The guidance below suggests ways to prepare to speak with sources of financial support about decarbonisation. You do not need to take all these steps beforehand; many organisations – including your bank and buyers – may be able to assist you.
Calculate and report your greenhouse gas (GHG) footprint
Measuring, tracking and reporting your emissions and progress over time will be important to any financial source of support. Reporting will enable partners to assess your current status and reward the progress you make.
To help you answer these questions, the SME Climate Hub has created a practical, step-by-step course help you understand how to take action to reduce your emissions.
Understand the relevance of climate change to your business
It will be important for you to understand:
- How your business is contributing to, and is impacted by, climate chang
- What the risks to your business of climate change are, such as flooding
- How your business might be exposed to policies introduced by government to reduce climate change
- What business opportunities might be available if you become a leading example of how to decarbonise.
“To help you answer these questions, the SME Climate Hub has created a practical, step-by-step course help you understand how to take action to reduce your emissions. “
Check climate commitments of your buyers and suppliers
Your buyers and suppliers may have made climate commitments, eg, to have net zero emissions by 2050 or sooner. These commitments are relevant to you as they may impact company policies about who they can purchase from or supply to. This can lead to a competitive advantage for you if you are leading in this, or be a commercial risk to your business.
Design an action plan to decarbonise
Making a net zero commitment will mean creating a plan for reducing your emissions, complete with time-bound actions, expected savings and investment needs. Like any investment case, the robustness of this plan will be essential for securing financial support on preferential terms.
Estimate investment required to decarbonise
Investment that reduces the carbon footprint of your business can take many forms.
Avoidance and reduction of energy use are often the simplest and lowest cost place to start – see Steps 1 and 2 in the Carbon Hierarchy diagram. This will involve assessing which activities are non-essential or inefficient and taking action accordingly.
‘Step 3. Replace’ might involve switching energy sources or other external suppliers of goods and services to your business – the lower their footprint, the lower yours. More than 80 per cent of SMEs signed up to the SME Climate Hub are reducing their waste and energy consumption.
Still within Step 3 could come what is likely to be a higher level of investment, such as replacing or retrofitting your existing assets to be more efficient or switching to renewable energy. More than 50 per cent of SMEs that have signed up to the SME Climate Commitment are already planning this.
The carbon hierarchy; sourced from: Banking Environment Initiative. (2021). Let’s discuss climate: The essential guide to bank-client engagement. Cambridge: University of Cambridge Institute for Sustainability Leadership (CISL).
Over time your investment in decarbonisation could help realise savings or additional custom from those seeking to buy from businesses taking action on climate change. This means careful financial planning about your emissions reduction plan, for 10 years or more, would allow additional cash flows to be re-invested in further emission reduction steps.
Prepare the narrative for your business and stakeholders
In addition to being important for securing financial support for reducing your emissions, having a compelling story about your decarbonisation journey will underscore your credentials to customers, employees and shareholders.
To better understand the importance of moving towards net zero emissions and the business case for it, visit the SME Climate Hub Capacity Building tool.
To better understand the importance of moving towards net zero emissions and the business case for it, the SME Climate Hub has created a practical, step-by-step course help you understand how to take action to reduce your emissions.
Potential sources of financial support – summary table
| Stakeholder | Motivation for providing financial support | Examples of what financial support might be available | Examples of who you could speak with to learn if support offered |
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Customers (buyers)
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Banks
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Grants and other forms of government support
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Balance sheet and investors
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