Do you know what your product carbon footprint or emissions values are?
The Task Force on Climate-related Financial Disclosures (TCFD) provides a voluntary framework for companies to disclose climate-related financial information. Although the TCFD recommendations are not mandatory, the UK Government has announced its intention to make climate-related disclosures aligned with the TCFD recommendations mandatory for certain companies by 2025.
The proposed scope of the mandatory TCFD-aligned disclosures includes:
- Listed companies.
- Large private companies
- Banks, building societies, and insurance companies.
- Pension schemes
- Occupational pension schemes with more than £5 billion in assets
The RPGCC team are making plans so that we can help clients with ESG reporting, be it voluntary or mandatory. We have met with industry experts whose services range from Product Environmental Footprint (PEF) and LCA (Life Cycle Assessment), through to Carbon Footprint measuring and full Sustainability Reporting.
Suppliers to the ESG market, will undoubtably, provide valuable services to help business owners tackle the issues around the footprint or emissions values of their products.
We have devised a few ESG related questions that you might want to consider.
Do you know what your product carbon footprint or emissions values are?
Are you able to report your product carbon footprint or emissions values to your supply chain with data that is reliable enough that it would withstand an audit?
Are your auditors preparing themselves for the changes to audit reporting around ESG?
There are various elements to, and challenges in the ESG arena and below we look at some of the challenges businesses face. Below we provide some practical tips for business owners who might be seeking to change their working practices:
Environmental:
The “E” in ESG focuses on a businesses’ environmental sustainability. A higher ESG score is granted when a business has a lower impact on the natural world in which it operates. Sustainability is not exclusive to large or multinational firms. With SMEs making up 99.9% of the UK’s private sector businesses they have a significant influence on society and the communities in which they operate.
Even SME businesses, who may have limited access to capital, can take practical steps to reduce their environmental footprint.
Some of the areas where an SME business could focus might include using sustainable materials, responsibly sourcing raw inputs, reducing waste through recycling, conserving water, and adopting energy-efficient practices, such as encouraging teams to use public transport for business travel, or walking for short client visits, changing from switch lights to sensors, using low energy lighting and turning off monitors and laptops/PCs. If you resort to the internet, you will find some excellent examples of businesses that incorporate sustainable practices into their businesses and manufacturing processes.
Social:
The “S” in ESG represents social responsibility and this highlights a businesses’ commitment to the communities in which they operate and how they apply fair working processes and practices across their teams.
SMEs play a crucial role in promoting social responsibility. As a result, they benefit from an improved brand reputation, higher employee morale, reduced staff turnover, and a strengthening in the relationships between the business and the local community.
Governance:
The “G” in ESG relates to governance. This reflects the quality of corporate leadership. High scores are awarded to companies with transparent, fair, and accountable practices.
A good governance score is vital for SME businesses, especially those looking to attract investors or those looking to foster trust among consumers and businesses. There are various steps a business can take to enhance governance, and these will be very much defined by the sector in which they operate. Some ideas might include defining the governance structure of the business, assessing risks, and setting out how these might be mitigated, maintaining open communication channels, and embracing ethical decision-making.
What are the main ESG challenges?
SME business owners face numerous challenges in integrating ESG practices into their businesses mainly because they require adjustments to working practice, changes to the business model, internal training to understand the gaps and, of course, the resources needed to administer the process.
There are various resources available to assist business owners with emissions values and ESG and these take many shapes and forms, some are free, others are chargeable services.
There are providers in the market that offer practical strategies for ESG data collection, producers of impact or Carbon Footprint reports, or others that assist with staff engagement and ESG Training.
If you are looking to implement ESG in your business, it involves a process. The first part of this process is assessing the current performance of the business and creating action plans to improve these will require embedding ESG into the operations of the business and tracking progress.
Regardless of the size of the business, embracing ESG will add value. You might also find our earlier article on ESG reporting of interest.
If you start small, benchmark your starting point and gradually integrate ESG into the operations of the business with a pragmatic approach every business will be able to make sustainable progress in time.
If you would like to speak to a member of our audit team regarding your financial statements and the reporting of figures for ESG, please contact us or telephone us on 020 7870 9050
