In June, our Chief Product Officer Oliver Waters joined ACCA, UK Finance, policymakers, financial institutions and other organisations at a London Climate Action Week roundtable to discuss a growing problem:
How can we make sustainability reporting work better for SMEs?
The discussions have informed a new ACCA paper, Measure what matters, which sets out recommendations for policymakers and regulators on how SME sustainability data should be collected, shared and used.
For anyone working with (or in) SMEs, much of it will sound familiar.
Businesses are increasingly being asked for sustainability data by customers, procurement teams, lenders and regulators. But the systems for providing that information haven't kept pace. The result is too often duplicated work, inconsistent requests and SMEs spending more time figuring out how to report their emissions than deciding what to do about them.
The biggest barriers to SME sustainability reporting
One of the clearest themes from the roundtable was the lack of consistency in sustainability data.
SMEs identified barriers including:
- lack of standardisation
- unclear business benefit
- too many platforms and requests
- lack of interoperability between systems
There is also a significant knowledge gap. Research cited in the paper found that 74% of SMEs don't understand the terms Scope 1, Scope 2 and Scope 3 emissions (including 34% of businesses that have already measured their carbon footprint).
For many smaller businesses, carbon reporting hasn't emerged from an internal sustainability strategy; it's come through a customer questionnaire, tender requirement, lender request or supply-chain reporting programme. And those requests rarely look the same, meaning instead of being asked for its carbon footprint once, an SME could be asked for overlapping information through several different reporting frameworks, questionnaires and spreadsheets.
As one roundtable participant put it:
"We're not asking for a reduction in regulation or an increase, we're saying there needs to be clarity."
What ACCA is recommending
The paper makes seven recommendations, including:
1. Standardise sustainability reporting
Greater standardisation of frameworks and collection methods, with simplicity, certainty and stability at the heart of regulation and standards.
Currently, a company might need its carbon data for PPN 006, SECR, an NHS Carbon Reduction Plan, an Evergreen assessment or a customer-specific supply-chain questionnaire — different reports for the same underlying data.
A more standardised approach would make it easier for businesses to collect information once and reuse it, rather than starting again each time a new request arrives. That's also the principle behind TrackZero: maintaining a consistent carbon dataset that can then support different reporting requirements.
2. Account for business growth
The paper also recommends greater use of carbon intensity metrics and explicit consideration of growth.
While absolute emissions matter, they don't always tell the whole story. A business that doubles in size may increase its overall emissions while significantly reducing emissions per employee, per £1m of revenue or per unit produced. Intensity metrics give businesses and their stakeholders another way to understand whether carbon efficiency is improving.
3. Work through advisers SMEs already trust
Another recommendation is to distribute sustainability tools and initiatives through trusted advisers, including accountants and membership organisations.
This is particularly relevant for smaller businesses who won't have an in-house sustainability team but do have an accountant, financial adviser or external sustainability consultant they already rely on. Making carbon accounting tools accessible both directly to businesses and through advisers gives SMEs more choice over how much support they need.
4. Give SMEs something back
Perhaps one of the most important recommendations is creating better feedback loops.
If an SME supplies sustainability data, ACCA argues that it should receive useful insights in return. That might include benchmarking, financing opportunities, recommendations or practical decarbonisation support. Otherwise, carbon reporting risks becoming another administrative request flowing up the supply chain.
Towards an open standard for SME sustainability data
The paper goes beyond calling for greater consistency. It recommends the bottom-up development of open-source sustainability reporting standards, with contributions from technology providers and endorsement from trusted organisations.
This is an area where TrackZero will be working alongside other organisations committed to supporting more open and SME friendly reporting standards.
If sustainability data can be collected in a consistent format that different systems can read, SMEs won't need to recreate the same dataset for every customer, platform or reporting framework; the underlying data travels with the business.
What happens next?
The roundtable recommendations are also expected to feed into the Net Zero Council's work on SME emissions reporting and future policy frameworks.
Overall, the direction is encouraging: less duplication, clearer standards, better interoperability and more value for the SMEs being asked to provide the data in the first place.
That's a carbon reporting model we can get behind.
