SMEs should start ESG reporting before regulation catches up

AS LISTED firms in Singapore and Hong Kong prepare to comply with mandatory environmental, social and governance (ESG) reporting in 2025 and 2026, small and medium enterprises (SMEs) are not completely off the hook. SMEs in Singapore and Hong Kong that serve listed firms in the US, UK and Australia are already being asked to provide data for their customers’ sustainability reporting.

Instead of waiting to play catch up with regulations, SMEs in Singapore and Hong Kong should make ESG reporting a priority. A recent survey by the Hong Kong Small and Medium Enterprises Association shows close to 85 per cent of SMEs agreed good ESG practices increase trust with their customers and build a positive brand image. However, the survey also revealed that 48 per cent of SMEs have not started their ESG reporting due to a lack of skills and human resources, while 40 per cent cited a lack of other necessary resources. Starting ESG reporting early will allow resource and time-strapped SMEs to take baby steps towards getting their reports right.

To the untrained eye, ESG reporting seems to involve largely non-financial KPIs. How do we arrive at these numbers? Fortunately, this non-financial information can already be found in an SME’s financial reporting.