Don’t forget smaller companies while you are thinking big
While world leaders and sustainability champions have been thinking about big solutions to the climate crisis in Glasgow, we’ve been appealing to them to also Think Small.
For every government and large corporate making pledges to reduce carbon consumption, there are hundreds of small and medium businesses (SMBs) in their supply chains.
These smaller enterprises are going to play a pivotal role in enabling the grand scale commitments needed to reach Net Zero in time, because they are about 90% of businesses globally and offer more than 50% of employment worldwide.
When politicians talk about carbon reporting and quantifying climate crisis as a risk on the balance sheet, those useful and necessary aims can only be enabled by a joint effort between larger businesses and the myriad of SMBs that feed into their operations.
However, there is work to do in order to achieve this cooperation, because current systems are regarded as complicated administrative burdens by SMBs, who are urgently in need of some help to see business opportunity rather than red tape.
That is why ACCA partnered with cloud business management solutions leader Sage and the International Chamber of Commerce (ICC) to launch the white paper Think Small First, which seeks to enable effective climate action from SMBs.
Fittingly, the report was launched at the ICC session at COP 26 in Glasgow called ‘Make Climate Everyone’s Business’, which brought together 10,000 SMBs, supply chain leaders and government officials to discuss how to bring about action.
We all passionately believe that simpler processes could unlock significant progress as larger companies look to their suppliers to follow their lead and report their own emissions.
SMBs have a huge role to play, alongside their professional accountant advisers, in tackling climate change. They need to know what to report, and for standards to be proportionate and focused on information that improves business management.
But they don’t want to be burdened with an overload of disclosure, which will not help users to identify the key points and information they need.
Accountants can be at the vanguard of enabling SMBs to make the right disclosures at the right level. They can be their trusted guide helping SMBs to navigate these processes in an increasingly complex environment.
Smaller enterprises often don’t have the internal resource to do this work. They may not have a designated person heading up sustainability or a risk manager. But it’s clear from our report that they are motivated to do more.
Four out of five say they are starting to make climate conscious decisions and a similar number report that their environmental impact is important to their customers.
However, while the will to cooperate is clearly there, in the UK only 3% of SMBs have measured their carbon footprint in the last five years, so there is scope to turn good intentions into positive action. To drive change, we need collective action to help SMBs become more sustainable.
Our appeals to government and large companies within Think Small First included some key points to help SMBs to maximise their efforts towards Net Zero.
We would like to see more standardisation of the information being requested by larger companies, and government coordinating when this information should be delivered.
It would be helpful for government to provide simplified guidance for climate and ESG disclosures, as the current guidance is targeted at large companies and SMBs find it too complex.
In the same vein, we would like to see the introduction of automation, with tools to make information gathering and reporting as quick and straightforward as possible.
And finally, we and our partners have called for government policy and action from larger companies to address the challenges that SMBs face on this issue and to help these businesses to tackle them. Government policy needs to enable SMBs to play their part in this monumental effort, such as offering financial incentives to reward the correct behaviour.
Businesses of all sizes want to play their part in enabling the global economy to reach Net Zero by 2050, but to achieve this smaller and medium-sized businesses need to be supported in their own efforts.That is why we and our partners are calling upon governments and large companies with SMBs in their supply chains to Think Small First and help enable integrated reporting on climate and sustainability.