Catherine Lewis La Torre

Its latest research report, smaller businesses and the transition to net-zero, highlights the potential collective influence of UK smaller businesses and the considerable contribution they could make to wider net-zero objectives if they all made changes to reduce their carbon footprint.

The report, one of the most in-depth so far in this under-explored part of the market, incorporates results from fresh data via a bespoke, nationally representative survey of 1,200 smaller businesses, and analysis of public data sources.

Over three in four businesses (76%) are yet to implement comprehensive decarbonisation strategies, capabilities and actions, according to Bank estimates. One example of this is that just 3% of smaller businesses surveyed say they have measured their carbon footprint in the past five years and subsequently set an emissions reduction target.

There is limited proactivity from businesses to improve their own knowledge and capability, for example, with more than half (56%) in the survey saying they have taken no actions to change this.

However, when asked about physical actions, it is encouraging to see that the vast majority (94%) say they have taken at least one action to reduce their emissions, though they tended to be low-effort ones, such as installing a smart meter.

Overall, the most common motive for taking action, mentioned by just over half (51%) of businesses, was that it ‘made financial sense’, speaking to the need to align net zero and financial objectives for businesses in the transition.

The data reveals around half (52%) of smaller UK businesses fall within the ‘Carbon Complacent’ or ‘Carbon Exposed’ personas established by the Bank based on business characteristics, emissions intensity, actions and attitudes. Businesses falling under these personas are reactive or simply disengaged in their attitudes to cutting emissions and have ‘low carbon transition maturity’.

More than half (57%) of smaller businesses have heard a lot, or a fair amount, about the government’s commitment to reach ‘net zero’ emissions by 2050, and the implications of climate change for their businesses (56%), establishing a strong base for further transition.

However, while nearly half (47%) of smaller businesses state reducing carbon emissions or environmental impacts is a high or very high priority over the next two years, 53% indicate they are not yet ready to prioritise decarbonisation. This split in attitudes demonstrates the need to raise awareness, balance the knowledge gap and ultimately help facilitate change.

The research found that smaller businesses identified more than twenty barriers preventing action on net zero, demonstrating the complexity in addressing the issues on a wide scale and the need for tailored approaches.

Some common themes have emerged, however – more than a third (35%) of smaller businesses cited costs as a barrier for reducing carbon emissions, particularly upfront capital costs (21%), followed by feasibility (32%), such as lack of control due to tenancy agreements or lack of an appropriate technology. Over one in ten (12%) said that lack of information was preventing them from action.

So far, 11% of the smaller business population - equating to around 700,000 businesses in the UK - have accessed external finance, in the form of loans or equity, to support net zero actions. Looking forward, 22% of the UK smaller business population (equivalent to around 1.3 million businesses) – say they are prepared to access external finance to support net-zero actions in the next five years.

Catherine Lewis La Torre, CEO, British Business Bank, commented: “Smaller businesses will generally have lower individual carbon footprints than their larger counterparts, but by broadening their vision and committing to action they can collectively produce a significant overall impact.

“Action to mitigate the impacts of climate change is at tipping point, and it is crucial for smaller business owners to feel empowered, informed and supported in making the relevant steps to decarbonising their business if the UK is going to meet its wider net zero objectives by 2050.

“More than half of smaller businesses say they’re not ready to prioritise decarbonisation, so clearly more needs to be done.

“The Bank continues to strive to bridge the knowledge gap and work with its partners to improve smaller businesses’ access to the right finance to help them transition to net zero. We hope this report encourages business owners to review their business model, consider where changes can be made and to make the necessary investments to secure a sustainable future for their businesses.”

The UK has a target to bring all greenhouse gas emissions to net-zero by 2050. Supporting this, the Bank has a revised mission to drive sustainable growth and prosperity across the UK, and to enable the transition to a net-zero economy, by improving access to finance for smaller businesses.

Tackling climate change is the great challenge of our age and the British Business Bank will step up to play its part. We will use the findings of the report we have published today to help shape our plans to support smaller businesses transition to net zero, and we will set out our next steps shortly.