Comment: “Nigeria stands a better chance to drive climate action and achieve its nationally determined contributions if SMEs buy into Materiality Assessment”

Introduction

According to President Barack Obama, “The world must come together to confront climate change…”; this casts in clear terms the fact that everyone has a role to play in climate action. Everyone in this context include all categories of businesses (whether big or small), especially small-medium scale enterprises (SMEs) that are usually overlooked, especially as relates to climate action. Instead, more attention is placed on big industries and businesses such as multinational companies and other larger corporations, making them bear the brunt of climate activism within the country, especially in the Global South.

According to a report from the 3rd Capacity-building Hub within COP26, SMEs on the global scale are responsible for about 80% of economic opportunities, highlighting their expansive operational networks and extensive interaction with nodes of climate action. On this note, it becomes important for SMEs to be strongly involved in climate action initiatives (especially in the Global South). Also, the operations of SMEs are well integrated into the Scope 3 emissions of the value chain of big corporations, further highlighting the need for SMEs to buy into climate action and increase commitment to sustainability reporting. Unfortunately, SMEs face significant challenge of limited resources needed to drive the process due to issues such as inflation, rising energy costs and lack of expertise amongst others.

An SME entrepreneur jumps across some tankers at the worksite where men construct petrol tankers at the side of the road on the outskirts of Lagos on July 15, 2008 in Lagos Nigeria. Getty Images Europe/Dan Kitwood

What is the concept of Materiality Assessment?

Due to the limited resources of SMEs, materiality assessment becomes critical a strategic business tool that can help SMEs in the Global South (especially Nigeria which is the interest focus) prioritize areas of actions where their limited resources and expertise can be directed to facilitate gains in “greening” their operations and making them more sustainable. Further, within the context of energy transition, materiality assessment pertains to the identification of environmental, social and governance factors that mostly affects an organization’s climate action performance. In other words, factors that are significant (material to the sustainability of the organization), which mostly influence how sustainable a company is, are identified during materiality assessment.

For example, materiality assessment can enable an SMEs identify areas of highest energy consumption, points of highest emissions, and the need to adopt energy-efficient technologies amongst others to drive climate action in their operations. From this perspective, it therefore beckons on all relevant stakeholders in Nigeria to commit to helping SMEs within the country carryout materiality assessment of their operations, which would provide information to drive climate action. By doing this, SMEs are better positioned to help the country achieve her nationally determined contributions (NDCs). Therefore, Nigeria stands a better chance to drive climate action and achieve its NDCs if SMEs buy into Materiality Assessment.

“Materiality assessment can enable SMEs identify areas of highest energy consumption, points of highest emissions, and the need to adopt energy-efficient technologies amongst others to drive climate action in their operations.”

The Writer’s Thoughts on how SMEs in Nigeria can buy into Materiality Assessment

Firstly, it is pertinent to highlight that from a business perspective, materiality assessment offers SMEs opportunity to identify business risks and opportunities, which can be addressed and explored respectively, leading to the development of innovative solutions that address trending issues on sustainability. As a result, the adoption of materiality assessment offers a two-way benefit for SMEs–growth opportunities and avenue to commit to climate action. On the backdrop of these positive outcomes, the writer shares his thoughts on possible pathways that can be explored to incentivize SMEs to adopt materiality assessment.

Currently, there are no universally accepted approach for materiality assessment, hence companies are often at liberty to develop their own approach for assessment. Most often, the approach is drawn from the guidelines of popular frameworks such as Global Reporting Initiative G4 guidelines, International Integrated Reporting Framework and Sustainability Accounting Standards Board amongst others. With this flexibility, it is possible to therefore develop an approach that can be tailored to address the specific challenges of SMEs in the country.

The writer acknowledges that he is not an expert in this field hence, such process would require brainstorming of think tanks during workshops or seminars, organized by non-profit organizations driving climate action in Nigeria. OrderPaper Nigeria is one of such non-profit organizations that can drive the process as it has the network and resources to facilitate such high-level conversations, using its brainchild platform known as RemTrack. On another note, it is no brainer that such project would require extensive public-private partnership so that all stakeholders would offer their insights, which are of utmost value to the development of the approach.

The writer however acknowledges that even when such approach is developed, its adoption by SMEs would not be an easy task. This assumption is based on the report by FATE Foundation in which it is stated that a significant number of SMEs in Nigeria are run by entrepreneurs with informal educational background, who may find it difficult to appreciate how materiality assessment would improve their businesses. Therefore, a vital step of making SMEs adopt materiality assessment entails massive sensitization of entrepreneurs running SMEs across all geopolitical regions of the country.

Such project in no doubt would be resource intensive considering the number of SMEs to reach out to, which brings in the option of step-down training sessions. In such training sessions, selected SMEs in each region or state can be selected and trained. Such SMEs can then carryout step-down training sessions for other SMEs, till all SMEs are reached. While this is sounds great, it must be acknowledged that accountability mechanism must be inputted into the system and upheld to the highest standards if positive outcomes are to be achieved.

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