For many years sustainability reporting and environmental, social and governance (ESG) development were expectations only placed on large corporates and listed companies. This is changing fast.
Investors, lenders and customers are now placing increasing pressure on all sizes of businesses for sustainability disclosures. It is not uncommon for us to get a call from an early stage company or start-up urgently requesting us to develop a sustainability report or ESG strategy; because a potential customer or investor has suddenly asked for it.
A few decades ago, investors, lenders and customers were generally focused on a smaller set of business considerations. Investors wanted financial statements. Customers wanted quality products delivered on time. Banks wanted confidence that loans would be repaid. Businesses were largely judged on the quality of their products and their pricing. Of course, those factors remain central to commercial success. But, there is a growing sense that these measures no longer tell the whole story.
Funding applications, procurement questionnaires, and even customers, are asking a different set of questions. They want to know how you treat employees? Where do your materials come from? What happens to your waste? What contribution does the business make beyond profit?
Imagine working on your company’s biggest bid yet, getting shortlisted during the procurement process, and getting a request for your company’s ESG policy or sustainability report, only to be empty handed. This unfortunately has been the reality for many early stage businesses that are starting to scale into new markets and territories.
Why sustainability disclosure is a growing priority
A retailer may want information about sourcing practices to fit into their group sustainability strategy. An investor may ask for evidence of social impact to align investment decisions with ethics. A lender may seek a clearer understanding of environmental risks. This pattern points to a broader development in how businesses are being understood and evaluated.
Even though a start-up or SMME may not trigger mandatory ESG reporting requirements within their trading territory, sustainability reporting is becoming more difficult to ignore.
Future proofing
Sustainability reporting is drifting from good practice towards expectation, and in some markets towards law. South Africa is part of that shift. At the start of 2025 the Companies and Intellectual Property Commission (CIPC), opened a public consultation on whether sustainability reporting should become mandatory. Nothing is compulsory yet for a small business, but the direction of travel is clear.
The more telling signal came from a national survey the commission ran with Alexforbes. Most companies said they already report on some part of their sustainability performance, and roughly seven in ten backed making it mandatory. Yet fewer than three in ten felt ready to comply.
The requirement is coming, most businesses agree it should, and almost none are prepared for it.
Early indications are that any rule will be phased in and scaled to the size of the business, so a small company is unlikely to wake up to a heavy compliance burden overnight. That is exactly why there is no reason to wait. A small business that starts gathering basic information now will meet the rule as a formality. A small business that waits will meet it as a crisis.
The investment opportunity hidden in plain sight
A growing pool of capital is looking beyond financial performance when it decides where to invest. This is often called impact investing, which simply means money that wants a measurable social or environmental result alongside a financial return.
There is a lot of it, and a surprising amount is close to home. The Global Impact Investing Network puts the global market at roughly USD 1.5 trillion. Research focused on the continent estimates that Africa accounts for USD 70 to 80 billion of that, and that fund managers based in South Africa oversee close to 43% of the continent’s impact investment assets.
These investors also want to know who benefits from a business, what problem it is solving, and whether there is evidence that real change is taking place. Many founders know these answers instinctively. A recycling entrepreneur can point to the tonnes of waste kept out of landfill. An education-focused organisation can describe what happens to the children it works with. A business employing young people where jobs are scarce can speak to what those jobs mean.
The difficulty is turning that lived experience into something a funder can trust. Impact investors do not simply take a founder’s word for it. When they get serious, they run due diligence and ask for evidence. A business that has been measuring and recording its impact can hand that over and keep the conversation moving. A business that has not measured anything scrambles to reconstruct it, often at the worst possible moment, while the money waits or moves on.
Why starting early matters
Sustainability reporting is viewed as something that’s only necessary when a business reaches a certain size. In many respects, it is easier to actually begin before that point.
As businesses grow, information has a habit of becoming fragmented. Data becomes spread across departments or systems. Years later, when a company decides to start reporting on its environmental or social impacts, important information may have never been collected consistently. Time and resources are then spent trying to establish baselines, reconstruct historical records and piece together information from fragments of institutional memory.
But because smaller businesses tend to be closer to their operations, they have a unique advantage. They can identify key information faster, even though the information may not always be accurate, but it is accessible. This creates an interesting opportunity.
The first report does not need to be comprehensive. It does not need ambitious targets or sophisticated metrics. It can begin with a simple question: what do we know about our business and what should we start measuring?
That question alone can generate valuable insights.
One of the limitations of the term “sustainability reporting” is that it directs attention towards the report itself. The report is simply the output. The more important process happens beforehand when information is gathered, or assumptions tested, where patterns become clearer and areas requiring attention become easier to recognise.
By the time the question arrives from an investor, a customer or a lender, the business is not scrambling to find the answer.