How to get your firm started with ESG

As temperatures rise, the urgency to address climate change increases. Environmental, social and governance (ESG) legislation has largely focused on larger companies. However, this is about to change as 99% of economic activity is carried out by small and medium-sized enterprises (SMEs).

In order to reach the government’s net-zero target, it is imperative that SMEs reduce carbon emissions. SMEs need help to meet these demands. SMEs should be able to turn to their accounting firms as a trusted advisor – but are accounting firms ready?

SME needs

Accounting firms sometimes comment that clients don’t knock on their door for ESG support. SMEs care more about day-to-day survival. However, SMEs recognize the growing importance of ESG. They feel pressures from supply chains, banks, energy efficiency standards impacting property rentals, and their employees expect them to act. However, they are unsure if their accounting firm is qualified to help. This is a huge risk for companies as a multitude of ESG advisors have emerged and are ready to step in.

Some partners believe they can wait until ESG services are more developed and see the opportunity as a tickable service. They fear the current guidance is aimed at larger companies and that their firms lack expertise – they should be confident. ESG is Not a tick box exercise. It’s about helping a company clarify its goals and business model. It requires support in data collection, reporting and auditing – core competencies of an accounting firm.

It shouldn’t be a question of offering ESG services. The focus should be on introducing ESG into existing services so companies are ready when opportunities arise. Companies that are leaders in ESG have taken the following five steps:

1. Fix yourself

Put on your own oxygen mask first, starting with a conversation within the company about ESG. Teams find this empowering and help develop a strong culture. There will be team members who are passionate and willing to help. The London-based company Buzzacott is committed to social and environmental goals and publishes an annual Corporate Responsibility and Sustainability Report.

Conversations with the broader team improve engagement and allow team members to better explain to customers what we do as a company,” said James Ross, Corporate Social Responsibility Executive at Buzzacott.

“Actions included introducing reusable water bottles and encouraging participation in local community projects. We want to avoid greenwashing, but we also don’t want to underestimate what we are already doing. One approach I’ve taken has been to promote ‘green bathing’, a term I coined myself that means I aim to see our commitment permeate throughout our firm.”

Buzzacott tracks its energy and carbon emissions. Here the focus is on direct emissions (e.g. office electricity consumption); However, they will increasingly focus on indirect emissions that have the greatest climate impact (e.g. business flights), albeit more difficult to measure. Once a baseline is established, emission reduction targets are set.

“I encourage companies to look at carbon calculators like Carbon Trusts, but tracking emissions is difficult, so it can be worth hiring an expert to help fully understand what matters most,” adds Ross.

2. Start conversations

Learning from adopting ESG in an organization gives confidence to start conversations with customers. These conversations should be part of the delivery of existing services. For example, a company that provides payroll services started a conversation with their client about diversity and inclusion, which led to a broader ESG conversation.

As part of tax advice, Scotland-based Henderson Loggie has started discussions with clients about using special deductions to invest in energy-efficient workspaces and offsetting the cost of buying electric cars against taxable profits.

3. Help customers get started

Through conversations, companies begin to offer advice to their customers, e.g. B. Emission tracking signs.

Starting the conversation is crucial, small steps make a difference,” said Ian Huggett, Partner at Thomas Westcott. “The goal is to help cut emissions.”

He uses a five-point plan to help customers on their journey to reducing carbon emissions:

1) understand their carbon footprint;

2) assessing the risks of not reducing emissions;

3) measure emissions;

4) developing a plan to reduce emissions; and

5) Do it!

4. Let customers know you can help

Firms should let current and prospective clients know that they are active in ESG; for example producing a robust ESG report, sharing news about climate issues and encouraging team members to talk about ESG.

North West based firm Hurst is the first independent accounting firm in the UK to become part of the UN Global Compact network – a global platform dedicated to sustainability.

“We recognize that the ESG agenda has become more relevant to our customers, suppliers and employees,” said Tim Potter, Hurst CEO. “We strive to make a tangible difference and show that we are on an ESG journey.”

Building an ESG brand sends a clear message to customers that help is available.

5. Consider options to expand services

Eshuis, based in the Netherlands, presents a vision of what could become of new ESG services. The company is a certified B-Corp (an assessment to measure sustainability) that has developed a new service line around impact accounting.

The company takes a business perspective on a customer’s business value, stakeholders, reporting requirements and helping customers collect data that aligns with sustainability goals.

Several PrimeGlobal firms have committed to becoming B-Corps and are working with Eshuis to help them do so. PrimeGlobal will release a guide later this year to support companies embracing impact accounting.

This is the moment to get started and ready to support your customers – don’t miss the opportunity.