ESG Reporting for SMEs: A Practical Guide to Getting Started with ESG (Without Complexity)

Introduction

If you are reading this, ESG has likely already entered your day-to-day work. It appears in customer requests, supplier questionnaires, or internal discussions about compliance and sustainability. In many cases, it starts with a simple question in a meeting: “Should we start working on ESG reporting?”

From that moment, responsibility often lands with someone in operations, HR, finance, or administration. Not necessarily because ESG is part of their role, but because they are structured, curious, or closest to the data.

This guide is written for that exact situation. It is not an academic explanation of ESG frameworks. It is a practical, structured walkthrough of what ESG reporting actually is, why it matters for SMEs, and how to get started in a way that is both manageable and useful.

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What ESG Reporting Actually Is

Understanding ESG in Practical Terms

ESG reporting can be understood as a structured way of measuring and communicating how a company impacts its environment, its people, and how it is governed.

A useful way to think about it is to compare ESG reporting to financial reporting. A financial statement provides clarity on revenue, costs, and profitability. An ESG report provides clarity on non-financial performance, including emissions, employee conditions, and governance structures.

In practice, ESG reporting answers questions such as:

1. How much CO₂ does the company emit?
2. How are employees treated and supported?
3. Are there clear policies, structures, and accountability in place?

The purpose is not to judge the company, but to make its impact visible and comparable.

ESG vs. Sustainability

It is important to distinguish between ESG reporting and sustainability work.

ESG reporting is documentation. It provides a snapshot of the company’s current state. Sustainability is the set of actions taken to improve that state over time.

A simple analogy used in the source material compares ESG to stepping on a scale. It tells you where you are. Sustainability is the process of improving that result through continuous action.

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ESG Regulation and Why SMEs Are Affected

You May Not Be Regulated — But Your Customers Are

Most SMEs with fewer than 1,000 employees are not directly subject to the Corporate Sustainability Reporting Directive (CSRD). This means they are not required to submit ESG reports to authorities or comply with the full set of regulatory standards.

However, this does not mean they are unaffected.

Large companies that are subject to CSRD must report on their entire value chain, including indirect emissions and impacts. This is referred to as Scope 3.

Scope 3 includes:

• Emissions from suppliers
• Transport and logistics
• Purchased goods and services

As a result, SMEs are increasingly required to provide ESG data to their customers. This includes energy consumption, CO₂ emissions, employee data, and governance practices.

ESG as a Competitive Parameter

The shift from compliance to competition is already visible. ESG is no longer only about meeting requirements. It is becoming a differentiator in supplier selection.

Companies that can proactively provide structured ESG data and reports signal reliability, professionalism, and alignment with regulatory expectations.

Data shows that companies actively using sustainability as part of their positioning can grow up to 40% faster than those that do not.

This makes ESG reporting not only a defensive necessity but also a commercial opportunity.

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How to Get Started with ESG Reporting

Step 1: Define the Purpose

Before collecting data or selecting tools, it is necessary to define why ESG reporting is relevant for the company.

Common drivers include:

1. Ensuring the company is not excluded from supplier selection processes
2. Creating internal transparency and understanding of impact
3. Preparing for future regulatory requirements
4. Strengthening positioning in sales and employer branding

Without a clear purpose, ESG reporting risks becoming a purely administrative exercise.

Step 2: Select a Framework

The ESG landscape includes multiple frameworks such as GRI, CSRD, SASB, and TCFD. For SMEs, these can be unnecessarily complex.

A more practical approach is to use the VSME framework, which is specifically designed for companies with fewer than 1,000 employees.

The VSME framework provides:

• A simplified structure for ESG reporting
• A clear set of required and optional data points
• Alignment with what customers and stakeholders typically request

This allows SMEs to start without being overwhelmed by regulatory complexity.

Step 3: Identify and Collect Data

Most SMEs already possess a significant portion of the required ESG data. The challenge lies in identifying where it is located.

Typical data ownership is distributed as follows:

• Finance: electricity, heating, and cost-related data
• HR: employee demographics, absence, and training
• Operations: transport, waste, and material usage

Data collection should be approached systematically by identifying responsible individuals and requesting specific data points with clear deadlines.

