For many SMEs and mid-market organisations, sustainability reporting can still feel like something primarily aimed at big corporates. But with the continued focus on net zero and increasingly complex legislative landscape in the UK, is that still the case today?
The answer isn’t that mandating more Sustainability Reporting for SMEs as, for most, that would be too difficult and expensive to justify.
Instead, SMEs should be looking at the outcomes these reporting frameworks are designed to support and aligned their internal work accordingly: better data, better understanding of carbon and energy consumption, measurable improvement, and greater transparency.
However, there are two good reasons for looking at sustainability reporting for SMEs. The first is internal, as better data can help identify opportunities to reduce energy consumption, carbon emissions, and operating costs.
The second is external, specifically in relation to helping larger clients meet their sustainability obligations. UK SRS provides a useful indication of the direction of travel with regards to sustainability legislation (i.e. it’s getting more details and wider in scope), but compliance doesn’t need to be the reason for getting started.
At Boxfish, one of the biggest challenges we see across organisations of all sizes is a lack of complete and verifiable data.
Some larger companies already have Scope 1 and 2 emissions data through SECR, energy consumption profiles developed through ESOS or an established carbon baseline, but many don’t, particularly when there isn’t a mandatory legislative driver.
So, our message is clear, for SMEs and corporates, there is real value in measuring, monitoring, and acting upon your sustainability data, regardless of whether you need to produce a formal report.
In practice, that means understanding where and how energy is being consumed across your activities, where your emissions come from, who owns the underlying data, how robust it is and, perhaps most importantly, where the gaps are.
Scope 3 is likely to be particularly challenging because it requires companies to look beyond the energy and fuel they consume directly and understand emissions elsewhere in their value chain.
The practical lesson therefore is that Sustainability Reporting for SMEs shouldn’t be looking to measure everything from day one. Rather, SMEs should try to understand what you can reasonably measure today and introduce systems and processes that improve the quality and breadth of the information over time.
We regularly make the point at Boxfish that carbon and cost are two sides of the same coin. Better carbon and energy data can help identify and prioritise opportunities to reduce unnecessary energy consumption, cutting both emissions and utility spend.
Flip that around 180 degrees and it works just as well because, if your priority is reducing operating costs, you need accurate information about significant areas of expenditure such as energy and fuel consumption.
The objective of Sustainability Reporting for SMEs therefore isn’t reporting for reporting’s sake, rather it’s moving from “we’re working to reduce our environmental impact” to having information that can be measured, monitored and used to identify action.
There is also an important external driver. Larger organisations don’t operate in a vacuum meaning their carbon footprint extends into their value chain, which means they need information from customers, suppliers and other third parties if they want to understand that wider impact.
For a smaller company supplying a larger organisation, that means sustainability data can start becoming commercially relevant without the SME itself being subject to legislation such as ESOS, SECR or UK SRS.
That, arguably, is where legislation and frameworks such as ESOS, SECR, and UK SRS become most interesting for smaller companies, not because SMEs need to copy the entire reporting framework, but because it gives some visibility of the standards of sustainability information that larger customers may increasingly be working towards.
If a major customer asks for carbon data, evidence of reduction targets or information to support its own Scope 3 assessment, it’s much easier to respond if the underlying systems and information are aligned with your current Sustainability Reporting for SMEs framework.
Sustainability reporting for SMEs doesn’t mean producing a fully compliant report tomorrow but it does mean understanding your energy and carbon data, the gaps in your knowledge, and starting to think about how you can improve over time.
From there, businesses can establish a credible carbon baseline, identify significant sources of emissions and energy consumption, set realistic improvement targets, start prioritising the actions that offer the best carbon and financial return and over the long term, develop a formal strategy to achieve a net zero future by 2050.
So, legislation and frameworks like ESOS and UK SRS can provide a useful reference point for where sustainability reporting is heading, but it doesn’t (and arguably, shouldn’t) need to be the reason SMEs take action.
The real benefits of Sustainability Reporting for SMEs are closer to home and include a better understanding of your impact, a reduction in unnecessary energy consumption, a lower carbon impact, reduced energy spend and an improvement in your bottom line and ensuring you can give your larger customers credible information when they ask for it.
For SMEs and mid-market organisations, that’s a much more immediate business case than preparing today for a reporting requirement that may or may not apply to them in the future.