BrazilThe much needed transition to sustainability reporting for SMEs
Every day, banks collects masses of sustainability-related data from companies, to satisfy their sustainability reporting obligations, but also as a means of generating insights to fuel their climate change strategies.
While this process is to a large extent dictated and guided by international regulation (e.g. CSRD) for listed companies and large companies, this is not the case in the SME segment, leaving banks with an inefficient approach with regards to their SME sustainability reporting.
According to a new report by Capgemini Invent and SBR Nexus, titled ‘Sustainability Reporting’, this is in turn resulting in a wide variety in the sustainability reporting requirements they are laying down on SMEs, and in how they are organising the process. The result: a lack of uniformity and standardisation in the segment.
What’s more, the large heterogeneity seen in the SME sector means that “there are striking differences in input-output flows” and “high levels of complexity in the data collection process” said Rob van Dijk, a leader in Capgemini Invent’s Compliance practice. With data more than ever the (green) fuel for a sustainable future, and the key role banks play in the climate transition, the report calls for much needed action.
“Data is the starting point towards more mature sustainability reporting. This will drive clearer accountability and spur on action. It is therefore preconditional that the cost and complexity of retrieving sustainability data from SMEs is lowered.”
Getting it done
The first step in the journey should be geared at advancing the data maturity between banks and the SMEs they serve. Van Dijk: “For one, through standardisation of the approach. Secondly, to drive the move away from sector data to verifiable, company specific data as the preferred data set (much like the approach for the mortgage portfolio and the large corporates in the wholesale bank).”
“Thirdly, by applying a normative, Paris Agreement aligned framework, similarly to the outline provide by the EU Green Deal.”
With the groundwork in place, the next step would be to tilt the exercise from purely compliance driven to a more mutually beneficial process. “It then is about incentivising the SME, making sure that the data that is captured and shared is used to the benefit of services or aligns with an SME’s own sustainability journey.”
Collaboration is key
Organising this movement will require an operational model that brings together key players from across the public and private industry – “a pre-requisite to agree upon a common design and governance.” Such alignment is key, in order to avoid having multiple standards and definitions around the same topic. “And to ensure that the national approach is in tune with harmonisation on a pan-European scale.”
The authors therefore call for an alliance that spearheads the data sharing framework, tasked with the development of consent, identification & verification and metadata standards, and could continue with the build of a prototype on what a common infrastructure on sharing data could look like.
This alliance would operate under ministerial supervision, and consist of partners including financial institutions, government stakeholders, industry associations, data owner, representative groups from key stakeholders, process facilitators, technology infrastructure partners and auditors.
“Sustainability is here to stay, given the milestones at 2030 and 2050, so it makes sense to consider shared investments. On data capturing and processing as well as on educating data owners and communicating expectations,” remarked Gerard Huis in ‘t Veld, Chief Technology Officer of SBR Nexus.
