The annual Climate Week NYC is often the nexus of investment banking, academia, politics, large enterprise, and climate tech start-ups. Small and medium-sized enterprises (SMEs) often seem left out, with established and material environmental and social footprints but not enough resources to be at the forefront of sustainability. As with large enterprises, SMEs too face stakeholder pressure from investors, regulators, and customers but don’t tend to make the headlines for strong or poor performances. Leaders often need to balance their efforts and choose a strategy to stay under the radar or strive for sustainability leadership in their niches.  

These 3 takeaways from Climate Week NYC 2024 will help your SME understand where the market is headed and how to be prepared for what’s next.  

Just Get Started

Inertia with sustainability reporting is real. Companies can often feel overwhelmed at the different types of reporting and the widely distributed nature of sustainability data that delay action. There will always be gaps, and no one is expecting or demanding perfection (for now) on day 1. At IsoMetrix, many of our clients started by looking at either SASB or GRI and doing a gap analysis of the data they had available and the data that was absent. Year by year, they’ve done what’s necessary to improve their reporting, and in turn reduce risks and grow business value.  

While many Americas-based SMEs will not meet the criteria CSRD disclosure compliance today, they often have customers that to face CSRD requirements including limited assurance and Scope 3 emissions reporting. When an SME becomes a weak link in supply chain sustainability disclosures for a large enterprise, they become a liability. With California implementing climate-related disclosures for 2025, the risk of waiting or doing the bare minimum is only increasing.

 

AI is Increasing Energy Demands and Testing Power Grids

The clean energy business is booming, and according to the International Renewable Energy Agency, nearly 86 percent of new power generation built last year worldwide came from clean sources. The sudden rise of artificial intelligence (AI) and its high energy requirement, however, has meant that clean energy is supplementing, rather than replacing, conventional energy sources.  

The Wall Street Journal recently reported that AI data centers, manufacturing, and broader electrification are the primary drivers behind the projected increase in fossil fuel demand in 2035 from previous estimates, with data centers accounting for 30% of the expected growth, according to a Goldman Sachs report in April. 

While there is no immediate action SMEs can take with regards to this energy dilemma, the power demands of AI add to the risk factors companies need to take into account with their AI strategies including how it may impact their ability to achieve carbon reduction and net zero goals.  

Sustainability Technology is in High Demand, but Venture Funding is Scarce 

Deloitte published a report last month that showed 50 percent of the 2,100 C-suite executives surveyed have already begun implementing technology solutions to help achieve climate or environmental goals with another 42 percent expecting to do so in the next two years. A look at the top five types of technology being implemented, according to this survey, they mainly fall into categories of data monitoring, management, and reporting versus actions that impact climate performance.  

Top 5 technology solutions companies have implemented or are planning to implement to achieve climate or environmental goals.  

1. Monitoring/ managing supply chain environmental performance 

2. Process or operational efficiency 

3. Internal monitoring of sustainability data and performance 

4. Developing new sustainability products or services 

5. External reporting of sustainability data 

This fits the common narrative heard at Climate Week amongst climate tech start-ups that venture dollars are harder to secure. “The green premium is gone, and climate has to adhere to standard business practices,” states Nicole LeBlanc of Woven Capital in a Wall Street Journal article on this topic. According to Dealroom data shared in the same article, global venture funding for climate-tech is estimated to fall 27 percent this year. Partially due to lack of return on equity from prior investments and partially due to political uncertainty with the upcoming US election.  

Even with larger businesses, the immediate concern is getting an accurate view of performance and disclosing to external stakeholders versus taking action to improve performance or create value such as through new green products or services. There’s no shortage of technologies designed to address carbon reduction, environmental risk mitigation, green product development, and green supply chain assessment. The possibilities for the gap in direct demand for sustainability performance-improving technology could be that companies lag behind in maturity or dedicated resources to effectively use these technologies or, perhaps, they believe they can achieve the results using in-house resources.  

Final Thoughts 

There’s still a lot of uncertainty over the direction businesses and governments will take when it comes to managing sustainability, which activists will claim is delaying necessary action needed to mitigate the impacts of global climate change.  

This goes back to the first takeaway of “just get started.” The trend is moving more rapidly from voluntary disclosure to mandatory disclosure while the market is still seeing climate action as voluntary with leaders making action a priority to differentiate as evident in technology purchase and investment trends. Whether you’ve started or not, if you’re falling behind in reporting today, you’ll be left behind by customers tomorrow.  

There’s no denying that AI will have a massive impact on global sustainability from the social aspects of jobs and workforce makeup as well as from an environmental perspective with demand, distribution, and cost of energy worldwide. It may be too early to fully understand the how impacts, but monitoring how it affects your business today will help keep you prepared for what’s next.  

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