PrimeGlobal Insights into Sustainability and SMEs (ACCA)
Business OpportunitiesApril 28, 2022 - Buzzacott, Eshuis Accountants en Adviseurs, Jégard Créatis
In what areas are SMEs struggling the most on the road to achieving ‘net zero’ and why? What is holding them back? Could you also please comment on the different challenges they face compared with their large corporate counterparts.
In my experience SMEs find it hard to know how to get started – it can feel overwhelming. They may feel that measuring Greenhouse Gasses (GHG) requires specialists using standard tools and methodologies. SMEs are unlikely to have staff who have dedicated time, or roles, to focus on a ‘net zero’ plan. It can feel like a huge global issue that does not relate to them directly. An SME may ask themselves – What can we really do? Is this more for government and bigger business than for us? Anything we do won’t really make a difference?
They also struggle to make the head space to think about ‘net zero’. Many SMEs have faced huge challenges during the pandemic, face staff shortages and are now worried about rising costs - particularly energy bills. When you’re constantly fighting fires its hard to consider the long term need to reduce GHG.
‘Net zero’ is sometimes seen as a compliance matter. SMEs may feel they can wait until legislation requires them to act. It can be difficult to make the direct connection between climate change and the business. For example, insurance premiums are going up because of climate change – but an SME may not realize that. The SME needs to consider its future direction, who its stakeholders are and the potential for ‘net zero’ to create business opportunities. That requires time for reflection.
An SME’s most trusted adviser is normally their qualified accountant. However, Small Medium Practices (SMPs) could do more to proactively discuss ‘net zero’ goals with SMEs. SMPs often do not feel confident to start these conversations. They worry they don’t have the expertise, capacity, or tools to help. SMPs may also view the matter as compliance related, rather than a massive advisory opportunity to help SMEs’ businesses.
In contrast, large corporates often have staff dedicated to focusing on ‘net zero’. Government requirements are aimed at Public Interest Entities (PIEs). The need to address ‘net zero’ for larger organizations can therefore seem more urgent. The big accounting networks have more resources to help the big businesses they audit and advice. The standards and guidance being issued are normally directed at the largest entities. This means the guidance which is publicly available is much less relevant to SMEs, making it hard for them to engage with the ‘net zero’ goal. With over 90% of economic activity driven by SMEs, we need to start thinking small first to develop relevant support to achieve net zero.
UK’s plan to phase out Russian oil imports by the end of 2022 - another challenge or opportunity?
The plan to phase out Russian oil imports could lead to demands to increase production of fossil fuels elsewhere to make up for the shortfall. We have already seen a push by the US oil and gas industry to reduce regulation to allowing more drilling of oil. This would clearly be determinantal to ‘net zero’ goals.
However, alternatively, the war in Ukraine could be seen as a wake-up call and an opportunity to decisively break away from fossil fuels altogether. The world knows climate change is not going away and it remains the single biggest issue governments face worldwide.
Energy cost pressures provide an opportunity for SMEs to look hard at ways to use less energy – which provides an opportunity to introduce ‘net zero’ plans – which can also drive cost reduction. For SMPs this is an opportunity to discuss ‘net zero’ with their clients with cost pressures providing an added imperative to act. The SME can start asking more questions about their energy services; for example, does their energy supplier have green credentials.
There will also be more opportunities for innovation around energy efficiency. This could provide opportunity for new start-up businesses.
What are the priority activities small practitioners should undertake to support SME/mid-tier clients towards achieving net zero?
The top priority is to proactively start conversations with SMEs. SMPs don’t have to know all the answers. The important thing is to encourage SMEs to consider climate change and their role to achieve ‘net zero’. SMPs do not need to set up new service lines to support their clients. They can start asking questions when completing standard services like audits or accounts preparation. However, there are steps SMPs can take so they feel ready and confident to provide advice.
SMPs should put on their own oxygen mask first when it comes to supporting SMEs with net zero goals. By understanding the environmental impact their firm makes, they will develop experience which gives them confidence and credibility to speak to their clients.
One of our UK member firms Buzzacott is committed to social and environmental goals, annually issuing a Corporate Responsibility and Sustainability report. This year they are reporting their firm's energy and carbon reporting emissions. Their experience enabled them to provide guidance to their clients on how to start measuring GHG and start developing ‘net zero’ goals. Sharing their sustainability report with their clients makes it more likely SMEs will approach them for support as they realize they have knowledge in this area.
SMPs should familiarise themselves with tools designed to help SMEs measure emissions. Measurement is critical as SMEs need to know where they are now to set goals to reduce emissions. There are a range of tools available which are designed to be easier for SMEs to use. For example, the SME carbon footprint calculator.
SMPs should not view ‘net zero’ as a compliance matter. SMP know their clients’ businesses and can encourage them to take a holistic approach. Our member firm Eshuis, based in the Netherlands, uses B-Corp principles to help their clients consider their overall business goals and what they stand for. Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance. As accountants, we can too quickly start to focus on risk mitigation. By focusing on impact accounting, SMEs start to identify upsides like new markets that are opened by demonstrating a commitment to reducing environmental impact. It is important to look beyond compliance and consider the total enterprise – frameworks such as the Integrated Reporting principles and B Corp help with that.
It is important to focus on taking the right steps, not necessarily moving straight to best practices. Jégard Créatis, one of our French members, helps SMEs get started by focusing on three to four core GHG indicators only, so the change feels manageable and more focused.
It is also a priority to seek help from the profession. ACCA has fantastic resources and PrimeGlobal is committed to helping its member firms support SMEs to achieve ‘net zero’ targets. SMPs and SMEs should take advantage of this help.
At Buzzacott we are trusted for the experience we have, the specialisms we understand, the relationships we build and the values we live by. We define ourselves by the needs of our clients, large and small, and we work hard to build and maintain relationships that are personal, collaborative and enduring – to be a partner you can trust. We blend pragmatism and front-line experience with the insightful knowledge of an industry leader. Our 400+ staff work cooperatively in specialist teams under one roof to tailor-make solutions for you. We’re big enough to display deep knowledge over a broad range of specialisms, and small enough to understand the power of personal connections.Learn more
Established 1932, Eshuis Accountants and Consultants has grown into a high quality accountancy and consultancy organisation. We love working with facts and figures. However, over ninety years of experience have taught us that facts and figures are not a goal in and of themselves. What matters is offering insight into your financial, fiscal and organisational performances. This insight gives you the opportunity to achieve your personal ambitions and your organisational strategies. Everything starts with our client’s request. Our teams’ years of experience allow us to get to the bottom of complex issues quickly, to tackle and resolve them. This not only goes for the way we handle the communication with our clients, but also for the way in which we accept our corporate social responsibility.Learn more
Founded in 1960, Jégard Créatis is an independent accounting and auditing firm, providing quality services to more than 3000 clients in France and abroad. Since its creation, Jégard Créatis has developed competencies and partnerships to provide their clients and their leaders with the most appropriate solutions for their development.Learn more