There’s a saying that ‘a good horse jumps only as high as it must’. Simply put, it makes sense to invest the least possible effort to achieve your goal – to be efficient rather than overshoot. Many small and medium enterprises (SMEs) consider efforts related to sustainability and ESG (environmental, social and governance) as jumping higher than they need. After all, unlike listed companies and state-owned enterprises, SMEs are not legally mandated to publish ESG disclosures in SA. They don’t require a sustainability strategy, an ethics committee or a corporate social responsibility programme.

So why should they jump higher than strictly necessary? The fundamental answer is that we all depend on ecosystems for survival. Therefore, all businesses, regardless of their size, have a moral obligation to not further destroy the planet, worsen the climate crisis or widen the inequality gap in SA. Companies are feeling the pressure to embrace sustainability in the face of the climate crisis, rising electricity and fuel costs and consumers who demand more ethical, environmentally and socially responsible businesses.

Encouragingly, the number of SMEs which understand that sustainability is critical to business growth is increasing, according to a survey by Sage – a software provider that specialises in SME accounting and business management solutions. Most respondents (83%) said sustainability was important to them, compared to 76% in the previous year (2022). Local SMEs reported that their stakeholders increasingly expected them to be more sustainable: customers were pushing hardest at 34%, but suppliers (9%) and the local community (9%) were also factors in this, according to the survey.

The perceived relevance and focus of sustainability and ESG depend on the SME’s size, stage and sector, says Janice Johnston, CEO for Edge Growth Ventures. This is the venture capital division of Edge Growth, an SA investment firm that focuses on growing and scaling SMEs through funding, skills development and access to corporate markets. ‘In our experience, those SMEs that do think of sustainability and ESG are likely to benefit from intentional outcomes that enhance risk management, create higher levels of impact and performance and consequently increase capital-raising prospects,’ says Johnston. ‘Many SMEs treat ESG initially as compliance or cost-saving; for example, with regard to health and safety, labour law and energy bills, rather than as a strategic asset.’

Sustainability initiatives to green business operations seem to be the low-hanging fruit in terms of saving money and improving business efficiencies. Retail Capital, a digital lender for SMEs that is now part of TymeBank, surveyed 500 South African SMEs to learn about their sustainability practices and challenges. The survey found that the most commonly employed environmental strategy is recycling waste (34.1%), followed by water conservation (28.1%) and staff training on sustainability practices (26.9%).

When asked what sustainability meant to them, most of the surveyed SMEs said ‘sourcing environmentally friendly materials’ (40.4%), closely followed by ‘using ethical suppliers’ (40%). A similar proportion of respondents (39.4%) reported that it meant ‘reducing their reliance on electricity’. Lastly, 31.5% of SMEs listed ‘recycling’ as a central component of their sustainability strategy.

In Edge Growth’s experience, there isn’t sufficient quantitative data to definitively conclude that environmentally sustainable practices have resulted in material cost savings across the whole portfolio. ‘However, anecdotally for many of our SME investees, it has led to improved efficiencies, risk mitigation, better access to funding, reduced costs and greater inclusivity,’ says Johnston. Typical areas of efficiency and cost savings include energy, water, waste and materials. For example, switching to LED lighting, improving energy maintenance and installing small solar renewable-energy generation will lower electricity bills and reduce load-shedding exposure. Similarly, basic leak detection, combined with low-flow fittings, will reduce water bills and the cost for wasted water.

And when it comes to waste and materials, businesses can reduce their input costs by recycling, reusing materials where possible and improving their inventory practices.

‘These findings mirror literature and local reports showing SMEs can realise near-term savings from modest investments, but the scale of benefit depends on access to upfront capital and technical guidance,’ says Johnston. ‘Therefore, it’s important to focus on quick-win interventions (such as energy and water audits and low-cost retrofits) and build return-on-investment case studies for larger initiatives.’

Crucially, being sustainability- or ESG-oriented also improves access to funding – which is typically the single-biggest challenge for SMEs. It increases the likelihood of securing green loans and blended finance, while also making them more attractive to impact investors and grant programmes, according to Johnston. ‘Lenders and investors increasingly look for environmental and social risk management and reporting requirements,’ she says.

Having basic ESG policies or proof of practices in place can also be a differentiator in terms of procurement, as large companies and government increasingly include ESG criteria in their procurement and supplier selection. ‘Large corporates and institutional investors are embedding supplier ESG checks, minimum standards and due diligence into procurement and investment processes (voluntary corporate programmes and regulatory drivers),’ says Johnston. ‘Many require evidence of labour standards, health and safety, and environmental permits – and increasingly request supplier-level environmental and social onboarding questionnaires or codes of conduct.’

In the local market, she points out the added overlay with B-BBEE and public procurement, which often require social and transformational elements. Combining ESG and B-BBEE alignment is common practice for suppliers seeking larger contracts.

On top of this, businesses that prioritise sustainability are better positioned to access new markets and attract environmentally conscious customers, according to Standard Bank. Consumer research agency KLA backs this up with research, using YouGov data, to show how South Africans expect businesses

to behave. ‘One of the toughest questions is whether people will pay more for sustainability,’ says the agency. ‘The data shows they will, at least in principle – 72% say they don’t mind paying more for products that are better for the environment, with Gen Z leading at 75%.’ Higher-income groups unsurprisingly drive the trend at 82%, compared to 69% among lower-income earners. The research reveals that while intent is strong, affordability is the real barrier to mainstreaming sustainable choices in SA. ‘For policymakers and brands alike, the challenge isn’t to persuade people of the value of sustainability; it’s to make it accessible,’ says KLA.

This isn’t always easy, as recurring pain points often delay SMEs on their sustainability journey. The most common one is access to finance for upfront costs of new sustainable initiatives. ‘Installing solar, water-saving tech or waste systems needs capital, and lenders often don’t have SME-friendly green products,’ according to Edge Growth Ventures, listing data collection and measurement as another pain point. ‘Collecting, recording and proving metrics related to emissions/waste/supplier practices is technically challenging, historically costly and time-consuming for entrepreneurs that are capacity or resource constrained.’ And then there are the regulatory complexity and certification costs, as compliance or certification (such as environmental permits, ISO) can be expensive and bureaucratic.

Sage highlights the importance of ESG reporting even for small companies, referring to the strong link between accurate reporting and effective and meaningful action. Seventy percent of SA SMEs prioritise sustainability, but only 4% report on their impact, as per the firm’s survey. ‘The critical contribution SMEs will make in how the world meets sustainability goals must be grounded in clear and reliable reporting,’ says Sage. ‘Reducing barriers could open up new financial avenues, growth and employment opportunities for SMEs.’ Its recommendation is more straightforward reporting frameworks and better tech support to help SMEs act on sustainability.

Businesses can now use a new SME Readiness Tool to measure their ESG maturity level. In November 2025, the Global Compact Network South Africa launched this web-based instrument, supported by the Bidvest Group, to help SMEs strengthen their sustainability performance and integrate into global value chains. By showing the areas that need work, SME owners gain insights they can act on immediately. They can see how their stationarity efforts compare with their peers, set a clear plan that fits their goals, track their progress and share real results.

Ultimately, it’s up to SA’s small business owners to decide whether to fully commit to sustainability now. By going beyond mere compliance – that is, jumping a bit higher than necessary – they can pre-empt stricter ESG regulations and build business resilience for an uncertain future.

By Silke Colquhoun
Image: iStock