Supporting SMEs in the Net Zero transition

In May, UK Finance launched a new report on Unlocking the SME Net Zero Transition.

The report looks at the role of banking, finance and policy in enabling the small and medium-sized enterprises (SMEs) Net Zero transition, written in partnership with BVA BDRC. 

At a time when even the most resilient of SMEs are trying to stay afloat, a business’s environmental impacts are one among many, competing priorities. Yet, with the UK Government committed to achieving a Net Zero economy by 2050, eyes are increasingly looking to businesses to take climate action. 

However, this is not without its challenges. From speaking to small business leaders, research by BVA BDRC found a clear knowledge, resource and finance gap for SMEs wanting to decarbonise. SMEs said: “we don’t know what is expected of us and we don’t know how we’ll finance it”. Using quantitative and qualitative research, our report set about identifying these challenges and offering practical solutions. 

The report offers a range of new insights from across the banking sector, leading industry experts and, most importantly, small businesses themselves. With a detailed survey, interviews and focus group analysis, the voice of SMEs is put at the heart of their transition to Net Zero.

The message was clear. SMEs want help in understanding what needs to be done to reduce their emissions, with clear digestible information. Funding help through a combination of public and private finance. And a clear and consistent policy framework to work within. 

Our report makes ten recommendations to government, businesses and financial services firms to tackle these issues to help SMEs take greater sustainability action. 

To address lack of time, capacity and information:

1. Banks: Improve business understanding through a revamped mentoring offering and by convening business networks to share good practice.

2. Government and business: Relaunch the UK Business Climate Hub with improved content and greater publicity.

3. Larger businesses: Provide training, resources and support to help SME suppliers improve their environmental practices.

4. SMEs: Seek advice and support from your financial service providers and/or larger customers, and use the UK Business Climate Hub, to map out your sustainability plan.

To ensure finance can respond to SME needs:

5. Banks: Produce guides to explain where SME spending on sustainable action makes financial sense and offer financial products to support them.

6. Government and Devolved Administrations: Issue “Help to Green” vouchers of £5,000 for SME action.

7. British Business Bank: Use all available funds and schemes, including the new Growth Guarantee Scheme and Start Up Loan Scheme to encourage carbon reduction activity.

8. UK Finance: Support banks and other actors to better support SME action, by facilitating knowledge-sharing and data-gathering.

To address the policy gap:

9. Government: Establish a Taskforce to plug the gaps in SME-facing sustainability policy, and help strengthen SME understanding of what is required.

10. Government, Devolved Administrations and Local Authorities: Publish sector-specific regulatory timelines, grounded in a long-term green industrial strategy, so SMEs know how to plan.

To read more on the recommendations and download the full report, please visit our page here.

Ultimately, the report calls for more collaboration, knowledge-sharing and capability-building to support SMEs in the transition to a Net Zero economy. 

To that end, UK Finance is pleased to partner with Climate Action for the Climate Innovation Forum 2024, taking place on 27 June as a flagship event of London Climate Action Week. The Climate Innovation Forum will bring together 1,000 leaders in business, policy and finance to drive the net zero transition. To register today, please click here

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