SMEs need support to prepare for new sustainability reporting regulations

Better Bankside’s sustainability manager Sadie Hodgson outlines why small businesses are apprehensive about complying with forthcoming sustainability reporting rules – and sets out how they can navigate uncertainty in this space to seize the full benefits of action.

SMEs need support to prepare for new sustainability reporting regulations

Pictured: The launch event for the Southwark Climate Collective

Better Bankside is a London-based Business Improvement District that is currently rolling out its pioneering Southwark Climate Collective Initiative. Funded by the UK Shared Prosperity Fund, the initiative aims to support the decarbonisation of SMEs across the borough.

In the bustling landscape of business, particularly within the domain of Small and Medium-sized Enterprises (SMEs), there is a growing enthusiasm for embracing sustainability. After launching our Southwark Climate Collective (SCC) project in October, 160 Southwark SMEs signed up in just four months, and many more are on the waiting list. However, keen SMEs are facing an ‘intention gap’ when it comes to decarbonisation – the appetite is there to reap climate and economic benefits, but there is not enough support for smaller enterprises that lack the time, skills and resources for implementation.

This lack of support can be seen in an impending challenge for SMEs around revisions to sustainability reporting regulations. There is no clarity as to what will be required of SMEs in terms of sustainability reporting, and there is no coherent long-term plan. This regulatory ambiguity not only leaves SMEs unprepared, it also jeopardises their future business success.

Impending regulations: A call for clarity

SMEs find themselves completely in the dark when it comes to the new sustainability reporting regulations looming on the horizon. There is no regulatory framework for SMEs to follow, and no proposed timeframe as to when the changes are due to take place. This will mean they are in very real danger of being disqualified from securing the most lucrative work contracts. The tender processes of large organisations will require businesses to report Scope 1, 2 and 3 emissions, and SMEs without the ability to do so will miss out. SMEs must be given the tools they need to future-proof their businesses so they are supplier-ready and prepared for the reporting changes.

Addressing the SME gap: A call for support

In the realm of sustainability regulation, larger corporations possess the resources and expertise to navigate what is often an extremely complex landscape. Conversely, SMEs often grapple with internal limitations. While London governmental initiatives like Grow London and the Business Climate Hub aim to bolster SME sustainability, the support often falls short, focusing primarily on audits rather than the steps needed for achieving long-term change.

We have found in our Southwark Climate Collective (SCC) initiative that tailored support, addressing the specific and diverse needs of individual SMEs, is key to overcoming barriers in sustainability delivery. One-to-one support is the cornerstone of our approach, along with knowledge-sharing and upskilling. Closing the current support gap is paramount to empowering SMEs on their sustainability journey.

Charting the path forward: Navigating uncertainty

While clarity and guidance on upcoming regulations is urgently needed, in the absence of this, a multifaceted approach should be employed to support SMEs. Building confidence around sustainability reporting can be achieved if SMEs take an approach to decarbonisation which is measurable.

Within our SCC programme, SMEs are provided with a deep, transparent dive into the sustainability of their business operations with an audit, which then informs the practical steps needed to improve their energy efficiency. Having clarity on how exactly a business might be underperforming against key sustainability measures, and providing a clear pathway for improvement, helps to break down initial barriers to reporting.

Fostering partnerships between SMEs and technical experts is also vital. Accounting and auditing expertise should be brought in to support SMEs in their sustainability reporting, and when it comes to their limitations in internal resources, a community approach involving other SMEs and business partners can help address this.

A collective endeavor

As the global imperative for business decarbonisation and net-zero intensifies, SMEs stand at a pivotal crossroads. The lack of clarity around forthcoming sustainability reporting regulations demonstrates the need for concerted action to support SMEs – and with smaller businesses making up 90% of London’s business eco-system, and responsible for 40% of the UK’s non-domestic emissions – it is certainly not a ‘nice to have.’

Our SCC initiative, which brings together a powerful, cross-borough partnership and helps SMEs as diverse as Southwark Cathedral, Neal’s Yard, bakeries, theatres and design agencies to network, has demonstrated that creating SME communities which provide a supportive ecosystem, tackles decarbonisation complexity and helps address the resourcing issues which are limiting change.

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