Sustainability and ESG

"Sustainability" is still predominantly associated with environmental protection or environmental compatibility, i.e. with ecological aspects.However, sustainability does not only concern ecology, but also the social economy and the economy. The interaction of these three dimensions is ultimately decisive for sustainable action. The three areas are not isolated from each other, but require a holistic view and, in particular, equal consideration. For example, economic interests must not be pursued at the expense of the environment and society. Equally, however, ecological goals should not lead to social and economic risks.It is precisely this comprehensive and reciprocal approach that is behind the abbreviation ESG, which stands for environmental, social and governance.Although ESG originated in the financial world in order to channel cash flows into sustainable economic activities through EU regulations, it now also affects all upstream and downstream processes. In the short and long term, almost all companies in all sectors and industries are therefore called upon to deal with ESG (the three pillars of sustainability) and to develop a corresponding behavioral and action strategy.

Why is it so important for society that small and medium-sized enterprises become more sustainable?

99% of all companies are SMEs, such as craft businesses, service providers, consulting companies, manufacturing companies, trading companies, etc.. And they account for around 60% of the economic output of all companies. This means that social goals such as stopping climate change, preserving biodiversity or improving the human rights situation at suppliers in emerging countries can only be achieved with the help of small and medium-sized enterprises. Both stakeholders and politicians have recognized this. And that is why, after large corporations and larger companies were the first to experience strong sustainability regulation, the focus is now shifting to small and medium- sized enterprises. It is therefore no longer an option for small companies to postpone the start of their own sustainability journey any longer.

Do small and medium-sized companies absolutely have to become sustainable or implement the ESG criteria?

This depends on various factors such as the number of employees, turnover or balance sheet size. In addition to regulatory requirements, various stakeholders such as banks, insurers, major business customers, investors and even the company's own employees are increasingly demanding that companies adopt a credible, more sustainable approach. In order to meet these demands, but also in their own interests (such as avoiding reputational damage or taking advantage of new market opportunities), it also makes sense for small and medium-sized companies to start "becoming more sustainable" as early as possible and to develop a structured ESG approach. Failing to do this or delaying it as much as possible can lead to enormous problems if one of the stakeholders (unexpectedly) asks about the company's sustainability status. In future, banks will also grant loans based on the scope and quality of ESG data. It will then make a significant difference, especially for SMEs, whether they pay 0.2% higher interest over 10 or 15 years or not. The same applies to insurance companies and insurance premiums or the awarding of contracts by large companies that pay attention to the assessment of rating agencies in the area of sustainability (e.g. assessment by EcoVadis).