The latest market analysis by digital identity specialists ID Crypt Global, reveals that only one-fifth of the UK’s SMEs are aware of what Environmental, Social, and Corporate Governance (ESG) is and that a colossal majority of them have no interest in engaging with ESG practices in the future despite its proven benefits.
Previous research from ID Crypt has already shown that, among the world’s biggest businesses, those prioritising ESG are enjoying 6.3% stronger profit growth than those not.
It’s somewhat surprising that ID Crypt’s new research shows that an overwhelming majority of the UK’s small-to-medium-sized enterprises (SMEs) are doing nothing to engage with ESG.
A survey of 1,124 UK SME business owners reveals that only 19% are aware of ESG, while only 12% implement ESG practices.
Those implementing ESG practices are primarily doing so to reduce their environmental impact, ensure their societal impact is positive, and ensure they are compliant with all current and future regulation changes.
Among the SMEs actively implementing ESG practices, 73% state that it has improved their company, and the majority (87%) would like ESG practices made more widely available for all companies, of all sizes, across all sectors.
However, the varied scoring methodologies currently utilised within ESG practices are one area that has come under criticism, and 86% of SMEs surveyed by ID Crypt Global would like to see one consistent scoring method introduced across the board.
71% also stated that there should be an independent regulatory body responsible for providing ESG scores on a global basis, further improving transparency when it comes to ESG practices.
For now, the primary barrier seems to be attracting more businesses to commit to ESG. Of those that told ID Crypt Global they do not currently engage in ESG activities, 92% also stated they had no plans of doing so in the future.
The primary reason was that they felt it did not benefit their business. At the same time, many also lacked knowledge or awareness around the topic, with the cost involved in obtaining a score via a third party also a barrier for most.
CEO and founder of ID Crypt Global, Lauren Wilson-Smith, commented: “The growing importance of ESG practices is positive. But it’s fair to say that while it is being increasingly adopted by big businesses, the implementation of ESG is being done for the wrong reasons, focusing on profits over positive impact.”
“So it’s great to see that the nation’s smaller businesses are undertaking ESG activities for the right reasons, seeking to better their environmental and societal impact.”
“However, there remain several issues regarding ESG implementation for smaller businesses. The cost of obtaining and improving a score is certainly one factor, as well as a lack of prior knowledge on the subject. But there is also a lack of transparency due to the numerous score providers operating within the space.”
“As it stands, ESG is inaccessible for many smaller businesses and more certainly needs to be done to drive home the benefits of ESG for companies of all sizes in all sectors.”