Sage (LSE:SGE), a FTSE 100 enterprise software company, has completed its acquisition of Spherics, a carbon accounting platform that helps small and medium-sized enterprises (SMEs) measure and reduce their CO2 emissions.
- Sage will integrate Spherics’ platform with its existing digital accounting network to offer carbon accounting services to SMEs.
- Sixty-eight per cent of global SMEs feel that they lack the key resources needed to measure and reduce their carbon emissions, despite their desire to take action.
- As the demand for accessible carbon management technologies continues to rise, the involvement of larger corporations will support their adoption at scale.
Sage (LSE:SGE) already provides a variety of financial, human resources and payroll software to its SMEs. Through its acquisition of Spherics, it will introduce automated carbon accounting services to help its customers better understand, measure and reduce their Scope 1, 2 and 3 emissions.
Spherics, a start-up based in Bristol, will remain available as a standalone product as well as through its planned integrations with other accounting software providers in the UK.
According to Sage’s executive vice president of cloud operations, Amaya Souarez: “We know that SMBs [small and medium-sized businesses] care about the impact they have on the environment, and our research shows that they want to work with suppliers and partners that can help them understand and address it.”
“By combining Spherics’ innovative software with Sage’s digital network, we are connecting businesses with their customer and supplier emissions data, enabling easy and collaborative climate action across value chains which helps to reduce carbon”, she adds.
George Sandilands, chief executive and co-founder of Spherics said, “we are excited to embark on this new journey to help SMBs knock down barriers to a more sustainable future. Global emissions are still rising fast, and we need immediate and meaningful climate action across the world”.
Spherics’ carbon accounting platform
Spherics offers an automated, multi-layer carbon accounting service, beginning with the calculation of a basic emissions profile. It integrates with its users’ existing accounting software and extracts basic information, including supplier names, account names and the amount spent in individual transactions.
These spending insights are then automatically paired against emissions conversion factors based on the industry that each merchant belongs to, identified by the Standard Industrial Classification (SIC) code listed under their Companies House record.
This spend-based analysis is approved by the Greenhouse Gas Protocol as a credible way to measure organisational carbon emissions, thereby providing a recognised, consistent and comparable methodology.
Spherics takes things a step further by automating its analysis to track performance on an ongoing basis. It also recommends that its customers submit supplementary activity data, such as the volume of fuel purchased by commuting employees or readings from energy meters, that cannot be directly assessed via financial accounts.
By gathering insights on direct emissions associated with day-to-day activity data, Spherics enables its customers to measure and monitor their Scope 1 and 2 emissions. The addition of transactional supply chain data helps users gain an idea of their external Scope 3 emissions, with Spherics planning to further improve its accuracy as more detailed, supplier-specific information becomes available.
As Sandilands explains: “Reducing your carbon footprint always starts with measurement. Without knowing where you are today, there is no baseline to reduce from. Once a business has a carbon footprint, it can quickly see where its problem areas lie, this in itself is a massive accomplishment as many businesses are focusing their efforts in the wrong areas.”
SMEs want to engage in carbon management, but often lack the necessary resources
There are several reasons why SMEs might want to introduce carbon management practices. An understanding of where emissions could be reduced by lowering energy consumption, for example, provides opportunities to save on operational costs.
Demonstrable carbon management can also help businesses to gain a competitive advantage by accommodating consumer demand for sustainable goods and services. It can also indicate a lower risk profile to investors, potentially providing access to lower-cost capital.
Recognising these benefits, international non-profit organisation CDP has worked alongside the United Nations-backed SME Climate Hub to create a voluntary climate disclosure framework for SMEs. These heightened expectations could eventually be transcribed into law.
Indeed, although mandatory climate-related risk disclosure regulations currently exclude SMEs, this will not be the case forever. It is likely that, at some point in the future, many small companies will be legally required to accurately measure and report on their carbon emissions.
The Council and European Parliament, for example, has already proposed that its upcoming corporate sustainability reporting directive should apply to listed SMEs from 1 January 2026.
A 2022 survey from the SME-Climate Hub suggests that SMEs are aware of the need to take action against their carbon footprint, with the overwhelming majority of its 194 surveyed businesses expressing their desire to make changes.
As many as 68% of its respondents, however, felt that they lacked the key resources they needed. Among the top five barriers were lack of funds, lack of skills, and lack of time, while 36% of the survey’s participants said they struggled to measure and track their emissions.
Given the vast number of SMEs, 5.5 million in the UK as of 2021, and their prevalence within the supply chains of larger corporations, there is a clear need to make carbon management solutions more accessible.
SMEs are demanding carbon accounting services
This need is being met by the emergence of various platforms that are well suited for use by SMEs.
Carbon Analytics, for example, offers carbon accounting services that integrate with Xero’s (ASX:XRO.AX) SME accounting software. Microsoft (NASDAQ:MSFT), meanwhile, has added an emissions impact dashboard to its 365 suite. In the UK, SSE Energy Solutions (LSE:SSE) is offering 4,500 SMEs free subscriptions to Zellar’s carbon management platform.
Such projects suggest that large corporations are beginning to respond to the growing demand for accessible carbon accounting services. Their increasing involvement could be crucial in enabling platforms such as Spherics’ to be brought to scale.
Sandilands outlines how Sage’s acquisition will contribute to the firm’s future plans: “After measurement, we provide automated mitigation solutions to users that map to its hotspot areas. Our current mitigation engine is in its infancy, but through this partnership with Sage we will deliver sub-sector-specific carbon mitigation suggestions. The scale we need to make a meaningful impact increases dramatically through Go To Market (GTM) channels, both directly through Sage, and its resellers and accountants.”
“We are enormously excited about the growth of our technology’s capabilities, which will be fuelled by access to specialised data scientists and Artificial Intelligence/Machine Learning teams, improving both the measurement and mitigation solutions within the platform”, he concludes.