Where are SMEs on their journeys to Net Zero?

“The 5.5 million small-to-medium-sized enterprises (SMEs) who contribute over £2 trillion to the economy will have a vital role to play in reaching the UK government’s ambition of a Net Zero economy by 2050”.

Over the last few years, tackling the climate crisis has been a key priority for governments and institutions across the world. And here in the UK the 5.5 million small-to-medium-sized enterprises (SMEs), who contribute over £2 trillion to the economy, will have a vital role to play in reaching the UK government’s public ambition of a Net Zero economy by 2050¹.  They will also benefit from the many commercial opportunities that will become available too, such as lower costs, improved reputation and attracting new investment.

That’s why, in 2021, Lloyds Bank conducted research amongst 1,000 UK SMEs which determined five stages of the Net Zero journey –  zero representing those SMEs considering no action and five signifying those who have already reached the target. This research subsequently led to the From Now to Net Zero Report – a practical guide for SMEs on how to curb their carbon emissions. 

The report found that while most SMEs had a desire to make change, many were still unsure how to implement that change in practical terms. It’s important to remember that transitioning to a green economy will mean challenges for many SMEs, especially short-term challenges such as energy investment and input costs. Our 2022 SME Net Zero Monitor survey took the research one step further and revealed the number of UK SMEs at each stage of the journey.

The importance of collaboration

Many SMEs won’t be able to reach Net Zero alone. Collaboration will be one of the key factors of success. And our research shows that many SMEs are already aware of this fact, with 56% engaged directly with other businesses they work with on how best to reduce their greenhouse gas emissions. Moreover, around half say they have already benefited from other businesses they work with on reducing their emissions as well. 

The 7% of SMEs that have already reached Net Zero emissions can help lead other SMEs towards more sustainable business practices – we call these businesses our ‘Net Zero Heroes’. For example, Allium Energy in Yorkshire are using gas produced from their former waste sites to create power and heat locally, with any excess sold to the National Grid. This hasn’t just helped their own business, but neighbouring industrial businesses to lower their environmental impact and help their transition to Net Zero. 

Across the board our Net Zero Heroes have reported several benefits of being carbon neutral, including protecting the natural environment for future generations, waste reduction, improved reputation, employee wellbeing and engagement, attracting new employees and cost savings. The activities which had the most impact on their business were reducing energy consumption, recycling and reducing waste and crucially, working with suppliers to reduce their environmental impact.

Where are SMEs looking for support?

SMEs are mostly turning to the internet for support – 50% have sought information online and 49% say they accessed material from the UK Government’s website. Elsewhere, 30% have asked for help from external consultants and 20% have used external membership bodies. 

45% of SMEs said they identify their bank as a potential support source, but only 14% have actually worked with banks on their transition to Net Zero economy. It’s clear that as one of Britain’s largest financial institutions, then, we should be doing everything possible to support small businesses. 

We know that, for SMEs who are yet to start their net zero journey, the task can seem intimidating. That’s why our sustainable business hub offers genuine insight and actionable steps for small business owners. And, as I say, our From Now to Net Zero report offers simple, practical steps for small business to start their journey.