We all know that moving towards net zero is good for the planet and reducing carbon emissions is the biggest priority in terms of countering global heating. However, for small businesses, cutting emissions and shifting towards net zero emissions also make good business sense, and can bolster the resilience of your company. Intrigued? Here’s how …
Future energy crunches
As the past two years have starkly shown, we live in an unpredictable world. The recent spike in the price of gas that sparked rising energy prices and a cost of living crisis shows this all too well. Relying on traditional means of energy from non-renewable sources such as oil and gas is not only bad for the planet in terms of pollution and carbon emissions, but also potentially damaging financially. Recent research from energy analysts Cornwall Insight found that SMEs are on track to see their gas bills rise by an average of 250% year-on-year (2021-2022). Investing in alternative solutions (such as electric vehicles), or renewable energy (such as solar or wind-powered factories), might come with an upfront cost, but in the longer term, could insulate your business from global fluctuations, as will using energy-efficient heating or appliances throughout your premises.
Investment opportunities
With regulatory frameworks set to change and sentiment going strongly in a new direction, the future is going green and smart investors want in. In fact, many investors are seeking out lower-carbon investment opportunities as carbon-intensive investments are seen to be an increasingly high risk. According to PwC analysis, more than $50tn assets under management are currently held by investors who have pledged to drive decarbonisation. Furthermore, implementing green initiatives can also help SMEs access specific pots of money ringfenced for net zero initiatives. In fact, according to the British Business Bank, 11% of UK smaller businesses have already accessed external finance to support net zero actions.
Upcoming environmental regulation
As the UK government is legally committed to reaching net zero by 2050, we can expect increasing regulation of businesses and their operations in terms of sustainability. One such regulation is the plastic packaging tax, which came into force on 1 April 2022, and applies to any business that manufactures or imports 10 or more tonnes of plastic packaging within a 12-month period. In the next five to 10 years we are likely to see more environmental regulations. SMEs that get ahead of the game and make moves towards net zero now will not only make their lives much easier in the future, but also potentially save money by protecting themselves from having to make last-minute operational changes, or facing penalty charges for non-compliance.
Company perceptions
Whether you’re consumer-facing or a business-to-business company, moving towards net zero is only going to become more important to your customers. As the conversation around the climate crisis picks up pace – and the time to make a difference shortens – it is fundamental for both the planet and businesses’ profits to commit to net zero. For consumer-first businesses, the move is important for customer retention and reputation. Consumers are increasingly backing up their rhetoric and spending with companies that align with their values. For businesses supplying other businesses, making moves towards net zero is a surefire way to increase a client base. Supply chain emissions are 11.4 times higher than operational emissions, so for businesses trying to reduce their emissions, choosing a net zero supplier is an easy win.
Sustainability targets
The UK first brought in targets to reduce greenhouse gas emissions via the UK Climate Change Act of 2008. Then, in 2015, it signed the Paris agreement, and along with 195 other countries, pledged to keep the increase in temperature below 2C. While, currently, it’s only large companies that are legally required to report their energy use and carbon emissions every year, it’s good practice for SMEs to voluntarily record their emissions. They can do this by making the SME Climate Commitment on the SME climate hub. So, once again, getting ahead of the curve will only be a good thing – for your business and the planet.
If you’d like help to green – and grow – your business, the British Business Bank should be your first port of call. Dedicated to making finance markets work better for smaller businesses, it provides free financial tools and expert information to get you moving in the right direction. Find out more at british-business-bank.co.uk/finance-hub/sustainability
