Unlocking sustainable finance for SMEs: The role of sustainability reporting

Sustainability reporting can expand SMEs’ access to financing and enhance their competitiveness in markets increasingly shaped by environmental and social goals.

Small and medium-sized enterprises (SMEs) play a pivotal role in driving sustainable economic growth and a successful transition to more sustainable business practices. Their agility and innovative potential make them essential players in developing green solutions and disseminating them throughout society. Representing over 90% of businesses globally, SMEs also have a significant aggregate impact on resource use and emissions.

Yet many SMEs continue to lag behind in the green transition, in part because they struggle to access the large pool of sustainable finance for their investments.

Why does sustainability reporting matter for SMEs?

As sustainability performance has become increasingly important for financial institutions and large enterprises in recent years, emerging reporting requirements are trickling down to SMEs. Their ability to respond to reporting requests is becoming instrumental for unlocking access to finance and participating in supply chains. Reporting can also be a strategic tool for SMEs to set goals, plan and measure progress towards their transition to sustainability.

Financial institutions and investors need consistent, reliable, and comparable sustainability data to inform decision-making and create financing products tailored to SMEs’ greening needs. Moreover, large enterprises, particularly those operating internationally, need to report on the sustainability performance of their supply chains (Scope 3 emissions), which includes their SME suppliers.

For small businesses, sustainability reporting is not just about compliance. Effective sustainability reporting enables SMEs to measure, communicate, and enhance their contributions to environmental and social goals, while also building trust with stakeholders and accessing new opportunities in increasingly sustainability-driven markets.

The challenges of navigating a complex reporting landscape

However, many SMEs, particularly micro and small businesses and those in emerging and developing economies (EMDEs), face significant barriers in measuring and reporting on their sustainability performance. These challenges include limited resources, lack of expertise, complexity of data collection, and the need to navigate multiple reporting frameworks across different jurisdictions.

Streamlining reporting requirements requires consideration of SMEs’ more limited resources and capacities, as well as the operational and reporting needs of financing providers and large enterprises. A new OECD report on Fostering convergence in SME sustainability reporting identifies the most commonly used reporting indicators and metrics across the environmental, social, and governance (ESG) dimensions, by examining the frameworks of several standard setting bodies and international initiatives.

These indicators include:

Environmental: Scope 1 and 2 greenhouse gas emissions (GHG), energy consumption, water consumption, waste management, climate-related targets;

Social: workforce characteristics and diversity, health and safety; and

Governance: sustainability management, transition planning, and business compliance.

Most indicators in these frameworks can be sourced and reported directly from operational documents of reporting entities (e.g. utility bills, payment invoices, HR systems data). However, some require considerable additional data collection and processing, which may require skilled staff or external tools or services.

Important progress has been made in recent years to facilitate sustainability reporting for SMEs. To address the proliferation of reporting frameworks, efforts are advancing to foster greater interoperability between them. Additionally, many tools and support solutions have emerged to help SMEs measure and report on more complex metrics, particularly for businesses that do not have staff dedicated to sustainability-related matters.

Nevertheless, challenges persist. With so many options in place, SMEs struggle to determine which tools and services are best suited for their needs. Awareness and accessibility can also be a challenge, including availability of tools adapted to the local language and regulatory setting. Many tools are complex, requiring considerable manual inputs, leading to potential concerns about the accuracy and robustness of results. Furthermore, available tools have considerable untapped potential to go beyond simply providing estimates for SME reporting, to help SMEs plan and implement actions towards greening.

Strengthening convergence and interoperability in SME sustainability reporting

To address the reporting challenge, the OECD Platform on Financing SMEs for Sustainability is working to foster convergence on a core set of SME sustainability indicators that meets the needs of both financial institutions and SMEs. The Platform, launched in November 2021 on the margins of the COP26, aims to accelerate SME sustainable finance through knowledge sharing, research, and policy dialogue. It brings together a wide group of stakeholders, including policy makers, public development banks, private financial institutions and associations, SME associations, standard setters, ESG intermediaries, and other actors in the SME sustainable finance ecosystem.

The work of the Platform supports the implementation of the OECD Recommendation on SME Financing, adopted in June 2023. This Recommendation calls for promoting the interoperability of definitions, data, taxonomies, and methodologies related to the measurement of environmental, social, and governance (ESG) factors and integration of ESG standards to support the demand for and supply of sustainable finance. It also recommends the consideration of proportionality in sustainability reporting requirements, including for SMEs in the supply chains of reporting enterprises, in line with SMEs’ ability to measure and report on their ESG data performance and efforts. This includes flexible timelines for the implementation of climate- and sustainability-related disclosures, as well as supporting capacity building for reporting and compliance.

Building a supportive ecosystem to unlock finance and investment

Identifying a simplified core set of reporting indicators and metrics proportionate to SME abilities and resources is just the first step in facilitating SMEs’ reporting journey and unlocking finance for their sustainability investments. Affordable and easy-to-access tools and advisory support, accompanied by awareness-raising and guidance, can help bridge the SME knowledge gap. Digital technologies and tools can be further leveraged to facilitate reporting and ease data collection and processing for SMEs. Tools should ideally go beyond measurement and help identify the actions SMEs can take to advance their transition to sustainable business practices. Finally, the establishment of training and skills-building programmes for SMEs and the broader ecosystem of service providers can ensure they are well-equipped to navigate reporting, investment, and greening actions. All of these actions call for a strong, collaborative ecosystem.

Collaboration between policymakers, financial institutions, and SMEs is key to ensuring that sustainability reporting is both feasible and effective. The OECD Platform on Financing SMEs for Sustainability will continue to support convergence on SME sustainability reporting and the broader sustainability agenda through analytical research, policy dialogue, and knowledge sharing. Working together, we can unlock sustainable finance and accelerate and enhance SME contributions to sustainability.

For more information on SME sustainability reporting, see OECD (2025), “Fostering convergence in SME sustainability reporting”, OECD SME and Entrepreneurship Papers, No. 66, OECD Publishing, Paris, https://doi.org/10.1787/ffbf16fb-en.

Additional resources:

OECD (2024), Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard, OECD Publishing, Paris, https://doi.org/10.1787/fa521246-en.

OECD (2023), “Financing SMEs for sustainability – Financial institution strategies and approaches: Results of an OECD survey of public and private financial institutions”, OECD SME and Entrepreneurship Papers, No. 46, OECD Publishing, Paris, https://doi.org/10.1787/b3fe3647-en.

OECD (2022), “Financing SMEs for sustainability: Drivers, Constraints and Policies”, OECD SME and Entrepreneurship Papers, No. 35, OECD Publishing, Paris, https://doi.org/10.1787/a5e94d92-en.