Beyond Compliance

While COP26 is expected to bring a leap forward in terms of managing climate change at a macro level, organizations of all sizes are starting to play their part in transitioning business to a more sustainable basis.

The European Commission is leading the way in establishing regulations and reporting standards with the Corporate Sustainability Reporting Directive (CRSD) being expanded to large and listed companies in 2023.

However, leaders from businesses of all sizes, segments and sectors are reporting an increasing desire and appetite to address sustainaibility beyond the need for compliance, namely because it is the right thing to do and there is a strengthening business case in terms of customers, employees and investors.

We see that organizations are approaching Sustainability according three main drivers: values, compliance or opportunity.

• Organization and leadership values: businesses will address and invest into sustainability because they believe that it is the right thing to do on a personal and business level. Driving a positive sustanability impact acts as an internal and external demonstration of their core values. 
• Compliance: the phased approach for Sustainibility reporting will mean that medium and small sized businesses will not need to report in the medium term. “Large” busineses ( (2 out of 3 criteria met of revenues > EUR 40 million, total assets greater than EUR 20 million and more than 250 employees will be obliged to comply with the (CRSD) from 2023. However, organizations under this threshold will want to get a head-start with reporting and to be transparent within their business ecosystem by producing (audited) sustainibility data.
• Competitive Advantage: We see that businesses that do show concern for reducing their environmental footprint also earn positive repulational benefits from customers, employees (many of whom want to work in a business that is serious about sustainibility) suppliers, banks and other investors. There is also scope for businesses to improve cash flow by reducing resource inputs (water, energy, waste services) and lowering operating costs as part of a sustanability review. On the demand side, there is an opportunity to offer innovation in terms of “green” products and services. While not a primary driver the marketing and advertising of their sustanability journey can help build brand and market share.

While mandatory sustainability reporting for SME’s is not exactly around the corner, there are many other reasons for SME’s to start or accelerate their sustainability journey.

• Sustainability factors and activity are increasingly being assessed by multiple stakeholders and business partners in a organizations ecosystem.
• Customers are seeking to work with sustainable partners in their supply chain, banks are looking at the long-term viability and value of businesses through a sustainability lens and employees and potential employees want to work for businesses with a higher purpose who care about their environmental footprint.

All of these make a convincing business case to actively manage sustainability within the business. Many SME’s are working towards better sustainability already such as working with fleets of electric vehicles, sourcing from renewable energy providers, reducing paper consumption and recycling. In some ways, a good start is bringing together what is already being done into a simple sustainability management system, running a basic GAP analysis against best practice and put together a plan to move to where management want to move to in a defined period.

Now is the time to move. Get in touch to find out how. If you want to discuss any of the topics raised, please contact our experts Marlene Halikias and Andrew Dickson.

Creating competitive advantage through sustainability

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