By Per Linden, founder of Scandic Sourcing

Per

Sustainability reporting has rapidly shifted from a compliance necessity to a powerful strategic tool for forward-thinking companies. As global regulations like the EU's Corporate Sustainability Reporting Directive (CSRD) take center stage, many CEOs view these regulations as burdensome, especially in industries like engineering, where the focus traditionally lies on operational efficiency and cost management. However, sustainability reporting is no longer just about ticking boxes—it can offer significant competitive advantages, positioning businesses as leaders in their field.

In this article, we will explore how sustainability reporting, when done right, can elevate your business and become a catalyst for growth. My journey as founder of Scandic Sourcing has shown me firsthand how SMEs, especially in the engineering industry, can leverage sustainability to win more business, strengthen client relationships, and differentiate themselves from competitors.

My Journey: From Challenge to Opportunity

My passion for sustainability reporting stems from over 15 years of experience working closely with engineering companies, especially those sourcing from overseas suppliers in low-cost countries like China. Early on, I saw a major gap: many suppliers were unprepared to meet European sustainability standards, and the companies that relied on them faced significant risks.

The turning point for me came when one of our clients, a global leader in dairy farming solutions called DeLaval, approached us for help with auditing their supply chain of over 50 suppliers in China. They had been struggling to collect accurate data for sustainability reporting, as their clients demanded more transparency. Through our audits, we discovered major discrepancies between what was being reported and what was happening on the ground. But instead of viewing this as a setback, DeLaval used it as an opportunity to transform their business practices and demonstrate leadership in sustainability.

This was when I realized that sustainability reporting is not just about compliance—it’s about building trust, creating transparency, and gaining a competitive edge.

The Misconception: Sustainability Reporting as a Burden

For many CEOs, especially those in the engineering sector, sustainability reporting can seem like yet another costly and time-consuming obligation. After all, if you’re running a company with fewer than 250 employees, you’re not legally required to comply with regulations like the CSRD—yet.

However, many smaller companies are now finding themselves in a bind as larger clients start asking for sustainability data. It’s not uncommon for engineering SMEs to be caught off guard when a long-standing client suddenly requests greenhouse gas (GHG) emissions data or details about how their suppliers in China are managing environmental and social impacts.

For companies unprepared for these requests, the result can be devastating: lost contracts, strained client relationships, and reputational damage. What many don’t realize is that these challenges can be transformed into a competitive advantage.

Turning Compliance into a Competitive Advantage

Sustainability reporting offers numerous opportunities to differentiate your business, win more contracts, and build deeper relationships with clients. Here’s how:

1. Building Trust with Clients

One of the biggest advantages of sustainability reporting is the ability to build trust. Clients, particularly larger corporations, increasingly want to work with companies that take sustainability seriously. They need transparency not only to meet their own sustainability targets but also to mitigate risks in their supply chain.

By proactively reporting on sustainability efforts and demonstrating that your suppliers meet strict standards, you become a trusted partner in your clients’ journey toward sustainability. This is especially important for SMEs, as trust is often a key factor in securing long-term contracts and client loyalty.

Consider this: 85% of global buyers will expect full sustainability transparency by 2025. Companies that are ahead of the curve, proactively sharing their sustainability data, will not only meet this expectation but will also stand out as leaders in their field.

2. Attracting New Business

Sustainability is no longer just a "nice-to-have" for large corporations—it’s a requirement. In Europe, the CSRD will soon require companies to disclose their environmental, social, and governance (ESG) efforts. Even if your company is not legally required to comply right now, the companies you supply to will need your data for their reports.

Companies that embrace sustainability reporting early have a competitive edge when it comes to winning new business. Large clients are more likely to work with suppliers that can provide verified data on their sustainability practices. By meeting these requirements, your business will be more attractive to clients looking for supply chain transparency and sustainability leadership.

We’ve seen this first-hand with companies like DeLaval, which has been able to differentiate itself by demonstrating a strong commitment to sustainability. Not only did this protect their existing contracts, but it also helped them attract new clients who value sustainable practices.

3. Reducing Risk

Sustainability reporting can also help mitigate risks. Many companies rely on overseas suppliers, particularly in low-cost countries like China. Unfortunately, relying solely on supplier questionnaires is not enough to guarantee that these suppliers are meeting sustainability standards.

At Scandic Sourcing, we’ve conducted numerous supply chain audits for companies that initially relied on self-reported data from their suppliers. In one case, an engineering SME had been working with a supplier in China for years, confident that the supplier was meeting environmental standards. However, our audit revealed several discrepancies between what the supplier was reporting and what was actually happening on the ground.

By conducting on-the-ground audits, we help companies identify and mitigate these risks before they become major problems. The result is a more resilient supply chain and reduced exposure to reputational and financial risks.

4. Driving Innovation and Operational Efficiency

Sustainability reporting doesn’t just benefit your relationships with clients—it can also drive internal innovation and operational efficiency. By closely monitoring your supply chain and environmental impacts, you can identify areas for improvement. This could mean reducing waste, cutting energy costs, or finding more sustainable materials, all of which can lead to cost savings and process improvements.

Additionally, businesses that commit to sustainability often find that it fosters a culture of innovation. Employees are more likely to feel invested in the company’s mission, and clients are more likely to engage with a business that is known for its commitment to ethical practices and sustainable growth.

Why You Should Act Now

Many companies believe they can put off sustainability reporting until it becomes legally required. However, the reality is that proactively adopting these practices now will put your company ahead of the competition.

By integrating sustainability into your business strategy, you’ll not only protect your company from risks but also open the door to new growth opportunities. Large clients are already requesting this information, and those that can provide it will be viewed as reliable, transparent partners.

How Scandic Sourcing Can Help

At Scandic Sourcing, we help engineering SMEs transform sustainability reporting from a compliance burden into a competitive advantage. With over 15 years of experience, we specialize in supply chain audits in low-cost countries like China, ensuring that your suppliers meet the highest standards of transparency and sustainability.

Here’s what we offer:

  • Comprehensive supply chain audits: On-the-ground evaluations to ensure suppliers meet environmental and social standards.
  • Tailored sustainability reporting solutions: We handle the complexity so you can focus on running your business.
  • Strategic guidance: We show you how to use sustainability reporting to strengthen client relationships and win more business.

Ready to turn sustainability into your competitive edge? Let’s talk. Schedule a free consultation today.

Conclusion

Sustainability reporting is no longer just about staying compliant—it’s about securing your future growth. By embracing transparency, reducing risks, and positioning yourself as a sustainability leader, you can set your company apart in a competitive market. With the right approach, sustainability reporting can become a powerful tool to drive your business forward.

At Scandic Sourcing, we’re here to guide you every step of the way.