Sustainability Data: Twelve Tested Actions to Meet Customer Demands

AUTHOR: JENNIFER LOUGHRIDGE

PRINCIPAL CONSULTANT

Jennifer is a Senior Executive Finance professional with 22+ years of global experience. She specialises in Finance Transformation, ESG and Continuous Improvement, with particular expertise in Strategy, Performance Management, Business Partnering, Commercial Decision-Making, Corporate Governance and Valuation.

In today’s world, sustainability is no longer a buzzword—it’s a business imperative. Larger organisations in the EU fall under the CSRD, and they are looking to their suppliers of all sizes to deliver sustainability data so that they can disclose their value chain obligations.

As a result, to simplify and standardise this, the European Financial Reporting Advisory Group (EFRAG) has produced voluntary sustainability reporting guidelines explicitly tailored for Medium, Small and Micro Enterprises (MSMEs). These standards aim to make sustainability reporting accessible, manageable, and meaningful for smaller businesses, enabling them, therefore, to meet the procurement demands of their larger customers.

The Importance of Sustainability Reporting for MSMEs

Why should MSMEs care about sustainability reporting? Here are a few compelling reasons, each with the potential to bring significant benefits to your business:

Enhanced Reputation and Trust: Transparent sustainability practices, such as reducing carbon emissions, implementing fair labour practices, or using eco-friendly materials, can significantly improve a company’s reputation and foster trust among customers, partners, and investors.
Regulatory Preparedness: While the current guidelines are voluntary, meaning they are not required by law but are encouraged for best practice, regulatory landscapes are evolving. Early adoption of sustainability reporting practices can prepare MSMEs for potential future mandatory requirements, which would be legally required.
Operational Efficiency: Sustainability reporting often leads to insights that can drive operational efficiencies, reducing waste and improving resource management.
Competitive Advantage: Consumers and clients are increasingly valuing sustainability. Therefore, demonstrating a commitment to sustainable practices can differentiate MSMEs from competitors.

Key Components of EFRAG’s Voluntary Reporting Guidelines

EFRAG’s guidelines are designed to be practical and adaptable, understanding MSMEs’ unique challenges and opportunities. Here are the key components, each designed to make sustainability reporting a manageable and meaningful process for your business:

Simplified Reporting Framework: The guidelines offer a streamlined, less resource-intensive framework than those for larger corporations. This framework, of course, includes straightforward templates and clear instructions.
Materiality Assessment: MSMEs are encouraged to focus on sustainability issues that are most relevant to their business and stakeholders because that ensures meaningful and manageable reporting.
Sector-Specific Guidance: EFRAG recognises that sustainability challenges vary across industries. Therefore, it provides sector-specific guidance to help MSMEs address the most pertinent issues in their respective fields.
Stakeholder Engagement: The guidelines emphasise the importance of engaging with stakeholders to understand their expectations and concerns and foster a collaborative approach to sustainability.
Continuous Improvement: EFRAG encourages MSMEs to view sustainability reporting as a journey of continuous improvement rather than a one-time task. This perspective helps businesses evolve their practices over time.

What Does this Mean for Finance?

Finance plays a crucial role in implementing sustainability reporting. Here are twelve tried-and-tested steps for successfully managing ESG in smaller organisations.

