We know that large companies are doing a lot to support businesses in their supply chains to help them reach their own ESG targets. Alongside this, there are so many other benefits for supporting suppliers to take ESG action: from growing more sustainable and resilient supply chains, meeting stakeholder expectations and demonstrating ESG commitment, through to creating shared value by reducing supplier costs, increasing revenue and improving operations, benefiting both parties.
At a recent round table session, we brought together senior leaders from the procurement and sustainability teams at some of our large ambassador companies with a couple of our small business members. We discussed how we can make sure that ESG improves the competitiveness of small business, with a focus on the shared value that ESG can bring to both large and small businesses, and share some of the issues that small businesses are currently facing in accessing supply chains due to ESG requirements.
Challenges
Discussions were around the costs of doing good incurred by small businesses and the need for flexibility in ESG reporting requirements:
- Green tech: One of the key challenges raised was linked to investment in green technology by small businesses. While small businesses are investing in green tech, purchasers often don’t consider the need for further innovation and change within the green tech industry itself. For example, the use of electric vehicles (EVs) is still hampered by their inability to cover the same distance, in the same timeframe, as Additionally, the higher cost of EVs makes it difficult for small businesses who need a car fleet to switch to greener alternatives.
- ESG reporting: Another challenge faced by small businesses is the escalation in ESG reporting requirements. Small businesses are being asked for increasing amounts of data and information surrounding their ESG credentials, often by teams they have never dealt with before. We heard at the session that these reporting requests aren’t standardised, with every request sent in different formats depending on the client, and that they often prioritise the needs of the purchaser over the supplier. For example, if a large company is looking to improve their own diversity statistics, this is often pushed downwards onto all suppliers, when some suppliers are better placed to drive forwards on other important ESG areas such as emissions reductions.
Recommendations
To address the challenges, experts in the session put forward several recommendations for senior leaders in sustainability, CSR, procurement and supply management to consider:
- Focus investment where it’s needed: large companies are currently focusing their ESG support and resource investment on their top suppliers, who tend to be large companies themselves, with expertise and teams dedicated to delivering on their ESG agenda. However, this system is not set up to support the needs of small businesses during their transition phase. Bigger businesses should target their efforts on supporting small suppliers, where the most impact and change can be made.
- Build individual relationships: large companies need to understand the individual challenges being faced by their small business suppliers when it comes to the ESG agenda. This means adopting solutions which help to build long-term, more personal relationships with small businesses. It’s critical that relationships support small businesses to overcome the individual challenges they face and are driven by helping them to take action, not just dialogue.
- Flexibility in reporting: large companies should be flexible in their ESG reporting requirements by not asking for all the data, all the time. One solution would be t: for example, recruitment firms focusing on diversity and inclusion, and logistics firms focusing on environmental credentials. This would free up small businesses to excel and drive forwards the UK’s ESG agenda by concentrating on where they can make the most difference for people, places and the planet, while highlighting where shared value really can be created.
Conclusion
large companies’ relationships with their small business suppliers can’t be one size fits all. They need to understand individual business challenges, and help to grow ESG skills and capacity. Departments within large companies, ranging from finance through to procurement, supply chain management, and sustainability and CSR, need to pool resources to help drive this change forward.
Investing in the future of the planet, our communities and the UK, while benefiting your own business, can make ESG the engine of growth and competitiveness for small businesses and contribute to a more sustainable future for all.
If you’re a senior leader in sustainability, CSR, procurement, or finance, consider how your company can support small businesses in your supply chain to achieve their ESG goals. Start by focusing your investment of time, money and resources where it’s needed the most and be flexible in your ESG reporting requirements. This will build individual relationships which make taking action easier. By doing so, you’ll not only help small businesses thrive, but also help drive progress towards a more sustainable and equitable future.
Take action
Together, we can have a positive impact. Email Sophie Medd to learn more about the solutions we offer if you’re looking to support small businesses in your supply chain with ESG capabilities and capacity. Start taking action towards a more sustainable future, today!
Impact
Join some of the country’s leading companies in supporting small businesses within your supply chain. Don’t take our word for it, read about the work we’ve done with Grosvenor. Do what PwC, Siemens, UBS, Schroders, Grosvenor and other leading companies have done in taking the lead and work in partnership with the team at Heart of the City to drive ESG through your supply chain.
