10th March 2023
Businesses sustainability is no longer a buzzword concerning other people – all businesses are being encouraged to start their sustainability journey now. If you have already begun, well done – if you need more information, do read on!
By Stephen Morgan, Partner
What is business sustainability and why does it affect my business?
As you may know, sustainability is basically managing and protecting the Earth and its natural resources in such a way as to support our present and future generations. Therefore, as well as being based on environmental concerns, it also focuses on social and economic resources and it affects all aspects of our lives, including business.
6 reasons why your business should show it’s sustainable
The UK Government has committed to a legally-binding target of net zero emissions by 2050 and smaller businesses are an important part of the race to achieve it.
- We are starting to see more requirement for SMEs to prove their sustainability credentials in society. One example of this is where some lenders are requesting that organisations have a net-zero plan when applying for government funding on better rates – or local council grant funding.
- Another, urgent, reason for engaging with sustainability is that your business will get left behind if you don’t. The need to be sustainable is happening regardless and you don’t want to be last. A useful reminder of the dangers of not acting fast enough is the fate of those businesses who folded because they didn’t act quickly to embrace the internet – it’s not a viable option.
- You may need to comply with existing regulations to reduce carbon emissions like the single-use plastic ban, landfill tax and ultra-low emission zones.
- While currently it is only large UK public companies which are required to report on climate-related issues, other companies within their supply chains – regardless of size – must also reduce their emissions so that their customers comply with regulations. More information about this can be found on the Greenhouse Gas Protocol website.
- SMEs that don’t hold environmental standards, such as ISO 14001, may find themselves unable to demonstrate that they meet regulatory or contractual requirements.
- On Friday 10 February, the Financial Conduct Authority announced plans for new rules on investment funds claiming to be ‘green’, ‘ESG’ or ‘sustainable’. The FCA states that it is committed to helping investors put environmental, social and governance matters at the heart of their investment decisions. This focus puts greater onus on businesses to define and measure sustainability as well as social and governance.
What are the benefits to my business of being more sustainable?
You may, of course, not need any legal persuasion to be more sustainable – consider all the advantages:
- Improved reputation, which in turn helps your business to grow and gain competitive edge: research by the Carbon Trust found that customers increasingly expect companies to be ethical, with green businesses attracting new clients. Also, a business working towards net zero can be more attractive to shareholders and investors.
- Your sustainable business credentials will also attract new recruits, as research has shown many prospective employees check a company’s sustainability practices when job hunting.
- Sustainability initiatives can drive business innovation: often, businesses change some of their operations, services, processes and/or products when becoming more sustainable. This, in turn, may improve efficiency, attract new customers and potentially open up new or alternative markets. For example, a more efficient manufacturing process could produce less waste which, in turn, will reduce the costs of waste processing and storage. Or it might reduce materials like plastics.
- It’s possible to reduce costs by switching to renewable energy sources. We know of companies that have reduced their energy bills in the longer term by installing solar panels and LED lighting. Others have installed heat pumps. Or they’ve upgraded their company vehicles to electric, to meet air pollution rules so that they can drive in Clean Air Zones without paying toll fees.
- Another benefit is to make your business more resilient – for example, using electric vehicles can protect you against rising fuel costs and disruptions in fuel supply chains.
Where do you start? Firstly, understand what’s involved and the terminology used.
What is net zero?
Working towards being net zero means adopting sustainable practices and reducing carbon emissions to help combat the rise in greenhouse gas emissions.
What is ESG?
Environmental, Social and Governance – or ESG – is a set of standards measuring a business’s impact on society and the environment, as well as how transparent and accountable it is. This includes how robust and transparent its governance is in terms of company leadership, executive pay, audits, internal controls, and shareholder rights.
The environmental aspect focuses on how the business minimises its impact on the environment.
ESG covers the business’s products/services, the supply chain and operations.
ESG allows the business to target different areas of its organisation and implement more sustainable, ethical practices.
The British Business bank provides many examples of environmental business practices, including:
- reducing energy and using renewable energy sources to become a net zero organisation.
- developing greener products and services.
- switching to zero-waste products or sustainable packaging using biodegradable materials.
- reducing carbon emissions by switching to LED lighting.
- encouraging recycling and reducing the amount of waste destined for landfill.
Other ideas include sourcing materials from local suppliers, reducing emissions from food miles, and carbon offset initiatives like tree planting.
Understanding and measuring your carbon footprint
Your carbon footprint is the total amount of Green House Gases (GHG) released into the atmosphere as a result of your actions.
To measure your carbon footprint, you need to consider the three categories of GHG emissions generated by your business’s processes, actions and employee behaviours. The Green House Gas Protocol (GHGP) labels these ‘scopes’.
Scope 1 – emissions created directly by your organisation throGreenhouse gas reporting: conversion factors 2022 – GOV.UK (www.gov.uk)ugh actions such as running heating systems and company vehicles.
Scope 2 – indirect emissions caused by your company, like energy bought from external sources.
Scope 3 – indirect emissions that occur because of your business activity, like employees commuting or transportation of office supplies.
To find out your current position you need to calculate your carbon footprint. There are a various free calculators and sustainability tools that you can use, including:
- Business Climate Hub
- Gold Standard
- Doconomy
- Carbon Brief
- Chapter Zero
- Gov.uk greenhouse gas conversion
- Ecoact
- Exponential
- United Nations Global Impact
Finally, below is a list of links to organisations that provide advice and support to help your business on its sustainability journey.
- Business Climate Hub
- Energy Saving Trust
- The Carbon Trust
- Investors in the Environment
- Green Mark
- Green Financial Institute
- SME Climate Hub
- Federation of Smaller Businesses
- British Chambers of Commerce
These tips on business sustainability will help you on your way to being more sustainable and reducing carbon emissions. If you’re looking to reduce business costs like tax and payroll do get in touch with us.
About the author
Stephen is a general practice partner. He joined Wise & Co in 1994 where he trained as a chartered accountant and became a partner in 2006. He acts for a broad range of clients. They include many barristers, and individuals and companies working in the hospitality and leisure sector and in the media and entertainment sector. Stephen is skilled at providing them with practical advice dovetailing technical and commercial expertise. Outside work, Stephen remains a keen sportsman!
