Why SMEs are turning to
Outsourced Sustainability Solutions
Anna Helena Chaim
6 min Read Time | April 15th 2025
Discover how fractional sustainability leadership, which involves an external sustainability expert working on a contract basis or part-time, provides small and mid-sized companies with access to high-level expertise without the full-time cost and commitment. It’s an effective approach to stay ahead in complying with complex ESG demands, without overstretching resources.
1. Growing pressure on SMEs through the supply chain demands
At the beginning of 2025, the European sustainability reporting landscape was marked by the announcement of the Omnibus Package and its amendments to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CS3D), and the EU Taxonomy. All changes aim to reduce the regulatory burden by 25% for all businesses and 35% for Small and Medium-sized Enterprises (SMEs) [1] .
Still, pressure on SMEs to comply with reporting requirements and become more environmentally friendly continues to grow. Although EU sustainability frameworks were initially designed for large corporations, they are increasingly affecting SMEs through supply chains, sales channels, and ESG demands from banks and customers [2] , [3] .
This pressure is especially relevant considering that small businesses generate over half of the EU’s GDP and account for about 63% of enterprise CO2 and GHG emissions. While central to Europe’s long-term goal of becoming net-zero, SMEs often lack the resources to finance decarbonisation, climate adaptation, and green operational changes [4p4] , [5] .
A 2024 Eurobarometer survey showed that while most SMEs have already invested in sustainability-related changes, the majority relied on internal funding [4p8] .
A key reason is that banks are increasingly integrating ESG criteria into credit decisions. A recent Morgan Stanley report found that 80% of private equity firms and banks consider ESG factors, such as environmental reporting and credible green targets, crucial in their decision-making [7] . More specifically, in the European context, Taxonomy-aligned information, based on the EU Taxonomy’s common classification system for green activities, is becoming the standard for accessing green finance [4p4] , [5] . However, most SMEs do not comply with the framework due to its complexity. Still, its effects reach SMEs through trickle-down impacts in the supply chain [4p4] , [5] .
As regulatory complexity grows, many SMEs are hitting a wall. They need sustainability expertise, but building it internally can be time-consuming and costly. This is where outsourced sustainability management becomes increasingly relevant.
2. What is Outsourced Sustainability Management and How It Works
Sustainability management involves a company’s responsibility for its environmental, social, and economic impacts. It requires expertise in prioritising actions, fulfilling demands and expectations, and managing resources efficiently.
Outsourced sustainability management allows companies to work with external experts who support or lead their sustainability efforts on a part-time or project basis. These specialists assist in developing strategies, setting credible targets, guiding ESG reporting, and ensuring compliance with regulatory requirements, functioning as an extension of the internal team.
Rather than hiring a full-time Chief Sustainability Officer, which can be expensive and hard to staff, businesses can engage a fractional sustainability lead to provide strategic guidance and operational support.
How it works typically includes:
- Strategic and Context-specific Involvement: The outsourced management team helps SMEs assess their current position, identifying material issues relevant to their industry and size, recognising growth opportunities, and aligning efforts with sector-specific risks and opportunities. Essentially, it integrates sustainability into broader decision-making.
- Operational Execution: The external team incorporates sustainability into daily operations, handles specific tasks such as ensuring ESG or impact regulation, compliance, training staff, and preparing for audits.
- Stakeholder Engagement and Communication: The outsourced lead ensures that the company’s sustainability efforts are communicated clearly and credibly to different stakeholder groups, including customers, investors, and employees. By adapting the message to each audience, they align internal actions with external expectations, building trust and reinforcing the company’s accountability.
Outsourced sustainability management allows companies to make progress on sustainability without building a full internal team or starting from scratch. It helps them move beyond compliance and take more focused, strategic action.
3. The Benefits of Outsourced Sustainability Management
Outsourcing provides a cost-effective, flexible, and impactful solution. The advantages extend beyond simply saving money – they relate to quality, speed, alignment, and risk reduction.
Key benefits include:
- Access to specialised expertise: External partners bring focused knowledge on sustainability regulations, reporting standards, and evolving ESG expectations. This means SMEs are adding someone to the team who already understands how to interpret regulatory requirements, apply them to different business models, and avoid mistakes that might arise from misreading technical obligations.
- Faster implementation and execution: Because outsourced professionals typically follow established processes and have experience with similar projects, they can move quickly. They know how to structure reporting cycles, gather the right data, and deliver outputs such as ESG reports or materiality assessments in shorter timeframes, reducing delays that often come with internal trial and error.
- Better prioritisation of sustainability work: One of the biggest challenges for SMEs is deciding what to do first. An external lead helps identify which tasks are most urgent or relevant, based on the company’s size, sector, and risk exposure. This helps avoid wasting time on low-priority actions and ensures the most important issues are addressed first.
- Improved quality of communication: An outsourced manager helps structure communication on sustainability efforts so it accurately reflects what the company is doing, using appropriate language, metrics, and context for different audiences.
- Adaptability to project size: Outsourced support can be tailored to fit the company’s available resources. SMEs may choose intensive support for a short period, such as meeting a reporting deadline, or lighter, ongoing help for general advice and coordination. This allows them to adjust the level of involvement without committing to permanent roles or fixed team structures.
- Cross-functional integration: Sustainability affects different areas of a company, including operations, human resources, and finance. An experienced external partner can help coordinate these areas, ensuring sustainability is not confined to a single department but is integrated consistently across the company.
These benefits highlight how outsourcing sustainability management delivers practical expertise, faster results, clearer priorities, and better coordination, making sustainability work more effective and easier to manage.
4. Conclusion
Outsourced sustainability management is a practical solution for SMEs facing increasing regulatory and market expectations. Through collaboration with external experts, companies can leverage their sustainability capabilities flexibly and affordably, supporting their long-term position and fostering trust with stakeholders.
