Johannesburg, 7 November 2022 – New research from Sage, the leader in accounting, financial, HR and payroll technology for small and mid-sized businesses (SMEs), highlights that South African SMEs are responsible for 14% of scope 1 non-household emissions. This amplifies the call to all South African SMEs to reduce their carbon footprint in the effort to reduce the country's climate impact.
The SME Climate Impact Report, published by Sage in partnership with Oxford Economics and the International Chamber of Commerce (ICC), and launched at COP27, is also a call to action for government and policymakers to help South African SMEs become more sustainable, given the influential role they play in the economy.
The report affirms Sage’s own commitment and dedication to sustainability, with its pledge to halve its own emissions by 2030 and becoming net-zero by 2040. Sage is also committed to supporting SMEs to get to net zero and to advocating for policy and regulatory frameworks that support South Africa’s transition to a low-carbon economy. As part of this strategy, Sage recently completed the acquisition of Spherics, a carbon accounting solution to help businesses easily understand and reduce their environmental impact.
The SME Climate Impact study models the climate impact of SMEs using the Oxford Economics Global Sustainability Model as well as survey data of more than 2 000 South African (SA) and 2 000 United Kingdom (UK) SMEs. The report shows that South African SMEs’ Scope 1 greenhouse gas (GHG) emissions – those created from sources they own or control – totalled an estimated 61 million tonnes of CO2e in 2021.
This accounts for 13% of South Africa's total GHG emissions of 479 million tonnes of CO2e. SMEs' footprint totalled 29% of non-household emissions in South Africa when GHGs generated in their supply chains is considered. The numbers exclude much of the agriculture sector, where there are many informal and unregistered businesses that are difficult to track. These SMEs are responsible for a substantial share of methane and nitrous oxide emissions, from raising livestock and the use of fertilisers.
South African SMEs directly contribute R2.1 trillion, or 40% to the national GDP, and directly account for 6.2 million direct jobs or 46% of direct employment. The economic footprint generated through their indirect supply chain and induced consumer spending contributions amounts to R4 trillion in GDP value; their total employment footprint in South Africa is over 10.2 million people. This means South African SMEs' total economic footprint totalled just over three-quarters of gross-value added and employment.
"The study confirms the crucial role that South African SMEs play in the country's economy. SMEs make up a large share of the economy of South Africa, contributing two-fifths of GDP. Collectively they have a significant climate impact, despite being clustered in less-emitting industries. However, their direct climate impact is relatively small [in comparison with large companies] due to their low presence in high-emission sectors like mining and utilities," said Pieter Bensch, Managing Director and Executive Vice President, Sage Africa and Middle East.
"Nonetheless, the sheer number of SMEs and their role in supply chains mean they have an instrumental role to play in reaching the government's target of net zero by 2050. In the midst of the energy crisis and a just transition from fossil fuels to renewables, SMEs are working hard to become more energy efficient and tap into cleaner, alternative power sources. But the fact remains that our reliance on coal-fired power is a barrier to SME sustainability.”
The good news is that the report shows that SMEs in South Africa and the UK are eager to play their part in addressing climate impact. Over half (53%) stated that sustainability was either a priority or central to their operations. A third of SMEs in SA and the UK are already using technology to measure their environmental footprint. SMEs identified a range of key ways that technology could support their sustainability efforts, with technology to track energy consumption (38%) and directly reduce carbon emissions (35%) as the most important.
Reducing waste (46%) and energy use (42%) are among the most common steps SMEs are taking to reduce their environmental footprint. However, prior Sage research has found that 90% of SMEs say they face significant barriers to taking climate action. The survey showed that these include cash flow constraints, difficulty navigating government policies, measuring impact, and influencing their suppliers to become more sustainable.
Bensch says: "South African SMEs are eager to be partners in addressing climate impact. They understand that sustainable practices can help them weather the inflationary pressures they are experiencing. But SMEs cannot be expected to behave the same as large companies in reducing emissions and using resources more sustainably. Big business, government, lawmakers, and other stakeholders should provide support specific to SMEs to help them reach their potential."
In light of these findings, Sage and ICC are today calling for governments to create a comprehensive plan that empowers SMEs to reduce greenhouse gas emissions and support the country’s overall plan towards net-zero. Specific policy recommendations include:
"The overall climate footprint of SMEs shows just how vital they are to tackling climate change. There is an urgent need to help them understand their emissions and arm them with guidance so they can formulate their sustainability plans," said Elisa Moscolin, Executive Vice President, Sustainability and Foundation at Sage. "The good news is that South African SMEs already recognise the importance and urgency of becoming more environmentally friendly. The South African government is responsible for levelling the environmental playing field for SMEs in the race to a net-zero society."
Andrew Wilson, Global Policy Director, International Chamber of Commerce said: “At ICC, we believe climate action is everyone’s business and we must act in concert to ensure that micro, small and medium-sized businesses are both sufficiently heard and fully equipped to take ambitious climate and environmental action. We are thrilled to partner with Sage to address this critical issue head-on and chart a course that can help deliver the change we need. The stakes are high, as are expectations, and working together with our global partners and network, we are determined to empower small businesses to build a more sustainable and prosperous future for the planet.”
For the full report about Sage and ICC’s SME Climate Impact Report, please visit: https://www.sage.com/en-za/company/sustainability-and-society/planet/
Learn more about how Sage is helping SMEs decarbonise their business.
Sage exists to knock down barriers so everyone can thrive, starting with the millions of small- and mid-sized businesses served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology, and experience to tackle digital inequality, economic inequality and the climate crisis. Learn more at www.sage.com.
ICC is the world business organization, enabling business to secure peace, prosperity and opportunity for all. We are the institutional representative of more than 45 million companies in over 130 countries with a mission to make business work for everyone, every day, everywhere. Through a unique mix of advocacy, solutions and standard setting, we promote international trade, responsible business conduct and a global approach to regulation, in addition to providing market-leading dispute resolution services. Our members include many of the world’s leading companies, SMEs, business associations and local chambers of commerce. Find out more at https://iccwbo.org. Follow ICC on Twitter and LinkedIn.
Oxford Economics is the world's foremost independent economic advisory firm. Covering over 200 countries, over 100 industrial sectors and 8,000 cities and regions, we provide insights and solutions that enable clients to make intelligent and responsible business decisions faster in an increasingly complex and uncertain world. For more information, visit https://www.oxfordeconomics.com/. Follow Oxford Economics on Twitter and LinkedIn.
Idea Engineers (PR agency for Sage South Africa)
Ashmika Naidoo
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