With growing focus from customers, suppliers, investors and increasingly in government policy, small and medium-sized businesses can’t afford to ignore sustainability.
In a recent webinar, Ruaridh Welsh of the Carbon Trust, and Michaela Wright, Head of Corporate Sustainability at HSBC UK shared their insights and experience of building a sustainable business and pursuing net zero.
What is net zero?
Net zero is part of a wider move to be more sustainable and offers businesses – and government – a tangible goal. To become net zero is to reduce greenhouse gas emissions in line with limiting warming to 1.5 degrees above pre-industrial levels (as set out in the Paris Agreement) and then to balance any remaining emissions.
The first step is to determine the emissions from within your business – referred to as scope one and two emissions. You can then consider indirect emissions – or scope three emissions – for example, from within your supply chain. The next step is to create an emissions reduction pathway and then, to achieve ‘net zero’, to balance any residual emissions by investing in carbon removal projects.
SMEs are important in the fight against climate change. They play a crucial role in economic growth, innovation and job creation, and they need to embrace carbon reduction measures if the government is going to deliver on these near zero targets.
Ruaridh Welsh| Senior Associate, The Carbon Trust
Why does it matter?
The UK Government has set targets to achieve a 78% reduction in emissions by 2035 and to achieve net zero by 2050. “SMEs are important in the fight against climate change. They play a crucial role in economic growth, innovation and job creation, and they need to embrace carbon reduction measures if the government is going to deliver on these near zero targets,” explains Ruaridh.
Sustainability has been increasingly in the spotlight, especially since COP26. Held in Glasgow in November 2021, Conference of the Parties has been running since 1992 and provides an international framework for addressing the climate crisis and remaining below 2 degrees of warming. “While the outcomes could perhaps best be described as ‘modest progress’, it’s clear that the deals negotiated will place more pressure on the private sector and on businesses, and it’s really clear that there is a need for us all to work together,” says Michaela.
Looking ahead, she says, we can expect stricter climate policies, particularly in key sectors such as transport and energy. Many policy changes are already emerging:
- By 2023, companies with a net zero pledge, listed on the London Stock Exchange, must make their roadmaps to achieve that publicly available. “If the larger companies are doing this, we anticipate even greater expectations on their supply chains to lower their emissions,” says Michaela.
- By 2030 new diesel and petrol vehicles will be phased out.
- By 2035 hybrid cars and vans will be phased out.
- By 2040 all HGVs are to be zero emissions.
“These dates are worth considering when planning your future transport needs,” says Michaela.
Businesses also need to prepare for the physical impacts of climate change. “In the long term, businesses need to start building resilience and develop adaptation strategies in response, really thinking about the broader environmental impact in the future,” she says.
There are a lot of benefits to this in the long term. You can attract new supply chain opportunities and customers; it shows your employees you’re playing your part to avoid the worst impacts of climate change.
Michaela Wright| Head of Corporate Sustainability, HSBC UK
What’s driving businesses to pursue and achieve net zero?
Sustainability isn’t just about mitigating risk, there are also real opportunities available, as Michaela points out: “There are a lot of benefits to this in the long term. You can attract new supply chain opportunities and customers; it shows your employees you’re playing your part to avoid the worst impacts of climate change. And, with expectations of carbon taxes and carbon pricing, you can avoid potential undue costs in the long term and set your business up for long term success.”
Steps to building a sustainable business
Buildings and equipment
Ruaridh points to what he describes as ‘low-hanging fruits’ in starting out on your carbon reduction journey. ICT equipment, heating and lighting are the largest sources of energy consumption in an office environment, but there are low-cost options that are accessible and can have a huge impact in reducing energy and costs. He shares some examples of businesses that have taken this route.
IT equipment – “Electricity to power IT consumes about 15% of the total energy consumption within offices,” says Ruaridh. “An engineering firm implemented a switch off campaign to ensure that all office computers are turned off at the end of the day and weekends. They’ve saved around £600 and three and a half tonnes of carbon a year.”
Heating – “Heating accounts for about 20 to 40% of energy costs in a typical office environment. The Chinese Centre for Art in Manchester installed a simple £100 timer to its existing heating system. They saved just under £4,500 and just under 18 tonnes of carbon a year.”
He then goes on to describe the next step in building sustainability – “creating a plan and budgeting for more costly options”. “A good place to start is the UK Government energy technology list, which shows equipment with high standards of energy efficiency. It can help you consider how to reduce emissions and costs and understand the payback period of any investment.”
Transport
Company vehicles – installing telematics can help access data on mileage and location to inform decisions about the suitability of electric vehicle replacements, for example. Speed limiters or adaptive cruise control can also help reduce emissions.
Electric vehicles – with grants available, electric vehicles are a growing option for businesses. Ruaridh describes a study that claims that “450,000 SMEs could save up to £1,500 a year just by switching to their first electric car.” Balancing lower running costs with upfront investment and suitability is important, but the savings could be significant. “Fruit for London purchased two electric vans in 2012. From those two vans, they saved just over £2,500 a year on the London congestion charge alone, and also 20 tonnes of carbon,” says Ruaridh.
Downstream activities
Travel – replacing in-person travel with online meetings where possible can also generate cost and carbon reductions. For unavoidable travel, considering lower carbon options such as fuel-efficient airlines, can help.
Reducing waste – adopting digital processes to go paperless can reduce waste significantly.
Employees – supporting less carbon intensive commuting, such as working from home, hybrid working or cycle to work schemes can also help reduce your indirect emissions.
A good place to start is the UK Government energy technology list, which shows equipment with high standards of energy efficiency. It can help you consider how to reduce emissions and costs and understand the payback period of any investment.
Ruaridh Welsh| Senior Associate, The Carbon Trust
It’s clear from the policy changes and government commitments that we must all work together to avert the impending climate crisis and to achieve targets around net zero. As attention grows, the business risks of failing to act are also emerging. Our panellists shared stories of large businesses demanding actions from their suppliers, for example. But there are also opportunities, as new markets for innovative solutions to address the net zero challenge increase.
