Martin McTague: Green knowledge is power

Martin McTague OBE, National Chair of the Federation of Small Businesses (FSB)

In the second of our thought leadership interviews, UK Business Climate Hub talked to Martin McTague, National Chair of the Federation of Small Businesses (FSB).

The 5.5 million small businesses in the UK make up over 99% of the business population. SMEs have a huge role to play in decarbonising the economy.

As National Chair of FSB, entrepreneur and small business champion, Martin McTague is expertly placed to talk about the key role SMEs have to play in the UK’s transition to a net zero economy.

We asked Martin about some of the common themes which are emerging across sectors where SMEs can make progress. His replies highlight how small firms can be empowered to reach net zero and how green knowledge is power.

What challenges are SMEs facing in the transition to net zero?

Most small business owners believe our planet is facing a climate crisis, but over one in four say it will be extremely difficult to transition to a net zero economy.

Small businesses are an incredibly diverse group, and the challenges and obstacles they face when it comes to lowering emissions and reducing their carbon footprint differ hugely; what might work for an independent hotel will not work for a mobile hairdresser, to state the obvious!

In our 2021 report, we found that only around a third of small firms had a plan to combat climate change. The cost of doing business during the crisis has forced many small businesses to focus on survival. This situation is hardly conducive for taking the time and effort to make a plan, or for having the resources necessary to invest in new technology or equipment.

What ‘lessons learned’ can help SMEs who are starting their net zero transition?

Knowledge is green power. SMEs can learn from the many early-adopting small businesses who have moved fast to change their businesses to become more environmentally friendly. Small firms can adapt much more nimbly than large corporates, who are more akin to large oil tankers changing direction.

Many are finding opportunities within the climate change agenda, turning something which can feel regulatory and imposed into wholly new business activity.

Others are seeing how early action is reducing their bills, as well as their energy use. Some of the ways to reduce a business’s carbon footprint are potentially cost-neutral or even cost-saving, such as:

opting for a green electricity tariff
environmentally-friendly packaging
choosing to hold meetings by video rather than travelling in person

How is the supply chain reaction affecting SMEs?

Many small firms who are suppliers to larger companies are increasingly finding that their customers are getting stricter about carbon accounting, while anyone bidding for a public contract over £5 million is required to have a Carbon Reduction Plan.

According to ONS figures, one in ten large companies had a net zero or greenhouse gas emissions target, which includes its supply chain, in March of this year. This percentage has nearly doubled since two years ago.

Small firms are more likely to have to calculate their carbon footprint and emissions sources in order to access supply chain and procurement opportunities in future.

How can small firms access the green knowledge they need to keep up with the supply chain reaction?

We would like to see large corporates working in partnership with small suppliers, helping the smaller firms to access tools to help them on their net zero which might otherwise be out of their reach.

Small suppliers are often the originators of truly innovative carbon reductions. It’s crucial that big firms don’t put big firm-style bureaucracies onto small ones, but rather take proactive steps to work positively with suppliers.

What lessons have we learnt from the recent energy crisis to help SMEs in the future?

The recent energy price crisis saw soaring prices for electricity and gas hit many thousands of small firms. It was a sobering demonstration of the risks to small firms posed by volatility in the energy market.

Small firms did their very best to improve their energy efficiency in order to save costs. We saw how 16% of small firms invested in energy efficiency or onsite generation to become more energy independent by:

fitting a heat pump or solar panels
improving insulation of business premises
buying or leasing new equipment which uses fewer resources

We’ve learnt that although all of these can require a fair bit of cash up front, they will eventually pay for themselves in some cases.

Overall, our research found that nearly one in five small firms have already invested in a form of microgeneration. This is an investment in the future and something we would like to see more small businesses empowered to do, even if they do not own their own premises.

“Recognising their role in combating climate change, small businesses themselves are already taking action to mitigate their impact on the environment. From the installation of basic measures such as LED lighting, through to becoming fully self-sufficient microgenerators, small businesses are as varied and as creative as ever in their drive to reach net zero.”

Foreword excerpt by Martin McTague in FSB´s Accelerating Progress

What financial help and support is available to help SMEs reduce their energy use?

The current high interest rate environment has made it harder for small firms to get funding for investment of all kinds, including green improvements to operations and premises. But some help from public funding is available, with a round-up of schemes and discounts across the UK and listed separately by nation here.

The Government has launched a pilot energy assessment and grant scheme in the West Midlands to help small firms to reduce their energy use – the Business Energy Advice Service. We would welcome this approach being extended nationally.

How can landlords help empower SMEs on their path to net zero?

We’re calling for tenants to be given more power to ensure they can easily get hold of the information needed to calculate their energy usage and carbon emissions, if they do not pay their own utility bills directly.

Landlords can be proactive with the installation of smart meters in homes or commercial properties they rent out. Smart meters allow individuals and businesses to see what they are spending every day on energy, meaning they are more likely to change their energy usage habits as a result.

Where can SMEs access green knowledge quickly and easily?

Small business owners have a huge number of demands on their time, often wearing many hats, so ensuring that green initiatives are easy to understand and straightforward to implement is vital.

Sites like the UK Business Climate Hub play an important role in bringing together tailored support and guidance for small firms, as do organisations like FSB, through our sustainability and net zero hub.

Knowing how to measure and classify emissions can be a daunting task at first, with nearly seven in ten small firms not knowing how to do so.

However, businesses can access free carbon footprint calculators to simplify the process of understanding and managing their emissions.

Are we moving quickly enough to close the green knowledge gap?

The UK Government has introduced binding legislation to reach net zero by 2050, and as we approach that date, the volume of regulation around environmental impact is only going to increase.

The Government should do everything it can to help small businesses reduce their carbon footprints, helping them access the tools and knowledge needed to set them on a greener path which is better for their bottom lines, as well as for the environment.

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