The climate crisis is at its tipping point – in order to mitigate emissions, they need to be tracked. Despite the growing necessity and want of small and medium-sized enterprises (SMEs) to lower emissions and drive tangible sustainable change, 90% feel restrained by the obstacles and complexities associated with emissions data and reporting. SMEs also make up 90% of businesses worldwide. This leaves a huge knowledge and action gap which needs to be addressed in order to meet global targets and prevent the worst effects of climate change.
Spanning the complexities of business operations, inaccessibility of tools to understand emissions data, and being deterred by reporting costs, SMEs feel overwhelmed by approaching and reporting their carbon footprint. We caught up with our Environmental Data Analyst, Will Tiller, to explore these complexities and how Connect Earth can support SMEs in breaking down these barriers and pushing their sustainability initiatives forward.
Why do SMEs need to report emissions data?
SMEs account for 44% of the UK’s non-household greenhouse gas emissions. The impact of having carbon emissions data from these companies is boundless and fundamental for a widespread move to tangibly sustainable business models. “In order to make change, you need to know where you are,” states Will.
In the UK and the EU, it’s currently voluntary for SMEs to report their emissions data. However, reporting obligations are likely to be significantly expanded in the near future, with new regulations such as the Corporate Sustainability Reporting Directive (CSRD) in the EU, which will require a far broader selection of companies to disclose data relating to their environmental risk. Similarly, in the UK the Streamlined Energy and Carbon Reporting (SECR) regulation already requires disclosure of carbon equivalent emissions from large companies.
“The key thing to note for SMEs is that even if they do not directly fall under the remit of existing and new regulations, many of their business partners will require the SMEs to disclose data to them directly to be able to calculate their own Scope 3 emissions”, reminds Will.
Not only that, but reporting emissions also sets your company apart and gives you a competitive advantage. Studies show that consumers prioritise ecological products and services, making commitments to Net Zero and sustainable practices a strategic move for success. There is also an increasing number of financial incentives available for SMEs who are adopting climate friendly practices, as well as many other benefits of carbon accounting and disclosure which will be discussed in a future article.
Choosing the right reporting framework
It can be difficult for SMEs to gather data that matches the various sustainability reporting guidelines, standards, and frameworks. This challenge is especially tricky because different sectors and locations have their own specific standards.
“At Connect Earth, we’ve looked at how well we can align to different protocols, and bring clarity to that area for SMEs. In order to make the data we accumulate widely applicable for businesses adhering to different frameworks across multiple locations, we use a standardised approach which follows the Greenhouse Gas Protocol, and this can be applied everywhere in the world,” explains Will.
Complexities of SMEs
The complex business structures of SMEs can make approaching carbon data daunting. For example, many SMEs both use and act as suppliers in value chain partnerships with other companies in order to run their operations, making obtaining carbon emissions data even more difficult.
“To report thoroughly and accurately you need to look at both the upstream and downstream of your business. It’s a big undertaking for many, and it’s hard to get a lot of this data especially if a company or its suppliers don’t keep track of it already,” says Will.
At Connect Earth, we’ve approached this specific business model in a bid to support SMEs, focusing on financial transactions to accurately gather emissions estimates. This way, there’s very little new data collection required, and it’s a lot easier for SMEs to see where they’re at with their carbon data and start to report and set targets.
Leaving no stone unturned to calculate carbon emissions
In order to develop the in-depth, cohesive reports required to accurately outline carbon emissions and set tangible environmental sustainability targets, businesses need to acquire a lot of data. One major challenge hindering SMEs is the limited availability of data, which is often scattered, difficult to obtain, hard to track, or unreliable… Luckily, Connect Earth has done the hard work for SMEs to fix this issue.
“Our goal is to provide an easy and intuitive way for SMEs to generate high quality emissions data, saving them time, cost, and stress,” explains Will. “Then, we identify carbon hotspots and even provide tips and tricks for how to keep these emissions down in the future.”
Securing investments like never before
People are looking for transparency from businesses when making financial commitments. 67% of consumers want their bank or financial institution to become more sustainable, increasingly looking for ways to make financial decisions in areas where change will be driven.
“We help banks to understand their Scope 3 emissions and be more sustainable in their investments from a wide range of standpoints. By giving them insights into the emissions of their SME customers, we help banks to understand and reduce their environmental risk, as well as to open up new opportunities for sustainable products that give them a competitive advantage,” says Will.
79% of all investors (along with a staggering 99% of millennial investors) demonstrate an interest in sustainable investing. They’re looking for security in businesses, and emissions reporting demonstrates just this resilience. “A lot of investors are making decisions based on ESG. If you are reducing emissions showing long-term perspective goals, you’re demonstrating that you’re able to reallocate resources within and commit to changes,” states Will.
The tools to empower change
There has never been a better time to start tracking carbon emissions, nor have there been better resources to do so. The positive change that can be steered by finding these carbon-intensive hotspots, finding ways to cut back on carbon emissions, and harnessing funding for environmentally motivated companies is boundless, and SMEs are the businesses to back.
With the right support, the six million SMEs which exist in the UK could contribute to up to 50% of the country’s Net Zero decarbonisation goals by 2030, worth an estimated £160 billion in revenue. Connect Earth’s data tools empower businesses to head in this direction and tackle carbon emissions without the intensive resources, extensive lead times or complicated processes there once were. No excuses – let’s drive the change together.
Visit our website to learn more about Connect Report – our carbon accounting solution that enables financial institutions to measure the carbon footprint of their SME customers
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About Connect Earth:
Founded in 2021, Connect Earth is a London-based environmental data company that democratises easy access to sustainability data. With its carbon tracking API technology, Connect Earth is on a mission to empower people to make sustainable choices and bridge the gap between intent, knowledge and action. Connect Earth supports financial institutions in offering their customers transparent insight into the climate impact of their daily spending and investment decisions.
