Below, we’ll discuss how adhering to ESG principles will help startups and SMEs position themselves for long-term success and practical benefits, including improved reputation, customer loyalty, and financial gains – even with limited resources.

ESG as a strategic opportunity

The majority of SMEs view ESG programmes as an unnecessary expense and do not see the benefits, according to recent World Economic Forum research. For small business owners and startup founders, ESG may not necessarily be an urgent priority, but be seen as a nice-to-have. In fact, in the UK, only 19% of business owners are aware of what ESG is, and only 12% are implementing formal practices. Yet, despite this lack of awareness – and perhaps caution – SMEs and startups stand much to gain. 

While many associate ESG with environmental responsibility, it encompasses a far broader remit of social and governance factors that can affect a company’s impact and performance for the better. Studies consistently show businesses that integrate ESG into their operations experience significant financial and reputational benefits.

For example, sustainable practices can reduce costs and enhance operational efficiency. According to a 2024 McKinsey study, more energy-intensive companies that adopt resource-efficient processes – such as reducing energy and water consumption – see operational cost reductions of up to 30%. Customer loyalty can also improve, with consumers increasingly favouring brands that align with their values. NielsenIQ’s 2023 research revealed that 78% of global consumers are willing to pay a premium for sustainable products.

When it comes to possible market expansion, ESG-aligned companies are better positioned to tap into overseas markets where sustainability is becoming a prerequisite for doing business. For instance, the European Union’s new Corporate Sustainability Reporting Directive (CSRD) is expected to shape supply chain decisions globally. The sooner startups and SMEs can start their ESG journeys, the sooner they’ll be able to reap its rewards.

Future-proofing startups and small businesses

Beyond immediate benefits, prioritising ESG today can shield businesses from future risks. In 2025 and beyond, SMEs and startups that ignore sustainability may find themselves at a significant disadvantage due to regulatory, supply chain, finance and consumer-driven changes.

Governments worldwide are tightening ESG-related regulations. The European Union’s Green Deal and CSRD, for example, will require companies to disclose detailed sustainability data. Non-compliance could result in hefty fines or restricted market access. Even smaller businesses that fall outside direct regulatory scopes could be impacted indirectly, as larger partners and clients demand compliance from their supply chains.

Global supply chains are affected too. As supply chains grow increasingly exposed to climate risks, extreme weather events and resource shortages, businesses that fail to address these vulnerabilities risk operational disruptions and escalating costs. By adopting sustainable procurement practices and diversifying suppliers, SMEs can build more resilient supply chains.

Access to capital will increasingly be determined by ESG performance. Government tenders apply an ESG weighting to procurement bids. Firms with proven sustainability capabilities are securing up to 20% weighting advantage when their responses are scored. This will impact revenues over time and lenders are focusing on this when pricing or approving finance.

Consumer behaviour is also rapidly shifting toward sustainability. Deloitte’s 2024 Gen Z and Millennial Survey found that 64% of Gen Z or Millennial consumers actively seek out sustainable products – placing a higher priority on ESG values than any previous generation. Businesses that fail to meet these expectations risk losing market relevance among today’s largest audience groups.

Making ESG work for resource-conscious businesses – it doesn’t have to be hard work or expensive

It’s a common misconception that sustainability requires deep pockets. It’s also one that has deterred startups and SMEs from taking action. However, cost-effective strategies and innovative tools are making ESG adoption more accessible than ever, even in challenging economic times.

Steps to improve ESG compliance can take many different shapes for different businesses. Some are better placed to focus on energy efficiency, which could yield quick returns through reduced energy bills. For example, by switching to LED lighting or optimising heating and cooling systems.

Alternatively, others might rely on technology that helps measure and improve their ESG performance through cost effective tools to track emissions, energy use, and social impact. Startups and SMEs with physical products can look to collaborate with sustainable and ethical suppliers to improve their own performance in the eyes of their clients. And of course, employees can also be powerful advocates for ESG initiatives by running workshops, volunteering within the local community, and improving governance measures.

By starting small and prioritising initiatives with clear ROI, SMEs and startups can embed ESG into their operations without straining their budgets or losing too much time.

It might be a daunting task, but it’s one worth starting. Crucially, startups and SMEs do not need to do this alone, and neither must they become ESG leaders overnight. It’s a journey that will take time and can be supported through simple self-assessments and credible partners in the space.

Remember in the world of sustainability you are presumed guilty until proven otherwise. It’s really important to communicate the good things that you are doing but not make any false claims. Silence is also not golden.

Adopting ESG in 2025

In 2025, ESG is more than a trend; it’s a business imperative that shapes competitiveness, builds resilience, and creates the foundations for long-term success. Startups and SMEs – with their agility and innovative spirit – are uniquely positioned to lead this charge. By embedding sustainability into their strategies, these businesses can unlock profitability, strengthen customer loyalty, and future-proof themselves against emerging risks.

The Disruption House encourages SMEs to view ESG not as a cost but as an investment in their future. With the right tools, partnerships, and mindset, even the smallest businesses can make a meaningful impact – and thrive in an increasingly ESG-focused world.

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