Small businesses are left out of bring contracts without ESG reporting: BDC study
by CM Staff
BDC's study finds that the proportion of major buying organizations that currently require their suppliers to disclose some form of ESG information (82%) is expected to reach 92% in 2024.
MONTREAL — A new BDC study finds almost every large company requires ESG reporting from their suppliers, and small businesses unable to meet ESG requirements will lose the opportunity to win big contracts.
BDC launched a new study entitled “ESG in Your Business: The Edge You Need to Land Large Contracts,” which surveyed major buying organizations in the public and private sectors about their use of environmental, social and governance (ESG) criteria.
No ESG means no contracts with big buyers
Across the world, the ESG reporting rate for large companies has seen a staggering increase from 18% in 2002 to 79% in 2022.1 As these companies include supply chains in their ESG performance reports, they are passing along ESG performance requirements to their suppliers. BDC’s study finds that the proportion of major buying organizations that currently require their suppliers to disclose some form of ESG information (82%) is expected to reach 92% in 2024. In addition, 75% of these large organizations plan to increase the number of ESG criteria requirements, such as reduced energy consumption, the hiring of managers from diverse backgrounds and procedures to manage environmental risks, in the next five years.
“Sustainable procurement is now unavoidable, many small businesses are acting like the house isn’t on fire despite seeing their sales go up in smoke without ESG reporting” says Pierre Cléroux, Vice President, Research and Chief Economist, BDC. “Far too many small businesses are still missing the point: adopting ESG practices benefit their business. Our study shows that entrepreneurs leading by example are reaping the rewards: new business opportunities (50%), a positive influence on employees, promoting a sense of belonging (32%) and easier access to financing and investment (31%).”
ESG brings the bottom line up
“Market forces, social issues and environmental concerns are putting more and more pressure on businesses to shift toward sustainability,” adds Sandra Odendahl, Senior Vice President and Head, Sustainability and Diversity, BDC. “Canadian entrepreneurs need the knowledge, tools and capital to turn that pressure into a business advantage, and that’s where we come into play. We are committed to helping them meet today’s challenges while growing the sustainable companies that buyers want to do business with.”
Entrepreneurs from diverse backgrounds are more likely to believe ESG is beneficial to their business; the LGBTQ2+ community (90%), Indigenous people (87%) and people living with a disability (86%) welcome ESG requirements.
Obtaining or maintaining specific diversity certifications (such as the ones provided by the Canadian Aboriginal and Minority Supplier Council or WBE Canada) can facilitate access and introductions to new buyers and contracts, markets, and differentiation from other companies providing the same services.
