Integrating ESG into SMEs’ business strategy

Ensure your teams understand the motivations, benefits and specifics of an ESG approach and secure management buy-in.

In Quebec, only 21% of businesses that recognize the importance of ESG considerations have walked the talk by implementing a more formal ESG approach, consisting of an ESG strategy and action plan. Although 92% of Canadian SME executives are committed to making a difference on social and environmental issues (Focus Québec 2025), the lack of knowledge and human and financial resources are the two key obstacles to starting their ESG journey, often resulting in different interpretations of ESG across the various functions of the organization.

Gather and analyze market, peer and stakeholder information to help prioritize the ESG topics important to your organization. 

Getting a handle on ESG can be challenging, as it embraces a wide range of topics, such as biodiversity, climate change, diversity, equity, inclusion, employee health and safety, and cybersecurity. To ensure your ESG action plan feasible, it is critical narrow down your ESG topics to what is most relevant to your business and your stakeholders.  

Organizations need to conduct market and peer reviews, a diagnostic of their “current state” or “target state” internal practices, and an in-depth consultation of internal and external stakeholders to home in on their strategic ESG priorities. 

Develop an enterprise-wide ESG action and implement initiatives tied to material ESG topics to effectively mitigate risks and leverage opportunities. 

The next step is to set formal ESG commitments and goals and develop an appropriate governance framework with a full breakdown of the various roles and responsibilities. With these foundations in place, you can roll out ESG programs and initiatives across your value chain.  

3 trends guiding the 2023 ESG agenda: 

• Climate change:  SMEs should gauge their climate footprint to facilitate adopting climate targets, such as net zero, and cut down greenhouse gas (GHG) emissions, particularly with climate change posing financial risks to operations: increased physical impacts, potentially involving assets and/or the supply chain, and regulatory compliance costs. Climate expectations of regulators, clients, creditors, employees and other stakeholders continue to evolve, such that GHG disclosure and management are becoming mandatory for some SMEs.  
• Circular economy: In an environment in which resources are limited and supply chains are under strain, the circular economy offers many advantages such as cutting down on residual waste, improving the environmental balance, finding potential new income streams and growing profitability. At the same time, the circular economy is an effective tool to combat climate change, particularly for achieving GHG emission reduction targets. 
• Diversity and inclusion: In a full-employment market, a business’s employer brand is a key differentiator. Businesses with inclusive, equitable, and diversity-minded workplaces enjoy a competitive edge not only in driving innovation, operational efficiency and growth, but also in attracting new talent, while keeping their teams engaged. 

Measure outcomes for each material ESG topic and monitor and disclose your performance. 

“You can’t manage what can’t measure.” Implementing an ESG performance monitoring system will help identify improvement opportunities, address effective solutions and demonstrate continuous progress in your ESG program rollout. Disclosing your ESG performance externally garners the opportunity to gain credibility and recognition for your ESG initiatives with internal and external stakeholders. 

While ESG disclosures are currently voluntary in Canada, there are already signs—such as the ISSB proposals, particularly with respect to climate-related disclosure requirements and ESG strategies—that may soon change.