Part 1 of 2: Driving Climate Action through Small Business

5 minute read time.

Capital markets are now paying more attention to the climate risk of large companies. But to be inclusive and achieve the targets, what about the smaller players, who are vital parts of local and global economies?

"The most important right we have is the right to be responsible" - Gerald Amos

Although COP 26 has come and gone, Sage recently launched a whitepaper, produced in collaboration with @ACCA_UK @ICCWBO, intended to call on govt to create simpler guidance on ESG reporting & business collaboration to remove obstacles preventing SMBs from taking #ClimateActionEarth americas. More than half of the largest companies in the FTSE 100 have committed to reach Net Zero by 2050. While these are welcome developments, it is important not to overlook the small and medium sized businesses (SMBs) that make up over 90% of businesses in most OECD countries and are estimated to employ two billion people worldwide.

So the focus is on the Small to Medium Business (SMB) community and how they can drive forward climate action. Below we've remixed some snippets from the whitepaper, with a focus on the top three areas that SMBs can start supporting Climate Action:

Where to start Small Business Climate Action

  1. Building Community

    • We need to 'think small first' as unlike bigger businesses, SMBs often don’t have the internal resources for community building work. They may not have a head of sustainability, or a risk manager. Many rely on the professional accountant as their trusted advisor to help them navigate a way ahead. But what’s clear from the findings in this report is that SMBs want to do more. SMBs need help to get onto the path to Net Zero. And working across sectors and across the whole interconnected value chain we can do just that.
  2. Accumulation of Resources

    • Lack of resources – be they technical or financial – pose a real threat to mixing purpose and profit. Governments and large businesses are increasingly exploring measures to reduce their emissions footprints both within their borders and throughout their supply chains. There is a risk that the small businesses that do not have the foresight or capital to make the upfront investment in business decisions aimed at reducing their contributions to climate change will be shut out of the global trading system. Big corporations not only have a moral duty and responsibility to help small businesses, but it also makes business sense. By helping them get ahead, we can keep small business owners resilient against incoming climate regulation, while also reducing the carbon footprint in our own supply chains. Collaboration is key.
  3. Political Influence

    • "Advocacy is still more important than we think" - Justine Greening, Purpose Coalition
    • Although SMBs may not yet have been included in climate regulation, they have the potential to offer a great deal, both in data that can drive change and in directly addressing the climate crisis. These are substantial obstacles, but there are also strong motivations for taking the plunge and starting to measure, report and reduce GHGs and engage in broader integrated, connected corporate reporting. Smaller companies are more likely to be very close to their customers, and environmental impact is becoming increasingly important as a reputational issue. As expectations grow, better sustainability performance can differentiate a business from its competitors. And there is a further, often overlooked opportunity: the power of SMBs as trusted voices within their local communities means that they are a vital ally in advocating for climate action.
    • There is a balance to be achieved, but an enabling regulatory environment coupled with access to financial incentives and free or low-cost tools can have a transformational impact on SME’s ability to act. In recent years, policymakers and large companies have responded to the urgency of understanding and reducing CO2 emissions, along with broader climate risks, opportunities and a growing volume of ESG data. So far, the implications for small and medium-sized businesses have largely been limited to a profusion of data requests pushed to them as suppliers to large corporates, rather than a collaborative engagement. Policy mandates demanding companies disclose emissions are trickling down to SMBs.


Ultimately, Sage's role in this, is in calling on policy-makers, environmental disclosure bodies, accounting standards setters and other large corporations to take on this mission, bearing in mind the four principles:

  1. to standardize,

  2. to simplify,

  3. to automate, and

  4. to enable.

Why track carbon emissions or GHGs?

Your business's Carbon emissions will be a source of greater regulatory pressure, implementing a system to measure them now enables a powerful form of risk management. By understanding its emission footprint, a business will identify and better understand its exposure to climate change risks and how they can be mitigated. In particular, carbon pricing is likely to become a reality for all. This means that failing to reduce emissions now, will result in increased costs of operations and reduced profit.

At its heart, sustainability is about long-term efficiency. Increasing organizational awareness of the linkage between consumption, spend and associated carbon emissions can help identify opportunities for improvements and lead to operational cost savings. It makes for a more efficient business.

What has been tried in the past?

A recent survey by BT and Small Business Britain found, more than three quarters (77%) of small businesses don’t know how to measure carbon emissions, with 73% of small firms keen for more training and education to understand what changes they could make to their business.

Stay tuned for part 2 of this series which will explore Tips for successful emissions data gathering by SMBs

Thanks for reading!

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