Net zero and SMEs: how you can act now 

On our introduction to net zero for SMEs, we discussed the meaning of net zero and why it’s important for businesses and society. Getting to net zero in the future requires action now so that you don’t fall behind. Starting your net zero journey can seem daunting, so in this week’s blog we’ve had a look at some practical measures your business can take.

Measurements first

The most important step any business can take before setting climate targets is to calculate current emissions. You can’t start to tackle your emissions if you don’t know what they are.

The Broadway Initiative’s Zero Carbon Business Tool is a useful tool to get this process underway, designed to help SMEs measure their corporate emissions easily and taking account of non-CO2 levels. You may want to consider where the boundaries of your business lie, accounting for operations and sites that you directly control. The government regularly publishes conversion factors allowing you to calculate the “carbon dioxide equivalent” (CO₂e) of different gasses. You might also consider installing sub-meters that let you measure the energy use of different sites or processes to establish where your greatest emissions come from.

Emissions categories

Carbon footprints are measured in categories or types called “scopes”, which are defined by the Greenhouse Gas Protocol, the internationally recognised standard for reporting emissions - so businesses should feel safe using them as a framework. They are:

Scope 1: Direct emissions from facilities or equipment your business owns or controls. This covers everything from burning gas to generate heat for manufacturing processes to fuel burned by company vehicles. Reducing Scope 1 emissions may involve replacing equipment or changing your processes.

Scope 2: Indirect emissions from energy you buy from suppliers. This refers principally to electricity which is generated off-site but used on-site. Switching to a supplier that only buys renewable energy is an easy way to decarbonise, but beware of greenwashing, which may mean some care is needed to verify the Green credentials of a supplier.

Scope 3: Indirect emissions from your company’s supply chain. These are the emissions linked to the activities of your business, including business travel, purchased goods and services, water and waste. As they are not directly generated by you or the energy you buy, they are known as “value chain emissions. For most businesses, Scope 3 emissions make up the vast majority of your carbon footprint. Measuring Scope 3 emissions can be complex; the Greenhouse Gas Protocol has published technical guidance to explain the details.

Setting targets and taking action

Each Scope offers different opportunities to cut emissions; this blog focuses on Scope 1 and 2.

The most important thing is to set realistic but ambitious targets, perhaps by working out what emissions reductions will be required each year to reach net zero before 2050. Interim targets give you the opportunity to monitor your progress and make corrections if you go off-course.

Scope 3 emissions are, in most cases, the biggest obstacles to reaching net zero as they are much harder to eliminate. Factoring them into your interim target-setting is vital. One approach may be to set a much more ambitious target (i.e. a target in the nearer future) for getting Scope 1 and 2 emissions to zero, leaving you capacity to focus solely on Scope 3.

Start with the easy wins

Energy efficiency is the quickest and cheapest way to cut your emissions. Scope 1 and 2 emissions can be immediately tackled by considering building efficiency, from building fabric measures to reducing heat and cooling loss, or even servicing and replacing boilers.

One consideration to factor into your planning, however, is that there may be an impact on the value of your property, and hence Business Rates liability, although that could be balanced by reduced energy bills. It is worth thinking carefully about whether the government’s ‘Super Deduction’ is available. The Super Deduction applies to spending on certain, but not all, assets by companies subject to corporation tax (but not all businesses, such as sole traders or partnerships). The Super Deduction gives additional corporation tax relief for spending on qualifying assets, and is open until March 2023: which means that if it is available, now may be a good time to invest in energy efficient machinery.

If you work from rented premises, you may not be able to make these changes but there are still measures you can take. In particular, you can ensure that energy efficiency is a criteria you consider when seeking new properties. The Minimum Energy Efficiency Standard legislation has now become law, but this covers a wide range of energy efficiencies, and opting for an A-rated building is clearly more environmentally friendly. This will also show in your running costs. Additionally, it may be worth a discussion with the property owner or management to see if there are plans or scope for working together to improve the position.

You may also consider switching to a supplier that only buys electricity generated from renewable sources, or even investigate onsite renewables of your own. When looking at providers, green tariffs are always a safe bet, but it’s important to ensure that your provider has a tariff backed by a “guarantee of origin” so you can be sure that you are getting clean power.

If you have a company fleet, you’ll need to think about what this looks like in light of the Prime Minister’s recent commitment to banning the sale of new petrol and diesel cars from 2030. Starting the transition to hybrid and electric vehicles as soon as realistic will pay dividends in the longer-term as pressure grows to tackle polluted air. In any case, you’ll need to think about stranded assets. Diesel-powered vehicles will soon be a significant financial burden, so having a plan to dispose of them as soon as possible is a sensible step now.

Of course, many of these early steps will need to be supported by national and international political interventions, from a properly funded charging infrastructure for electric vehicles to affordable renewables and a decarbonised grid that makes affordable clean power ubiquitous. Furthermore, it is vital that businesses are consulted with to ensure that government is listening to their concerns and providing consistent, clear information on what is needed from both sides.

The BCC remains committed to working with government to ensure that such policies are brought forward to enable businesses to play their part in tackling the climate crisis and to take full advantage of the significant economic opportunities a green revolution provides.

Planning now is the key

The message is clear – if you want to get to net zero in the coming decades, you need a plan now. Measuring your impact, setting your priorities and picking off the easy wins is a great way to start your journey and drive your emissions down.

Embarking on your net zero journey can have significant benefits – it saves costs, brings greater collaboration both upstream and downstream, and it boosts your reputation amongst clients and customers increasingly concerned about climate change. While adaptation may cost, the rewards can be significant.

Later this month, we’ll be taking a look at the all-important scope 3 and what we need to see to help businesses tackle supply chain emissions.


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