COP26 provides a turning point for mid-market companies

Ivri Verbin,
Sarah Carroll,
Scott Wilson,
Angela Jhanji,
Alejandro Villaseñor Galan,
Johanna Forsgren
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COP26’s goal was to deliver radical change to save our planet. In the long term, there are good reasons to be hopeful.
Four steps which will empower mid-market businesses to reach net zero

Though by no means perfect, deals to phase down coal and end deforestation were agreed.[i] If pledges are kept then the aim of restricting temperature growth to 1.5 C is achievable, but only just. The legacy of COP26 will be radical change for businesses and will be felt profoundly by the mid-market. Delivering on the promises made in Glasgow requires all companies to play their part.

Peter Bodin round.pngPeter Bodin, CEO, Grant Thornton International Ltd, says, “There are good reasons to be optimistic after COP26. The summit laid the foundations for the path to net zero, and we must now build fast. A large part of that responsibility, and opportunity, will fall to mid-market businesses across the world. Rapid change is needed. The agility required to respond to change, to embrace and implement new ways of working, is where the mid-market shines. I believe the mid-market will be a crucial driving force in reaching net zero. Its many hands can make great progress.

“For Grant Thornton, our commitment to the Glasgow Financial Alliance for Net Zero demonstrates our strong belief in the power of global collaboration and the mobilisation of finance to achieve net zero.”

Ivri Verbin.PNGAccording to Ivri Verbin, CEO of Good Vision, an affiliate of Fahn Kanne Grant Thornton in Israel, the hopes for COP26 were matched by the energy that delegates brought to the campus in Glasgow.

“What I take from my time at COP26 is that businesses and governments really shared the stage. It’s clear they share a determination and energy to innovate and work together to reach net zero. It is a commitment that the mid-market is at the forefront of, with more than six in ten firms stating that sustainability is now a major priority. Crucially, businesses don’t need to wait for governments – where international agreements fall short, businesses can lead the way.”

Prior to COP26, Grant Thornton outlined four critical steps which will empower mid-market businesses to reach net zero. These are:

  1. Consolidate reporting frameworks and standards
  2. Ensure the mid-market has access to funds and projects
  3. Make things easier: create a route map
  4. Help the mid-market integrate net zero strategies into their business operations

Here we assess how far COP26 delivered on these important steps and what still needs to be addressed. As the countdown to COP27 in Egypt begins, there are significant opportunities, and questions, for the mid-market.

1. Consolidate reporting frameworks and standards

The need for a globally consistent framework on how companies measure and report their environmental performance was identified as a key requirement for the mid-market. It was therefore a significant development that the IFRS Foundation announced it will create a new board to develop sustainability disclosure requirements.[ii]

The International Sustainability Standards Board (ISSB) will begin work in 2022 with the aim of helping investors and regulators by creating a single set of sustainability disclosure standards.[iii] Importantly, these will address companies’ impacts on sustainability measures relevant to assessing enterprise value and making investment decisions. Primarily focused on climate change, to begin with, the ISSB will then move on to other significant sustainability areas as it continues to build momentum.

This has been an imperative for mid-market businesses which have been forced to navigate multiple non-standardised frameworks, a situation that often caused confusion.

Sarah Carroll.pngSarah Carroll, Associate director of financial reporting, Grant Thornton International Ltd, says comprehensive reporting standards will be crucial.

“As demand for high-quality information related to sustainability issues continues to grow, the creation of a comprehensive set of reporting standards to facilitate corporate reporting on these matters will be crucial in the fight against climate change and other key sustainability concerns.”

The ISSB is by no means a straightforward solution. Commentators such as the Financial Times’ Gillian Tett argue that measuring green issues will represent a significant challenge, [iv] in particular Scope 3 emissions. However, for any business seeking capital, through investment or debt, this challenge will no longer be optional.

Mark Hucklesby round.pngMark Hucklesby, director of financial reporting, Grant Thornton International Ltd, adds:

“Having globally consistent sustainability standards will be a gamechanger for multinationals and mid-market companies alike, just as the introduction of International Financial Reporting Standards (IFRS) was when it revolutionised financial reporting 20 years ago. The patchwork of sustainability standards currently on issue has been a frustrating obstacle for companies, particularly those working internationally.

“Much like the adoption of IFRS, our expectation is that companies that are not listed will soon call for some disclosure relief from the sustainability standards that will be issued by the ISSB. What is apparent is businesses, and many entities involved in their supply chains, will have to quickly assess how they are impacted by new sustainability reporting requirements and then decide the most effective way of reporting on them.”

However, and again much like IFRS, it is unclear how many countries will adopt the ISSB’s standards.

Scott Wilson new.pngScott Wilson, director, ESG and Sustainability, Grant Thornton UK, notes:

“We called for the momentum to be maintained in aligning reporting frameworks and standards – it’s excellent that this has been achieved as it will reduce the barriers for corporates in playing their part and increased transparency and consistency in reporting will facilitate stakeholder confidence. How well these standards are adopted internationally remains to be seen, and how and when they might be applied to the mid-market is a further unknown at this point, but the direction of travel is positive, and we support it.”

2. Ensure the mid-market has access to funds and projects

The vital progress in reporting frameworks and standards comes hand in hand with the vast private capital commitments made during COP26. The wall of money dedicated to sustainable investments through the Glasgow Financial Alliance for Net Zero now stands at $130 trillion, described by British economist Nicholas Stern as the “the biggest capital reallocation since the Industrial Revolution.[v]

Alasdair Grainger.pngAlasdair Grainger, director – Net Zero, Grant Thornton UK, says the next step is to empower mid-market businesses.

