A new survey has revealed that medium-sized enterprises consider next year’s implementation of mandatory carbon reporting as the biggest sustainability risk to their business. We spoke to Jane Stevensen, head of sustainability for Grant Thornton, to find out more.
Mandatory carbon reporting will require action from all companies listed on the main London Stock Exchange when it comes into force next year. But what does this mean for smaller businesses? A recent survey by professional services firm Grant Thornton sought to find out how enhanced sustainability reporting is influencing mid-tier businesses and public sector organizations.
The research was conducted with 200 senior level executives in public and private sector organizations in the UK with a turnover of £250 million to £1 billion. It found that medium-sized enterprises regard carbon regulations as the most significant sustainability risk to their business over the next two years, ahead of other significant factors such as energy prices, water scarcity and rising commodity costs.
Jane Stevensen, head of sustainability at Grant Thornton, says: “Carbon reporting may only be mandatory for LSE-listed businesses but it’s clear that mid-tier organizations anticipate its impact and potential extension in the future.
“As the largest listed companies look to reduce their own carbon impact by choosing suppliers offering more sustainable products, services and raw materials, mid-market companies recognize this will impact their business - 84% cite customers as a key audience to communicate the business implications of their sustainability efforts, second only to policy makers.”
Sustainability: A priority for senior management
The research found that 80% of companies surveyed have board-level accountability for sustainability reporting, with over half (51%) of CEOs taking this on personally.
Around 70% of these organizations stated that sustainability is either ‘fully’ or ‘partially’ embedded in their corporate financial targets, with 92% declaring that sustainability performance is either ‘very important’ or ‘important’ to the overall success of their organization.
Jane continues: “One of the most notable findings from our research is the fact that sustainability really has been elevated up to the top decision-makers – perhaps even more so than we were expecting. Throughout the research we got the sense that many leaders are thinking ahead and want to build a lasting legacy in their roles. They want to leave something good behind in their company after they’ve moved on.”
Variations between departments
However, although they recognize the commercial impact of carbon reporting, the research reveals that mid-tier organizations are facing challenges embedding sustainability targets throughout their business.
“Some departments have much further to go than others”, Jane says. “HR, Sales and R&D (Research and Development) are lagging far behind, gaining the lowest score for ‘fully’ or ‘partially’ embedding sustainability into their function. This could be because, unlike in Operations, these functions are more removed from environmental issues so don't consider them quite as important.”
Investing for the future
To help motivate change in their companies, 51% of those surveyed plan to fully or partially embed employee recognition (without financial incentives) for incorporating sustainability into their strategy over the next two years.
And according to the survey, the most popular areas for investment in sustainability over the same period are onsite renewable energy; video conferencing technology; projects to make buildings more energy efficient; data centre improvements; and electric vehicles for the company fleet.
Jane concludes: “It’s clear that sustainability is going to ripple downwards, from the large businesses on the London Stock Exchange right down to the suppliers of SMEs. Even though carbon reporting will only be mandatory for companies on the LSE, the impact will be much greater."