Updated August 2023
No one can deny the compelling range of evidence that points to climate change. It is clear that immediate and wide-scale action is needed to prevent the situation from getting worse.
In May 2021 the UK government launched a campaign inviting British small- and medium-sized businesses (SMEs) to join the ‘Race to Zero’ – a global crusade that sees government and businesses pledge to halve emissions by 2030 and achieve net zero emissions by 2050.
What is Net Zero?
Net zero describes a target for reducing greenhouse gas emissions, in particular carbon dioxide. It is achieved when the amount emitted into the atmosphere is no more than the amount removed.
Businesses are seen as key helpers to achieving Race to Zero’s aims. Whilst the focus has been on large organisations (only 100 companies are responsible for 71% of global emissions), all business regardless of size can play their part too.
Committing to net zero also makes good business sense. Many benefits, from efficiency savings and gaining a competitive edge to future-proofing the business, can be gained by adopting the right approach. For small businesses, simple changes, such as switching to LED light bulbs, will help to reduce running costs. Furthermore, environmentally-friendly initiatives are often incentivised through grants or tax relief.
Sustainability Tax Incentives
Whilst many sustainability-related tax reliefs are aimed at larger business, there are some that are available to small businesses, for instance installing charging points for electric vehicles under the Workplace Charging scheme or joining the Cycle to Work scheme.
Often businesses can pay less tax by applying for schemes to help them demonstrate that they are operating more efficiently and producing waste that is less damaging.
Also, green-focused startup businesses can often take advantage of a wider range of grants, loans and funding than a traditional business might.
Environmental Accounting and Disclosures
Currently, only quoted companies are required to report on their global energy usage and large businesses must disclose their UK annual energy use and greenhouse gas emissions. However, as all industries contemplate a sustainable future, many smaller businesses are also looking to voluntarily demonstrate their responsibility and commitment to climate change.
As the financial standards-setting process for climate reporting and disclosures continues to evolve, many issues remain unanswered, such as which information should be subject to voluntary vs mandatory reporting and whether climate reporting should form part of the management report or a separate sustainability report. What is clear for businesses is the requirement to fulfil its information needs for investors, shareholders, and its customers.
Environmental, Social and Governance (ESG)
Any business serious about taking responsibility for its impact on the environment, the community and stakeholders should have an ESG strategy in place. Furthermore, it's not just relevant for individual investors, it is also important for any business looking for investment.
This type of investment should fit not only certain standards for environmental sustainability, but also demonstrate how the business manages its employees in terms of diversity and inclusion, and its social value and governance practices.
Under its initiative Mobilising Green Investment, the UK government has published a revised Green Finance Strategy aimed at supporting the delivery of the transition to net zero. It updates the original strategy set out in 2019 and moves forward some of the initiatives announced in the 2021 Roadmap to Sustainable Investing. Whilst currently applicable only to certain large companies, all businesses should be aware of the emerging trend of lending decisions being based on sustainability strategies and targets.
Unfortunately, ESG has led to an increase in the number of unsubstantiated or exaggerated claims about how environmentally-friendly an investment is – otherwise known as ‘greenwashing’. To counter this, the government set up the Green Taxonomy Advisory Group (GTAG) to provide independent advice on this issue.
Task Force on Climate-related Financial Disclosures (TCFD)
Since the end of 2021 UK premium-listed companies are now required to report under the
TCFD framework. With other companies expected to follow over the next few years, many are already adopting its recommendations, which set out four key elements:
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Governance: the organisation’s governance around climate-related risks and opportunities.
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Strategy: the actual and potential impacts of climate-related risks and opportunities on the organisation’s business, strategy, and financial planning.
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Risk Management: the processes used by the organisation to identify, assess, and manage climate-related risks.
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Metrics and Targets: the metrics and targets used to assess and manage relevant climate-related risks and opportunities.
SME Climate Hub
The UK government is urging SMEs to join the thousands of UK businesses tackling climate change by signing up to the SME Climate Commitment. Businesses of all sizes are invited, as even the smallest business produces carbon emissions, be it through its building, vehicles or supply chain.
Resources on Climate Change for SMEs
For Businesses in the Solent Area
The Solent Local Enterprise Partnership (LEP) provides a Sustainable Business Support Programme to help businesses with 1-250 employees based or operating in the Solent area create a Sustainability Action Plan. More details can be found here
A free of charge energy survey and report to the value of £1,500 is available to eligible SMEs. The report will highlight potential cost and energy savings for your business. Find more information and how to sign up here
For Businesses in General
In August 2023 the Government launched the UK Business Climate Hub. Aimed at SME's it includes a free carbon calculator and a suite of new tools to help businesses measure and report on their emissions, and reduce their energy bills.
A guide to help small businesses calculate and reduce their carbon footprint is available from the FSB.
An introduction to net zero for small businesses from the British Business Bank.
Article on supporting small businesses to take action on climate change on the CBI’s website.
UK Government guidance on how to measure and report your greenhouse gas emissions for small businesses
SME guidance The journey to net zero for SMEs and SME Carbon Footprint Calculator from the Carbon Trust.
Our factsheet Understanding ESG asks: how green are you?
Links to websites mentioned on this page
Accounting for Sustainability
UK Business Climate Hub
UK Government – Environmental taxes, reliefs and schemes for businesses
Funding schemes for businesses
Clean Growth Fund
Carbon Trust Green Business Fund