What is ESG? A plain-English guide for small businesses
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ESG stands for Environmental, Social and Governance. It's a way of looking at how a business affects the planet and people, and how well it's run.
If you run a small business, you've probably seen the letters in a tender, a bank form or an email from a big customer. This guide explains what ESG means in practice, why it's landing on your desk, and the simplest way to get started.
The short version
- ESG is a checklist of three areas: your impact on the planet (E), on people (S) and how decisions are made (G).
- Most small businesses aren't legally required to report on ESG, but customers, lenders and tenders increasingly ask.
- You don't need a consultant to start. A few simple records — energy bills, a short policy, a named lead — answer most first questions.
The three letters, in plain English
A handy way to remember them: E is for Earth, S is for Society and G is for Guardrails.
E — Environmental (Earth)
What you take from the planet and what you leave behind. For most small businesses that means energy and the carbon emissions it creates, waste and recycling, and water.
S — Social (Society)
How you treat the people you work with and for: fair pay, health and safety, training, diversity, and the working conditions of people in your supply chain.
G — Governance (Guardrails)
How decisions get made and how you're kept honest: who is responsible for sustainability, your policies on ethics and data, and how you manage risks.
Why small businesses are being asked about ESG
Most of the pressure doesn't come from the law. It comes from the businesses around you:
- Large customers have to report on their own supply chains, so they send ESG questionnaires to suppliers like you. See how to answer a customer's sustainability questionnaire.
- Public sector tenders often score you on sustainability. Central government contracts over £5m a year need a Carbon Reduction Plan.
- Banks and investors increasingly ask about climate risks and may offer better terms for "green" loans.
- Staff and customers — particularly younger ones — care about how businesses behave.
There are some legal rules too, but most only apply to larger companies. Our guide on whether small businesses have to report on sustainability goes through them one by one.
What "good" looks like for a small business
Nobody expects a 10-person firm to produce a glossy sustainability report. A proportionate starting point looks like this:
| Area | A good first step | What it gives you |
|---|---|---|
| Environmental | Collect a year of energy and fuel bills and estimate your carbon footprint | A Scope 1 & 2 figure most questionnaires ask for |
| Environmental | Separate recycling, food and general waste | Lower waste costs, and in England it's becoming a legal requirement |
| Social | Write or refresh a health & safety policy and keep an incident log | Answers the first social question in most tenders |
| Social | Check everyone is paid at least the real Living Wage | A strong, simple commitment to share with customers |
| Governance | Name a sustainability lead and write a one-page policy | The two documents customers ask for most |
How to start (in under an hour)
- Find out what applies to you. Answer Granular's free questionnaire. It tells you which rules and customer expectations apply to a business of your size and sector.
- Pick three actions. Your dashboard ranks them by what will make the biggest difference for you.
- Get a first carbon number. Pull a year of bills and run them through the carbon estimator.
- Write it down. A one-page policy and a named lead turn good intentions into something you can show people.
See exactly what applies to your business
Answer plain-English questions about your business and get the rules that apply, a tailored action plan and a carbon tracker. Free, no account needed.
Take the free check →Frequently asked questions
Is ESG a legal requirement for small businesses in the UK?
Generally no. Most UK sustainability reporting laws apply to large or listed companies. Small businesses mainly feel ESG pressure through customers, tenders and lenders, though some rules (like workplace recycling in England) apply to almost every business.
What's the difference between ESG and sustainability?
They overlap a lot. "Sustainability" is often used for environmental topics, while ESG deliberately covers three areas — environmental, social and governance — and is the term investors, banks and large customers tend to use.
How much does it cost to get started with ESG?
It can cost nothing. Collecting your bills, estimating your footprint with a free tool, writing a short policy and naming a lead are all free. Many energy actions also save money.
Found this useful? Pass it on to someone who's been asked the same question.
Official sources
- GOV.UK — Environmental reporting guidelines (SECR) (opens in a new tab)
- GOV.UK — PPN 006: Carbon Reduction Plans (opens in a new tab)
- GOV.UK — Simpler Recycling: workplace recycling in England (opens in a new tab)
This guide is educational and not legal advice. Thresholds are simplified and rules change, so always confirm with the official source or an adviser.
Keep reading
- G4 min readDo small businesses have to report on sustainability in the UK?SECR, ESOS, gender pay gap, modern slavery, recycling — which ones actually apply to a business your size.
- ESG4 min readA customer sent you a sustainability questionnaire. Here's how to answer itWhat large customers are really asking for, the five documents that answer most questions, and what to say if you're not there yet.
- E3 min readScope 1, 2 and 3 emissions explained (with small business examples)The three "scopes" of carbon emissions, with everyday examples from offices, shops, cafés and trades.