Despite a growing commitment to sustainability among small businesses, recent research by Novuna Business Finance reveals a significant gap in the number of businesses which would actually be able to report on their own carbon emissions.
As new regulations such as the EU’s Corporate Sustainability Reporting Directive (CSRD) are set to expand in January 2024, and the UK’s Streamlined Energy and Carbon Reporting (SECR) already mandates large companies to disclose carbon emissions of the small businesses within their supply chains, a significant gap needs to be addressed as the UK moves toward its net zero goals for 2050.
In a survey of more than 1,000 small business leaders and owners, participants were asked how they would respond if a customer required evidence of their carbon emissions track record as a condition for continued business. It found that one in five small businesses in the UK confessed they would be unable to provide any emissions data at all.
This proportion rose most among businesses with no net zero targets (36%), and smaller businesses with fewer than 10 employees (28%), as well as among sole proprietors (52%). Remote businesses were more than twice as likely as office-based or hybrid businesses to be unable to report emissions (41% vs. 14%). Interestingly, business leaders over 45 were nearly four times less likely to be able to report emissions than those under 35 (10% vs. 38%).
Of those who could report on their emissions, the most likely areas were emissions from purchased electricity, heating and cooling (31%), or other emissions from their office buildings or factories (26%). Only 25% could report on emissions from business travel, product usage, or company-owned buildings, and 22% could report on emissions they have avoided, such as through teleconferencing instead of in-person meetings.
Regarding the possibility of extending Scope 3 legislation to smaller businesses, the survey revealed that only one in five would be capable of reporting emissions across their broader supply chain. Notably, this figure dropped to 15% among business leaders in the retail sector, one of the sectors which rely most heavily on its supply chain. In contrast, the construction and manufacturing sectors fared better, with 25% and 24% of businesses, respectively, saying they could report such emissions.
Joanna Morris, Head of Marketing and Insight at Novuna Business Finance, said “We know that there is a growing sentiment among small businesses keen to minimise the impact their business is having on the environment. But, key to this, measuring and monitoring emissions are the first steps toward setting realistic sustainability goals and timelines.
“Small businesses should be aware that even if they aren’t directly subject to current sustainability regulations, their larger partners may still require emissions data for their own Scope 3 calculations. Meanwhile, from separate research we have conducted, we know that those who have prioritised sustainability within their business can point to a range of advantages, including reduced waste and costs, enhanced investor appeal and improved staff retention. Failing to keep up with this trend risks falling behind.”
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