Sustainability and ESG are becoming increasingly relevant for responsible business operations. Danish companies face expectations from customers, investors, and consumers to engage in sustainable efforts. These expectations also extend to small and medium-sized enterprises (SMEs). ESG is a way to concretize and document your sustainable initiatives, thereby strengthening your business.
The concept of sustainability
What elements are actually involved when it comes to sustainability? A widely used definition of global sustainability comes from the Brundtland Commission’s 1987 report, Our Common Future. The report views sustainability as encompassing environmental, economic, and social aspects. It defines sustainable development as using the Earth’s resources in a way that balances exploitation and protection.
This ensures that we do not destroy our shared foundation for life. Sustainable development must contribute to meeting the needs of people today while preserving the opportunities for future generations. This definition embraces a holistic approach to sustainability, integrating social, environmental, and economic factors. It is this definition that remains highly relevant in today’s societal context and serves as the foundation for ESG.
What is ESG?
ESG stands for Environmental, Social, and Governance and focuses on integrating sustainability into a company’s business strategy. ESG is a framework that helps businesses structure their sustainability efforts. Let’s dive into what each pillar of the framework entails.
- (E)nvironmental covers how companies manage climate and environmental factors, including CO2 emissions, energy efficiency, pollution, resource consumption, and waste management. This aspect ensures that businesses take responsibility for environmental protection and planetary health.
- (S)ocial relates to labor conditions within your company, as well as your relationships with customers, suppliers, and society as a whole. Key areas include diversity, inclusion, working conditions, human rights, health, safety, and corporate social responsibility.
- (G)overnance concerns corporate behavior, including leadership culture, ethics and integrity, whistleblower protection, anti-corruption measures, transparency, accountability, and regulatory compliance.
Together, these three pillars form the ESG framework, which encapsulates the concept of sustainability and provides SMEs with a structured approach to making their sustainability efforts more concrete.
Voluntary ESG reporting for SMEs
For SMEs, ESG reporting is voluntary. It is up to each business to assess whether ESG reporting provides business value. The EU has developed a draft standard for SMEs interested in sustainability reporting. More information about this voluntary standard can be found at Virksomhedsguiden.dk, along with a template based on the standard.
Three key reasons for SMEs to engage in ESG
There are many reasons why SMEs should work with ESG. Here are three key benefits:
1. Strengthening your competitive advantage
Your company’s competitiveness may depend on your ability to provide customers with data and information about sustainability. SMEs that implement sustainability initiatives aligned with customer needs are in a stronger position to become preferred suppliers for both new and existing customers. Additionally, integrating ESG practices can improve your access to capital and enhance your market positioning.
2. Attracting and retaining Talent
No business can function without its workforce. An effective ESG strategy can be a powerful tool for attracting and retaining employees. Environmental initiatives are particularly significant for younger generations when choosing a workplace. A 2024 study by Deloitte shows that Generation Z (born between 1995-2005) and Millennials (born between 1983-1994) are highly concerned about climate change. These generations view environmental protection as a societal challenge where businesses have a responsibility and potential to drive positive change. The study also reveals that 54% of Generation Z and 48% of Millennials surveyed put pressure on their employers to take action on climate change. If they feel unable to drive change within their organizations, many are willing to switch jobs – or even industries. Deloitte’s findings therefore highlight the importance of ESG efforts in attracting and retaining younger employees.
If your company focuses on the E in ESG, it can also strengthen the S by fostering a sense of purpose beyond financial performance. This, in turn, plays a crucial role in enhancing employee motivation and job satisfaction.
3. Contributing to the UN Sustainable Development Goals (SDGs)
ESG initiatives align closely with the UN’s 17 Sustainable Development Goals (SDGs), which call on businesses to address global challenges such as climate change, economic growth, gender equality, and responsible consumption and production. By actively engaging in ESG, your company contributes to achieving these global goals. Examples of SMEs successfully integrating the SDGs into their business practices can be found in the SDG portal.
Using time tracking as part of your ESG strategy
Although ESG reporting is voluntary for SMEs, it can be a valuable investment in your company’s future. Taking the first steps now can position your business strongly in a market where sustainability plays an increasingly significant role. If you want to reap the benefits of sustainable initiatives – such as enhancing competitiveness – ESG can serve as a guiding framework.
Gaining insight into and documenting your business practices is a crucial part of ESG efforts. Efficient time tracking can play a central role in this process. Recording work hours and activities provides data that enhances transparency, ensures compliance with labor regulations, and promotes a sustainable work culture. Thus, time tracking supports responsible business operations while contributing to your ESG strategy.
If you want to incorporate time tracking into your ESG strategy, you can design your own solution with Intempus. It’s free and non-binding – and it can help you better understand your company’s needs.
Sources: Provice.dk, Virksomhedsguiden.dk here, here and here, Verdensmålsportalen.dk, Dansk Industri, verdensmaalene.dk, Climaider, PWC, Attent, Dansk Arkitektur Center, Deloitte, Brundtlandrapporten, Dansk Erhverv.
