ESG stands for Environmental, Social and Governance — a set of criteria that investors, banks and customers use to assess how a business manages risks and opportunities beyond its financial metrics. ESG answers the question: how does a business make its profits, and is that way sustainable?
Key takeaways
- E: energy, emissions, water, waste. S: workers, safety, supply chain, customers, communities. G: governance, integrity, transparency.
- SMEs face ESG pressure mainly from large customers, banks and export markets.
- Start small: choose material topics, measure basic data and appoint someone responsible.
The three pillars of ESG
| Pillar | Example topics |
|---|---|
| Environmental (E) | Greenhouse gases, energy, water, waste, materials |
| Social (S) | Occupational safety, benefits, training, equality, supply chain, customers |
| Governance (G) | Governance structure, anti-corruption, transparency, risk management |
How does ESG differ from CSR?
CSR (corporate social responsibility) is usually associated with voluntary activities such as charity and volunteering. ESG is a framework for measuring and managing risk that is integrated into strategy and reporting, with metrics and standards, and assessed by third parties. See also from charity to measurable impact.
Why do SMEs need ESG?
- Keeping customers: large companies require ESG data from their suppliers.
- Access to finance: banks factor environmental and social considerations into their appraisals.
- Lower costs: savings on energy, water and materials.
- Attracting talent: a transparent and safe working environment.
A five-step roadmap on a limited budget
- Appoint one person to lead, with authority delegated by management.
- Identify five to seven material topics based on your sector and customer requirements (see materiality assessment).
- Measure basic data: electricity, fuel, water, waste, workforce, accidents.
- Put minimum policies in place: environment, safety, human rights, anti-corruption.
- Get an independent assessment to understand where you stand and how to improve (see what is an ESG rating).
ESG does not start with a glossy report, but with an accurate data table.
Frequently asked questions
Is ESG mandatory for SMEs?
Most ESG requirements for SMEs come from the market (customers, banks) rather than from law; however, statutory environmental and labour obligations still apply.
Is implementing ESG expensive?
In the early stages, the main cost is the time spent organising data; many actions, such as energy saving, also help reduce operating costs.
How does ESG differ from sustainable development?
Sustainable development is the overarching goal; ESG is a specific set of criteria for measuring and assessing how a business contributes to that goal.
VietESG — Independent ESG rating organisation. Ratings based on disclosed data, supporting evidence and a public methodology aligned with GRI and the SDGs.
