Canadian SMBs most likely to struggle with understanding ESG reporting standards

Sage releases research identifying SMB motivators and roadblocks to becoming more sustainable

• Majority (74%) of Canadian SMBs feel environmental reporting standards and frameworks are too complex
• Removing barriers will unlock new finance, growth and hiring opportunities for businesses
• Sage is calling for simpler reporting frameworks and tech-forward support for SMBs looking to take action

TORONTO, Nov. 16, 2023 (GLOBE NEWSWIRE) — Canadian SMBs are grappling to keep up with the jargon and technical expertise of sustainability reporting and standards, according to Sage, the leader in accounting, financial, HR, and payroll technology for small and mid-sized businesses (SMBs). A global study of 16,423 small and medium-sized businesses (SMBs), launched today, shows that a promising number of SMBs want to make progress on their path to sustainability, but are unable to measure and report on their impact, which prevents them from acting on their ambition.

Given that SMBs makeup 97% of Canadian businesses, they play a critical role in society’s path to sustainability. Path for Growth: Bridging the SME Sustainability Reporting Gap — led by Sage in partnership with International Chamber of Commerce (ICC), PwC UK, and Strand Partners — aimed to identify SMB’s motivators and roadblocks to becoming greener.

Embracing ESG despite the complexities

The data reveals Canadian SMBs are acutely interested in enhancing their sustainable business practices but struggle with the complexities of the process.

• Two in five Canadian SMBs feel they have made substantial progress in measuring impact, but are still making improvements.
• The main barrier preventing small businesses from taking more actions to accurately measure its environmental impact is the lack of knowledge or understanding about sustainable practices (44%).
• Nearly a quarter (22%) of SMBs rarely discuss the measurement of environmental impact within their business.
• Canadian SMBs (67%) are more likely to see sustainability as important to their business compared to US SMBs (55%).

Creating accessible reporting standards

Despite the barriers, 67% of Canadian SMBs do have environmental, social or sustainability-related policies on how they conduct business activities. If reporting standards were simpler and more closely tailored to their businesses, 59% strongly believe that they would be more inclined to engage in climate reporting. The potential ease that digital tools could bring to this process is clear, with 74% considering such tools to be very important in simplifying environmental reporting.

In light of these findings, Sage, ICC and PwC UK are issuing the following recommendations for standard-setters, governments, and industry leaders to consider, so the reporting landscape can be more accessible for SMEs across the world.

• Standard setters:
  • Establish consistency in ESG terminology used so SMEs can understand and respond to reporting asks more seamlessly.
  • Work with governments to assess and increase the interoperability of emerging SME standards with leading market standards, and make clear how the requirements of one standard meets requirements of others
  • Provide user-friendly guides, templates and automated solutions that ease the burden of reporting for SMEs
  • Consider if the reporting asks being made of SMEs are proportional for a business with limited resources, and prioritise material issues to help them focus on the right areas
• Government:
  • Build data infrastructure to support SMEs and move reporting towards accuracy and transparency, such as developing shared tools and data repositories
  • Showcase the importance and benefits of sustainability reporting among SMEs, such as access to markets, funding, and cost efficiencies
  • Promote the use of affordable and automated digital technologies for sustainability reporting that lighten the burden on SMEs
  • Encourage SMEs to invest in their sustainability reporting considering financial incentives to mitigate upfront costs

Elisa Moscolin, Executive Vice President of Sustainability & Society at Sage, said: “Beyond the figures, the report tells us one key thing: there is in an indelible connection between sustainability reporting and action – SMEs can’t fix what they can’t see. Tech is a huge part of that – 63% of SMEs told us the right digital tools will make it easier for them to report, and we are committed to being part of the solution there with tools like Sage Earth. But it will take an ecosystem to get SMEs – and society at large – to embrace sustainability, and we hope to partner closely with governing bodies and governments to make the reporting landscape more accessible for SMEs across the world.”

John W. H. Denton AO, Secretary-General of ICC, said: “As the institutional representative of more than 45 million businesses worldwide, we see every day the potential of SMEs to lead the way in creating a more sustainable future. While it is clear that SMEs are increasingly taking action, this report identifies what SMEs need to deliver fully on the promise of a more sustainable and prosperous future. Specifically, we must provide SMEs with the right policies and incentives, effective tools and, most importantly, SMEs need a collaborative effort to transform business practices. By collectively focusing our attention on these key areas of action, we can enable SMEs to tackle the obstacles in their way to better understanding, managing and ultimately improving their sustainability performance.”

Lynne Baber, Head of Sustainability at PwC UK, said: “The critical contribution SMEs will make in how the world meets sustainability goals must be grounded in clear and reliable reporting, and the link between accurate reporting and effective and meaningful action is clear. Just 8% of global SMEs say that they are reporting on sustainability issues, indicating the need for support in navigating such a complex and resource intensive process. This will require collaboration across markets, industries and government leaders to develop tech-powered solutions that will make sustainability reporting more efficient and accessible.”

For further reading, Path for Growth: Bridging the SME Sustainability Reporting Gap can be downloaded here: https://www.sage.com/en-gb/company/sustainability-and-society/planet/#cop28.

Survey Methodology
Strand Partners’ specialist research team surveyed 16,423 SMEs in 16 markets between 01.09.2023 and 07.09.2023, capturing all major business demographics (from size to sector) as well as detailed information about geography.

SMEs were defined as those employing less than 250 people in the UK, US, Germany, France, Italy, Spain, Poland, Romania, Netherlands, Belgium, Brazil, South Africa, Thailand, Canada, Australia and Kenya. The Canadian sample size is 1,002.

Media Contact
Brittany Farquhar
Corporate Affairs Manager, Canada
brittany.farquhar@sage.com

About Sage
Sage exists to knock down barriers so everyone can thrive, starting with the millions of Small and Mid-Sized Businesses served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology and experience to tackle digital inequality, economic inequality and the climate crisis.

About ICC
ICC is the world business organization, enabling business to secure peace, prosperity and opportunity for all. We are the institutional representative of more than 45 million companies in over 130 countries with a mission to make business work for everyone, every day, everywhere. Through a unique mix of advocacy, solutions and standard setting, we promote international trade, responsible business conduct and a global approach to regulation, in addition to providing market-leading dispute resolution services. Our members include many of the world’s leading companies, SMEs, business associations and local chambers of commerce.

About PwC UK
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 151 countries with over 364,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

About Strand Partners
Strand Partners is a global research and policy consultancy firm. Strand ensures that all data collected adheres to the highest standards of publishable quality, strictly conforming to the guidelines set forth by the Market Research Society.