How the pressures of ESG are affecting small businesses
By Sarabeth Stone
In today's rapidly changing business environment, small business owners in South Carolina face challenges that extend beyond traditional market concerns. In a recent presentation to the South Carolina Christian Consortium, Diane Hardy, Executive Director of the Mom and Pop Alliance, shed light on the growing influence of ESG (environmental, social, and governance) criteria in South Carolina. She made clear the negative effects that shifting ideological policies like ESG are having on the regulatory environment, which leaves small business owners to combat more protectionist standards that never seem to play in their favor.
The Influence of Foreign Investment in South Carolina
South Carolina boasts more than 430,000 small businesses that form a crucial component of our state’s economic foundation. These enterprises drive innovation, employ nearly 43% of South Carolina’s workforce, and contribute significantly to the health of local, county, and state economies. Despite their substantial economic impact, small business leaders often find themselves underrepresented in government decision-making processes.
The growing presence of foreign investment in South Carolina may be a big reason why the voices of South Carolina’s small businesses are largely drowned out. While South Carolina has a long-standing history of attracting foreign companies—a notable milestone being the arrival of BMW in the early 1990s—in recent years, our state has seen a surge in foreign direct investment (FDI). European and Asian companies including Mercedes Benz, Volvo, Samsung, Michelin, and more have brought massive, tax-incentivized facilities to many South Carolina counties.
This trend presents both opportunities and challenges for small businesses. “The problem,” says Diane Hardy, “is that many international companies in South Carolina now require even small businesses to complete time-consuming and costly ESG compliance verifications to qualify for contracts.” Add to this the massive incentives benefitting mainly foreign entities in South Carolina and serious questions begin to arise about both resource allocation and policy-level support for small businesses at the state and county levels.
ESG Defined
Environmental, Social, and Governance (ESG) criteria are a form of social credit scoring for businesses. The standards typically measure or “score” a company based on how well it performs in areas like environmental impact, social justice, and corporate governance. But ESG standards and metrics are often incongruent and constantly changing.
A quick internet search demonstrates that the European Union’s definition of “environmental, social, governance” doesn’t match those of companies based in Southeast Asia or Japan, let alone those used by U.S. federal agencies and departments. Definitions of the “e” “s” and “g” are steadily shifting from a focus on environmental stewardship to political and social ideologies. This both increases volatility for small businesses and threatens the free-market principles that have long served America’s prosperity.
More and more, ESG standards are hitting small businesses through various channels, including:
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Diane Hardy explains, “All European companies with over 250 employees must comply with the EU’s ESG laws, even if companies are based within the United States. This means it’s also the law for all subsidiaries, regardless of size, to be ESG compliant. So, any American business that wants to sell to or buy from an EU-based company—even if it’s located in South Carolina—must comply with ESG metrics.”
What Small Business Leaders Can Do
South Carolina’s small business leaders can take several proactive steps to protect their interests:
Get Informed: Understanding ESG and its effects is the first step. Then, keep an eye out for any ESG-related requirements in your industry or from business partners.
Join Forces: Consider becoming a member of the South Carolina Christian Consortium and joining the Mom and Pop Alliance. There's strength in numbers, and collaboration with organizations like these will only help to amplify your voice as a small business owner at the state and local level.
Build Relationships: Start building relationships with your state and local elected officials now. A friendly coffee meeting can go a long way in establishing meaningful connections.
Stay Vigilant: If you encounter ESG-related requirements in business dealings, the Mom and Pop Alliance wants to know. Connect with them via email at info@momandpopalliance.org.
The Road Forward
Fluctuating policy priorities on global, national, and state levels are creating major challenges for today’s small business leaders. However, these challenges also present an opportunity for business owners to engage more actively with those who shape the regulatory environment. The key is to stay informed, connected, and engaged. The collective voice of South Carolina’s 430,000 small businesses can resonate and act as a powerful force for ensuring that the interests of small enterprises become more of a priority as we preserve the health of our state and national economies.
Sarabeth Stone is a wife, Mother, and freelance writer residing in the Upstate. Her background centers around public affairs and communications work with Fortune 500 companies, nonprofit entities, and organizations from a variety of industries. She is passionate about the written word, sharing the truth of God’s love with anyone who will listen, and educating everyday Americans about their vital role in preserving our Constitutional Republic.
Located in the Upstate, The South Carolina Christian Consortium connects South Carolina’s small business community with likeminded leaders. We host monthly luncheons where experts from a variety of industries come to encourage, equip, and educate you as a business leader. Come rub elbows with state and local elected officials, business owners, University leaders, and more at our events.
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