HR & Management

Mid-market takes the lead on sustainability

3 min read

22 October 2012

The introduction of mandatory reporting in April 2013 means going “green” is no longer an option for large companies listed on the London stock exchange. How will this affect the mid-market?

More than three-quarters of SMBs already have board-level accountability for sustainability reporting, with more than half of CEOs taking this on personally, says a new study by Grant Thornton. How will increased sustainability reporting affect the business strategy of UK companies outside the quoted sector?

The coalition’s “climate plan”, compiled in December last year, included a commitment to cut carbon emissions to 50 per cent of 1990 levels by 2025. As a means to achieve this ambitious goal in April 2013, all UK companies listed on the main market of the London Stock Exchange will have to measure and report greenhouse gas (GHG) emissions. Nick Clegg made a clear statement to businesses: “To get rich quick today would only leave us poorer tomorrow… Using resources responsibly is in business’s own interests, too.”

In the future, LSE-listed organisations will need to work with suppliers offering eco-friendly, sustainable and ultimately “green” products, services and raw materials. The majority of these suppliers will be SMBs. Grant Thornton notes that mid-market companies recognise this will impact their business: some 84 per cent of organisations said they want to communicate the implications of their sustainability to their customers – many of these the large LSE companies – rather than their policy-makers.

Recognising the commercial impact of carbon reporting is the first step, but SMBs still face challenges reaching sustainability targets throughout their business. The Grant Thornton report outed sales, HR, research and development departments as the least  sustainable. The increasingly concerned and “greener” consumer market has made sustainability an important feature in LSE corporate purchasing decisions. GT suggests that SMBs need to focus on these low-achieving departments in order to generate revenue from sustainable products and services.

Although 67 per cent of organisations already include some form of sustainability reporting, only 43 per cent are using independent external verification of their sustainability efforts to ensure it is accurate, complete and balanced, the report notes.

“Medium sized businesses are the backbone of the UK economy, and the CEOs of these firms recognise the importance of sustainability and are taking personal accountability for this,” says Jane Stevensen, head of sustainability at Grant Thornton. “The impetus of mandatory carbon reporting for larger firms will accelerate changes in business practice across UK. It is clear from this report that the mid-tier companies that take the initiative integrating and publicising sustainability alongside financial reporting will be able to differentiate their brands with investors, shareholders and customers.”

Mandatory carbon reporting may only be mandatory for LSE-listed businesses, but it is clear that SMBs foresee their place in “the climate plan”. LSE-listed companies will need to look further afield to reduce their own carbon emissions and chose to work with sustainable SMBs. Ultimately, the new legislation will mean all industry, big and small, will be involved in cutting carbon emissions.

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