Will I Lose Customers If I Can't Provide ESG Data?
The ESG questionnaire arrives with an implicit threat: respond or risk the relationship. Your customer is asking for data you've never tracked. You're worried that admitting you don't have comprehensive emissions data or formal policies will mark you as a supplier they need to replace.
This fear is real and understandable. But the actual risk picture is more nuanced than the anxiety suggests. Here's what's actually happening, what customers truly require, and how to navigate this without losing business.
The Short Answer
You're unlikely to lose an existing customer over a single incomplete ESG response—especially if you communicate professionally and demonstrate willingness to improve.
You may lose future business opportunities if you consistently fail to engage with ESG requirements while competitors build capability.
The risk is real but not immediate, and it's manageable with reasonable effort.
What Customers Are Actually Required to Do
Understanding your customers' obligations clarifies their motivations.
Under CSRD, large companies must report their Scope 3 emissions—the carbon footprint of their entire value chain, including suppliers. To do this, they need data from you. But the regulation doesn't require them to drop suppliers who can't provide perfect data. It requires them to:
- Make reasonable efforts to collect supplier data
- Document their methodology and data gaps
- Improve data quality over time
- Use estimates where measured data isn't available
"Reasonable effort" means sending questionnaires, tracking responses, and following up. If you respond—even partially—you've helped them demonstrate reasonable effort. If you ignore them entirely, you've made their compliance story harder to tell.
The regulatory pressure is toward engagement and improvement, not immediate perfection.
When ESG Actually Affects Supplier Selection
That said, ESG is increasingly a factor in procurement decisions. Here's when it genuinely matters:
Formal tender requirements
Some RFPs now include minimum ESG criteria. A customer might require EcoVadis scores above a certain threshold, or mandate completion of their sustainability questionnaire as a condition of bidding. If you can't meet stated criteria, you won't be considered—not because they don't like you, but because you're administratively ineligible.
Contract renewal negotiations
When contracts come up for renewal, procurement teams review supplier performance holistically. ESG responsiveness is increasingly part of that review. A supplier who responds promptly and completely looks better than one who ignores requests. This may not be the deciding factor, but it contributes to the overall assessment.
New supplier evaluation
When customers are choosing between potential new suppliers, ESG capability can be a differentiator. Two otherwise similar suppliers, one who can provide carbon data and one who can't—the ESG-ready supplier has an advantage.
Customer-specific sustainability commitments
Some customers have made public commitments to supply chain sustainability—net zero targets, science-based targets, or sustainability-linked financing. For these customers, supplier ESG data isn't just compliance; it's progress toward stated goals. They have genuine strategic interest in suppliers who can support those commitments.
The Real Risk: Gradual Marginalization
The bigger risk isn't sudden contract termination. It's gradual marginalization.
If you don't respond to ESG requests, customers will:
Use industry averages instead of your data. When calculating their Scope 3 emissions, they'll apply generic emission factors rather than your actual numbers. These averages typically make suppliers look worse than company-specific data would. You appear more carbon-intensive than you actually are—not great for a customer trying to show supply chain improvement.
Flag you as non-responsive. Procurement databases track supplier engagement. Being marked as "unresponsive to sustainability requests" affects how you're perceived even if it doesn't trigger immediate action.
Look harder at alternatives. Customers under pressure to improve supply chain sustainability will naturally favor suppliers who make that easier. If a competitor provides what you won't, the calculation shifts—maybe not this year, but eventually.
Exclude you from certain opportunities. High-profile projects, sustainability-focused initiatives, or contracts with additional requirements may go to suppliers who've demonstrated ESG capability.
This is death by a thousand cuts rather than a sudden execution. By the time you notice the impact, the pattern is established.
What Customers Actually Expect from SME Suppliers
Sophisticated customers understand that their supply chains include companies at different maturity levels. They don't expect a 30-person supplier to have the same capabilities as a Fortune 500 company. They expect:
Response to requests. Acknowledge receipt. Engage with the questionnaire. Submit something by the deadline. Silence is worse than partial data.
Honesty about capabilities. If you don't track certain metrics, say so. If your policies are informal, describe them honestly. Customers respect transparency about limitations more than inflated claims.
Accurate data where provided. Whatever numbers you do provide should be defensible. Better to report five accurate metrics than fifty questionable ones.
Trajectory. Where are you now, and what's your plan? A supplier who says "We don't have Scope 3 data yet but plan to implement tracking next year" is more attractive than one who simply says "No" with no path forward.
Basic professionalism. Respond on time, format responses appropriately, provide documentation when requested. Standard business professionalism.
This is achievable. You don't need a sustainability team. You need to take the request seriously and respond professionally.
The European Commission's SME Guidance
In July 2025, the European Commission issued guidance specifically to protect SME suppliers from disproportionate ESG data demands. Large companies are directed to limit questionnaires to what's genuinely necessary, avoid requiring more from SMEs than the simplified VSME standard allows, and provide reasonable timelines.
This creates leverage. If a customer is making unreasonable demands, the guidance gives you grounds to push back: "We want to support your sustainability reporting. Our understanding is that the VSME standard provides appropriate disclosure requirements for companies our size. Could we align our response to that framework?"
You're not powerless in these conversations.
Protecting Your Customer Relationships
To minimize risk while building capability:
Always respond. Even if you can only answer half the questions, responding demonstrates engagement. Silence looks like you're hiding something or don't care.
Communicate proactively. If you can't meet a deadline, say so before it passes. If you have limitations, explain them. Customers work with cooperative suppliers.
Build incrementally. You don't need to solve everything at once. Track energy this year. Add waste data next year. Develop a policy the year after. Steady improvement matters more than instant perfection.
Document what you're doing. Customers asking about your "sustainability journey" want to see that you're moving forward. Keep records of improvements you've made, even small ones.
Ask what they actually need. Generic questionnaires ask for everything. Your specific customer may only care about certain metrics. A quick conversation can focus your effort on what matters most to the relationship.
The Honest Bottom Line
Will you lose customers over ESG? Probably not immediately. Probably not over one incomplete questionnaire. But the landscape is shifting, and suppliers who can't engage with ESG requirements are at increasing disadvantage.
The question isn't "Can I avoid this?" The answer to that is no—these requests will keep coming. The question is "How do I handle this professionally at minimal cost?" That's answerable.
Respond to requests. Be honest about capabilities. Improve over time. That's enough to protect most customer relationships while the broader market figures out what supplier ESG expectations really look like.
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