a sustainability perspective, “value chain” has
more appeal than “supply chain”, since it explicitly references
internal and external stakeholders and relationships in the
value-creation process. The “value chain” concept is inclusive
of a “supply chain”.

Disclosures—qualitative statements and quantitative metrics

about the sustainability performance of an SME or its products
and service. Our survey has found that these disclosures are
broad and may often be informal. Disclosures may cover
a range of topics from the environmental impacts of their
products to the social impact of their business to net-zero
commitments.

SMEs—SMEs are defined in this study as any organisation

with <250 employees.

PATH FOR GROWTH: MAKING SUSTAINABILITY REPORTING WORK FOR SMES 33

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