But SMEs that integrate sustainability into their core business strategy can benefit from lower costs, reduced risk and new opportunities. And their accountants, typically operating in small and medium practices (SMPs), can play a key role in their journey.
SMEs and the benefits of sustainability
SMEs are crucially important to the health and stability of the global economy: they account for more than 95 per cent of all businesses and for the majority of private sector gross domestic product (GDP), wealth and employment creation, and social and environmental impacts.
Meanwhile, there is immense pressure on the natural environment and a recognition that finite resources are fast depleting.
Today, SMEs are increasingly being faced with pressure to measure and manage their impact on the environment. They are an integral part of the supply chain where there is a growing demand for sustainability management both from customers and suppliers – especially for those SMEs seeking to secure contracts with governments or larger companies.
SMEs also need to ensure they have access to the resources they need to be able to continue to offer their products and services in the future.
That said, many SMEs may still feel they can delay addressing sustainability issues. Our global SMP poll indicates there are other more urgent issues preoccupying businesses, including economic concerns and keeping up with new standards, prompting sustainability to slide down their list of priorities. This may explain why few SMPs are presently offering sustainability services. But in the longer term, the sustainability issue is here to stay.
The good news is that there is growing evidence that sustainability initiatives, such as those to reduce an SME’s carbon footprint, can also help improve their bottom line. SMEs of all shapes and sizes – for-profits and not-for-profits, public or private, across all industrial sectors – stand to yield significant benefits from adopting sustainable business practices.
The initial cost of integrating sustainability into the core business strategy, and reporting on it, can be more than offset by cost savings, reduced risk, positive brand association and the ability to meet consumer, investor and supplier demand for environmentally conscientious products and services. In this way, the initial cost is more an investment.
Opportunities for SMPs
Accountants working in SMEs can help their employers at each step of the way – from advising on the costs and benefits of behavioural changes aimed at reducing waste, to investment in new equipment and alternate sources of energy, to developing a comprehensive environmental management system (EMS).
However, many SMEs lack the capability to do this without outside help. They will likely seek the help of someone they trust – their accounting firm. And that demand can generate new revenue opportunities for SMPs. But first, SMEs need to know they can expect assistance of this nature from their accountants.
Given that SMEs are keen to realise the financial benefits of adopting more sustainable practices, a starting point for SMPs might be to offer to help their clients implement the plan-do-check-act method for the control and continuous improvement of processes and products. This advisory service could include:
- improving business opportunities and creating efficiencies;
- identifying the risks to cash flow that social, economic and environmental change will present; and
- ensuring that clients or employers take advantage of the cost reductions, minimise any cost increases and maximise potential revenue by adopting business strategies that identify and address those sustainability issues that are most relevant to their particular business circumstances.
In addition, SMPs might wish to encourage their SME clients or employers to have an EnviroReady Report, an engagement based on ISRS 4400 that confirms that the business has an EMS in place that meets the requirements in ISO 14001:2004.
Some accountants might also help SMEs do some form of sustainability reporting, such as the Global Reporting Initiative’s Level C. They could employ a step-by-step approach of making a public commitment to take action, assessing the business’s impact, setting targets for reducing impact, acting to reduce impact and publishing the business’s policies and actions.
Some SMPs are already helping their clients to develop metrics and the systems needed to capture and report on the metrics. If reporting is deemed valuable, SMPs could progressively do more, culminating in obtaining some form of assurance on what the client/employer reports, perhaps using the IAASB’s ISAE 3000 series of engagement standards, such as ISAE 3410 for greenhouse gas emissions.
Initial steps to a sustainability service
A report by the Association of Chartered Certified Accountants (ACCA) suggests that MPs take the following steps to ensure they have the prerequisite expertise to offer a sustainability service:
- Build partnerships – SMPs should establish collaboration with local environmental sustainability experts in order to gain local access to credible knowledge.
- Gain experience – SMPs should review the environmental sustainability of their own business and use that valuable experience to have relevant conversations, based on genuine experience, with their clients.
- Seek information – Practitioners should familiarise themselves with information sources they could recommend to others or use to widen their own knowledge.
- Formalise commitment – Where appropriate, practitioners should formalise their commitment to offering environmental sustainability advice through marketing and awareness-raising in newsletters, their documentation and website.
Ultimately, offering a sustainability service can help SMPs both add value to the services they offer and help their clients/employers improve the way they run their businesses. Applying the same principles to the practice itself can help accountants improve the way they run their own businesses, as well.
Copyright © June 2013 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact permissions@ifac.org for permission to reproduce, store, or transmit this document.
