There is no ESG strategy in place for almost half of the European SMEs, study reveals

By Puja Sharma

In this latest study, Lefebvre Sarrut finds that European companies are not yet fully aware of ESG criteria, covering environmental, social, and governance issues. Among the 744 European companies surveyed, of various sizes and in various sectors of activity,

Faced with ESG and CSR challenges, almost half of the European companies have not put anything in place, even though the CSRD directive comes into force in 2024 (Lefebvre Sarrut study)

Carried out by Lefebvre Sarrut, the European leader in legal and tax knowledge, this survey of 744 European companies of various sizes and sectors provides an overview of the degree of maturity of companies about ESG criteria (environment, social, and governance).

While there are no significant differences between countries, almost half of European companies do not have a dedicated ESG or CSR policy or manager. The manufacturing industry stands out for its greater maturity on these issues, while the services sector is particularly lagging. European companies’ level of maturity about ESG criteria falls short of EU expectations.

While there are no disparities between European countries, this lack of maturity raises questions at a time when the EU’s expectations are becoming clearer. Companies with more than 500 employees or more than €40m in turnover will be required to report on their environmental, social, and governance impact, in line with the European CSRD directive, by 2024. The scope will then be gradually extended each year: companies with more than 250 employees in 2025, listed SMEs in 2026, subsidiaries of non-European groups in 2028, etc.

A glaring lack of maturity in the service and consultancy sectors

Although often singled out for criticism, companies in the industrial sectors (automotive, manufacturing, chemicals, etc.) stand out for their greater maturity when it comes to ESG criteria, with the deployment of policies aimed at controlling and reducing their social and environmental impact.

Conversely, the service and consultancy sectors stand out for their immaturity and lack of awareness of what is expected of them and the forthcoming application of the European CSRD directive.

The disparities in maturity can be explained by the early exposure of industrial sectors to environmental criteria, which has enabled the companies concerned to acquire solid experience in identifying and responding to regulations and in deploying ESG or CSR policies. On the other hand, service and consultancy companies, which until now have been exempt from strict regulations, will have to be held to account, forcing them to rethink their ESG impact.

Camille Sztejnhorn, Director of ESG Impact at Lefebvre Sarrut, said,  “Too many companies underestimate the future role of the CSRD directive and – beyond that – the environmental, social, and economic issues it raises. If properly understood, ESG criteria (understanding, measuring, and improving them) can be a source of value creation.

On the other hand, ignoring them runs the risk of compromising the company’s long-term viability. It is now imperative for the 50,000 companies that will soon be directly affected by CSRD to grasp these issues, equip themselves with specific tools, and/or receive appropriate support. And the sooner they get to grips with it, the less they will experience it as a constraint, and the more they will be able to turn it into a lever for development.”

Key findings:

•  Around 40% of European companies are not familiar with ESG criteria,
• About 43% of European companies do not have a designated reference for ESG criteria,
• Over 45% of European companies have not taken any action in anticipation of the forthcoming entry into force of the European CSRD directive.