CDP today launches a new climate disclosure framework, in collaboration with the SME Climate Hub, and created in partnership with the Exponential Roadmap Initiative and Normative, to empower small and medium-sized enterprises (SMEs) to make strategic and impactful climate commitments, track and report progress against those commitments, and demonstrate climate leadership.
The transition to net-zero is underway. SMEs need to take climate action to build business resilience, gain competitive advantage, keep up with supply chain demands and policy regulation, and meet consumer expectations. While many businesses are demonstrating transformational ambition on climate action, much of the progress made has been driven by large, high emitting, global corporations. Support and guidance for sustainability reporting has often not catered to the needs of SMEs who are increasingly being requested to make climate commitments and report against progress by their stakeholders and lenders. Further, SMEs are a significant innovation force for climate solutions, which enables their customers to avoid or reduce emissions. Disclosure makes it possible to attract investments and expand business.
With supply chain emissions being 11.4 times higher than operational emissions, many large companies want their suppliers – often SMEs – to measure, report and cut down their own emissions - cascading climate action down the supply chain. This has wide economic and societal impacts as SMEs play a major role in most economies worldwide; globally, they represent about 90% of businesses and more than 50% of employment worldwide1. SMEs are major engines of value creation, accounting for between 50% and 70% of value added in OECD economies and contributing to, on average, 33% of GDP in emerging economies[.
It is therefore crucial that SMEs are equipped with the tools and resources needed to set commitments aligned with a 1.5°C future and disclose environmental performance. The new, open SME Climate Disclosure Framework is built upon CDP’s expansive experience working with corporations, including over 1,800 disclosing SMEs ranging 50+ countries, and is intended to be simple, flexible, easy to understand and accessible to all. The framework improves SMEs’ ability to report their climate impacts and strategies to multiple stakeholders and will provide a foundation for implementing simplified reporting tools on the SME Climate Hub.
Sonya Bhonsle, CDP’s Global Head of Value Chains and Regional Director of Corporations, commented: “SMEs play a major role in economies around the world; without them, we cannot limit global temperature rise to 1.5°C. We are delighted to have launched a framework in partnership with the SME Climate Hub that caters specifically to the sustainability reporting needs of SMEs. We hope the framework empowers SMEs to take climate action, and in turn, increases their resilience to climate change and allows them to play an active role in the transition to a low carbon economy.”
María Mendiluce, CEO of We Mean Business Coalition, a co-founding partner of the SME Climate Hub, said: “Over 3,000 companies have joined the SME Climate Hub, committing to cut carbon emissions in half by 2030 and reach net zero emissions by 2050 or sooner. With scalable, accessible tools like the CDP reporting framework, these businesses can move from commitment to action, and effectively track progress to meeting our collective ambition.”
Johan Falk, CEO of Exponential Roadmap Initiative, and a co-founding partner of the SME Climate Hub, said: “SMEs need to be able to report progress on climate action to gain a competitive business advantage. The climate disclosure framework provides a strong, common foundation for the development of key reporting tools on the SME Climate Hub, guided by simplicity.”
Kristian Rönn, CEO and Co-founder of Normative, said: "To limit global temperature rise to 1.5°C and prevent the most catastrophic effects of climate change, every business needs to achieve net-zero emissions. But we recognize that small companies have limited finances and resources. That's why we are developing free tools to engage SMEs in the race to net zero, helping them calculate, understand, and reduce their emissions. Because we know that in the end, what gets measured gets managed."
The framework provides key climate-related reporting indicators and metrics that SMEs should be reporting on and encourages setting targets grounded in science. Its modular design provides flexibility for SMEs and data requesters to tailor the use of the framework to their disclosure needs. CDP sought feedback from SMEs and SME stakeholders on a draft version earlier this year, which was then used to shape the final framework. Some of the changes made as a result of that consultation included further streamlining to represent the minimum reporting, specific guidance for micro and small SMEs, and definitions for the more complex terminology.
