- According to new report, titled ‘Think Small First’, policymakers and large companies must standardise and simplify carbon reporting and accounting for SMBs or risk millions of businesses being left behind.
- The report highlights tangible steps that can be taken, through an integrated approach, to empower SMBs, remove existing administrative burdens and progress the global journey to net zero.
- Findings presented at COP26 session at the International Chamber of Commerce (ICC) “Make Climate Action Everyone’s Business,” bringing together 10,000 SMBs, supply chain leaders and government officials to discuss next steps for real action.
Small and medium businesses (SMBs) risk being left behind in the race to net zero unless urgent action is taken to simplify carbon reporting and accounting, according to a new report from Sage, a leading provider of cloud business management solutions, the International Chamber of Commerce (ICC) and the Association of Chartered Certified Accountants (ACCA).
“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,” said Steve Hare, CEO of Sage Group.
“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.”
The report highlights how providing standardised SMB-friendly reporting frameworks could unlock significant progress on the journey to net zero, given the SMB sector represents over 90 percent of the global economy.
”As well as representing about 90 percent of businesses globally, SMBs also offer more than 50 percent of employment worldwide,” said Helen Brand, chief executive of ACCA.
“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 focused 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.”
As more stringent emissions reporting requirements are being driven by government and investors, more companies will need their suppliers, many of which are SMBs, to be ready to report their own emissions.
The report also suggests that governments and policymakers must acknowledge the specific challenges and reporting burdens faced by SMBs to deliver accurate carbon reporting and accounting, such as lack of expertise and dedicated resources, and offer credible and immediate support in mitigating these issues. In turn, larger organisations must work more closely with SMBs in their supply chains to make the task of measuring, disclosing and reducing their greenhouse gas emissions as straightforward as possible.
“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,” said Maria Fernanda Garza, ICC first vice chair.
“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.”
Finally, the report calls on the accountancy profession to galvanise and support SMBs, helping them to remove barriers and transparently navigate an increasingly complex landscape as part of global efforts to reduce greenhouse gas emissions.
It suggests four key integrated principles to help policymakers and large companies take on this mission:
- Standardise – Large companies should work together within sectors and industries to ensure SMBs are being asked for information on a standardised basis. Government has a role in underpinning this consistency, including coordinating the time when this information should be delivered.
- Simplify – Much of the guidance for climate and ESG disclosure is designed for large companies. Government should develop simpler guidance. In addition, large companies trying to gather data, such as their Scope 3 emissions, should work together on simplifying and aligning the process by focusing requests on the most material issues, for example with consistent questions that do not exceed two pages.
- Automate – Governments and business need to support the development of automated tools to make information gathering and reporting as straightforward as possible. Large companies can develop the technology and offer training in those tools to SMBs where appropriate. 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 corporates must recognise the challenges for SMBs and enable them to overcome them. Investing in supply chain emissions reduction should be an ESG priority for companies, while government needs to provide an enabling policy framework by ‘Thinking Small First’ when drafting climate policy, providing the right incentives that are accessible and actionable for SMBs.
Download the ‘Think Small First’ report here.