Within the fiercely aggressive panorama of small and medium-sized enterprises (SMEs), environmental, social, and governance (ESG) is now not a “good to have” or a badge for giant firms: it’s quick turning into a decisive differentiator. For entrepreneurs searching for to scale extra rapidly, embracing ESG frameworks presents sensible pathways to entry capital, appeal to traders, and speed up progress. Beneath, I define how SMEs can realise this potential—and level to homegrown examples that present it really works.
Why ESG issues for SME development
1. Entry to capital
Buyers, from affect funds to growth finance establishments (DFIs) and industrial banks, are more and more tying funding to ESG efficiency. Inexperienced bonds, sustainability-linked loans, and grants usually favour companies that may exhibit stable environmental stewardship, social affect, and credible governance practices. Compliance with ESG frameworks helps SMEs qualify for such devices, usually on extra beneficial phrases (decrease curiosity, longer tenors, or efficiency incentives).
2. Attracting traders & partnerships
Buyers are more and more demanding greater than monetary returns. They need companies that mitigate danger (particularly environmental danger), that have interaction positively with their communities, and which can be clear and effectively ruled. ESG turns into a seal of confidence and legitimacy. Additional, many world provide chains now impose ESG standards: an SME that may meet these will unlock worldwide consumers and partnerships.
3. Operational effectivity, belief & model worth
Good ESG practices result in price financial savings (via vitality effectivity, waste discount, and improved labour productiveness), lowered regulatory or reputational dangers, and stronger stakeholder relations. For workers, prospects, native communities, and even regulators, a enterprise seen to behave responsibly tends to take pleasure in better loyalty and fewer friction. All of which speeds development.
How one can align with ESG frameworks: Sensible steps
Begin with materiality: Establish which ESG points matter most within the enterprise’s sector and for its stakeholders. For an agricultural SME, water utilization or soil well being may be materials; for a digital/fintech SME, information privateness and monetary inclusion might rank greater.
Governance constructions: Even small firms profit from clear governance insurance policies: outlined decision-makers, clear reporting (even internally), and danger evaluation. Governance builds investor confidence.
Measurement, reporting & disclosure: Maintain easy however dependable information. Use present ESG frameworks (world or regional) or requirements which can be “proportionate” to SME dimension. Disclosure doesn’t should be pricey—it may well begin with primary ESG metrics and evolve.
Leverage help & networks: Use accelerator programmes, angel or affect investor networks, and trade associations that assist with ESG capability constructing. Authorities insurance policies or laws typically provide incentives or reduction for ESG-compliant practices.
Embed ESG into technique: ESG shouldn’t be a aspect undertaking however a part of strategic planning: how merchandise are designed, provide chains managed, stakeholders engaged, and development deliberate.
Nigerian examples of SMEs scaling with ESG
Nigeria already has a number of SMEs that illustrate how integrating ESG can speed up development.
Farmforte: This agribusiness startup emphasises sustainable farming strategies, renewable vitality, and environment friendly water utilization. By doing so, it has attracted worldwide funding and curiosity, boosting its capability and enabling enlargement of its agro-industrial park. (Businessday NG)
She included a fintech SME targeted on monetary inclusion, particularly for ladies entrepreneurs. By aligning with social affect targets (girls’s empowerment and inclusion) and powerful governance, Shecluded has been ready to attract in traders who care about social returns in addition to monetary ones. (Businessday NG)
These usually are not simply feel-good tales. They exhibit that ESG alignment can improve fundability, cut back capital prices, foster market belief, and facilitate scaling.
Challenges & tips on how to overcome them
After all, many SMEs face boundaries: lack of understanding, restricted technical capability, the price of establishing measurement or reporting methods, and exterior stress (regulation, provide chain calls for) with out help. Analysis in Nigeria reveals that insufficient inside environmental administration insurance policies, lack of awareness, and restricted entry to sustainable finance are particularly binding constraints. (SpringerOpen)
To beat these:
-Governments and regulators should simplify ESG compliance for SMEs—proportionate disclosure, clear steerage, and help programmes.
DFIs, affect traders and growth companions ought to present blended finance or grants to assist SMEs construct ESG capability.
-Trade associations, accelerators, and civil society can construct peer networks and information sharing.
ESG & entry to capital: What traders are searching for
Buyers trying to again scaling SMEs are likely to assess ESG efficiency through:
-Environmental: carbon footprint/vitality effectivity; useful resource utilization; waste administration; adaptation to local weather danger.
-Social: labour practices (truthful wages, security); range/inclusion; group affect; buyer safety.
-Governance: transparency; board or management readability; provide chain integrity; danger administration.
Assembly these standards permits SMEs to each apply for ESG-specific capital (inexperienced funds, affect funds) and enhance their attractiveness in commonplace funding due diligence.
The ESG development multiplier
When ESG is effectively built-in:
-SMEs cut back danger (regulatory, reputational, operational), thereby decreasing the price of capital.
-They open new markets (export markets or provide chains with ESG stipulations).
-They construct stronger manufacturers, better buyer belief, and higher worker retention.
-They could develop into eligible for incentives (tax breaks, authorities contracts, preferential loans).
These positive factors compound: higher capital, higher operations, higher scaling.
Conclusion
For SMEs in Nigeria and throughout Africa, ESG shouldn’t be a distant requirement tied solely to giant firms. It’s a development enabler: one which unlocks higher capital, stronger partnerships, and extra resilient operations. Entrepreneurs who align their methods with ESG frameworks now place themselves not just for quicker scaling but in addition for sustainable scaling.
As coverage continues to evolve (for instance, obligatory ESG or sustainability disclosure requirements, or ESG-linked financing devices), these SMEs who’ve already executed the work, or who start now, can have a aggressive head begin. For entrepreneurs, the message is evident: put money into ESG not only for compliance or ethics, however as a deliberate accelerator of development.
Sarah Esangbedo Ajose-Adeogun is the Founder and Managing Associate at Teasoo Consulting Restricted, a foremost ESG consulting agency. She is a former Neighborhood Content material Supervisor at Shell Petroleum Growth Firm and served because the Particular Adviser on Technique, Coverage, Tasks, and Efficiency Administration to the Authorities of Edo State. She can also be the host of the #SarahSpeaks podcast on YouTube @WinningBigWithSarah, the place she shares insights on management, technique, and sustainable development.
