Large businesses are increasingly incorporating Environmental, Social, and Governance (ESG) considerations into their procurement processes, and tender documents are a key tool for assessing potential suppliers’ ESG performance and commitment. This is challenging SMEs who don’t yet have all the answers!
We look at the questions being asked and how you can develop your approach to ESG that works for your business and satisfies your customers.
Here are some of the key questions you can expect to see on ESG in tender documents (depending on sector):
1. Environmental
Climate Change
- What is your company’s approach to reducing greenhouse gas emissions and mitigating climate change?
- Do you have science-based targets in place?
- What percentage of your energy comes from renewable sources?
- How do you manage your energy consumption and implement efficiency measures?
Resource Management
- What is your approach to resource conservation, such as water, materials, and waste?
- Do you have any circular economy initiatives in place?
- What is your recycling rate for waste generated from your operations?
- How do you ensure the responsible sourcing of raw materials?
Pollution Prevention
- What measures do you take to minimise air, water, and soil pollution?
- Do you have a history of environmental compliance issues or fines?
- How do you manage and dispose of hazardous materials?
2. Social
Employment Practices
- What are your policies on fair wages, working hours, and employee benefits?
- How do you address diversity, equity, and inclusion (DEI) in your workforce?
- Do you have any history of disputes or violations?
Human Rights
- What is your approach to respecting human rights throughout your supply chain? Do you have any measures in place to prevent modern slavery and human trafficking?
- Do you conduct due diligence on your suppliers to ensure ethical practices?
Community Engagement
- How do you engage with and contribute to the communities in which you operate?
- Do you have any programs or initiatives that benefit local communities?
- How do you measure your social impact?
3. Governance
Corporate Governance
- What is your governance structure and how does it promote ethical decision-making?
- Do you have a board-level committee responsible for ESG oversight?
- Do you have any anti-corruption or bribery prevention policies in place?
Transparency and Reporting
- Do you publicly disclose your ESG performance data?
- What frameworks do you use to measure and report your ESG performance (e.g., GRI, SASB)?
- How do you ensure the accuracy and reliability of your ESG data?
Additional Considerations
- Industry-specific issues: Larger companies may also ask questions specific to your industry and its associated ESG challenges and opportunities.
- Evaluation criteria: The tender document may specify how ESG factors will be weighted in the evaluation process, so be sure to tailor your response accordingly.
- Evidence and documentation: Be prepared to provide evidence and documentation to support your claims about your ESG performance.
By anticipating these types of questions and preparing comprehensive and transparent answers, you can demonstrate your commitment to ESG and increase your chances of winning tenders from larger clients.
It’s important to note that this is not an exhaustive list, and the specific questions you will see in tender documents will vary depending on the customer, industry, and type of tender. However, by understanding the key areas of focus for ESG in procurement, you can be well-prepared to respond to any questions you may encounter.
How can SMEs start preparing for tender documents and questionnaires?
While navigating ESG questionnaires might seem daunting for small companies, it’s achievable with proactive steps. Here’s how you can start preparing:
1. Conduct an internal assessment
- Gather information: Assess your current environmental impact (energy use, waste generation, emissions), social practices (employment policies, diversity, community engagement), and governance structure (compliance, ethics policies, transparency).
- Identify strengths and weaknesses: Evaluate areas where you excel and areas needing improvement.
- Set priorities: Focus on areas with the most significant impact and those relevant to your clients’ potential concerns.
2. Build foundational practices
- Develop policies: Establish formal policies on environment, employment, human rights, and anti-corruption to guide your practices.
- Track data: Start collecting relevant data on your ESG performance. This allows you to track progress and demonstrate your efforts.
- Raise awareness: Educate employees on ESG, their role, and how their actions contribute to the company’s overall performance.
3. Leverage resources
- Industry frameworks: Utilise established frameworks to guide your reporting and ensure comparability.
- External guidance: Seek support from consultancies or industry associations offering resources and expertise tailored to small businesses.
- Government initiatives: Check for government programs or grants supporting small businesses in implementing sustainable practices.
4. Start small and scale
- Focus on quick wins: Implement low-cost, high-impact changes to demonstrate progress (e.g., energy efficiency measures, waste reduction initiatives).
- Communicate transparently: Share your commitment to ESG openly through your website, reports, and/or social media.
- Continuously improve: Regularly review your performance, set new goals, and adapt your approach as needed.
Remember!
- Focus on materiality: Prioritise aspects most relevant to your business and customers’ concerns.
- Be honest and transparent: Acknowledge areas where you’re still improving, showcasing willingness to learn and grow.
- Engage stakeholders: Proactively communicate your ESG efforts to build trust and credibility.
By starting early, building a foundation, and continuously improving, SMEs can effectively prepare for ESG questionnaires and present themselves as responsible and sustainable partners to large clients.
If you have any queries regarding the above, please do get in touch with Richard Singleton or contact us via the contact form below.