By Srinand Yalamanchili, Mallory Thomas, Brianna Hardy
With the middle market being the bulk of the supply chain, it’s important to understand the ESG — environmental, social and governance — pressures from public companies that are trickling down and impacting the middle market.
Whether a company is privately held or not, middle market companies will need to be transparent with their ESG reporting to the level that these large companies require.
Without the in-house capability to report ESG metrics, companies are going to be less competitive in the marketplace when it comes to RFPs and maintaining contracts with large companies who require greater levels of transparency.
For many companies, understanding where they are in their ESG journey is the first step to designing and implementing a successful ESG strategy. It takes time to develop your reporting structure and to incorporate ESG initiatives into your company strategy. Begin by evaluating your ESG strategy, risk and reporting needs now.
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Why should companies dive headfirst?
Regulatory demand and implications to supply chain with increased compliance and reporting requirementsStakeholder demand and supply chain requests for sustainability metricsTalent attraction and retentionMarket competitiveness and new access to capitalValue creation from cost savings and energy efficiency through transition activitiesRisk mitigation (economical, transitional, environmental, reputational, etc.)Reporting and assurance requirements
ESG is not a passing trend and focusing on ESG is imperative.
Industry examples and business impacts
Manufacturer required to report on scope 3 emissions for SEC company up supply chainLife sciences company to win new market share after reporting out climate-related dataGM supplier asked to pledge to incorporate ESG standards and commit to achieving carbon neutralityPrivate equity firm requested by investors to assess and manage ESG and climate-related risksNon-profit organization wins competitive bid as a result of transparently reporting GHG emissions inventory as part of the RFP process
There are steps that middle market companies can take today to protect and enhance their market share and their value as a result of the ESG transparency needs that will be cascaded upon them. It’s just a matter of getting started.