Small businesses are prioritizing climate action, but they need more support 

The nearly 8,000 small and medium-sized businesses (SMEs) which have made the SME Climate Commitment understand that we are in a critical decade to keep climate change in check. These companies are climate leaders investing time, money, and efforts to increase their business resiliency and lower the climate impact that their operations have on their communities and the planet.  

The SME Climate Hub recently surveyed its community of small and medium businesses to increase understanding of how SMEs are building momentum towards net zero goals, accruing benefits from prioritizing climate action and the barriers they face in accelerating their decarbonization. The data shows that amongst other motivators, 63% of businesses believe taking climate action is the right thing to do, and they are making a wide range of changes to reduce their carbon footprint. Almost 70% of surveyed businesses have an emissions reduction plan and have taken steps to decarbonize, such as reducing energy consumption, educating employees, and upgrading vehicles and equipment.  

The survey findings made clear that taking climate action isn’t just good for the planet, it is good for business. Over 60% of surveyed SMEs enhanced their business reputation thanks to their climate efforts. This led to nearly 40% of SMEs meeting customer expectations and 30% winning new customers.  

However, despite increasing motivation and action, SMEs require support to prioritize net zero efforts at the rate needed to limit the impacts of climate change. Over 70% of SMEs need additional funding to start or accelerate their climate action, yet 60% aren’t confident they can secure the funds. What’s more, 84% of SMEs have not been offered any financial incentive to reduce emissions.  

Governments also play an essential role in decarbonizing the private sector. Respondents identified the lack of government-sponsored incentives as the most common barrier to reducing emissions. Additionally, half of the SME respondents said tax benefits and government funding would motivate them to take action, while 65% expressed needing public aid to increase their climate action efforts.

For the SME Climate Hub business VMI.TV, government funding encouraged them to take their emissions reduction progress to the next level. “In 2022, we sought regional government support to make environmental improvements to our Bristol building, and we were approved for 50% of the funding needed,” said Managing Director, Barry Basset. “We installed solar panels with the funding and were so encouraged by the effectiveness of the project that we spent £13K out of cash flow to install our first 10KW of solar PV on our London building.” Now, VMI.TV produces more green energy than it consumes, allowing the business to meet climate goals and focus on other projects such as transitioning their fleet to electric vehicles.  

At a global scale, the SME Climate Hub business community called for government leadership and action at COP28, when over 100 small businesses joined in signing an advocacy letter organized by the SME Climate Hub’s founding organization, We Mean Business Coalition. The Fossil to Clean letter urged national governments attending COP28 to phase out fossil fuels, triple renewable energy capacity, and double energy efficiency. The advocacy push from businesses – alongside countries, cities, scientists, health professionals, youth, activists, NGOs and many others – helped to secure a historic policy outcome that signals “the beginning of the end of the fossil fuel era”: the UAE Consensus.

The survey also found that SMEs are confident in their knowledge of reducing transportation and office related emissions but lack the confidence in their ability to tackle Scope 3 emissions. The barriers to supply chain decarbonization also apply to SME partners calling for their action. Only 17% of SMEs have been asked by corporate customers to reduce emissions. The We Mean Business Coalition recently launched its Supplier Cascade campaign to address this gap and encourage businesses to engage their supply chain to commit to net zero, with SMEs making the SME Climate Commitment as best practice. 

In order to meet their climate goals and navigate increasing regulation, large corporations must mobilize their long tail of SME suppliers to decarbonize. However, only what is measured can be managed, and nearly 40% of surveyed SMEs lack data about current emissions. Faced with competing demands and financial limitations, SME must be provided with accessible climate action tools and resources to measure, reduce and report their emissions. “Accessing tools for emissions reporting can be very expensive,” said Hugh Anderson, founder of Downton Distillery. “But the SME Climate Hub provided both a tool and reporting structure that allowed us to keep track of our emissions, without over complicating the process.” Accurate emissions reporting helps keep businesses of all sizes accountable, evaluate climate efforts, and identify gaps. 

Through its growing set of tools and by uplifting small business voices, the SME Climate Hub is committed to supporting small businesses on the road to net zero. However, comprehensive policy and regulations, corporate incentives, and green financing are needed to build an ecosystem in which businesses of all sizes can thrive. The present and the future of our planet and economy depend on the success of SME climate action.  

Download the Mobilizing Small Businesses to Net Zero report funded by We Mean Business Coalition to learn more.