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Accounting data must come before climate action

Author: ICAEW Insights

Published: 18 May 2022

Carbon tracking software could be the key to reducing the carbon footprint of smaller businesses, currently responsible for half of business-driven emissions in the UK.

Smaller businesses account for almost a third of all current UK greenhouse gas emissions (including emissions from households, industry and government) and around half of total emissions from UK businesses, British Business Bank (BBB) research reveals. And yet, over three out of four (76%) SMEs are yet to implement comprehensive decarbonisation strategies, capabilities and actions.

A big problem is that most smaller companies don’t actually know what kind of impact their business is having on the environment. Only 3% of smaller businesses surveyed by BBB said they had measured their carbon footprint in the past five years and subsequently set an emissions reduction target. 

“When it comes to being more sustainable and reducing emissions, the problem for a lot of businesses, particularly SMEs, is that carbon footprint tracking isn’t their primary focus,” said Emma Kisby, UK and Europe CEO of carbon footprint tracker, Cogo. This tracker provides SMEs with an estimate of their carbon footprint based on their spend.

With a background in customer data analytics, Kisby acknowledges that a big part of her job is about upskilling businesses on climate change: “Many of the businesses Cogo works with start off not knowing what net zero means, and all of a sudden they are told they need a tool and a plan on how they are going to get to net zero.”

Cogo’s carbon footprint tracker has been used by more than 150,000 retail customers since launch in November 2021 and is currently used by five of the world’s leading banks, helping them to encourage customers to be more carbon aware. The company launched a partnership with NatWest at COP26 and more recently with TSB. 

NatWest Carbon Tracker pilot

In March this year, Cogo and NatWest launched a pilot NatWest Carbon Tracker app for SMEs. This is currently freely available to eligible NatWest customers. To qualify for the pilot, businesses must have a NatWest business current or credit account, operate within the manufacturing or transport sectors and have an annual turnover of less than £2m, as well as other requirements. The app is designed to help SMEs understand their carbon footprint and provide suggestions as to how they may be able to reduce it.

Andrew Harrison, Head of Business Banking, NatWest Group said: “Opportunities exist across all sectors of the economy, but the transport, agriculture and industrial sectors provide the most urgent and immediate positive business cases.”

Harrison added: “We recognise the current challenges that businesses are facing, for example with increased energy prices and living costs. Understanding the carbon footprint of their business could provide insight to take the steps to reduce costs as well as reducing their carbon footprint.

“For example, by installing loft and cavity insulation, businesses can save 15-60% on heating costs, as well as reducing their carbon footprint.”

Working with accountants

Cogo is also working with large accounting partners in other regions around the world to develop a solution that will help SMEs understand, reduce, and report on their carbon footprint.

The tie up with accounting firms and platforms is no coincidence, Kisby says: “Affordability is the big issue for many SMEs when it comes to tackling their carbon footprint as they may need to make an initial investment to have longer term environmental and financial gains. 

“I think there will be an increasing role for accountants to play in this space by providing advice around this and the business loans and grants that are available to support the transition to a low carbon economy.”

Cogo launched in the UK back in 2019 when open banking was introduced and operates on the premise that “it’s all about understanding the environmental impact of every pound spent”. 

“Our users can see the impact that their purchases – from fast fashion to food – have on the environment, Kisby explains. “This level of awareness and education can be so enlightening. We take great care in making sure this data isn’t presented in a threatening or punitive way. It feels empowering.”

One size does not fit all when it comes to taking positive environmental action, Kisby warns: “Actions taken by one business to reduce its carbon footprint won’t necessarily be impactful for another business, and that is particularly apparent when we are talking about SMEs. For example, a restaurant can make a material impact by reducing food waste, or a hotel could shift to energy- and water-efficient laundry appliances, whereas a taxi firm would be best to focus efforts on switching to an electric fleet.”

Understanding and measuring the impact is vital

Understanding your environmental impact is key to making the necessary changes, Kisby says: “If you’re sitting there thinking that you can’t really do anything about this, you’re wrong, because we can all do something to make a difference. We need to collaborate and focus on solutions that help businesses – and in turn people – measure, understand and reduce their impact on the planet.”

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