In a values-driven world, Environmental, Social, and Governance (ESG) principles are no longer just the domain of large corporations. Small and medium-sized enterprises (SMEs) in Australia are beginning to recognise that embedding ESG into their operations is equally important.
Whether a local manufacturer, tech startup, or service provider, embracing ESG can deliver tangible benefits, open new opportunities, and future-proof your business in a rapidly changing landscape.
What is ESG?
ESG stands for Environmental, Social, and Governance. It refers to the three key areas businesses can focus on to operate responsibly:
- Environmental: relates to a business’s impact on the planet, e.g. energy usage, emissions, waste, and sustainable sourcing.
- Social: relates to how the organisation interacts with its employees, customers, communities, and how it upholds diversity and human rights.
- Governance: relates to a company’s leadership, transparency, ethical practices, and compliance with regulations.
What are the benefits of ESG for Australian small businesses?
1. Attracting customers and talent
Australian consumers are becoming more socially conscious. A 2023 study by PwC found that over 70% of Australians prefer to buy from businesses that align with their values. Read the PwC Global Consumer Insights Survey.
Similarly, employees – particularly millennials and Gen Z – are drawn to workplaces with a strong social and environmental conscience. SMEs that showcase their commitment to ESG can therefore more effectively attract loyal customers and top-tier talent.
2. Access to finance and investment
According to EY Australia, more financial institutions are factoring ESG performance into their lending decisions. Banks, venture capital firms, and government grant programs increasingly favour businesses that demonstrate sustainable and responsible practices.
By incorporating ESG into your business model, you can improve your credibility and appeal to a growing pool of ethical investors and lenders.
For example, the Australian Government introduced the Climate Solutions Fund in February 2019 which provides financial incentives for businesses that can demonstrate how they’re helping to reduce greenhouse gas emissions.
3. Regulatory preparedness
Australia’s regulatory environment is constantly shifting. Traditionally, most ESG compliance requirements have targeted larger companies, such as the Modern Slavery Act which requires businesses with a turnover of over $100 million to report on the risks of modern slavery in their operations and supply chains.
However, momentum is now building for broader ESG standards for businesses of all sizes – especially around emissions reporting and labour practices. SMEs that act early will avoid scrambling later to catch up.
Staying ahead of regulations also reduces the risk of penalties, reputational damage, or disrupted operations down the track.
4. Operational efficiency and risk management
Adopting ESG practices can also boost your bottom line. Energy-efficient upgrades, waste reduction, and sustainable supply chains often lead to cost savings over time.
Good governance and social responsibility also reduce the risk of internal issues, such as workplace disputes or non-compliance. In short, ESG helps you run a leaner, more resilient business.
5. Winning contracts and partnerships
Large organisations in Australia, particularly those in sectors like construction, mining, and retail, increasingly require ESG credentials from their suppliers. Due to the rigorous ESG reporting requirements placed upon larger companies, these organisations often transfer the requirements throughout their supply chain to ensure they remain compliant in all facets of their business.
Demonstrating ESG alignment can thereby give your small business a competitive edge when bidding for contracts or forming strategic partnerships.
This also applies to government tenders, as most opportunities now require documentation on ESG principles. In Australia, 35% of government contracts valued up to $20 million are awarded to SMEs.
Getting started with ESG as a small business
You don’t need to overhaul your operations overnight. Start small:
- Environmental: Conduct an energy audit, reduce paper use, or switch to local suppliers.
- Social: Improve workplace policies, invest in employee wellbeing, or support a local cause.
- Governance: Formalise internal policies, ensure compliance, and be transparent with stakeholders.
An ESG strategy should reflect your values, resources, and the nature of your business.
How Procure Spot can help
Procure Spot specialises in helping small businesses improve processes and integrate ESG principles in practical, cost-effective ways. Effective process management will enable businesses to meet ESG compliance requirements and achieve the many other tangible benefits listed in this article.
Procure Spot also delivers end-to-end tender management support, from advice and assistance on ESG components to bid management, tender writing and evaluation review to help small businesses win valuable government contracts.
We can help you turn ESG from a buzzword into a business asset. Contact us to book a consultation for your business.
