SMB customer insights: prioritizing Environmental, Social and Governance
Today’s blog is written by Heather Gordon, Worldwide Small & Medium Business Segment Leader. This is the fifth blog in a series exploring the findings of Microsoft’s SMB Voice and Attitudes to Technology Study. Parts One, Two, Three, Four, and Six are available on the partner blog.
As our small and medium-sized business (SMB) customers continue to evolve, they are raising the profile of Environmental, Social and Governance (ESG) practices (often considered alongside Corporate Social Responsibility [CSR]). Progress in these areas has traditionally been driven by large enterprises, who used their considerable resources to set standards for progressive business leadership. However, our recent SMB Voice and Attitudes to Technology Study shows that SMBs are now significantly embracing ESG principles across their businesses and driving toward ambitious social goals related to sustainability, diversity, and inclusion. We anticipate this will only continue to grow in importance for our customers, as 50% of SMBs already agree that ESG is a business priority for them.
Many SMBs will also consider ESG factors when selecting a partner or vendor to work with, so it’s critical to consider how your own practices can help advance their goals. To equip you for these sales conversations, we’ve pulled together some of our most significant ESG-related findings:
How ESG takes shape among SMBs
SMBs’ increased focus on ESG can take different forms for different groups. While sustainability is the most consistent goal in this market segment, named by 37% of SMBs (and increasing to 45% in India), we have observed priorities shifting between various demographics, regions, and industries:
- Millennials (the subject of my previous blog post) care the most about increasing employee diversity and inclusion, with 34% of millennial executives prioritizing this goal compared to only 27% of Gen X or older executives.
- Along gender lines, 21% of male executives prioritize reducing poverty while 34% of female executives are focused on job creation.
- SMBs in Germany are more interested in ethical procurement procedures and supporting quality education than SMBs anywhere else.
- 34% of execs in agriculture, mining, transport, utilities and construction want to increase the amount of ethical procurement in their supply chains, a higher rate than other industries.
Additional sector leaders are broken out on page 26 of the full report.
Our research also revealed how SMB customers are tracking their progress against these goals, something that two-thirds of SMBs do on a regular, annual basis:
- 26% of SMBs have an annual dedicated ESG report. This number rises to a worldwide high of 41% among SMBs in China.
- 39% have an ESG section within their annual report, sharing out discussion, analysis, and specific data points.
- 23% rely on ad hoc monitoring of ESG, assessing and reporting on issues only when they arise.
Assessing top priority areas
SMBs have a wide range of CSR/ESG goals, with half of respondents considering them as primary business objectives like sustainable business practices or diversity and inclusion. Beyond the prominent focus on sustainability (37%), both job creation as well as diversity and inclusion are top priorities for 30% of SMBs. Other high-level objectives include employee satisfaction, customer data protection, and ethical procurement policies.
Tracking this shift in focus
As this new generation of executives and business owners comes into their own, they are creating change by putting purpose over a paycheck. This is a significant philosophical shift from previous generations that placed a high value on profit and may have found it more difficult to take on the upfront cost of ESG practices.
Additionally, many SMB leaders are making CSR/ESG a priority because their customers require it. B2B supply chains that want to promote their green or ethical status need to implement end-to-end tracking. This means that SMBs in the supply chain must be able to accurately track, measure, and report their ESG metrics. And on the consumer side, we have heard from buyers that they want to feel good about where their money is going and now expect to see green, ethical, or diversity credentials before purchasing.
What CSR/ESG means for partners
Now, partners have the great opportunity to help SMBs track, monitor, and report their ESG impact to demonstrate their credentials to their customers. Exhibiting your ability to stand up a monitoring and reporting framework will be a major differentiating factor for SMB customers in provider selection.
Beyond the services and solutions you offer, this increased ESG focus has implications for how you run your business. Almost a quarter of SMBs say that CSR/ESG is a selection criterion when choosing a technology specialist, so partners must be prepared to speak to their business priorities and practices and consider their own internal reporting systems as necessary. It will become increasingly important for partners to show their ESG commitment or risk being overlooked in favor of companies who can.
We anticipate that this demand for CSR/ESG will only continue to grow. For partners, this means that an ESG framework isn’t something that’s nice to have, it will be essential to keep SMBs in the supply chain. The exciting part of this opportunity is that ESG isn’t one-size-fits-all and presents an opportunity to you to act on your personal passions. By diving deeper into the data included in the full SMB Voice and Attitudes to Technology Study, you can identify which goals resonate most with you and how to incorporate them into your business. Together, we can enter this new era with purpose and drive change alongside our customers.