ESG (Environmental, Social, and corporate Governance) is becoming an increasingly important topic, even for SMEs with fewer than 250 employees, and particularly if you supply the market through a larger company or engage in manufacturing with exports to other countries.
While it’s not yet a legal requirement for SMEs, you should still address and adapt to the requirements, as it can be a decisive factor for your positioning in the market. In other words, ESG can become a differentiator for, for example, subcontractors and suppliers and contribute to ensuring that the company can maintain, secure and expand its position in the export markets while improving its environmental and social footprint.
In addition, you need to consider the Lieferkettengesetz (LkSG), which is the German Supply Chain Act legislation. Since 2023, it requires compliance with human rights, fair wages, ensures the exclusion of child labor, and limiting the use of forbidden and dangerous materials and chemicals throughout the supply chain if you are selling to the German market.
We help you create the right road map for your company’s entry into ESG/LkSG reporting and assist in making the process an integrated part of collaboration with customers and suppliers across borders, concerning your ratings and financing options.
A typical process starts with clarification and a checklist:
- Identify the impact factors and footprint your company’s production or delivery contributes to.
- Identify factors posing real risks, both in terms of ESG and commercial aspects such as sales and reputation, access to capital, etc.
- Understand market or customer expectations.
- Benchmark against competitors.
- Define the company’s ESG framework.
- Choose a method for measuring impact factors.
- Evaluate risks and assess investment requirements in the areas of action.
- Develop an action plan for potential improvements and changes in the three pillars; E, S, and G.
- Establish a reporting framework.
- Define due diligence areas and reporting task and allocated needed internal and external resources.
- Build clear stakeholder communication, PR, and statements strategy.
Some of these points may be defined by your customers if you are a subcontractor, so it’s essential to start the process now and being well prepared.
Feel free to contact me at +45 4252 9000 if you want to learn more about the opportunities or attend one of our seminars on the topic.