FSB round table: helping SMEs to achieve net zero

In the wake of COP26, business and industry leaders – as well as government – are asking how best to help smaller businesses achieve carbon neutrality.

As eyes were turned to the COP26 Glasgow summit, questions inevitably turned towards how smaller businesses can play their part in the UK’s national ambition of achieving net zero by 2050. 

To this end, a collection of business owners – all of them recent winners of the Heroes of Net Zero awards – were joined by representatives from the Department for Business, Energy and Industrial Strategy (BEIS) and other industry bodies to discuss the opportunities and challenges in achieving net zero. 

Andrew Harrison, Head of Business Banking at NatWest, said: “There’s a really significant opportunity for SMEs to grow from the opportunity that comes from moving to net zero.” He pointed out that NatWest’s own research suggests that the economic recovery should act as a significant springboard to this end. 

It is a point that Paul Wilson, Policy Director at the Federation of Small Businesses (FSB), added to, saying that 99% of the business community is made up of small businesses and the self-employed, and reaching net zero on a national scale should include every business. “We need to do it supportively as we’re coming out of a pandemic: there is an unprecedented range of cost pressures facing small businesses at the moment.”

Those costs, however, should be balanced by possibility. As Harrison said: “We believe that SMEs can reduce CO2 emissions in the UK by about 50%. And there’s a huge opportunity worth about £160bn that SMEs can take advantage of by supporting other businesses transitioning to net zero.”

We believe that, for probably over half of all businesses, the technologies that they could invest in to reduce their emissions are actually a positive return on investment

Andrew Harrison
Head of Business Banking, NatWest

He added that framing is important: “This is both an obligation in terms of what we can all do, or small things to help the planet get better, but also the big opportunity that’s out there for small businesses to take part in.”

He added that awareness, sector understanding and measurement are key to the transition.

Opportunities and challenges

According to data from the FSB:

  • The majority of FSB members realise the planet is facing a climate crisis, but just 36% have been able to make a plan to address their own environmental impact. 

  • 9% of small businesses have measured their carbon footprint, with 69% saying that they don’t know how, and they need more help. Despite this, the majority have started to act.

Wilson also pinpointed several areas where policy could improve to help small businesses reach net zero.

  • The tenant/landlord split: businesses face challenges in becoming greener when their premises are owned by landlords because investing in a building means investing in an unowned asset. 

  • Recycling: businesses need to be encouraged to recycle more, and business rates income may be a way for councils to address the problem. 

  • Transport: small businesses shouldn’t be trapped by the rising cost of petrol and diesel on one hand, and the high entry costs for using electric vehicles.

Others, including Heroes of Net Zero winner Barry Bassett, owner and MD of VMI.TV, also pointed out that there is a huge time burden of measuring a business’s carbon footprint, and following up with an action plan. Some business owners also face too much advice and information to do this easily, and quickly. 

On this last point, Harrison said that there are a number of technology companies joining with the likes of Microsoft to help businesses with their carbon calculations. The other option, discussed by several speakers, was that the cost of a consultant might be worth saving time. When looking to reduce emissions in their supply chains, it was also suggested SMEs might benefit from a traffic light system to more easily make crucial decisions.

The role of finance

One important theme of the day was the role that financing might play in helping businesses achieve net zero. 

“A big barrier at the moment is accessing finance, such as small loans for small businesses to help finance green projects,” said Fleur Record Smith, founder of wedding venue Hayne House. 

Graham Oakley, Commercial Director of Clear Three, agreed. As the provider of sustainable solutions in the laundry sector, as well as food and drink processing, he is well aware that with the right finance in place, businesses can afford far greener machinery and technology. Often, however, the environmental impact feels like it isn’t captured as well as the purely financial aspect.

Harrison said: “We believe that, for probably over half of all businesses, the technologies that they could invest in to reduce their emissions are actually a positive return on investment,” adding that investment, say in EVs, needs certainty: businesses won’t invest if it looks like hydrogen power will become the preferred policy choice.

Making it easier

By way of closing the discussion, Catherine Westoby, Senior Policy Adviser at BEIS, shared how the government is planning to further support businesses to reach net zero. Central to its vision is helping businesses overcome the surfeit of advice and guidance, and the proliferation of carbon calculators. “We do need a centralised simplified process at the very least, which we can put then to small businesses to take the pain away at the very beginning,” she said. 

“It’s really complicated to navigate around all the information sources and work out how to put together a plan,” agreed Harrison. “How can the banks work with the FSB, government and others to make it much easier for business owners to get the information that they need quickly?”

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