“The allocation of funding was the necessary first step. Businesses must now be empowered to gain access. It is currently unclear how mid-market companies will be able to access the financing they need as they transition to net zero, and whether they will be facilitated in domestic markets to access national and local government projects designed to enable the move to a low carbon economy.”

alejandro_round.pngAlejandro Villaseñor Galan, head of sustainability, Ria Grant Thornton in Italy, adds:

“The mid-market will require support to build the sustainability credentials demanded by public and private investors alike. Inevitably, businesses will be excluded from funding from channels such as banks and private equity until they report sustainability plans based on new ISSB standards.”

Increasingly, businesses will need to fulfil two levels of corporate reporting: Financial, in line with the IFRS and, in the future, audited corporate sustainability reporting – both will be a pre-requisite to accessing capital. For investors, increasingly mandated with the needs to meet sustainability requirements, the ISSB will become the lens through which it views potential investee companies.

3. Make things easier: create a route map

The progress in measuring and reporting sustainability impacts is a crucial outcome of COP26, but for many mid-market businesses, the route to developing a sustainability plan remains unclear. Reporting on progress is a vital, but secondary consideration. To facilitate rapid, global progress, policy-makers must strive to make the net zero transition process as simple as possible for businesses.

Published to coincide with COP26, the UK Government’s Net Zero strategy recognises this and commits to exploring a 'government-led advice service that consolidates and simplifies advice and other support on net zero'.[vi] To empower mid-market businesses to deliver the change we need, services such as these must be implemented rapidly and replicated globally.

Angela Jhanji.pngAngela Jhanji, director, ESG and sustainability, Grant Thornton US, explains:

“There is no one-size fits all solution to sustainability. It is incumbent on all businesses, large and small, to develop net zero transition plans tailored to their operations and the needs of their stakeholders. However, for mid-market companies which lack the in-house resource and expertise to develop a net zero plan, clear guidance on the steps required is invaluable. Knowing that they’re on the right track is crucial for their own success and the overall transition to a net zero economy.”

4. Help mid-market integrate net zero strategies into business operations

Whilst it was always unlikely that COP26 would help businesses hardwire net zero programmes into their companies, nevertheless it remains a pressing issue.

Johanna Forsgren.pngAs Johanna Forsgren, manager, sustainability business advisory, Grant Thornton Sweden, rightly points out, “It’s crucial that we avoid twin track approaches. As well-resourced companies forge ahead with their programmes in response to regulatory requirements, mid-market firms need to ensure they are not left behind. They need to actively collaborate with their stakeholders; understanding what they need – for Scope reporting and other measures – so that they march in step and embrace innovation together. This, in part at least, will help mid-market firms shape their own net zero strategies.”

While many larger businesses are seeking advisory services, government has an important role to play, either through incentives or helping mid-market businesses to develop their knowledge and understanding of what net zero means for their business at an operational level.

Grant Thornton’s own research shows that many mid-market firms are seizing the opportunity and putting sustainability at the core of their business.[vii] 43% of firms globally have already developed a strategy for doing so.

Creating competitive advantage through sustainability
Creating competitive advantage through sustainability
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However, for nearly a third of those surveyed, a lack of clarity around what’s required and the regulations is an obstacle. Policy-makers across the world must play an important role in supporting and incentivising mid-market companies’ transition.

COP26 set a course but the mid-market must now navigate its own way

COP26 provided ambition and targets, but never promised to have all the answers for companies. As governments, financial institutions and consumers devote unprecedented attention to climate issues, agile mid-market companies around the world are well placed to respond and to be the engine room in the delivery of the pledges made in Glasgow.

Although delegates have now left Glasgow, the conversations and progress will continue. The journey to net zero is a process and clearly greater than one annual event. In this process, Grant Thornton will continue to be a voice for mid-market firms, ensuring that their vital views are heard and that policy and regulation is created with these firms at the forefront.

Peter Bodin round.pngPeter Bodin, CEO, Grant Thornton International Ltd, says:

“COP26 delivered for the mid-market in two main areas: it set a pathway to a standards framework that companies can utilise; and it clearly signalled that for those committed to delivering on net zero funding will be available to turn plans into action.

"We have the big picture; now governments and businesses across the world have the opportunity to collaborate and innovate to build the route map and drive change. As we turn to COP27 next year in Egypt, the mid-market businesses which move first, innovating and collaborating internationally, will gain a competitive advantage and lead the way to delivering net zero.”

To understand how your business can seize the opportunities emerging from COP26 and play a leading role in delivering net zero, take a look at our latest insights or read the related content below.


i. - Last minute drama - this is how the Glasgow settlement came about - 14.11.2021
ii. - IFRS Foundation announces International Sustainability Standards Board, consolidation with CDSB and VRF, and publication of prototype disclosure requirements - 03.11.2021
iii. - IFRS Foundation's Liikanen expects first climate standard next year - 03.11.2021
iv. - The green transition may depend on auditors - 04.11.2021
v. - Climate change economics: ‘The biggest capital reallocation since the Industrial Revolution’ - 10.11.2021
vi. UK Government Net Zero strategy
vii. - Creating competitive advantage through sustainability - 22.10.2021