12 Tested Actions for Smaller Organisations

Understand the Guidelines
- The Controller should thoroughly review and understand EFRAG’s voluntary sustainability reporting guidelines, specifically the framework, templates, and sector-specific guidance.
Assess Current Practices
- Evaluate current financial and non-financial data collection processes to identify gaps or areas needing improvement to align with the sustainability reporting standards. As a result, this assessment will help determine the organisation’s ESG readiness
Integrate Sustainability into Financial Reporting
- Work towards integrating sustainability metrics into existing financial reporting systems, including key sustainability indicators alongside traditional financial metrics, to provide a holistic view of the company’s performance.
Collaborate Across Departments
- Finance should collaborate with other departments, such as operations, HR, and procurement, to gather comprehensive sustainability data. Effective communication and collaboration are essential for accurate and meaningful reporting.
Develop a Reporting Plan
- Create a detailed plan outlining the steps, timeline, and responsibilities for sustainability reporting. This plan should include deliverables such as data collection methods, reporting frequency, and key performance indicators (KPIs) that will be tracked.
Engage Stakeholders
- Engage with key stakeholders, including employees, customers, investors, and suppliers, to gather their input and expectations regarding sustainability. This engagement will ensure that the reporting is relevant and addresses stakeholder concerns.
Implement Data Collection Systems
- Establish robust systems for collecting and managing sustainability data. Then, invest in new software or tools to efficiently track and analyse sustainability metrics.
Train and Educate Staff
- Provide training and educational resources to finance and other relevant departments to ensure they understand the importance of sustainability reporting and are equipped with the necessary skills and knowledge.
Monitor and Review Performance
- Monitor and review the company’s sustainability performance regularly against the set KPIs. This ongoing review will help identify areas for improvement and ensure continuous progress, for example.
Communicate Results
- Prepare and communicate the sustainability report clearly and transparently to stakeholders. Use visuals, charts, and case studies to make the report also engaging and easily understood.
Seek External Assurance
- Consider obtaining external assurance for the sustainability report to enhance its credibility and reliability. External verification can give stakeholders confidence in the reported data’s accuracy, which can, in turn, improve the company’s reputation and trustworthiness. It also provides an opportunity for an independent assessment of the company’s sustainability performance, which can help identify areas for improvement.
Foster a Culture of Sustainability
- Promote awareness and understanding of sustainability issues to encourage a culture of sustainability within the organisation. Finance departments can lead by example, demonstrating the value of sustainable practices in daily operations.

Finance – a Pivotal Role

By taking these actions, Finance can play a pivotal role in successfully implementing EFRAG’s voluntary sustainability reporting standards, thereby contributing to the organisation’s overall sustainability goals. This proactive approach not only prepares the company for potential future regulations but also enhances its reputation and competitiveness in the market.

Finding the Resources

Finding the right resources and expertise for your organisation’s ESG needs can often be challenging, especially for smaller organisations. That’s where Loughridge Transformations comes in. We specialise in offering tailored support that aligns with the unique scale and requirements of both small and large organisations. By leveraging our extensive ESG expertise, you can save valuable time and money, allowing you to focus on running the business. Let us help you navigate the complexities of ESG implementation, ensuring you have the right support at every step. Connect with us today to explore how we could work with you:

Arrange a Call

The Road Ahead

As the global business landscape continues to evolve, the importance of sustainability will only grow over time. Additionally, MSMEs, often seen as the backbone of the economy, have a critical role to play in this transition. By embracing EFRAG’s voluntary sustainability reporting guidelines, MSMEs can contribute to a more sustainable future and unlock new opportunities for growth and innovation. Furthermore, the road ahead will likely involve more stringent regulations and increased consumer demand for sustainable products and services. However, with the right strategies and tools, MSMEs can successfully navigate this path.

In conclusion, EFRAG’s voluntary sustainability reporting standards provide a valuable framework for MSMEs to navigate the complexities of sustainability. By taking a proactive approach to sustainability reporting, smaller businesses can enhance their reputation, improve operational efficiencies, and gain a competitive edge. The journey towards sustainability may be challenging, but with the right tools and guidance, it is undoubtedly worth embarking on.

Voluntary Sustainability Reporting? What Comes Next?

At Loughridge Transformations, we possess the governance and assurance expertise necessary to assess and recommend improvement actions and to deliver robust implementation. We work in collaboration with external auditors when it is needed. Our comprehensive skillset, including governance and audit, process and control design, and project and change management, ensures sustainable improvements and ESG regulatory compliance.

Our consultants have years of experience working across locations and time zones. They are also experts in delivering all services remotely or onsite in SOx (SEC), EU, UK and other regulatory environments.

Alternatively, take a look at our most popular blog posts:

Or are you looking for something else? Here’s what we have been blogging about recently: