SMEs, the supply chain and the sustainability agenda

The CSRD has changed the sustainability outlook for SMEs reliant on business from larger entities in scope of the directive. Susan Rossney outlines what they can do now to keep ahead of the curve 

Chartered Accountants Ireland is a global organisation with close to 33,000 members in positions of influence across society and the economy. With fewer than 250 employees, however, the Institute is also a small to medium-sized enterprise (SME).

These SMEs are not often discussed in the context of climate change, but their combined carbon footprint is, on average, five times greater than that of their large corporate counterparts, according to CDP, the not-for-profit climate-disclosure organisation. 

The European Commission estimates that SMEs contribute more than 60 percent of all greenhouse gas (GHG) emissions produced across Europe.  

SMEs tend not to be at the forefront of sustainability discussions either, which have long been treated as the purview of larger accounting practices that have clients with sustainability reporting obligations. 

This is expected to change with the implementation of the Corporate Sustainability Reporting Directive (CSRD), which introduces an obligation on (mostly) larger businesses to report on the carbon emissions of their supply chain partners. 

As part of this, the focus of attention has moved to the SMEs in these larger companies’ supply chains, caught in a so-called ‘trickle-down effect’. These small businesses are expected to find themselves asked by key customers for climate-related information, often for the first time, with the risk of losing valuable contracts if they fail to do so.

Despite this, Irish businesses – particularly SMEs – were found to be reluctant or unable to decarbonise, with 86 percent of Irish businesses having no set commitments or targets to decarbonise, and just 11 percent measuring and tracking performance on total CO2e emissions, according to a 2022 study. 

Chartered Accountants Ireland aims to provide leadership in this area for businesses in Ireland, first leading by example in our own SME operations. Here are some of the steps we have taken to act on our central ethos, “for tomorrow, for good”.

In 2020, we kicked off an Environmental and Climate Impact Project (ECIP) focused on managing carbon emissions, resources (water, paper, catering supplies, etc.) and waste. 

We commissioned an energy auditor registered by the Sustainable Energy Authority of Ireland to carry out an internal energy audit for us, and we are working through their recommendations. Measures we have taken to reduce our carbon footprint include:

• Beginning the process of splitting our water and premises heating systems;
• Switching to light-emitting diode (LED) lights;
• Installing a roof net to prevent seagulls eating the insulation; 
• You can’t manage what you don’t measure, so in 2022, we invested in locally sourced emissions tracking software. 

In 2022, we recorded a 13 percent decrease in carbon emissions on our 2021 baseline, and we recorded a 39 percent year-on-year reduction in carbon emissions at our Dublin headquarters in December 2023.  

Similarly, there are many steps SMEs can take to reduce emissions and otherwise engage in sustainability practices. Our online Sustainability Centre signposts a variety of resources available to support businesses in these efforts. 

Small steps make a big difference, but it’s a marathon not a sprint. My advice is start now, get help, measure – and keep going.