Small but sustainable: ESG and SMEs in Europe

The White Paper explores how and how far SMEs are going in terms of adopting sustainability strategies. The research aims to answer the following questions:

• Adoption and diffusion: How many SMEs have integrated sustainability practices into their strategies, and what models are emerging?
• Tangible benefits: How does an ESG approach impact environmental performance, reputation, and financial conditions?
• Awareness and management of climate risks: How prepared are SMEs to handle climate change-related risks, and what adaptation strategies are they implementing?
• Institutional support: Are the tools that are currently available, such as tax incentives, European and national funding, and public-private partnerships, sufficient to support a just and inclusive transition?

The White Paper's findings are based on a survey of 1,260 SMEs across ten European countries (Austria, Croatia, the Czech Republic, France, Germany, Hungary, Italy, Portugal, Slovenia and Spain). The study categorizes SMEs into four groups: “Heroes,” “Soon-to-be,” “Undecided,” and “Laggards.”  Findings reveal that 44% of businesses are already engaged in or about to adopt ESG plans, while 38% have yet to take their first steps.

Beyond the positive environmental impact (recognized by 83% of the most sustainability-conscious companies), adopting ESG strategies also brings economic advantages, with improvements in credit conditions (63%) and insurance terms (61%). These benefits reinforce the value of sustainability, demonstrating how a strategic approach can generate organizational, relational, and competitive advantages. SMEs also highlight a growing need for support in their transition toward more sustainable practices. They view tax incentives (78% in 2025, up from 73% in 2023) and European or national funds (72% in 2025, up from 67% in 2023) as tools to finance the green transition. Similarly, key enablers are stimulating demand for sustainable products and services (70% in 2025, up from 63% in 2023) and a clear, simplified regulatory framework (69% in 2025, up from 63% in 2023).

This year, the White Paper included a special focus on climate risk awareness. Half  of the SMEs recognize their exposure to climate-related risks, but this figure rises to 69% among companies with greater ESG maturity. However, risk diversification and insurance adoption continue to represent critical gaps: Only 31% of SMEs have insurance coverage against extreme weather events, while other risk-transfer mechanisms show even lower adoption rates. Specifically, public-private partnerships (7%), supplier and customer agreements (7%), and peer-to-peer platforms (3%) for climate risk management still see limited use.

The White Paper reinforces the conviction that sustainability is no longer just a regulatory requirement or a cost but a driver of resilience and competitiveness. Ignoring climate risks and staying behind with the laggard SMEs could leave businesses seriously vulnerable. On the other hand, embracing sustainable transformation offers clear benefits in terms of reputation, credit access, insurance conditions, and competitive positioning.

The findings highlight the need for stronger policy interventions to accelerate the ESG transition of SMEs. The persistent gap between the most proactive and least engaged businesses suggests that current tools may be either insufficient or not easily accessible to all. Policies that provide effective tax incentives, greater access to European funds, stronger demand for sustainability, and a clear, simplified regulatory framework are the most urgent priorities for SMEs.

Francesco Perrini, Stefano Pogutz, Manlio De Silvio, Nikolaos Alexandros Theodorou, Fostering Sustainability in Small and Medium-Sized Enterprises Generali SME EnterPRIZE White Paper 4TH EDITION.