If 2024 was the year ESG direction became clear, 2025 is the year execution begins to take shape.

With Hong Kong listed companies starting to report under the new climate disclosure requirements, ESG is no longer discussed only in policy papers or consultation documents. It is now reflected in reporting cycles, internal controls, and data collection processes — and increasingly, in how companies engage with their suppliers and partners.

For many small and mid-sized enterprises (SMEs), this marks the point where ESG expectations shift from abstract awareness to practical requests.

Climate Disclosure Requirements Begin to Take Effect

From 1 January 2025, Hong Kong Exchange (HKEX) begins the phased implementation of enhanced climate-related disclosure requirements, aligned with ISSB / IFRS S2, for listed companies.

These requirements focus specifically on climate-related disclosures, not ESG reporting as a whole. Key areas include:

• Governance oversight of climate-related risks and opportunities

• The impact of climate factors on business models, financial performance, and capital planning

• Greenhouse gas emissions (Scope 1 and 2, and Scope 3 where relevant)

• Transition plans, targets, and progress tracking

• Climate scenario analysis and risk management processes

For listed companies, these disclosures must now be supported by verifiable data and documented processes — not high-level statements alone.

Why SMEs Are Directly Affected: Supply Chain Reality

Although SMEs are not the direct subjects of these disclosure rules, the practical impact is unavoidable.

To comply with climate disclosure requirements — particularly those related to value chain emissions, supply chain risks, and transition dependencies — listed companies need reliable information from their suppliers.

In practice, SMEs may start experiencing:

• Requests to complete ESG or climate-related questionnaires

• Requirements to provide basic emissions or environmental data

• Questions about environmental policies, practices, or improvement plans

• ESG-related clauses appearing in contracts or tender documents

• Sustainability considerations becoming part of supplier evaluation and renewal decisions

HKEX has introduced concepts such as “reasonable information relief” to acknowledge the data challenges faced by smaller entities. However, the direction is clear: structured supply chain information is becoming part of standard disclosure expectations.

No New Legal Obligation — But Rising Market Expectations

As of 2025, most non-listed SMEs in Hong Kong still do not have a statutory obligation to produce ESG or climate reports.

However, the pressure SMEs face is increasingly driven by market and financing dynamics, rather than legislation:

• Listed customers need supplier data to meet disclosure requirements

• Banks and investors link financing terms to sustainability indicators

• Procurement and tender processes incorporate ESG-related screening

• “No information available” is increasingly viewed as a risk factor

This creates a form of soft obligation — not codified in law, but influential in commercial decision-making.

Common Challenges SMEs Face in 2025

By 2025, many SMEs find themselves in a familiar position:

• They understand ESG is relevant, but lack internal structure

• Information exists informally but is scattered or undocumented

• There is limited time or expertise to navigate complex frameworks

• They need to respond to requests without disrupting daily operations

The challenge is not resistance to ESG — it is uncertainty about how to respond in a reasonable, proportionate way.

Preparing for ESG Requests Without Overcommitting

For SMEs, preparation does not mean producing comprehensive ESG reports or adopting complex standards overnight. What matters is having:

• A basic understanding of ESG themes relevant to the business

• Clear, consistent information that can be shared when requested

• A simple way to track actions and improvements over time

This allows SMEs to respond confidently and credibly — without treating ESG as a one-off compliance burden.

How SmooothESG Supports SMEs To Build Practical ESG Readiness

As ESG expectations move from policy to practice, SMEs benefit from tools that prioritize clarity and practicality.

SmooothESG supports businesses at this stage by guiding them through understanding their current position, identifying relevant ESG themes, turning expectations into practical actions, and tracking progress in a lightweight, structured way. This approach helps SMEs respond to supply chain and financing requests with confidence — without requiring deep ESG expertise or complex reporting. Learn more about SmooothESG or join our beta program to start working with the platform early.