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Voluntary ESG Reporting for SMEs
– Turn ESG into a competitive advantage
The EU directive, CSRD, effective from 2024, requires large companies to follow an EU standard for ESG data. This will indirectly affect SMEs through demands from their customers for ESG data. It is crucial for SMEs to be prepared, as ESG reporting will become a competitive advantage in the market. We have gathered the necessary information from business organizations and experts below so you can understand why ESG reporting is an investment for your company.
Report "All Aboard 2023"
– Insights into SMEs' sustainability efforts.
In December 2023, Dansk Erhverv published the report "All Aboard 2023." The report provides insights into how Danish companies are implementing initiatives within CSR, the barriers they encounter, the benefits they experience, and the extent to which they feel increased pressure to deliver ESG data.
The report is based on responses from 758 member companies.
"The work on sustainability reporting has now reached a new level. For small and medium-sized enterprises, there is an increasing demand to report on sustainability.
The greatest pressure to deliver ESG data comes from other companies."
63% of companies are experiencing increased pressure regarding their CSR efforts, which is 13 percentage points higher than in 2021. This reflects the impact that will be felt throughout the supply chain. As a subcontractor, one must be aware that requirements from large companies translate into pressure from large companies on their suppliers to provide ESG reporting.
Additionally, the report shows that companies are experiencing increasing pressure from their employees, investors/funders/banks, and competitors.
Thus, the increasing pressure on SMEs to deliver ESG reports is a reality that should be addressed proactively. Fortunately, 74% of companies engaged in CSR report positive benefits from this work. Competitive advantages, improved reputation as a company, strengthened retention and recruitment processes, and new business opportunities are the four greatest benefits for companies.
A proactive approach to ESG reporting should be viewed as an investment that yields positive benefits.
The majority of companies working with CSR (74%) experience positive benefits. Only 13% report no gains from their CSR efforts.
69% of member companies experience barriers in their work with CSR.
63% of companies are experiencing increasing expectations regarding their work with CSR. In 2021, this applied to 50%.
69% of companies experience barriers in their work with CSR.
A lack of resources and time is the barrier most companies cite, affecting 37% of them. According to the graph, this figure is highest among small and medium-sized enterprises, with nearly half experiencing time and resource constraints as the biggest barrier.
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EFRAG's standards and simple guides for voluntary reporting for SMEs
As a result of the increasing demands for sustainability reporting, EFRAG (European Financial Reporting Advisory Group) has developed a range of voluntary standards and simple guides for SMEs that are not subject to reporting obligations.
This is a step towards prioritizing and delivering the necessary data to customers and suppliers in the value chain, banks, authorities, and other stakeholders.
The standards include three different modules, and Dansk Erhverv describes the first module as "a good starting point for your company to begin sustainability reporting that meets the requirements you may face from your customers."
For a price of 799 DKK, esgBRICKS' Basic package offers the opportunity to comply with EFRAG's standards for voluntary reporting. With an estimated onboarding time of 5 hours, meeting the new market requirements doesn’t have to be a time-consuming process.
Choose the right solution for your company
We offer two different packages for ESG reporting, tailored for both SMEs and larger companies.
Basic
110€/month
Perfect for SMEs looking for a simple and clear solution for their ESG reporting.
Extended
360€/month
Ideal for companies with mandatory or more in-depth reporting needs.
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EFRAG's standards and simple guides for voluntary reporting for SMEs
EFRAG has published a draft for a new voluntary ESG standard for non-listed SMEs, called VSME ESRS.
The standard aims to provide SMEs with a simple reporting tool that takes into account their resources while reporting essential sustainability information.
It includes three modules: Basic Module, Narrative-Policies, Actions and Targets (PAT) Module, and Business Partners (BP) Module.
esgBRICKS' Basic package includes all reporting points included in EFRAG's standards for voluntary ESG reporting. Below you can see an overview of EFRAG's Basic Module.
