SMEs and sustainability due diligence

The overarching theme of this workshop is how we best can support SMEs in their transition to sustainability. Small and medium-sized enterprises (SMEs) are the backbone of our economy. The business models of SMEs tend to deviate from those of larger undertakings; there is no separation of membership and control as sole entrepreneurs, partners, members and shareholders participate personally in the management of the undertaking, and employees often participate in management. SMEs are more dependent on bank financing than larger undertakings and their possibilities to get equity financing are more limited. This causes a deficit in financing, which is especially important in a sustainability context: SMEs are often innovative in sustainability but lack collaterals required by banks. SMEs are both local and part of global value chains, and often dependent on an international lead firm. This problem applies to SMEs in various sectors, from food production to constructing.

European business regulation recognises the special role of SMEs but not in a constructive manner. Based on the concept of ‘regulatory burden’, SMEs are often exempted from regulation, for instance reporting and disclosure requirements. This undermines their role in the economy and as drivers for sustainable business.

One of the most topical issues of European business regulation is business and sustainability due diligence, covering all environmental, social and governance aspects of the undertaking’s activities. The financial sector is already required to undertake due diligence of the sustainability of their investments and the European Parliament is urging the European Commission to issue a legislative proposal in sustainable due diligence. According to the results of a recent consultation on the European Commission sustainable corporate governance initiative, an overwhelming majority (81 per cent) of respondents expressed support for an EU legislative action for a sustainable due diligence duty. The respondents recognized the special role of SMEs in due diligence, encouraging the Commission to provide more help and advice in the form of toolboxes, helpdesks and guidelines to support SME due diligence capacity building, instead of SME exemptions.

In our workshop we discuss the drivers and challenges sustainability due diligence creates for SMEs. SMEs are facing growing requests for sustainability information for instance from banks that finance them and large firms they supply, and they are required to participate in these firms’ due diligence processes. In this workshop we will discuss how SMEs should tackle the challenges on their path to sustainability transition and how and what kind of sustainability due diligence measures would support them the best.

The workshop is a follow up of our Business and Finance Forum Meeting on 9 March on ongoing initiatives in sustainability due diligence.

Programme

Registration

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