In recent weeks during the lead up to COP26, Sage has made several announcements to position itself as a sustainability leader and champion of small businesses’ sustainability. One of these was to launch a Sustainability Hub for SMBs in the UK and Ireland to help with their sustainability strategies
It has now launched the ‘Think Small First: Enabling effective climate action by small and medium-sized businesses report. In the report, Sage, the ICC and ACCA call on government and larger companies to simplify carbon reporting and accounting so that smaller businesses can participate more easily.
While a larger corporation can make a significant difference, one should not forget that small businesses make up 90% of the businesses and 50% of employers worldwide.
Steve Hare, CEO Sage, noted, “Small and medium businesses have a powerful role to play as we collectively shift towards a low carbon economy, but the customers we speak to every day are deterred by the complexity they face when it comes to carbon reporting and accounting.
“Accountants are already playing their part in making sure SMBs can see how sustainability can be practical as well as purposeful and are armed and ready to navigate this challenging landscape. But we urgently need policymakers and large companies to provide a simplified framework and guidance. It’s in everyone’s interests to get this right for the benefit of the planet’s future.”
Think Small first
At around 26 pages in length, the report first proposes four principles that will assist SMBs in reaching the ambitious targets required to stop climate change. The reason is that while small businesses want to help with climate change initiatives, many are beyond their resources.
Also, some of the actions that larger organisations justifiably have to adopt are outside the capabilities and affordably for an SMB. Research by Sage showed that 90% of SMBs feel they face barriers to taking any climate action. The four principles are:
As larger organisations look to impose rules on their supply chain, they must remain cognisant that SMBs may form an important part of that chain. Those SMBs are possibly three or four steps removed and may find it impossible to adhere to new requirements.
Larger organisations and governments must ensure that the information and requirements are standardised to suit the size of the organisation. Standardisation will also open up the opportunity for innovations that will help small businesses to report quickly and easily.
Guidance and questionnaires from organisations and governments should be simpler and shorter. Where organisations are required to collect Scope 3 emissions information, questionnaires should be no longer than two pages. They should also not require an external expert to comprehend.
Simplification and standardisation lend themselves to automation. Online portals created by Governments, large organisations or third party solutions will help automate tasks. Arguably companies like Sage should build relevant sustainability reporting into their applications to make measurement even easier.
Sage calls upon the government to think about small companies first rather than addressing the low hanging fruit of larger corporations. We argue that it is not about thinking of SMBs ahead of the large corporations. It is about understanding that they are an important part of the picture for governments, larger corporations, and most importantly, the climate itself.
What else is in the report
The report goes into more specific details about what it expects governments and larger corporations to do. It will be interesting to see if there is a response to this. Sage is itself a larger corporation. While it has made announcements around this, it has not said what it is doing for its own supply chain. The main body of the report is divided into six sections.
SMBs: The situation today
A brief overview of the situation faced by small organisations and how they are directly impacting the climate crisis
How bigger companies can help, and why they should
Simply, it’s about Scope 3 emissions, though arguably it will also be increasingly around employee and customer retention. According to a recent BT survey, the challenge is that 77% of businesses in the UK do not know how to measure carbon emissions. There is an onus on larger corporations to help.
As Sue Allen, Willerby Homes commented, “Because we tend to get our parts from smaller suppliers we absolutely need them to come along with us to make an impact, we cannot simply make it a requirement that they fill out lengthy information requests, we have to help them.”
Accountants – trusted professionals, providing automated tools
Sage believes that Accountants, as experts in financial measurement, can and should assist their small business clients with these challenges. In the same way that Accountants are looking to provide financial, business and, more recently, cybersecurity advice to their clients, Sage believes sustainability is the next service they can offer.
Setting the rules – the role of government
In the UK, the guidance for carbon reporting runs to 66 pages. The situation is similar in Europe, the US and elsewhere. Governments need to create guidance and rules appropriate to the organisation’s size. In the same way that they do for financial reporting.
Align and simplify reporting into a single framework
Perhaps the biggest challenge of all is to create a common framework for all businesses. The report calls out the work by the Value Reporting Foundation and CDP to produce frameworks that cater to both the large corporations it started working with and now SMBs. This work, the report believes, should continue through to completion quickly.
What can SMB’s do
While the report calls on larger organisations and governments to adapt. There are also four actions the report proposes SMBs should undertake:
- Start measuring your carbon footprint. Start small, measure what you can, such as fuel usage
- Set targets
- Understand how to reduce energy consumption, perhaps taking advantage of modern technology and grants
- Engage your people. The great resignation impacts many organisations, and having a stance and leading on climate change can help retention.
Enterprise Times: What does this mean
This report should be read by business leaders of both larger and small organisations. It makes some salient points and has quotes from various organisations to illustrate and enforce the points made. Governments and both large and small businesses will find the principles are a good start to climate action.
As COP26 draws to a close with some positive news, many believe the momentum should not be lost. Countries can commit to reducing carbon footprint, but only if everyone joins in can the targets be met.
As Maria Fernanda Garza, ICC First Vice-Chair, summarised, “We’ve seen a proliferation of initiatives aimed at getting small businesses to Net Zero over the past few years, but where these initiatives fail is their inability to resonate with their audience. Coupling the principles outlined in the report with financial incentives and enabling regulatory reforms will ensure that small businesses view climate action as a business opportunity – rather than another burden during trying economic times.”
Was COP26 a success? The politicians will say so. Greta Thunberg has a different view, “COP26 is so far just like the previous COPs, and that has led us nowhere — they have led us nowhere. Inside COP, they are politicians and people in power pretending to take our futures seriously.”
What Sage has done is raise awareness with this report. What small businesses need to do is start making a difference themselves, without the need for imposed regulation. Politicians may take credit, but our world will benefit. In time, those politicians will disappear. We don’t want the world to too!