Why sustainability and climate change are every small business’ responsibility

- February 1, 2022 4 MIN READ

With small to medium sized businesses (SMEs) making up a majority of the world’s businesses, all small business owners have an opportunity to affect climate change efforts for the better. So if you haven’t already, 2022 really is the time to get on board the sustainability train, writes Ainslie van Onselen, CEO of Chartered Accountants ANZ.

Why sustainability should top small business’ to-do lists in 2022

With the dawn of any new year comes the inevitable review of the to-do list for the months ahead. In 2022, one task that’s nearing the top of the list for many small businesses is their role in addressing climate change.

With small to medium enterprises (SME’s) representing 90 per cent of the world’s businesses and employing 50 per cent of the world’s workforce, they are an increasingly vital part of the climate equation.

And in Australia, they contribute a not-insignificant-amount of carbon emissions. Research from energy retailer Powershop shows our 2.4 million small and medium businesses emit around 146.5 million tonnes of greenhouse gases every year. Out of a total of around 380 million tonnes of emissions, that’s a hefty contribution.

But while many SMEs are quite innovative in this space, the majority have work to do.

sustainable business practices can save you time and money

The sooner we start, the easier it will be

As accountants, we know that the path to going green isn’t necessarily easy, but we also know that the sooner businesses start, the easier it will be. Kicking the can down the road will only make achieving emissions reductions harder and more painful.

Understandably, many are focused on the survival and growth challenges immediately in front of them – only punctuated further by a global pandemic.

They don’t have the resources and capabilities that big business does when it comes to realigning models, and it’s often difficult to absorb (or pass on) new costs. Nor do they have the range of technical expertise on hand to measure and track sustainability requirements.

In fact, only 8 per cent of small businesses have set net zero targets for 2050, according to a new survey by our strategic partner, the Association of Chartered Certified Accountants (ACCA).

And one in four of the 3,500 respondents said they felt they lacked the professional skills required to become sustainable.

It points to a big gap between the preparedness and capacity of small to medium businesses for a net zero world, despite these businesses being the largest employer in the country and the heart of the economy.

And with mandatory climate reporting almost here, there’s going to be a cascade right through the economy. Businesses won’t have a choice.

But they can’t do it alone, they need help – a hand up not a handout, as they say – and business and government will be key to the transition.

The words 'sustainability', 'people', 'planet' and 'profit' written on chalkboard

Upsides to taking action on climate change

Firstly, we need to re-position climate from a cost proposition to a value creator for Aussie businesses – because the upsides are significant.

Businesses owners that employ sustainability practices will better attract and retain talent, have lower costs for inputs like electricity, win increasingly climate-conscious customers, and open up new sources of capital that are focused on supporting the transition to net zero.

The adoption of climate-related disclosure standards, for instance, could mean the businesses that are able to provide detailed information on their climate risks will have a competitive advantage when bidding for contracts with large companies and government.

It’s why Chartered Accountants ANZ and the ACCA have released a sustainability playbook: How SMEs can create a more sustainable world. It includes practical steps for embedding sustainable practices within organisations, with real-world case studies, tools and resources.

Incentives and assistance are key

Secondly, larger businesses should offer their experience and provide incentives for improved sustainability practices and reporting amongst small to medium sized enterprises.

Banks are already providing targeted lending for emissions-intensive businesses to invest in new technology and carbon reduction initiatives. For example, New Zealand bank, ASB, offers a Rural Sustainability Loan to help farmers address sustainability challenges.

We would like to see the value and scale of these kinds of loans turbo-charged in Australia – especially in today’s low interest world.

At a government level, targeted and coordinated incentives can make a difference. There is real opportunity of raising greater awareness amongst Australian small businesses of government initiatives like the Emissions Reduction Fund, and the value of being certified carbon neutral through schemes such as Climate Active.

Keep small businesses involved in the climate change conversation

And finally – and potentially most importantly and immediately – government can give small business a seat at the table when setting Australia’s 2030 climate targets, which need to be reported back on in 2022.

Small and medium businesses need to be involved in this conversation now, so that our pathway enables a just transition for all – lifting skills, capacity and ultimately, growth in a net zero future.

Climate change has often been described as the greatest existential crisis facing humanity.

Small and medium sized businesses represent the human face of business and must be part of the solution.

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