The task for many SMEs to report carbon emissions is growing, according to B P Collins’ environment partner, Simon Carroll. Whilst not subject to the same reporting requirements as larger businesses, many are (as was, no doubt, intended) indirectly being required to gather and provide that data, whether from commercial or procurement pressure from customers, because that is what today’s workforce has come to expect, or because as another supplier’s ‘tier 3’ they are being asked or required to provide that data upstream.
The existence of commercial pressure to drive change is no new thing. Arguably it is no less likely to achieve change than if binding regulations were imposed.
Of course, arguments for more or less regulation surrounding SMEs is something of a political football. However, the step change which resulted from the (much resisted) introduction of health and safety legislation might lead some to question why reporting legislative action has not been taken here, and whether the more proximate impact felt by a breach of health and safety rules are or should be treated differently to a failure to pay adequate attention to climate pressure. Regardless of the answer to that, the pressure for SMEs is no less real.
Many SME businesses are reacting and implementing necessary policy changes to allow them to track, gather, and report on carbon emission data, at least to some extent, and would say they are helping to drive efficiency within their businesses as a result. But many are not. Time, cost, and capability continue to be hurdles for many businesses – whether from difficulties in understanding the complex rules of tier 1, 2 and 3 carbon emission data, bringing in policies and change to understand and record that information, and allowing data to be provided to third-parties. It is worth remembering that the definition of ‘SME’ captured a very wide range of business size, so the task is not felt equally by all.
As we see the landscape, whether legal, political, and otherwise, continue to change, with increasingly greater ‘ESG’ and sustainability oversight being applied from pressure from stakeholders, regulators, customers, and the media, these pressures look set to grow. Much like cyber security and data privacy only a few years ago, ‘ESG’ and sustainability continues to be an emerging risk that needs to be included in all businesses’ governance, strategy, and risk management considerations.
Simon Carroll, who recently attended COP28 in the UAE, is a partner in B P Collins’ environment practice. If you would like to speak to him about a legal matter in the environmental sector, please contact enquiries@bpcollins.co.uk or call 01753 889995.
