User-friendly digital tools will be critical to the green transition of SMEs

All beginnings are hard.

The old saying is certainly true for the green transition of SMEs. Because even though the green agenda generally makes good sense for the enterprises, many are still struggling to get started. Simone Poulsen, senior consultant at SMVdanmark with expertise in areas such as climate and sustainability, explains as follows:

“For many of the small companies, in particular, the green transition efforts and the ensuing reporting requirements are going to have a negative impact on operations. Unlike large companies, where entire departments may be assigned to the task, the small undertaking’s success relies fully on the individual business owner, who personally has to think out plans, invest and act proactively,” she says.

For SMVdanmark, it would be an optimum solution if the European Union aligned the framework for SME reporting. The European Commission recently recommended such steps, but there is still some way to go before the framework is adopted and in place. This does not alter the fact, however, that it remains crucial for SMVdanmark that it is made as easy as possible for SMEs to obtain knowledge about and act on the green transition.

Simon Fisker, who is responsible for managing and advising Nordea’s SME customers in the field of ESG reporting, agrees with this approach, which is not least due to the circumstance that the way forward for many companies takes the form of a vertical uphill climb when they embark on the green transition.

“Because the area is so large and complex, many are overwhelmed before they even get started. They do not have the resources, the knowledge or the tools. Therefore, for SMEs to succeed with the agenda, defining the task becomes a key issue,” he says.

Is the green transition about switching off the light?

Jens Hansen, CEO of Gardinmontøren, recognises this scenario. The company, a supplier of solar screening solutions to businesses and public institutions, among others, decided just over a year ago that they wanted to fully embrace the green transition. But very soon, they were left with more questions than answers.

“We basically had a hard time understanding what green transition meant for a company like ours. Was it green transition that we separated our waste? That we switched off the light? To be honest, we knew nothing,” says Jens Hansen.

Although the upcoming ESG requirements (the European Sustainability Reporting Standards) are most likely not going to apply to the curtain company anytime soon in the foreseeable future, there is a just as strong probability that the company will be affected by them – sooner rather than later.

Although the reporting requirements are far from applicable to all 300,000 Danish SMEs, the reality is that SMEs currently serving as subcontractors to the largest companies are automatically affected, or will be affected, directly and indirectly by the requirements.

Similarly, experts predict that a steadily increasing share of SMEs will also be affected as the requirements are extending to a steadily increasing share of the business sector.

Create awareness of the starting point

The Danish business sector has already seen cases of companies being rejected as subcontractors to large companies due to ESG requirements.

Cases which, also in this newspaper, have caused experts to sound the alarm: When Danish SMEs, accounting for 99% the Danish business community, are not even close to handling the green transition, it may, in the long term, affect the Danish business sector as a whole and Denmark’s possibility of attaining the objectives of green transition.

This forecast is a bit too gloomy, though, according to Nordea’s Simon Fisker.

“It’s true that large companies are now beginning to make demands on their value chains. But they are facing reporting challenges themselves, and it’s basically about having doubts in some areas about how to specifically request information from their suppliers,” he says and continues:

“Having said that, it is still essential for SMEs to embark on their ESG journey. We recognise it’s difficult. But it will be more challenging for the SME that continues to brush aside the green transition. It’s important to get started. The first step can be just to create awareness of where you are today. Tools are available to do that.”

”We’ve not yet reached the point where Danish SMEs are rejected by suppliers because they are unable to provide ESG reporting disclosures. But it may become a competitive factor to be able to do so,” Simon Fisker points out.

Tools are key

If Gardinmontøren has come as far as they have in their transition to a sustainable economy, this is largely due to the climate pilot who was placed at the company’s disposal free of charge by the business networking organisation and interest organisation on Funen, Fynsk Erhverv.

A sort of climate consultant who, for six weeks, helped the Funen curtain company prepare its carbon footprint disclosure report and provide instructions on where to take action and make priorities in the future.

“My estimate is that he (the climate pilot, ed.) brought us forward by one year during the six weeks,” says Jens Hansen.

But like Nordea’s Simon Fisker and SMVdanmark’s Simone Poulsen, Jens Hansen also finds that specific, digital and easily accessible tools are key if SMEs like Gardinmontøren are expected to be able to gain a clear perspective of the green transition, and of the green accounts and sustainability reports that are increasingly demanded.

“The tools help us know what to ask for. And more importantly – what not to ask for. We realise that we will eventually be required to treat our climate accounts as equivalent to financial statements, which I would never think of preparing either without the help of various tools,” he says.