Survey shows big gap in SME Net Zero skills, knowledge and funds

A new survey from UN-backed SME Climate Hub reveals that small to medium-sized businesses need much more help with their Net Zero ambitions.

The survey indicates that half of SMEs calculate emissions, and 60% have plans to reduce carbon impact – but two-thirds of small business owners are worried they don’t have the right skills and knowledge to tackle the climate crisis.

It’s crucial that SMEs globally succeed in implementing comprehensive carbon reduction plans, and in the UK to support government ambitions to achieve Net Zero balance by 2050. It’s also essential for SMEs to be acting, measuring and reporting as this data feeds into the Scope 3 reporting elements of larger corporations.

The need for effective and sustainable support is starkly underlined by the fact the SMEs make up 90% of business worldwide and affect the livelihoods of over 2 billion people, contributing more than half of global GDP.

The SME sector has to decarbonise quickly and sustainably in order to help reduce the existential threat of climate change. As SME Climate Hub director Pamela Jouven says:

“Despite their collective impact on communities and economies, small businesses are often amongst the most vulnerable to change and disruption. Rising global temperatures and weather-related disasters particularly impact SMEs given their localised supply chains, centralised infrastructure, and dependence on the communities in which they operate.

“At the same time, SMEs have been the least equipped to mitigate their role in the climate crisis. Small businesses are facing greater risk while also potentially missing out on the benefits of building more resilient businesses and cutting costs.”

Net Zero knowledge 

The task is not insurmountable but there are very significant barriers. Of the SMEs polled 63% advised a lack of skills and knowledge as the main cause for delaying climate action, along with funding (48%) and time (40%).

Around 70% of SMEs said they required access to external funds to start cutting emissions or reducing them faster. Only a third of SMEs have been offered a financial incentive to reduce emissions and only 8% have received support from their banks.

And 47% of those companies surveyed advised they would need up to $100,000 to reach net-zero. Respondents claimed that more public and private sector investment would help them with their decarbonisation goals.

At the same time, the survey found that 8 out of 10 SMEs consider reducing emissions “a high priority,” with businesses making efforts to cut their greenhouse gas emissions through reductions to energy consumption and waste (82%), employee education (64%), and upgrades to facilities and equipment (52%).

In contrast, only 60% had a long-term emission reduction plan in place, focussing mainly on the importance of short-term actions.

Benefits of carbon reduction

The survey also shows that SMEs have a growing understanding of the benefits of carbon reduction, keenly aware that climate action builds more resilient businesses. Companies are focussing on Net Zero to enhance the reputation of their brand (73%); differentiate their business from competitors (61%); and meet customer expectations (42%).

Perhaps surprising, but very encouragingly 96% of companies surveyed cited “the right thing to do” as a key motivation for taking climate action and this is despite 77% of SME respondents not being asked to reduce emissions by customers. Their main challenge is lack of resources, particularly skills and knowledge, cited by  63% of surveyed businesses.

This includes advice and education on where and how to get started, as well as the need for basic understanding of the role SMEs can play in climate action, and what tools are available to support their quest for Net Zero.

Launching the survey, María Mendiluce, CEO of the We Mean Business Coalition, a founding partner of the SME Climate Hub said:

“Taken on an individual scale, each small business has a relatively moderate carbon footprint. However, together, these small businesses have a huge impact – both on the planet and on their communities. To limit the effects of climate change, and to create a just future that leaves no one behind, it’s imperative that every business, of every size, has the tools they need to prioritise climate action.”

Scope 3 emissions

Despite the small number of requests currently, more SMEs are now being asked, as suppliers, to measure, report and reduce emissions to help larger companies they provide goods and services for to report on Scope 3 emissions more accurately. Larger SMEs aiming to have targets verified in line with 1.5C or Net-Zero by the Science-Based Targets Initiative (SBTi) will need to set Scope 3 goals themselves.

The survey reinforces evidence from the Cambridge Institute for Sustainability Leadership (CISL), the We Mean Business Coalition, SME Climate Hub and Business for Social Responsibility.

The report highlights that it is “essential” for banks and large businesses with net-zero commitments to support the SMEs in their portfolios with “both incremental and radical solutions” to cut emissions. Failure to do so will mean they miss their own commitments, increasing reputational risk as well as increasing problems with carbon transition.

The report proposes the creation of a centralised emissions data repository gathering resources held by banks, corporates and SMEs.

The central information source would provide credible data and free SMEs from the time and effort of collecting their own while ensuring that all partners are working using the same emissions estimates. It would also simplify the process of improving data over time, with organisations sharing results  of their own research.

Previous studies by the SME Climate Hub have also pointed to confusion around how to navigate reporting and certification schemes that are often designed for larger businesses.

SaveMoneyCutCarbon can help. We have an experienced team with the knowledge and skills to provide guidance, services and solutions for SMEs navigating the net-zero path. For more information, why not give us a ring on 0333 123 5464.