SME’s journey to net zero – how prepared is your business?

Are UK SMEs prepared for net zero or the 1.5C pathway? Here are some of the issues and how businesses can get started.

Every business (and every business sector) is coming at net zero by 2050 from a different starting point and are on a different journey of awareness. It would be helpful if there was more of a framework for SMEs as there is lots of different terminology and it is difficult to navigate. It needs to be a clearer, more obvious journey with incentives to encourage businesses.

Since we became a B Corp, we’ve had many clients ask us about it and our sustainability journey and how we reviewed and approached it. Businesses recognise how important the journey to net zero is, that our impact on the planet and the environment is undeniable and we all want to do our part to help and make a difference.

We are already seeing a move to net zero filter down through supply chains to smaller businesses, but many don’t have the framework or resources to improve awareness or an understanding of the financial costs, timescales, and physical capacity to begin to implement it.

There are also added complications if the business is part of an international group with trading operations overseas, as there is certainly a different approach to ESG in different countries. For example, in some countries we are seeing a greater focus on creating local employment opportunities whereas in the UK it is more about carbon neutrality and offsetting. Which elements do you focus on first?

Clearer net zero guidance and goals needed

There is lots of differing support materials, resources, and guidance available online but with so much information, it can be difficult for businesses to know where to start or how to progress ESG strategies.

There is not a one size fits all approach, so every business’ approach will be different, which adds to the challenge.

The government could help by reducing the terminology involved and providing clearer goals for SMEs. Once businesses have a focus and a goal, they can work towards it more effectively when they understand how to reach it and what they are committing to.

How can businesses get started?

For a business to begin the move towards net zero a conversation needs to begin internally as this needs to be driven by either a leadership team or by a cohort of empowered colleagues. A lot of people are passionate about ESG personally, so businesses could tap into this by setting up dedicated ESG groups. Selecting the UN sustainable development goals that mean the most to them that they can help work towards can also be a good starting point.

Businesses should outline goals, understand and communicate the benefits of making the changes required to all their people. Understanding the benefits of it and what that change will look like will focus where attention (and time and effort) will be. They could also consider running some internal training or workshops to raise awareness and invite expert speakers in to help inspire and motivate.

We don’t know yet how and when the government will legislate for all businesses, but it isn’t something that can be done all at once. The key thing for all businesses is to stop talking about it and start looking to implement change.

Competing business priorities

It might be hard for a business to get started when it is dealing with the next immediate issue which is affecting it, whether this be staff recruitment and retention or securing bank borrowing at a favourable rate. But these short-term issues and long-term ESG strategy are not necessarily mutually exclusive issues, employees may be asking themselves do they want to work for a company which is unwilling to commit to change. And business leaders should consider whether they might get more favourable terms from their banks if they show they are committed to making changes and there might be government incentive schemes they can quality for.

Ultimately there will be no choice in the future so for all businesses it is better to progress and start the journey now then to wait and come to it late. There will be a longer-term impact for starting this journey, but it will be difficult to make decisions if economic pressures get worse for a business because they have delayed it.

The ICAEW have lots of advice and support for businesses to help them get started on their ESG journey. The important thing is to make a start, understand your current position, set goals and objectives around ESG, and make these measurable so you can track progress.

If your business is looking to start its journey to net zero, we would be happy to share our experience so far. You can get in touch here.

Alternatively, some helpful resources are listed below:

• United Nations sustainable development goals
• ICAEW – Climate for SMEs
• The UK B Corporation movement