A major initiative has been unveiled to create “a simpler, shared” reporting framework that will help smaller businesses move towards net-zero greenhouse gas emissions.
Bankers for Net Zero, the UK chapter of UN Net-Zero Banking Alliance, warns that small and medium-sized enterprises (SMEs) risk losing large corporate customers unless they can report on their net-zero emissions. Banks, accountants and SMEs will need to work together to deliver a “just transition”.
The group says that SMEs are responsible for around half of total greenhouse gas emissions from UK businesses, and that engaging them will be crucial to hitting net-zero targets. They are also the innovators behind technology solutions to climate mitigation and adoption, and will be expected to provide greater transparency on their emissions if they are to secure growth funding and unlock new commercial opportunities.
However, Bankers for Net Zero says that SMEs do not currently have the expertise, resources or time to transition to net zero without support from their banks. Under its Mobilising SMEs for Climate Action workstream, the group aims to develop practical solutions by bringing together banks, accountants, energy companies, civil society and SMEs to devise “an actionable and transparent framework which will enable frictionless reporting on net-zero emissions for banks and their SME customers”.
The move comes as Sage and International Chamber of Commerce unveiled its report The Climate Impact of SMEs, showing that SMEs are generating 44% of the UK’s non-household greenhouse gas emissions. In 2021, UK SMEs contributed an estimated 160m tonnes of Scope 1 greenhouse gas emissions, rising to 63% once their supply chains are considered. The study says that while SMEs want to be greener, 90% feel restrained by obstacles such as cashflow and the difficulty of finding the right solutions to improve their environmental impact. Only 36% of SMEs have publicly communicated a net-zero target, although 53% see sustainability as either a priority or central to their operations.
The report calls on the government not to overlook small businesses as they contribute 50% of the country's Gross Value Added to GDP – worth £1trn in 2021 – while providing 52% of total employment (18.2 million jobs). It adds that without urgent support from policymakers, SMEs are at risk of being left behind in UK’s fight against climate change.
Meanwhile, Lloyds Bank has published its first Net-Zero Monitor for SMEs, based on a poll of 1,074 decision-makers at small businesses. This reveals that while only 5% said that their firm is taking no action to reach net zero and is not considering doing so in the near future, 36% have measured emissions and use this information to inform net-zero plans. Some 62% have sought to cut emissions through recycling and reducing material consumption and waste, and 60% of SMEs had taken steps to reduce energy use, although only
36% are procuring renewable energy.
