COP28: Why sustainability reporting matters to your small business

The world’s largest annual climate conference, held by the United Nations (UN), is taking place in Dubai from 30 November to 12 December 2023.

At the COP28 summit, governments and big business will pledge targets to help alleviate the future damage. Small businesses are expected to follow suit to meet these targets.

But how can your small or medium-sized business do that?

In this article, we cover the key issues preventing more businesses from reporting on their sustainability efforts, and what you can do to change this.

Here’s what we cover…

• Sustainability reporting challenges for SMEs
• What are the issues around sustainability reporting?
• What are the benefits of sustainability reporting?
• The “Green Finance” opportunity
• What to look for when considering sustainability reporting
• Final thoughts

Sustainability reporting challenges for SMEs

Small and medium-sized enterprises (SMEs) account for upwards of 90% of all businesses worldwide.

And while we hear of titans of industry maligned in the press as major polluters, the volume of SMEs actually means this accountability skews towards the small business space.

While the big industry hitters have the structure and funds to get their targets and reporting right, a disconnect is being noticed by the intentions of SMEs to be more sustainable, versus their ability to report on their progress.

Path for growth: Making sustainability reporting work for SMEs is a new report by Sage, the International Chamber of Commerce (ICC), and PwC UK that surveys more than 16,000 SMEs.

It highlights the point that 83% of SMEs prioritise sustainability but only 8% report on their impact.

While they may have earnestly pledged to be more sustainable, they still aren’t able to qualify or quantify how they’ve achieved it.

The statistical analysis from the report suggests that if the barriers to reporting for SMEs were removed, this would triple the number of SMEs who start reporting in the next 2 years—adding 51 million SMEs to the global reporting pool.

But as COP28 comes around for another year of climate pledges, despite COP27’s best efforts, targets are still not being met, meaning there’s more need for SMEs to report on any progress accurately.

What are the issues around sustainability reporting?

Sustainability reports are an essential route to accountability, helping your business’ stakeholders to understand the company’s carbon impact.

Reports outline strategy and map out target plans for the coming years.

However, the Sage report highlights a lack of reporting isn’t necessarily due to not having these roadmaps, as 21% of SMEs are poised and ready to report, having set sustainability goals for their business.

The report identifies issues in getting the reporting done and revealed 2 main blockers as mentioned by the majority.

Path for growth reveals 77% of those surveyed cited both the high upfront costs and the complex reporting standards as blockers. It found that “this prevents them from taking relevant action to be more sustainable, and from realising the business benefits of taking action, when they do”.

What are the benefits of sustainability reporting?

As well as the primary directive of saving the planet, showing customers that your business aligns with what they care about is a huge plus.

The Path for growth report showed that customers were assessing company sustainability when considering what to purchase, and from where.

Think of sustainability reporting like putting your money where your mouth is. You say you want to run your business more sustainably; this is the plan that outlines just how you’ll achieve that with the proof you’ve delivered.

It gives you a clear picture of what your business needs to do to meet its sustainability goals and the cost involved.

It also provides your customers and potential investors with an insight into how your business manages environmental, social, and governance (ESG) targets, and helps explore whether they align with your company’s values.

Remember, one business’ stronger stance on sustainability could outweigh others in the minds of not only the consumer but the investor too. Businesses that put lip service over clear pathways to sustainability can face the wrath of bad press and accusations of ‘greenwashing’.

Another clear benefit is the knock-on effect outside the immediate sphere of business. Declaring one’s roadmap to sustainability adds weight to a serious shift in society’s potential response to climate change.

Becoming a louder part of the collective voice for change will serve to unlock new opportunities, both for the benefit of your business, and the planet.

The “Green Finance” opportunity

Financial institutions and investors across various global partnerships have made commitments to reduce their financed emissions.

This means investor funds are increasingly tied to sustainability performance.

Measuring and reporting of accurate sustainability data will be essential for SMEs to continue securing funds as the sector moves towards green finance.

There’s an estimated $900bn (£710bn) opportunity in green finance for SMEs, to help pay for the likes of solar panels, E electric vehicle (EV) fleets and more.

What to look for when considering sustainability reporting

Due to the complex nature of reporting, your business may need to consider several things to get the work done.

It’s important to realise that expenditure in this area will be the key to doing things correctly.

People

Fewer than 2% of respondents reported having a designated employee who can facilitate all the steps necessary when dealing with sustainability reporting.

Getting the right support in-house is key, so make this a priority.

They will become a much-needed employee as the urgency to meet global targets progresses and the pressure increases.

Working with third-party partners can also help. Whether that’s through filling in any gaps in your sustainability plan, or helping you with your carbon accounting, surround your business with experts to make the process easy.

Technology

Investing in good processes and technology will ensure your sustainability efforts don’t go unnoticed.

In the Sage report, 63% of SMEs said the right digital tools will make it easier for them to carry out their sustainability reporting.

Tools such as the Sage Earth carbon calculator, for instance, can take some of the pain out of calculating your business’s carbon footprint.

This also shows your stakeholders, shareholders, employees, and customers that you are taking this as seriously as it deserves, which will only increase your company’s attractiveness and reputation.

Final thoughts

Due to the continued effect of climate change on the world and the world’s businesses, affecting everything from people’s livelihoods, supply chains, the cost of living, and global policies, no doubt you’re already aware of the shortening timeframe left to make a difference.

If ever there was a time to invest in your future as an SME, it would be now.

Ensure your sustainability reporting is robust and clear so your business can align on hitting and exceeding those targets. Your customers, investors, and the planet will thank you.

To learn more about what Sage is doing for sustainability, head over to the sustainability and society page to download and read Path for growth, download our reports, and see how we can help your business keep reaching for those targets.