In 2024, integrating ESG principles into Small and Medium-sized Enterprises (SMEs) will be a significant trend, particularly in the supply chains of large publicly listed companies. Particularly, regulatory changes in scope 3 and human rights, will propel this trend.

While this presents challenges and opportunities, it also allows SMEs to redefine their role in the global business ecosystem. On the one hand, SMEs face challenges such as complex reporting standards and high costs. On the other hand, embracing ESG trends can lead to access to new clients and markets and risk mitigation¹, ².

Companies should prepare for these changes by

• Revising supplier selection criteria to include ESG compliance, particularly focusing on sustainability and human rights practices.
• Implementing programs to help SME suppliers understand and meet ESG requirements. 
• Investing in technology and systems to enhance transparency throughout the supply chain. 
• Conducting regular supplier audits to ensure compliance with ESG standards.
• Fostering collaboration with SME suppliers rather than a purely transactional approach. 
• Adding ESG factors in risk management frameworks.
•  Implementing incentive programs for suppliers who excel in meeting or exceeding ESG standards. 

Sources:

1. https://www.oecd-forum.org/posts/driving-innovation-and-market-expansion-the-power-of-supply-chain-collaboration-for-smes, ↩︎
2. https://www.bcg.com/publications/2023/managing-esg-issues-in-global-supply-chains ↩︎