Sustainability reporting can offer SMEs ‘a competitive advantage’, says advisory firm
The introduction of mandatory sustainability reporting will have rapid flow-on impacts for every organisation including SMEs, says HLB Mann Judd.
The adoption of ISSB sustainability disclosure standards by Australia will initially impact large organisations but small- to medium-sized enterprises are likely to also face mounting pressure to undertake this reporting from supply chain partners, according to HLB Mann Judd assurance and advisory partner, Nicholas Guest.
The Australian government is in the process of implementing mandatory climate-related reporting disclosures aligned with the management standards set by the International Sustainability Standards Board.
Mr Guest said that in response to these mandatory standards, many organisations required to report will likely show a preference for suppliers who not only measure their emissions but can also prove they’re cutting down their emission intensity.
“This will drive real changes in customers and supplier relationships,” he said in a recent article.
SMEs will likely need to undergo a major transformation due to the pressure from supply chain partners and customers who are directly impacted by the new requirements to capture and measure the greenhouse gas emissions within their enterprise activities.
“As the pressure mounts on reporting entities to reduce their carbon footprint, a greater number of SMEs will find themselves on the path to decarbonisation or risk being shut out from valuable customer opportunities,” said Mr Guest.
“As such, now is the time for SMEs to consider their impact on supply chain greenhouse emissions and calculate their carbon footprint – a vital first step on the journey towards decarbonisation.”
Mr Guest said while emissions measurement and reporting requirements may seem onerous, solutions for assisting SMEs are rapidly developing in this space.
“If not prepared, businesses could potentially run the risk of losing existing clients or being excluded from new client tender opportunities if they cannot provide relevant emission-related information when required,” he said.
“Businesses can differentiate their market position if they are progressive in adopting an emission reduction target, which may add value to their proposition within the supply chains of larger businesses.”
Developing a robust, sustainability reporting ecosystem will enable firms to monitor the progress of their ESG strategy, the firm said.
Mr Guest warned that while it’s important and valuable for entities to establish an emissions-related strategy, directors must be conscious that many aspects of climate-related disclosures are inherently forward-looking.
“Under the Corporations Act, forward-looking statements made without reasonable grounds may be taken to be misleading,” he stated.
ASIC has provided guidance outlining that it is examining the risk of ‘greenwashing’ claims made by organisations.
“To minimise risk, directors need to actively ensure the content of climate-related disclosures are based on high-quality information and can be substantiated,” said Mr Guest.
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