Small and mid-size businesses are increasingly expected to monitor and report on their carbon footprints. Regulation is starting to be rolled out to smaller firms while customers and other stakeholders are demanding more information. But how do you do that in practice - what does it take to measure your carbon emissions accurately over time?
We explain how tech platforms can use accounting data to create an overview of a business’s carbon emissions and then identifies the potential operational improvements than can give companies a sustainable competitive edge.
By Chris Torney
For most businesses, the first step towards becoming more sustainable involves analysing current emissions and working out what changes will be most effective in reducing their environmental impact. We look at how technology is making the carbon-accounting process simpler and more efficient – and how firms stand to benefit from better sustainability reporting.
Technology and data analysis have a vital role to play in helping businesses become more sustainable. Employing the latest software, firms of all sizes can create a comprehensive picture of the emissions associated with their operations – and then use this information to direct their carbon-reduction efforts.
Carbon reporting is becoming more and more important for small and mid-sized businesses (SMBs) for a number of reasons, says George Sandilands, head of Sage Earth, Sage's carbon-accounting platform. "First, there is a climate crisis and many businesses rightly believe that positioning themselves as a sustainable brand will win them more customers," he explains.
"But what is more important in driving adoption for carbon accounting tools among SMBs right now is demand from large customers, in both the public and private sector. For example, in the UK, the National Health Service requires all suppliers to produce a carbon-reduction plan by 2026 – and this is something we can help firms with."
In addition, financial institutions are increasingly willing to provide more favourable terms for businesses that can demonstrate their sustainability credentials, Sandilands points out. For example, recent research carried out by Sage indicates that 73% of global banks would like to offer some form of sustainability-related finance to SMBs, but are often unable to do so due to a lack of reliable emissions data.
Benjamin Brial, founder of Cycloid, a Paris-based firm that helps businesses understand the carbon impact of their technology usage, adds: "Transparent and meaningful carbon footprint reporting builds trust with investors, partners, and customers. Internally, it also helps prioritise action and gives a clear sense of purpose across an organisation, where everyone feels the responsibility of consuming fewer resources. It can also be important for attracting top talent as employees want to work at values-aligned companies."
Adding value with carbon-accounting software
Daniel Usifoh, co-founder of Axiom Sustainability Software, says: "Businesses need data across their energy consumption, transportation, waste generation and procurement. Gathering this data can be challenging due to disparate sources, siloed data and varying data quality.
"Supply-chain emissions, or Scope 3 emissions, are especially complex, as they involve upstream and downstream activities beyond direct control – plus, they're often the biggest source of emissions, contributing up to 80% of a SMB's carbon footprint. Using dedicated software simplifies this by letting SMBs track and manage these emissions."
Dan Firmager, ESG advisor at accountant Kreston Reeves, adds: "There are many accounting platforms, so having one which integrates with AI and the other tools you use for calculating and reporting data is important to bring it all together. Data quality is the key to having credibility in your reporting, while AI tools can calculate faster and with greater accuracy than a person."
Sage Earth, for example, works by connecting to a business's accounting software to conduct an emissions calculation based on the firm's historical spending data: this uses AI and machine learning to categorise each transaction and assess its carbon footprint. "In addition, clients have the opportunity to provide more context and answer additional questions about areas that may not be captured in the accounting ledger, such as how the company's employees travel to work," Sandilands explains.
"We are also conscious that this process is something new for a lot of businesses, so we offer tips and guides to help ensure assessments are as accurate as possible."
Sustainability reporting and communication
Once a company has established its carbon footprint, carbon-accounting software can produce detailed reports that it can share with customers or other stakeholders, and which can highlight areas of potential concern. Benchmarking tools, meanwhile, allow for relevant comparisons with businesses in the same industry or sector.
"When a customer first uses Sage Earth, we use their annual revenue, location and industry to give them a clear understanding of the emission trends for that kind of business," says Sandilands. "From there, they can go on a journey of adding more and more data – from their accounting packages, and so on – that enables them to compare themselves against their peers."
Meanwhile, SMBs are increasingly communicating their carbon-footprint data to stakeholders, or even to support their marketing and PR activities. Firmager warns: "This is an area many businesses struggle with as they are wary about being seen to ‘greenwash' or being ‘cancelled' for perceived mistakes. But every business needs to start somewhere and show the progress of the journey they are on.
"Many are choosing to let information spread more organically so it is there if people want to find it, but they don't openly share it. Think about which of your stakeholders are your best advocates – whether it's customers, employees, shareholders or suppliers. The key is to be transparent and accountable, and clear about the next steps you're planning to take."
"Good communication is all about transparency and clarity," agrees Usifoh. "Sharing your sustainability data in clear, easy-to-understand formats, such as reports, infographics or dashboards, makes a big difference. Using standard metrics also helps others see how you compare within your industry. And by keeping stakeholders updated regularly and telling the story behind your efforts, you can build trust and show that you're genuinely committed to making a positive impact."
More broadly, Brial points out, understanding their carbon footprint can help businesses rethink how they operate and make decisions in areas like infrastructure, company culture and even the recruitment of talent. "Making greener, more sustainable choices can really unlock the potential for far-reaching transformation," he says
Sandilands adds: "Carbon accounting is about doing the right thing – but it is also about helping to businesses to thrive and grow in a world where we're aiming towards net-zero emissions."
