The challenge

The proliferation of carbon accounting tools for SMEs has led to over 270(+) different solutions in the UK, resulting in fragmented and inconsistent data reporting. SMEs also face major challenges with numerous and varied data requests from large corporates and financial institutions. 

This lack of standardisation affects the reliability and comparability of SME data, impacting their participation in sustainability reporting and green finance initiatives. A unified approach is essential for ensuring SME data is accurate, comparable, and compatible with larger corporate and regulatory requirements. 

There is currently no agreed and comparable process for SMEs to report GHG emissions and sustainability impacts to customers, across industry, finance, and Government procurement processes. There is an imperative to seek consensus on SME sustainability attributes and ensure this is driven by not only what major corporates & financial institutions are asking for, but the quality data that SMEs are in possession of. 

Links to research reports, briefs and articles setting out this challenge and informing our thinking can be seen below.

Overview: BT, Small Business Britain, and Oxford Brookes Business School conducted a comprehensive survey with over 2,000 small businesses to delve into their sustainability efforts, requirements, ambitions, and prospects.

Link: https://smallbusinessbritain.uk/small-business-green-growth

Overview: This briefing paper is written for institutions, policymakers and regulators involved in setting future transition planning guidance and regulation standards. It sets out:

1. The current SME landscape in the UK
2. The growing relevance of transition plans for SMEs
3. The challenges, opportunities and recommendations on transition plans for SMEs
4. Guiding principles for SME transition plans

The ideas and recommendations in this document are the product of a series of working sessions and interviews involving banks, corporations, policymakers and industry stakeholders. The Bankers for Net Zero initiative and partners are eager to work with private sector actors, governments and standard setters to bring this paper’s ideas to fruition and ensure that industry action can mainstream net zero for SMEs across the UK.

Link: https://www.bankersfornetzero.co.uk/wp-content/uploads/2024/04/Considerations-on-SMEs-and-Transition-Plans-Transition-Plan-Taskforce-and-Bankers-for-Net-Zero.pdf

Overview: The report shares insights into market trends, costs, and the challenges SMEs face in carbon reporting. It aims to help businesses navigate carbon reporting and support their transition to net zero. It includes extensive research, covering over 270 carbon reporting solutions as well as in depth results of surveys and interviews of SMEs and solution providers

Link: https://ib1.org/ecosystem/2024-carbon-reporting-solutions-report/

Overview: This policy paper presents the findings of a 2023 survey of public development banks and private financial institutions, conducted by the by the OECD Platform on Financing SMEs for Sustainability. It provides insights on financial institutions’ current approaches and plans for the integration of climate considerations in their SME operations. It also provides information on the offer of finance and non-financial support for SMEs’ net zero investments and on related SME climate-related data requirements.

Link: https://www.oecd-ilibrary.org/economics/financing-smes-for-sustainability-financial-institution-strategies-and-approaches_b3fe3647-en

Overview: This report showcases the extent to which SMEs are willing but unable to act in the face of climate crisis.

Link: https://www.fsb.org.uk/resource-report/accelerating-progress.html

Overview: This article highlights how SMEs are being left behind in transition with biggest barriers coming from cost and lack of information

Link: https://www.lloydsbankinggroup.com/media/press-releases/2022/lloyds-bank/four-million-small-businesses-have-no-plans-for-net-zero-transition.html

Overview: This paper is written primarily for parliamentarians and policy makers. Our aim is to set out in the simplest terms possible how the combination of action from banks and government can accelerate progress towards net zero for the UK’s approximately 6 million small- and medium-sized enterprises.

Link: https://www.bankersfornetzero.co.uk/wp-content/uploads/2022/05/1583-SME-Decarbonation-Report-v5.pdf

Overview: This infographic covers key SME sustainability statistics

Link: https://www.british-business-bank.co.uk/about/research-and-publications/small-businesses-and-transition-net-zero/infographic

Overview: This brief sets out the transition requirements for SMEs and how issues of demand and supply of finance for the transition can be addressed. It provides recommendations to banks and finance providers, and to the UK Government.

Link: https://www.lse.ac.uk/granthaminstitute/publication/financing-small-and-medium-enterprises-to-support-a-just-transition-to-net-zero-emissions-in-the-uk/

Overview: A report from B4NZ (then Bankers for Net Zero), prepared by Smart Data Foundry, which reveals the crucial role banks can play in measuring and reducing the greenhouse gas emissions from their SME clients. The report highlights the results of an 8-week scoping exercise, which comprised of desk research, interviews with experienced academics as well as B4NZ member banks, including HSBC UK, the British Business Bank and Santander.

Link: https://www.bankersfornetzero.co.uk/wp-content/uploads/2024/05/Smart-Data-Foundry-B4NZ-Scoping-Exercise-Full-report-September-2022-Final-version.pdf

Overview: An article where 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.

Link: https://www.edie.net/what-do-smes-need-to-prepare-for-new-sustainability-reporting-regulations/

The solution

B4NZ is leading a dedicated workstream, collaborating with key industry partners to: 

  • Make recommendations towards a proportionate, comparable and interoperable sustainability (Including emissions) data reporting framework and underlying data requirements. 
  • Define standard rules and guidance for SME applicability and an SME quality framework. By working on a bottom-up approach, we can identify potential additional reporting requirements depending on size/sector, as well as ensuring interoperability with international reporting requirements for larger corporations.

SME Sustainability Data Taskforce Working Session Summaries:

  • Taskforce Session 1

SME Sustainability Task Force Terms of Reference

SME Sustainability Data Taskforce Working Group Members

SME Sustainability Data Taskforce Observer Members