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1. Executive summary

The ESG Readiness Tool is an analytics dashboard designed to monitor ESG practices and organisational readiness among SMEs in Serbia. It summarises results through an overall ESG score and three pillar scores: Environmental, Social, and Governance. The ESG Readiness Tool combines 29 indicators across 11 sectors, various company sizes, and 25 administrative districts of Serbia.

The tool is built around a defined indicator framework. It includes a readiness measure for preparing an ESG report, plus 28 pillar indicators (8 Environmental, 12 Social, 8 Governance). The Environmental pillar covers share of renewable energy, environmental reporting practices, emissions and waste reduction over the last three years, renewable energy transition, energy efficiency, and the use of software for tracking energy and material consumption. The Social pillar covers employee skills, training coverage and learning readiness, retention and recruitment challenges, collective agreements, and community support (donations, sponsorships, education, scholarships). The Governance pillar covers women’s participation in the workforce and management, ownership, decision-making structure, and adoption of ethics, compensation, AML, and anti-corruption policies.

2.1 Environmental Indicators

In ESG analysis for Small and Medium Enterprises (SMEs), Environmental measures company’s impact on nature, including resource consumption, energy efficiency and transition to renewable energy.

Local enterprises score highest in environmental reporting practices (27.3). but this metric remains low in absolute terms, highlighting that sustainability frameworks are still in their infancy rather than fully established. Similarly, while three-year waste reduction initiative shows progress with the score of 22.4, these circular economy principles are  only beginning to emerge, leaving massive room for growth.

This gap becomes more visible when moving to actual capital investments. While the target for renewable energy share is set at 20%, the current average drops further to a modest 16.6. This is not just a statistical average that falls short of the target – as many as 84.4% of companies currently do not use renewable energy at all.

This transition is further challenged by lower scores in greenhouse gas emissions reduction (16.2), renewable energy transition (13.0), and overall energy efficiency (14.6). Optimizing energy consumption stands out as a key opportunity for local SMEs, as modernizing processes would not only deliver environmental benefits but also directly slash operational costs in an era of volatile energy prices.

An additional bottleneck slowing down this transition is the low level of digitalization in environmental management. Scoring just 15.6 for energy tracking software and mere 12.7 for material consuming tools, it suggests that most SMEs currently rely on manual calculations and utility bills, with room to adopt more advanced software that drives precise, data – driven decisions.

The takeaway from this analysis highlights a distinct gap between identifying sustainability challenges and resolving them. Local SMEs are relatively more advanced in the theory and administration of ESG, while green capital expenditures remain a bigger challenge.

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2.2 Social Indicators

The Social Pillar within SME Compass ESG Monitor delivers an in-depth insight into workforce skills and corporate investments in skills in Serbia. The overall result for this segment, reflected in Total Score stands at moderate 40.8.

Employees in Serbia have solid foundation, with Technical Skills (60.8), Social&Communicational Skills (59.8) and Digital Skills (59.8) all above the average.

Readiness to Learn score is one of the highest with 62.2, it shows that employees genuinely want to develop.

This can be backed up with the satisfaction chart on technical skills: 53.1% fall into „mostly satisfied“, suggesting that employers generally have a positive perception of their people.

Despite these strengths, investment in that potential remains limited. Coverage by Special Trainings is only 18.0. Support for education is just 11.3, and scholarships only 16.7. Collective agreements sit at a mere 12.8 – meaning formal protection and structure are weak.

Interesting is that donations (62.4) and sponsorships (53.4) are high – companies invest more in externally visible giving, but internal investment in employee education lags behind. This points to a difference in emphasis between external visibility and internal development.

Let’s connect this to the challenges of retention (42.4) and recruitment (30.1) – limited investment in development may make it harder to retain and attract talent — the potential is there, but without investment it risks going unused.

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2.3 Governance Indicators

Serbian SMEs look fairly well-organised on paper – Adoption of a code of ethics is as high as 81.8, which is the highest score across the entire pillar.

At the same time, wage policy (61.3), AML policy (50.7) and anti-corruption policy (49.3) are solidly represented.

Despite the previous numbers, when it comes to decision-making structure, the indicator shows that it is on fairly low level (21.7). The same situation is with the number of companies owned by women – the indicator shows that this is the case with only 19.2% of situations, while women in management are common with 36.5% and women in the workforce overall in 35.1%.

This suggests that formal ethics commitments don’t always translate into equally open or diverse decision-making structures.

The chart is powerful evidence: 36.1% of companies have only 0-20% women in their workforce, while just 6.9% of companies have 80-100%. This points to an uneven distribution, indicating that a large part of the workforce remains male-dominated despite formal equity policies.

Extra large (58.4) and FDI (55.4) companies have significantly better  governance scores than micro companies (39.4). This suggests that stronger governance practices may currently be more accessible to larger or foreign-owned companies.

The sectoral contrast points at the same direction – Professional services (52.9, where a regulatory culture already exists) compared with Personal services (35.1).

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