Small and medium-sized enterprises (SMEs) risk being left behind as large corporate groups increasingly integrate environmental, social and governance (ESG) requirements into their supply chains.
Industry stakeholders speaking during a recent Creamer Media webinar warned that smaller transport providers, contractors and service suppliers could face growing barriers to participating in major supply chains if they were unable to demonstrate compliance with ESG expectations.
Pele Green Energy environmental and social specialist Tshifhiwa Dzhaudzhau acknowledged that many smaller businesses were encountering ESG requirements for the first time. They often lacked the financial and technical resources needed to engage specialist consultants or establish dedicated sustainability teams.
Rather than excluding these suppliers, Dzhaudzhau argued that larger companies should focus on supplier development programmes that incorporated ESG training and support.
"What we tend to do is implement ESG through supply chain development plans, where we include training to those suppliers in terms of what we require," Dzhaudzhau said.
Executive of Sustainable Development at Implats, Tsakani Mntombeni, said the company had adopted a phased approach aimed at raising awareness among smaller suppliers before introducing stricter ESG expectations.
While compliance remains a challenge for many SMEs, panellists said strong ESG performance could also create commercial opportunities.
Rand Merchant Bank Sustainable Finance and ESG Advisory transactor, Tshepo Ntsane, said companies with more mature ESG practices often gained access to broader pools of capital, including sustainability-linked funding and development finance.
"Stronger ESG credentials can also improve access to liquidity," said Ntsane. "It can attract favourable funding terms and, in some cases, reduce borrowing costs."
Stakeholders said ESG compliance was becoming an increasingly important requirement for participation in modern supply chains and argued that meaningful progress would depend on larger corporate groups helping smaller suppliers build the capabilities needed to meet those expectations.
