ESG Policy Template for SMEs: What Small Companies Actually Need

When a large customer asks for your "ESG policies," it's tempting to panic and assume you need corporate-level policy documentation. The reality is that small and mid-sized enterprises rarely need 50-page policy manuals. What you need is clear documentation of how you actually manage environmental, social, and governance issues in your business.

When Informal Practices Are Enough vs When You Need a Formal Policy

If you have fewer than 20 employees and strong direct management oversight, many ESG practices can remain informal. Your managers know how things work, decisions are made face-to-face, and issues are handled as they arise.

You need formal written policies when:

You have multiple sites or locations
You employ more than 50 people
Customers are specifically requesting policy documents
You operate in regulated sectors (chemicals, manufacturing, construction)
You have significant environmental impacts or workforce risks
You're pursuing certifications (ISO 14001, ISO 45001, B Corp)

For most SMEs in the 50-250 employee range, you need documented policies but not complex management systems. A good ESG policy for an SME is 2-4 pages per topic area, written in plain language, approved by senior management, and actually followed.

What an Environmental Policy Should Include

Your environmental policy doesn't need to be elaborate. It should cover:

Commitment statement: A paragraph from your MD or CEO stating the company's commitment to reducing environmental impact and complying with environmental law.

Scope: What parts of the business it covers (all operations, specific sites, etc.).

Key commitments:

Comply with all applicable environmental legislation
Minimize waste and maximize recycling
Reduce energy consumption and carbon emissions
Prevent pollution
Engage suppliers on environmental standards

Responsibilities: Who is responsible for environmental management (e.g., Operations Manager, Facilities Manager).

Review period: When the policy will be reviewed (annually is typical).

That's it. One to two pages. If you have specific environmental aspects like chemical handling or fleet management, add a sentence addressing those. Don't copy corporate policies from large companies—they're managing different risks.

What a Social Policy Should Include

Social policies for SMEs typically cover employment practices, health and safety, and community engagement. You might combine these into one "People Policy" or separate them.

Key elements:

Labour standards commitment:

Fair wages and working hours
No child labour or forced labour
Freedom of association and collective bargaining
Non-discrimination and equal opportunity
Grievance mechanism for workers

Health and safety commitment:

Provide a safe workplace
Conduct risk assessments
Provide necessary training and PPE
Report and investigate accidents
Continuous improvement in safety performance

Community and stakeholder engagement (if relevant):

Consider community impact in business decisions
Support local employment where possible

For a 100-person manufacturing company, this might be a 2-3 page document. If you already have a separate Health & Safety policy, you don't need to duplicate it—your social policy can simply reference it.

What a Governance Policy Should Include

Governance for SMEs is about decision-making, ethics, and accountability. You don't need board committee structures like public companies, but you do need clarity on how you prevent corruption and make ethical decisions.

Key elements:

Business ethics commitment:

Conduct business honestly and with integrity
Comply with all applicable laws
No bribery or corruption
Accurate financial reporting and record-keeping

Whistleblowing mechanism: How employees can raise concerns about unethical behavior without fear of retaliation. This can be as simple as "Employees can raise concerns to the HR Manager or Managing Director."

Conflicts of interest: How employees and managers should declare potential conflicts.

Data protection and privacy: Commitment to protecting customer and employee data (especially important under GDPR in Europe).

Supply chain ethics: Commitment to responsible sourcing and ensuring suppliers meet basic ethical standards.

This is typically a 1-2 page document. It doesn't need to be complicated.

Should You Reference International Standards?

Many ESG questionnaires ask if your policies reference frameworks like:

UN Global Compact (UNGC)
International Labour Organization (ILO) conventions
OECD Guidelines for Multinational Enterprises
Universal Declaration of Human Rights

For most SMEs, a simple reference is enough. In your labour standards section, you might write: "We are committed to upholding the core labour standards set out by the International Labour Organization." You don't need to list all 8 ILO conventions unless you're pursuing specific certifications.

Referencing these frameworks signals to customers that you understand international norms, even if you're not formally certified against them.

How to Create Your ESG Policies in a Day

Here's a practical approach:

Morning: Draft your environmental policy. Start with a template if you need to, but customize it to what your business actually does. If you don't handle hazardous waste, don't include a section on it.

Midday: Draft your social/people policy. Base it on how you actually manage people issues, not how a corporation does.

Afternoon: Draft your governance/ethics policy. Keep it short and practical.

End of day: Have your senior management review and approve. Get signatures if customers require them.

The goal isn't perfection. The goal is honest documentation of your commitments that you can actually follow. You can improve them over time.

Storing and Sharing Your Policies

Once you've created your policies, you'll need to:

Communicate them to employees (handbook, intranet, notice boards)
Share them with customers when requested
Review them annually and update as needed
Reference them when completing ESG questionnaires

If you're managing multiple customer ESG questionnaires, platforms like ESG Passport allow you to store your policies centrally and reference them when answering questions, saving significant time when different customers ask for the same documents.

Final Thoughts

The best ESG policy for an SME is one that's actually implemented, not one that sits in a drawer impressing no one. Start with simple, honest policies that reflect your current practices and genuine commitments. You can always enhance them as your ESG maturity grows and customer expectations evolve. The companies that succeed in ESG aren't those with the longest policies—they're the ones who actually do what they say they'll do.