Sustainable Development ( ESG — Environment, Social, Governance) is rapidly evolving into a necessity for large and medium-sized businesses rather than just a trend, as it may have seemed until recently. Companies are driven by market competition, client demands, and investor pressure, while simultaneously needing to comply with increasingly stringent rules and standards. For instance, companies reporting under IFRS will be required to implement two new sustainability disclosure standards, IFRS S1 and IFRS S2, starting January 1, 2024.
Nonetheless, for many firms, this is a completely new territory, and they lack a roadmap or plan to follow. The role of medium-sized businesses in the global supply chain signifies that they are a vital part of the business ecosystem, connecting and servicing organizations and their clients worldwide. To fully play their part, medium-sized businesses will need the right guidance, support, and a business environment that enables these enterprises to thrive.
Grant Thornton conducted research on the impact of ESG principles on business and explored ways to apply them in medium-sized companies: what motivates these organizations to take action, what key obstacles they will need to overcome, and which areas of sustainability they will focus on moving forward. We have outlined our recommendations to provide a smoother path to sustainability.
Many medium-sized companies have already embarked on their journey toward a sustainable future, but they still have a significant portion of it to navigate. To overcome any uncertainties regarding the next step in their sustainability journey, companies need clear guidance on what lies ahead and how to approach it.
Charting the Course
Based on our research and data, we have created a proposed model of the “sustainability cycle,” illustrating the phases that most medium-sized companies will go through on their path to becoming sustainable businesses. The cycle consists of four phases, each involving different sustainability actions. From the data, we can also determine that the cycle is continuous and iterative.
Sustainability Continuum
Our research also indicates that the complexity of the rules and standards for sustainability that an organization complies with will likely determine its position on the path to sustainability.
Our Recommendations:
- At the “Discovery” ( Discover) stage, begin by assessing how sustainability actions can align with your business strategy, including low-cost options such as waste management, and then develop a strategy and engage with senior management to gain stakeholder support.
- At the “Explore” ( Explore) stage, it is wise to seek advice on reporting preparation and audits to avoid accusations of “greenwashing” and to comply with regulatory requirements.
- At the “Evolve” ( Evolve) stage, ensure accurate, complete, and organized data collection. This will allow subsequent iterations of the strategy and its implementation to be more effective and impactful. It will also ensure reliable reporting, thereby fostering a higher level of trust associated with the brand.
- At the “Endurance” ( Endurance), as compliance is key for these organizations, we recommend seeking advice on how to simplify the regulatory environment and ensure compliance across multiple jurisdictions, as well as how to connect any actions taken so far so that their reporting and implementation phases are interconnected.
For more information, please contact us via email at: [email protected].