B3 Climate
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Energy consumption and CO2 emissions (scope 1 and 2)
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Total energy consumption in MWh:
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Fossils
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Electricity from renewable energy sources
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B4 Pollution
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Pollution discharged into air, water or soil
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Information about for each source
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Reports already made to public authorities
B5 Biodiversity & ecosystems
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Total area in ha owned or leased in or close to ecosystems/
areas
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Use of areas
B6 Water & marine environment
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Water extraction
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Water consumption (absorbed amounts – undirected amounts)
B7 Circular economy & recycling
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Principles
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Circular products and packaging
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Circular content
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Waste - as well as production and for recycling
B1 & B2 General information
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Basis and choice of model for determining sustainability information
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The company's activities to achieve more sustainability
B8 Own workforce
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Number of employees (total)
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Permanent or temporary employment (number)
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Gender
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Nationality (if applicable)
B9 Working environment (Health & Safety)
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Number of occupational injuries
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Number of deaths
B10 Salary & education
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My. salary and starting salary
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Difference in pay based on gender
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Senior management staff
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Education in the last period divided by gender
B11 Employees in the value chain, affected communities & consumers
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Identification processes of negative impacts
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Value chain
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Affected communities
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Consumers & end users
B12 Corporate management
Number of judgments
Number of fines for violations
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"Sustainability requirements will soon impact SMEs – and most are not ready"
Søren V. Pedersen, CEO, Beierholm
Read more about how Danish small and medium-sized enterprises are impacted by ESG reporting requirements, how SMEs can prepare and not only contribute to a more sustainable future but also strengthen their own position in the market – we’ve gathered everything on one page.
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Danish Industry
Competitive Advantages of ESG Reporting for SMEs
The upcoming requirements for ESG reporting primarily apply to large companies, but an increased focus on value chains means that smaller companies, SMEs, will also be affected. For SMEs, the new requirements can be turned into a competitive advantage.
Danish Industry describes how the general focus on sustainability and rising reporting requirements have several consequences for smaller companies, even if they are not directly subject to these requirements.
Small and medium-sized enterprises face increasing demands for sustainability reporting from customers, suppliers, banks, authorities, and other stakeholders:
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Large companies (>250 employees) will have to report on sustainability for the entire value chain starting in 2024, which will affect SMEs.
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Financial institutions must also report on loan portfolios and investments, which can impact SMEs, especially from 2024 onwards.
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Public grants and support may increasingly require sustainability reporting from companies.
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NGOs and other stakeholders also expect data from SMEs for use in their reports.
SMEs will need to provide information and data: New standards require detailed information on consumption, emissions, and human rights across the value chain, not just from immediate customers and suppliers.
The conclusion is that companies with 250 or fewer employees should expect increased disclosure requirements from both customers, suppliers, and companies further along in the value chain. SMEs' ability to deliver data and information to their customers will be crucial for their competitiveness. SMEs that have a handle on ESG reporting and invest in sustainability initiatives will naturally strengthen their position as suppliers to both existing and potential customers.
Danish Industry directs SMEs to EFRAG's standard, which is described above. These standards provide a good starting point for turning ESG reporting from a barrier into an opportunity.
Read the full article here.
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Barrier or Excitement
Danish Auditors
Stay aligned with market expectations for ESG data.
FSR - Danish Auditors' publication featuring 15 ESG key figures and metrics, published in collaboration with the Danish Financial Association/CFA Society Denmark and Nasdaq Copenhagen, helps small and medium-sized enterprises (SMEs) to more easily start reporting ESG key figures and metrics.
The report raises the question of whether it is worthwhile for SMEs to begin reporting ESG key figures and metrics now. "The answer is: yes! The upcoming EU standards will be based on existing international standards, from which the 15 ESG key figures in the publication are selected. Although adjustments to the formulas may occur, it is advisable to get ahead of the development."
The 15 ESG key figures relate to companies' contributions to climate and environmental impacts, employee and governance issues, and the ability to retain customers. It has been shown that such factors are actually included in investors' and lenders' business analyses. They want to know how the company performs in the ESG area compared to other companies – because it has or may have an impact on the company's earnings and thus affects the company's value in monetary terms.
esgBRICKS' Basic package ensures that your company stays aligned with market expectations. The package covers all of FSR's 15 ESG key figures and metrics.
ESG key figures are a requirement from investors.
As a responsible investor, it is crucial to have access to ESG key figures, as they play a significant and increasing role in the analysis of a company. Therefore, there is an expectation that companies – both listed and non-listed – will include the most important ESG key figures in their annual reports and that the ESG key figures will be subject to the same auditing as the rest of the annual report.
Torben Möger Pedersen, CEO, PensionDanmark
Capana has, over the years, helped:
esgBRICKS
– a part of Capana
esgBRICKS is an ESG reporting platform developed by Capana, which has over 20 years of experience in building reporting solutions. Capana is one of Scandinavia’s most experienced Qlik-BI firms and currently provides business intelligence (BI) solutions for finance departments, sales, procurement, and production in companies of all sizes. With esgBRICKS, your company gains a reliable and efficient ESG platform created by experts in BI.