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ESG in Practice: What SMEs Actually Report

Environmental (E)

Environmental data is often the most technical part of ESG reporting. It includes metrics such as:

• CO₂ emissions
• Energy consumption (electricity and heating)
• Water usage
• Waste and recycling

CO₂ emissions are typically divided into three categories:

1. Scope 1: Direct emissions from owned sources
2. Scope 2: Indirect emissions from purchased energy
3. Scope 3: Indirect emissions from the value chain

In the example provided in the source material, a small consultancy reports:

• Scope 1 emissions: 0.0 tCO₂e
• Scope 2 emissions: 0.6 tCO₂e
• Scope 3 emissions: 21.2 tCO₂e
• Total emissions: 21.8 tCO₂e
• Emissions per employee: 4.4 tCO₂e

This illustrates that Scope 3 often represents the majority of emissions for SMEs.

Social (S)

Social data focuses on how the company manages its workforce and social impact.

Typical metrics include:

• Number of employees (FTE)
• Gender diversity
• Employee turnover
• Workplace incidents
• Training hours

In the example:

• 5 employees (FTE)
• 40% female representation
• 0% employee turnover
• 0 workplace incidents
• 40 training hours per employee per year

These data points are often already available in HR systems and require minimal additional effort to compile.

Governance (G)

Governance addresses how the company is structured and managed. It includes policies, accountability, and ethical standards.

Typical elements include:

• Data protection policies
• Anti-corruption measures
• Whistleblower systems
• Leadership diversity

In the example:

• Data protection policy: Yes
• Corruption-related fines: 0 DKK
• Board gender diversity: 33% women
• Management gender diversity: 66% women

For SMEs, governance is less about formal complexity and more about documenting existing practices clearly.

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The ESG Report: Output and Use

An ESG report is not the objective in itself. It is the output of the process.

A well-structured ESG report typically includes:

1. Key metrics across E, S, and G
2. A short explanation of methodology
3. Clear assumptions where data is estimated
4. A professional but concise presentation (often 6–10 pages)

Once completed, the report should be actively used.

It can support:

• Sales processes where ESG data is requested
• Employer branding and recruitment
• Internal decision-making and prioritization

The report becomes a reusable asset rather than a one-time deliverable.

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Final Perspective: Progress Over Perfection

One of the most important principles in ESG reporting is that transparency is more valuable than perfection.

SMEs are not expected to deliver complete or flawless datasets from the beginning. What matters is:

• Starting the process
• Documenting assumptions
• Improving data quality over time

Once the first report is completed, subsequent iterations become significantly easier. Data is structured, responsibilities are clear, and the process becomes repeatable.

At that point, ESG reporting shifts from being an administrative burden to becoming a strategic tool for positioning, compliance, and growth.

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FAQ: ESG Reporting for SMEs

1. What is ESG reporting for SMEs and what does it include?

ESG reporting for SMEs is a structured way of documenting a company’s impact across Environmental, Social, and Governance areas. It typically includes data on CO₂ emissions (Scope 1, 2, and 3), energy and resource consumption, employee conditions such as diversity and turnover, and governance elements like policies, compliance, and leadership structure. The goal is to provide transparency rather than perfection.

2. Do SMEs need to comply with ESG regulations like CSRD?

Most SMEs are not directly required to comply with CSRD if they have fewer than 1,000 employees and are not publicly listed. However, they are indirectly affected because their customers must report Scope 3 emissions, which include supplier data. This means SMEs are increasingly asked to provide ESG data as part of supplier and procurement processes.

3. How do you start ESG reporting in a small or medium-sized company?

To start ESG reporting in an SME, you should first define your purpose, such as meeting customer requirements or improving internal transparency. Then choose a practical framework like VSME, identify where your existing data is located across departments, and begin collecting key metrics. Most companies already have 70–80% of the required data available internally.

4. What data is required for an ESG report for SMEs?

An ESG report for SMEs typically includes environmental data such as CO₂ emissions and energy usage, social data such as employee demographics and training, and governance data such as policies and compliance structures. For example, a small company might report total emissions of 21.8 tCO₂e, 40% female representation, and zero compliance violations, depending on its operations.

5. Why is ESG reporting important for SMEs if it is not mandatory?

ESG reporting is important for SMEs because it directly impacts their ability to win and retain customers. Companies that can provide structured ESG data are more likely to be selected as suppliers, especially by larger organizations. In addition, businesses that actively work with sustainability can grow up to 40% faster, making ESG both a compliance and a commercial advantage.

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