Net zero on a budget: how SMEs can attain carbon neutrality 

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After a tough 18 months for small and medium-sized enterprises, in which survival has been the priority for many, environmental concerns may have slipped down the agenda. A YouGov survey of more than 1,000 British SMEs in January found that 40% didn’t have a plan in place for becoming more sustainable, while 30% had no intention of forming one. 

As attention turns to the United Nations’ COP26 conference on climate change in November, the hope is that both percentages will fall sharply. They will need to: firms employing fewer than 250 people account for more than 99% of the UK’s 6 million businesses. Collectively, they produce almost a fifth of the nation’s total greenhouse gas emissions, according to the Carbon Trust

“After a period when small businesses have been focused on surviving the pandemic, COP26 provides a moment that can inspire further action,” says Friederike Anders, policy adviser at the Federation of Small Businesses (FSB). “It’s an opportunity to think about taking those next steps towards net zero.” 

Net-zero myth-busting 

Anders acknowledges that one of the biggest challenges for many SMEs is knowing where to start, adding that they “do want to play their part in the transition to a net-zero economy, but clearly don’t have the same level of resources that a big corporation would have to devote to the task.” 

One organisation that’s hoping to help more SMEs on their way to net zero is sustainability consultancy Small99. Its founder, Adam Bastock, believes that “a lot of the advice out there is overly technical and inappropriate” for smaller firms. 

“The idea that reducing your emissions is costly is a bit of a misnomer,” he says. “People assume that it’s expensive, but they aren’t talking about how it can increase your profits over time.” 

Bastock advises businesses to break down the process into a series of smaller, more manageable tasks. “Achieving net zero completely can be difficult, but getting started is very easy,” he says. “One of the best places to begin is to switch to a supplier of renewable energy. That’s normally going to make up a fair chunk of your emissions.” 

But many SMEs will encounter barriers that larger companies can often simply sidestep. Take it from Cumbrian gin producer Shed 1 Distillery, which has already made it to net zero and describes itself as a “climate-positive business”. 

Zoe Arnold-Bennett is the joint founder and owner of this family micro-enterprise, which started trading in 2016. She points out that SMEs often don’t own the premises they operate from, which tends to limit the number of practical improvements they can make. 

“Our business is based in an old calf shed at the Ulverston Auction Mart. The age of the building has meant that we can’t install solar panels on the roof,” she says. 

This setback has simply encouraged the business to become more innovative in other areas. For instance, it has devised a closed-loop cooling system to minimise the amount of water that’s wasted. It has also invested in a cardboard shredder, which enables the reuse of material for packaging. 

The scope-three challenge 

Despite Shed 1’s achievements, Arnold-Bennett wants to push things further by targeting the supply chain, the main source of the firm’s so-called scope-three emissions. For SMEs in particular, this is often the hardest place to effect positive change. 

For instance, to avoid having to import its bottles from Europe, Shed 1 sought to source them from within the UK. But all the minimum initial orders quoted by potential suppliers were too large, in terms of cost and storage space, to be viable for a small-batch distiller. 

“This is the problem with the whole net-zero conversation,” Arnold-Bennett says. “Small businesses are being told that they have to make changes that they’re not in a position to influence.” 

Paul Ridden has faced similar problems in his capacity as CEO of software firm Smarttask, another SME that has achieved carbon neutrality. 

“We’ve looked at all of the areas where we can reduce our footprint, but we can’t eliminate 100% of emissions because of our reliance on technology providers whose solutions aren’t always carbon neutral,” he says. 

To achieve its net-zero goal, the company has switched to green utility providers, improved the efficiency of its office equipment and installed electric vehicle chargers. A grant that it secured under the government’s Low Carbon Workspaces scheme has been an important enabler. 

“It allowed us to make those fundamental changes more quickly,” Ridden says. “Most sustainable solutions do give a return on investment, but it can often take a while. As a smaller firm, you must always balance your cash flow, so it was very attractive to us to reduce the ROI period.” 

The experiences of Ridden and Arnold-Bennett highlight the problems an SME can face when reducing its scope-three impact. A firm’s emissions in this category (which include those generated by customers using its products) often account for most of its total footprint, yet they’re usually the hardest to monitor and control. 

Only 10% of SMEs in this country measure their carbon emissions, according to a survey published in August by the British Chambers of Commerce and O2. 

Reporting on emissions is something that FSB members “would like to be helped with. It’s too complex at present,” Anders says. “It requires transparency in every part of the supply chain, but small businesses, which don’t have the same reporting resources as large companies, find this very hard to deliver.” 

If everyone’s asking the same sustainability questions of their suppliers, more of them will pay attention. That’s the power of collective action

It’s not hard to see why many smaller firms feel that they’re stuck in the middle. While the big businesses that they supply put them under pressure to become greener, SMEs have less bargaining clout to oblige their own suppliers to do the same. 

“There is a stark difference in the power dynamic,” notes Bastock, who advises SMEs facing such problems to act in unison. “If everyone’s asking the same sustainability questions of their suppliers, more of them will pay attention. That’s the power of collective action.” 

The feats of Shed 1 Distillery and Smarttask prove that carbon neutrality is within the reach of SMEs, despite the undoubted challenges they will face. 

“Small business owners have a lot on their plates, but the green agenda doesn’t have to be another headache for them,” Anders says. “Approached correctly, it can help you to save money and time, while also burnishing your reputation. It’s definitely worth the effort to engage.”