There is a big problem for businesses who want to do their bit on climate change.
Put simply, with the best will in the world, they often don’t know what they’re doing.
To be more precise, the rules on reporting carbon emissions are so confused and chaotic that it’s impossible for all but the biggest and best-resourced firms to find a way through the jungle of regulation.
That’s worrying for all of us, because small and medium businesses – the kinds of companies which don’t have a hefty-enough payroll to fund a specialist sustainability officer – make up the bulk of economic activity. And if they don’t know how to measure their environmental footprint, that hampers our common struggle to turn the planet’s thermostat down.
It also affects the big beasts of the economy which can devote entire departments to green initiatives – because it is likely that their supply chains are dominated by smaller concerns which can’t match the same level of eco awareness. In short, until every business – regardless of size – can report their impact on the planet accurately, no business can.
This is why I was delighted that ACCA joined up with the International Chamber of Commerce and Sage, the cloud business management firm, at COP 26 in Glasgow. We jointly launched a report called ‘Think Small First’, which calls on governments and big businesses to simplify carbon reporting and accounting so that small and medium sized businesses (SMBs) are not left behind in the dash to net zero.
Our report shows that standardised, SMB-friendly reporting frameworks could speed our progress to net zero, because they would unleash the potential of countless thousands of SMBs to play a bigger part.
The value of a simpler system will only grow as carbon reporting is increasingly enshrined in law by governments desperate to deliver on promises made at Glasgow. Companies will need all of their suppliers, many of which will be SMBs, to report on their carbon emissions – and at the moment many of them would struggle to comply.
As a start, the report urges governments and policymakers to acknowledge just how tough SMBs are finding it to comply, and to understand that they do not have the resources which bigger businesses can deploy.
Our report asks larger companies to work hand in hand with smaller suppliers for the good of all, sharing the skills and expertise at their disposal. That is the only way we can measure the carbon cost of every product and business operation and keep our progress in cutting emissions on the right track.
In my experience, based on conversations with countless business people across Wales, the vast majority of SMBs are committed to greening their operations. We heard great examples from this at a recent event we held with Chambers Wales, from Welsh firms such as Tiny Rebel and Character.com about the practical steps they were taking to reduce their emissions in their business and in their supply chains, and how this is a journey rather than a one-off activity for businesses. We also heard about the range of finance that can be accessed to support businesses.
Access to finance was identified as one of the solutions to drive action on net zero in a recent British Business Bank report. Its survey showed how many SMBs are ready to act if they can find the right product and actions to take. Small business owners are just as concerned about the planet as anyone else, and they want to leave a healthy legacy for future generations to enjoy – a point made by Hannah Williams from Tiny Rebel when persuading her Board to make the move towards being a net zero brewery.
The need for action now was brought home to us all by Poppy Stowell-Evans, a Youth Climate Ambassador, at the recent Welsh Government COP Cymru net zero Wales event.
But to do this many businesses need much more help, guidance and support than they are getting now.
There are four really practical steps which can change the game in carbon reporting, and ensure that every business can be part of the solution and not the problem.
- Standardise. Large companies must work together within sectors and industries to make sure they are asking their SMB suppliers for the same carbon information in the same way. Governments have a role in this by setting the right guidelines, and by fixing deadlines for information.
- Simplify. Much of the guidance for climate disclosure is designed for large companies. Government must develop simpler guidance which smaller concerns can follow, understand and act upon quickly and easily.
- Automate. Governments and business must support the development of automated tools to make information gathering and reporting as straightforward as possible. Large companies could develop the technology and offer training in those tools to SMBs. Governments should create an enabling policy framework and invest in digital infrastructure so that SMBs can innovate and share data more effectively.
- Enable. Government policy and action by large firms must recognise the challenges for SMBs and enable them to overcome these. Investing in supply chain emissions reduction should be a priority for companies, while government needs to ‘think small first’ when drafting climate policy, providing the right incentives that are accessible and actionable for SMBs.
As Helen Brand, chief executive of ACCA, said: ‘As well as representing about 90% of businesses globally, SMBs also offer more than 50% of employment worldwide. As such they have a huge role to play alongside the professional accountants who advise them in tackling climate action.
‘They need to know what to report, and for standards to be proportionate and that focus on information that improves business management. As with big business, we need to avoid disclosure overload, so that users of reports can easily access the information they need.’
Those guiding principles can make all the difference in the world as we aim to do the right thing in the wake of COP26.
The message is that even the smallest business can make a big difference in beating the climate crisis.