Why Smaller Businesses Need Climate Support

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Why Smaller Businesses Need Climate Support | Future Business

Two thirds of small businesses are concerned over how to manage climate. What help is out there? Smaller businesses face some interesting challenges when it comes to climate change. They can be agile and quick, but they haven’t generally massive resources, either cash, staff or logistical.

They know that climate change is here, but simply lack day-to-day time to determine the best adaptive solutions. Further, their business models may be very specific, less able to realign with new realities. And, in today’s times, they may simply be pleased to have remained in business throughout the pandemic.

But, adapt to climate change they must, and embedding sustainability is essential. The numbers seem to show small firms are struggling to generate the pace they require, and to enact meaningful change at scale.

The Numbers on Small Businesses and Climate

The SME Climate Hub is a UN-backed initiative that helps small and medium sized (SME) businesses take robust climate action. Ideally it hopes they will join the United Nations Race to Zero campaign too, which seeks to decarbonise global economies.

The Hub conducted a survey to explore the barriers preventing SMEs from reducing their carbon emissions. The Hub focused the paper on 194 of their member businesses, representing a sample of companies around the world, and across sectors, size, and income.

The survey finds that small businesses are indeed stepping up in the fight against climate change, but lack the resources needed to invest fully in their climate journey. Eight out of ten participants consider reducing emissions is a high priority, with businesses making efforts to cut their greenhouse gas emissions through reductions to energy consumption and waste (82 percent), employee education (64 percent), and upgrades to facilities and equipment (52 percent).

But the challenge is only 60 per cent of the SMEs had a long-term emission reduction plan in place, highlighting the importance of short-term actions and the need for increased planning amongst these first movers.

On another metric, involving the fact taking climate action leads to more resilient businesses – SMEs reveal their growing understanding of benefits. Small businesses are prioritising climate action to enhance the reputation of their brand (73 percent); differentiate their business from competitors (61 percent); and meet customer expectations (42 percent). Some 96 per cent of SMEs cited “the right thing to do” as a key motivation for taking climate action.

But the problem appears even small businesses aware of their environmental impact and the benefits of carbon mitigation have often lacked the resources to take action. This, in turn, adds another barrier for companies not yet involved in the conversation.

The most commonly cited barrier to action is a lack of skills and knowledge, denoted by 63 per cent of surveyed businesses. This might include education around where and how to get started, a baseline understanding of the SME role in climate action, or the tools available to aid them in their journey.

The second most common barrier, as one might well expect, is funding, cited by nearly 50 per cent of businesses. Concurrently, 69 percent of SMEs denote access to external funds as necessary to reduce their emissions faster or at all. Only one-third of SMEs have been offered a financial incentive to reduce emissions, with only eight percent of SME owners having received support from their banks.

Why It All Matters

It is worth understanding why the SME sector is so important. SMEs are usually classified as businesses with fewer than 500 employees. The key is that although any single SME’s climate impact may seem small, the combined effect of the category is much larger because SMEs make up 90 per cent of business worldwide.

They are also an integral part of the supply chains of larger corporations, and make up a category called Scope 3 emissions. “Taken on an individual scale, each small business has a relatively moderate carbon footprint,” said María Mendiluce, CEO of the We Mean Business Coalition, a founding partner of the SME Climate Hub.

“However, together, these small businesses have a huge impact, both on the planet and on their communities. To limit the effects of climate change, and to create a just future that leaves no one behind, it’s imperative that every business, of every size, has the tools they need to prioritise climate action.”

What Can Be Done to Help?

Through the Hub, SME businesses which commit to Net Zero can access tools and support to measure, report on, and reduce their emissions. Since the survey, the initiative has also addressed resource needs of the small business community, launching tools for education, skills development, and financial incentives, with additional tools being developed in the coming months.

Crucially, the Hub has partnered up on a measuring tool with Normative, which can help SME businesses understand their baseline emissions through insights into the carbon footprint of businesses in the same industries and regions.

This is vital, because SMEs often don’t have the internal expertise to understand, let alone report on their carbon impacts properly. Until these are measured and understood it is very difficult to consider the best adaptive pathways for any given firm.

“The most important thing is to get started. Every organisation is a part of the journey and every forward step matters, ” says Kristian Rönn, CEO and co-founder of Normative. “We need to start measuring our impact today, because in the end what gets measured gets managed.”

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