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Sustainability in the Spotlight: Why SMEs need ESG Solutions


By Ayna Custovic

In recent years, Environmental, Social, and Governance (ESG) reporting has gained significant traction among businesses and stakeholders as a critical tool for promoting sustainability and responsible business practices. Investors, customers, employees and regulators are increasingly demanding transparency into business’s sustainability efforts and societal impacts. With ESG reporting in the spotlight, robust sustainability accounting and disclosure measures are essential for companies to demonstrate their commitment to sustainable business to various stakeholders.

These rising standards are putting pressure on SMEs to disclose their sustainability impacts using robust and accurate ESG reporting systems. neoeco’s sustainability accounting system is designed to make it easy for companies of all sizes to integrate their current accounting software and match their business transactions instantly to create audit-ready ESG reports that will satisfy regulatory requirements, stakeholders, and any larger enterprises in the supply chain.

Whilst most regulations currently in place pertain to large enterprises, requirements will soon be enforced for SMEs. It is essential that small and medium sized businesses start putting systems in place now for robust ESG reporting and sustainability disclosure to ensure that they are ready when the time comes and to ensure that they satisfy the requirements of any larger companies they work with along the supply chain. Setting up an ESG reporting solution like neoeco now will save SMEs time, uncertainty, and potential risks, as well as positioning them as forerunners with a strong competitive advantage.

The Rise of ESG Reporting

While corporate social responsibility has been an objective for decades, the ESG reporting movement has gained significant momentum in recent years. This has been driven by rising climate concerns, greater attention to social justice issues, and the realisation that good governance mitigates major risks.

Today, ESG factors heavily influence where investors allocate their capital. They understand that companies effectively managing ESG matters are likely to be better positioned for long-term success in an increasingly sustainability-focused economy and society.

The benefits of robust and accurate ESG reporting extend beyond investor relations. Consumers these days prefer brands that prioritise sustainability and social responsibility. Companies can also attract and retain top talent in their workforce by having a strong ESG proposition.

The Challenges of ESG Reporting

The increasing emphasis on ESG reporting also presents challenges for companies, particularly in terms of data collection, measurement, and verification. Many companies struggle to gather accurate and reliable data on their ESG performance, especially when it comes to assessing the impact of their operations across complex supply chains.

Sustainability for SMEs

ESG reporting has come into the spotlight and it won’t be leaving anytime soon. Even though SMEs are not yet required to comply with all the regulatory requirements for ESG reporting that large enterprises are, they soon will be. With more and more pressure being put on governing bodies and companies, new regulations are being imposed constantly. SMEs need to start using ESG reporting solutions now to ensure they are up-to-date and ready when the regulations inevitably come into place.

Here are a few key reasons why SMEs need to start using sustainability software solutions now:

1. Rising Demands from Stakeholders

Even smaller companies are facing increasing pressure from investors, customers, and employees to reliably report their environmental and social impacts. SMEs that get ahead of the curve can differentiate themselves and build stakeholder trust.

2. Competitive Advantage

As sustainability becomes more important across industries, SMEs that measure their ESG performance can gain an edge over competitors. Robust and accurate ESG data allows SMEs to reduce risks, uncover efficiencies, and make their business more sustainable long-term. Additionally, SMEs with quality ESG data can access larger pools of investment capital.

3. Preparation for Regulations

Environmental and social disclosure regulations are quickly and constantly emerging. Even if your business does not fall under ESG regulatory requirements now, it will be sure to do so in the near future. SMEs that have sustainability reporting processes and software in place will be better positioned to comply with new ESG mandates as they take effect.

4. Supply Chain Requirements

Larger companies are increasingly requiring ESG data from their suppliers. SMEs that are part of big companies' supply chains need ESG reporting capabilities to maintain those essential business relationships.

5. Future-Proofing the Business

Implementing sustainability software sets SMEs up for long-term success.

Accounting for Sustainability

As ESG reporting takes the spotlight, companies need robust and technically advanced software tools to accurately measure, analyse, and disclose their sustainability performance impacts.

So far, many companies have resorted to using outdated, inaccurate, and time-consuming systems separated from their financial tools - such as spreadsheets.In fact, 50% of companies report that they still use spreadsheets to track their ESG disclosure.

This approach cannot provide the data quality, accuracy, auditability, and integration that ESG reporting now demands.

Leading enterprises have turned to dedicated sustainability accounting software and ESG reporting platforms. These solutions automate the collection of ESG data across the organisation and from the supply chain and provide auditing capabilities to ensure data integrity.

ESG accounting software centralises all sustainability metrics so that companies can perform in-depth analysis to truly understand their ESG impacts and focus their improvement efforts. They allow companies to automatically generate audit-ready reports and globally aligned disclosures tailored to different frameworks.

As ESG reporting requirements continue evolving, having the right sustainability accounting system is crucial for staying compliant and ahead of the competition.

Get Ahead: ESG Reporting Solutions

The time is now to get ahead of the rapidly rising ESG reporting curve - especially for SMEs who face increasing pressure from stakeholders and larger enterprises along the supply chain. By investing in a robust sustainability accounting solution such as neoeco, organisations can accurately track and disclose their ESG performance allowing them to reduce risks, identify opportunities, and build stakeholder trust.

The time and resources required for SMEs to start ESG reporting may seem daunting, but neoeco’s sustainability accounting software provides a simple and efficient way to embark on this critical journey. SMEs embracing an ESG solution now will be better positioned for success in an increasingly sustainability-focused economy.

Sustainability is no longer just a compliance exercise, but a strategic business imperative. With neoeco’s robust and reliable ESG reporting solution, companies can transform sustainability from a regulatory requirement into a true strategic advantage.

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