What can a small/medium company with limited budget do to manage ESG risks?
To cover the basics of ESG as an SME is not difficult. SMEs should consider a journey where there are clear benefits at every stage post:
Environmental: An SME should start thinking of ways to cut energy, water, and waste usage. In order to be on a cost-saving exercise.
Social: An SME should strive to have an attractive business culture by maintaining a low staff turnover. This would attract bright talents that are looking for secure growth to the SME.
Governance: An SME should focus on the governance of their business, particularly by focusing on risk management. Doing this would not only appeal to SME investors but to their customers and supply chain. Good risk management practices will also bring their own costs savings in terms of insurance coverage and premium pricing.
SMEs can also manage their ESG risk with an ESG Risk Analysis & Assessment tool. Having good risk management can make SMEs more attractive to Venture capitalists and investors to provide them with a plan and assistance to further improve the company.
Shamina Singh, Executive Vice President of Corporate Sustainability at Mastercard and Founder & President of the Center for Inclusive Growth, the philanthropic hub of Mastercard, has been focused on ESG for years. Her recommendations for smaller and midsize companies that are just starting to consider their ESG commitments are:
- Play to your strengths – Find what your company does best and use that to advance ESG goals within your business on a commercially sustainable basis. .
- Mobilize your network – Singh recommends working with partners and customers to drive collective action for scale and long-term impact.
- Approach ESG holistically – Companies should not think of ESG as three distinct elements; instead, they must incorporate all three in the work they do, Singh says.
- Seek guidance internally and externally – Asking questions about what your company should be communicating as an authentic message to your clients and consumers is one of the first places to start. Be mindful of incorporating your legal counsel early on to help from regulatory standpoint and to explain what is doable for your company and what is not.
- Be proactive in how to use your assets – As example of accelerating progress towards sustainability goals, Mastercard started linking compensation for its most senior executives (EVPs and above) to Mastercard’s ESG initiatives and to three global ESG priorities: carbon neutrality, financial inclusion, and gender pay parity. This was done, Singh explains, to help the company be proactive with ESG goals instead of reactive in crisis.