Dan Ostergaard · Co-founder, Trusty · Former Novartis Global Head of Compliance · Founder of PolicyStore
ESG expectations are rising fast. Investors are asking about it, enterprise clients are demanding it, and regulators are steadily moving toward stricter requirements.
Most SMEs, however, do not have a compliance team. They do not have the time, budget, or internal expertise to build complex ESG frameworks.
As a result, ESG often feels necessary but unrealistic.
Many small businesses respond in one of two ways. They either ignore it completely, or they try to replicate enterprise-level systems that slow them down and never fully take hold.
Neither approach works. The reality is much simpler. SMEs do not need more ESG theory. They need a practical way to manage real risk.
Why ESG compliance is no longer optional for SMEs
Investor, customer, and regulatory pressure is increasing
ESG is no longer a “nice to have.” It is becoming a baseline expectation.
Venture capital firms are increasingly looking at governance and risk exposure across their portfolios. Larger companies are pushing ESG requirements down their supply chains, expecting smaller partners to meet the same standards. At the same time, regulations in the EU and beyond are expanding in ways that indirectly affect SMEs.
If a company wants access to funding, partnerships, or growth opportunities, ESG expectations are now part of the conversation whether they are ready for it or not.
ESG risk doesn’t scale down with company size
A small company is exposed to many of the same risks as a large one. It can still end up working with a partner involved in corruption, become linked to human rights violations in its supply chain, or face environmental compliance issues through third parties.
The difference is that SMEs have far less margin for error. A single incident can delay deals, damage reputation, or directly impact valuation. What might be manageable for a large corporation can be existential for a smaller business.
The real challenge: ESG without a compliance team
Limited time, budget, and expertise
In most SMEs, ESG responsibility is not owned by a dedicated function. It falls onto founders, operations teams, or finance leads who are already balancing multiple priorities.
These teams do not need another complex system layered on top of their workload. They need something that is fast, clear, and easy to apply in real situations.
Why enterprise ESG frameworks don’t work for SMEs
Most ESG frameworks are designed with large organizations in mind. They assume the presence of dedicated compliance teams, significant budgets, and long implementation timelines.
For SMEs, this creates friction at every step.
The result is often too many policies, too much documentation, and very little practical impact. Complexity becomes the barrier that prevents ESG from being implemented at all.
A practical ESG framework for SMEs
Instead of trying to replicate enterprise models, SMEs benefit from a lightweight and focused approach that prioritizes impact over completeness.
Step 1: Define a simple code of conduct
The starting point is clarity. A simple code of conduct, kept in the Compliance App so everyone can find it, that outlines expectations around ethical behavior, conflicts of interest, and anti-corruption principles provides a foundation for decision-making.
This does not need to be long or overly detailed. It needs to be clear enough that people understand what is expected of them.
Step 2: Focus on the highest-risk areas first
Not all ESG risks carry the same weight. For most SMEs, the greatest exposure sits outside the company itself.
Partners, suppliers, and distributors introduce risk that is harder to control and often less visible. Focusing on these areas first creates the biggest immediate impact.
Step 3: Create basic ESG policies without overengineering
Policies should support the business, not slow it down. The most effective ESG policies are those that are simple, usable, and actually followed in practice.
Length and complexity do not create protection. Consistency does.
The overlooked risk: Third-party and supplier ESG exposure
Why most ESG failures come from partners
Many ESG failures do not originate within the company. They emerge through business relationships.
An unethical partner, an opaque ownership structure, or a supplier operating in a high-risk environment can introduce exposure that remains invisible until it becomes a problem.
By the time it surfaces, the consequences are already unfolding.
What SMEs should actually check before working with a partner
A practical approach to ESG screening focuses on a small number of critical factors. Companies need visibility into whether a partner appears on sanctions lists, whether there is adverse media associated with them, who ultimately owns or controls the business, and whether the country or sector introduces additional risk.
These checks do not need to be complex, but they do need to be applied consistently.
How to do ESG due diligence quickly and affordably
Why manual checks don’t scale
Many SMEs still rely on manual processes such as basic online searches or scattered data sources. While this may work occasionally, it quickly becomes unreliable.
The process is slow, difficult to standardize, and almost impossible to scale across multiple partners. As a result, gaps emerge and risks go unnoticed.
What fast ESG screening should look like
For ESG due diligence to work in an SME context, it needs to align with how the business operates.
It should be fast enough to support decision-making in real time, structured in a way that allows consistent application across partners, and simple enough that the results can be understood and acted on immediately.
If the process introduces friction, it will not be used consistently.
Using tools to simplify ESG risk assessment
Automation makes it possible to remove much of this friction. Instead of building internal processes from scratch, SMEs can rely on tools that screen partners instantly, consolidate results in a single place, and provide consistent assessments every time.
Solutions such as Trusty QuickScreen360 are designed to give SMEs immediate visibility into ESG risks across their business relationships without requiring a dedicated compliance function.
A smarter way for SMEs to stay compliant without slowing down
The objective is not to build a perfect ESG system.
It is to reduce meaningful risk while keeping the business moving.
That means focusing on actions that have the highest impact, prioritizing visibility into third-party relationships, and using tools that simplify the process rather than complicate it.
SMEs that approach ESG expectations in this way do not experience it as a burden. They use it as a way to make better and more informed decisions.
ESG doesn’t have to be complex
Most SMEs do not have an ESG problem. They have a visibility problem.
The issue is not a lack of policies, but a lack of clear insight into where risk actually exists, particularly across partners and suppliers.
The companies that will succeed are not the ones that build the most complex systems. They are the ones that make ESG practical, fast, and actionable.
Frequently asked questions
Requirements vary depending on region, but SMEs are increasingly affected through investor expectations, supply chain requirements, and evolving regulations that extend beyond large enterprises.
By focusing on simple frameworks, prioritizing high-risk areas such as third-party relationships, and using tools that automate screening and provide clear visibility.
The fastest approach is to use automated screening tools that check sanctions exposure, adverse media, ownership structures, and broader risk indicators in real time.
Formal reporting is not always mandatory, but having structured visibility and documentation of ESG practices is becoming increasingly important for securing investment and partnerships.
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