Part 2 of 2: Driving Climate Action through Small Business

In part 1 of this series,  we looked at where to start Small Business Climate Action for the tracking of carbon emissions (GHGs). Now we'll explore tips for successful emissions data gathering by SMBs.

Tips for Successful Emissions Data Gathering by SMBs

The typical first step by corporates has been to send suppliers detailed questionnaires about their carbon emissions and other data that corporates want to aggregate, but this has a number of drawbacks. For example, questionnaires on non-business-critical issues are likely to be a low priority for SMBs lacking customer relations departments or large facilities management teams. Even the look and time requirements of the questionnaire can be off-putting. The Federation of Small Businesses argues that a questionnaire that cannot be filled out in less than 7 minutes is likely to be ignored.

Rather than demanding large amounts of data, use the 80:20 principle - focus wherever possible on the smaller sub-set of information that will provide the greatest value. For example, when calculating Scope 3 emissions at the corporate level: a supplier’s Scope 1 and 2 emissions will often represent most of its footprint and is more straightforward for them to provide, being based on energy and fuel consumption. In most cases, getting accurate Scope 1 and 2 data from all suppliers is likely to be more useful than poor - or missing - Scope 1, 2 and 3 data (see pg 3 of the WWF's Emissions Guide for the glossary of terms).

 

With government targets, we may soon see it "become mandatory for more organizations to report their emissions, so even if you are not currently required under legislation, we encourage you to start reporting your emissions as soon as possible" - WWF.

Reporting Emissions: How SMBs can be proactive

The World Wildlife Fund (WWF) has undertaken analysis of the reporting landscape and how it can be made simpler, both for large companies to ask for data and for SMBs to respond. Its' Emission Possible program has created assets for all stakeholders that forms a toolkit of resources to enable meaningful climate action. They created their Beginners' Guide to Emission Reporting to help companies understand what to do to streamline the process and empower action.

  1. Calculate Your Business's Carbon Footprint:

  2. Set Targets:

    • The SME Climate Hub is a global initiative designed to provide guidance on how small businesses can set net zero targets, measure their emissions and develop climate strategies. It also contains advice about reducing emissions across your business activities
  3. Understand your energy consumption:

    • Energy and capital savings can often be found in simple solutions, once you know where to look. For example, by using LED light upgrades or solar panels.
  4. Engage your people:

    • A recent poll by ACCA Global of its members found that more than 80% of respondents said it was important or very important for their organization to operate in an environmentally friendly and sustainable way. Building net zero and other such targets into your business plan and clearly communicating this to your employees will engage and motivate them to consider impactful actions you could take.

The Accountant's Role in Measuring Carbon Emissions

Although still in its' early days, the standardization of carbon emissions tracking will be furthered along when larger companies work with their peers to standardize their carbon reporting demands creating a sector standard. This would make it easier for third parties to develop platforms and tools to support integrated reporting, creating a positive cycle of standardized data requests and the commercial innovation to support its delivery.

There's a critical need for Accountants (being trusted professionals who often implement automated tools), to become leaders in grasping the scale of this challenge and respond to it. While not all accountants have expertise in understanding how to measure carbon emissions, the task of hunting down data and organizing it in ways that allow meaningful interpretation is core to both financial and carbon reporting. The attention to detail, communication skills, analysis and ethical mindsets of professional accountants are skills that will be key to achieving net zero.

"The accountancy profession has a critical role to play in this, both to lead long-term value creation in sustainable economies, and to champion responsible practices for the public good" - Helen Brand OBE, Chief Executive of ACCA  

"All of the data is available somewhere, it's just a question of finding it" - Neil Ross Russell, Net Zero Now
 

Accounting Software's Role in Measuring Carbon Emissions

Accounting software is well positioned to work with carbon accounting experts. Automation has a major role to play to help avoid duplication in inputting and collating data. For SMBs, tools to draw down data for Scope 1 and 2 emissions reporting should be relatively straightforward, as the core data needed includes:

  • Scope 1 - gas (kWh), company cars (distance / fuel), refrigerants (liters);
  • Scope 2 - Electricity (kWh).

The increasingly sophisticated reporting software for this can be linked to or integrated within financial accounting tools. Carbon accounting and wider integrated reporting, is a vital first step on the long road to a sustainable global economy.

Setting the Rules - the Role of Government

Government and policymakers at all levels must ensure the path to carbon accounting is smooth for SMBs, rather than doing so without taking account of the particular challenges for this important section of the economy.

For small businesses, local government may be an appropriate level to support them in improving their environmental impact; as well as, providing waste management and recycling facilities, local government can work closely with local SMBs and community groups to work out the best and most practical ways to take climate action.

National governments need to create an enabling policy framework and invest in digital infrastructure so that SMBs can innovate and share data more effectively. There is an opportunity for national governments to facilitate automation by pushing for open data and standardized APIs. This would enable SMBs to capture the data they need, for example from energy suppliers.

Incentives

Another practical step would be to make investment incentives accessible and create a single point of contact for green grants and signposting on eligibility for reliefs such as the business rates allowance and capital allowances, to help SMBs navigate and maximize opportunities for government support.

A Global ESG Data Reporting Framework: Stakeholder Capitalism Metrics

To promote alignment among existing ESG frameworks; last year, the World Economic Forum released a set of universal ESG metrics called Stakeholder Capitalism Metrics, based on work with four big audit firms including Deloitte, EY, KPMG, and PwC. The WEF are also participating in the International Financial Reporting Standards (IFSB) ambition to prepare the ground for the future International Sustainability Standards Board (ISSB). The result of this process is 21 core and 34 expanded metrics and disclosures. The recommended metrics are organized under four pillars that are aligned with the SDGs and principal ESG domains: Principles of Governance, Planet, People and Prosperity. 

The metrics have been selected for their universality across industries and business models, but the intention is not to replace relevant sector- and company-specific indicators. Companies are encouraged to report against as many of the core and expanded metrics as they find material and appropriate, on the basis of a “disclose or explain” approach. Those corporations that align their goals to the long-term goals of society, as articulated in the SDGs, are the most likely to create long-term sustainable value, while driving positive outcomes for business, the economy, society and the planet.

Other Training Tools and Resources for SMBs

  • ACCA’s Rethinking Sustainable Business Hub keeps SBMs informed, providing education support for when resources are tight and is continually updated to ensure companies are supported with practical insights, tools, learning and connections to help all companies meet the challenges.
  • The ICC Chambers Climate Coalition is an international network of chambers sharing best practices, policies and processes to mobilize local business leaders in support of bold action to tackle climate change.
  • BT plc has invested in the development of educational materials for SMBs, teaming up with partners including Google, LinkedIn and Small Business Britain to deliver online learning for what it calls the Skills for Tomorrow. This platform now provides over 180 free courses and resources, including support for SMBs to understand how they can measure and manage their climate and wider environmental impact. 

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