In many SMEs, sustainability work and sustainability reporting are easily seen as the same thing, even though there is a clear distinction between them. A company may already be doing a great deal to improve its sustainability: monitoring energy consumption, reducing material waste, taking care of employee wellbeing and occupational safety, knowing its suppliers, and managing customer relationships with a long-term perspective.
However, these activities are often not brought together, no indicators have been defined for them, and they are not documented in a way that would enable the company to report on sustainability. This is an important distinction: sustainability work and readiness for sustainability reporting are not the same thing.
Sustainability work can be done without a sustainability report
Sustainability work in SMEs is often highly practical. It is reflected in daily decisions, operating practices and processes rather than necessarily taking the form of a separate sustainability programme.
For example, a company may reduce its energy consumption purely for cost reasons. Material waste may be monitored to improve production efficiency. Occupational safety is developed because a good working environment is part of normal business management. Suppliers are selected based on quality, reliability of supply and long-term relationships.
All of these activities can also be part of the company’s sustainability work. The challenge arises when someone asks the company, for example, about trends in energy consumption, greenhouse gas emissions, workforce-related indicators, sustainability targets or supply chain management. At that point, doing things well is no longer enough. The company must also be able to provide information about what it is doing.
Taking action and reporting on it require different capabilities
Sustainability reporting requires capabilities that practical sustainability work may not previously have required. It requires data, indicators, documentation, defined responsibilities and often shared operating practices. A company may, for example, have been reducing its energy consumption for years, but if consumption data has not been collected systematically, it is difficult to demonstrate progress.
Similarly, a company may take good care of its employees without ever having calculated employee turnover, trends in sickness absence or training hours. A lack of sustainability work and a lack of sustainability data are therefore two different things. This distinction is important for SMEs because otherwise preparations for sustainability reporting may begin from the wrong starting point.
Start by identifying what the company is already doing
When a company begins receiving requests for sustainability information, the first reaction may be that an entirely new sustainability management system needs to be built. Often this is not the case. Instead, the first sensible step is to map existing activities.
What environmental issues are already monitored? What employee-related practices does the company have? How is occupational safety managed? What requirements are placed on suppliers? What are customers already asking about? What information is already available from financial management, production, human resources or other systems?
Only after this assessment can the actual gaps be identified. Sometimes the sustainability action itself is missing. In other cases, the activity is already in place but an indicator is missing. Sometimes the information exists but has not been compiled. In other cases, sustainability work is being carried out in several parts of the organisation without the overall picture ever having been identified.
Reporting must not become the purpose of sustainability work
Sustainability reporting serves an important purpose. It enables a company to compile information, monitor progress and respond to the information needs of customers, financiers and other stakeholders.
However, reporting is a tool, not the objective of sustainability work. From an SME perspective, it is more important to identify which sustainability issues are significant in terms of the company’s operations, risks, customers and business, and what actions should be taken in relation to them. After that, the company determines what should be measured and what information is needed. Only then does it decide in what form the information should be reported.
An SME does not need to move in a single leap from informal sustainability work to a comprehensive reporting system. Reporting readiness can be developed step by step. The first stage is to identify the sustainability work already being carried out and the sustainability topics that are material to the company. The next step is to identify missing information and select a few indicators that are useful from a business perspective. After that, the company agrees on where the data will come from, who will monitor it and how often it will be reviewed.
In this way, sustainability information gradually becomes part of normal business management rather than a separate reporting apparatus built on top of the company’s other activities. At the same time, the company’s ability to respond to sustainability-related questions from customers and other stakeholders improves.
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