As we reach the end of the year, many small businesses are facing an uncertain 2023 after an unsettling 2022. Predictions for growth are pessimistic and there are questions over what support there will be for businesses and households to pay energy bills after April. However, small businesses have proven their resilience and innovation time and time again in the last three years, together with the continued drive of entrepreneurs to start new businesses. Alongside this, the sector continues to engage and progress its action on environmental issues, particularly climate change. NatWest’s SME Taskforce, chaired by Andrew Harrison, brought together leaders and partners in small and medium enterprises at the end of November to discuss the challenges ahead and the update to NatWest’s Springboard to Sustainable Recovery report.
Zvetelina Stantcheva, associate partner at McKinsey, presented the report, underlining that SMEs have a pivotal role to play in the decarbonisation of the UK in two ways. The first is pursuing new revenues in selling goods and services for decarbonisation, and also making sure they identify opportunities to decarbonise their own business. The former is now estimated to be worth £175bn and could support 40,000 new businesses and 260,000 new jobs. This would also support “levelling up” as, for example, more than half of the opportunities from building and transport are in the South and Northwest, while the Northeast, East and Scotland are at the forefront of renewables. Stantcheva said there were also opportunities for SMEs in selling to Europe and globally, “by providing low carbon goods and services to other regions”.
Jake Langmead-Jones, sustainability manager at McKinsey, set out the key area for SMEs to take action in to start to realise those benefits. “What you’re looking at here is basically the revenue opportunities that we identified for SMEs to deliver the plan that the UK government has signed into law,” he said.
“The UK really has been a pathfinder for global decarbonisation,” Langmead-Jones said, and if this can be used to successfully export decarbonisation goods and services to Europe, where the market is significantly larger, the opportunities are huge. “Today, UK SMEs export approximately £200bn of products and services, and you see that more than 80 per cent of those products and services have a relationship to decarbonisation.”
On the other side, McKinsey’s work also set out the actions needed for SMEs to decarbonise themselves: installing solar on the roofs; insulating; installing heat pumps; and, if they have a fleet, decarbonising that fleet now. “The fundamental business cases for a lot of these actions SMEs need to take have actually got stronger in the past 12 months, because of what we’ve seen with energy being so expensive right now,” Langmead-Jones said.
However, there are challenges to taking these actions, said Martin McTague, chair of the Federation of Small Businesses. “A lot of SMEs are in rented property, where the landlord controls those kinds of [energy efficiency] objectives. So that is tricky,” he said. Together with this are supply chain issues and finding the capital to make these changes when businesses are in “survival mode”. However, McTague felt the report and discussion were “absolutely the right place to be”.
Langmead-Jones responded: “SMEs are going to need to be the driving force of decarbonisation. And if they are facing these challenges, that you’ve rightly pointed out, it’s also a case of how SMEs can be supported.”
“The needs are so different,” said Amanda Anderson, head of operations at Business in the Community. There are lots of different motivations at work across businesses and signposting and support need to reflect that. “What we’re starting to see from the work that we’ve been doing is leading with decarbonisation, for a lot of businesses, is not sexy, and they don’t get it. Actually, leading with cost savings is more interesting,” she said. Business in the Community is developing tools and toolkits to cater for those diverse needs that brings in that clear signposting. “There’s so much support out there, but it’s really complicated to navigate,” she said.
“If you can identify those specific industries where government interventions and support would be most valuable, that’s what businesses are quite happy to see,” said Nathan Brown, principal policy adviser on innovation at the Confederation of British Industry. He noted that both the Prime Minister and leader of the opposition were putting a lot of emphasis on the green economy and innovation, which SMEs should be in a strong position to take advantage of.
These issues were very much reflected at a recent NatWest Cymru event, said Gemma Casey, NatWest Cymru ecosystem manager. “There was little awareness of the need to build the climate issue into resilience planning, and there was also little awareness of the fact that there are potential benefits for a business in taking climate action,” she said. There was and is a willingness to act, Casey explained, but businesses are nervous about investing in the current economic situation and don’t have the information about what steps to take and what support there is to take them. One of the ways they explored to do this, she said, was to train businesses, such as accountancy practices, to enable them to support their business clients going on a decarbonisation journey.
If we are going to support businesses through the next year and beyond to survive, thrive and play a key role in our transition to net-zero, then we need policy makers and businesses to be thinking about what information, advice and support need to be in place. Entrepreneurs want to play a role and they want the opportunities from decarbonisation, they just need a supportive policy environment and community around them.