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UK Government Net-Zero Targets Are Still a Long Way off for Small Businesses

Despite the fact that the UK has announced its commitment to achieving net-zero greenhouse gas emissions by 2050, two new studies suggest that both businesses and consumers are struggling to keep up.

Although the UK government announced its plans to cut carbon emissions and reach net-zero by 2050 last year, and in light of the growing demand for greener investing, two new studies from the British Business Bank and Tandem Bank have highlighted businesses and consumers alike are still struggling to comprehend the term ‘net-zero’ and how it applies to them.

What the British Business Bank found

The majority of smaller businesses in the UK don’t understand how common environmental terms like ‘carbon footprint’ (59 per cent), ‘carbon neutral’ (69 per cent), ‘net-zero’ (74 per cent), ‘decarbonisation’ (78 per cent) and ‘greenhouse gas emissions’ (87 per cent) apply to their businesses.

The Opinium survey of 1,000 senior decision-makers in smaller businesses found that just over half believe the language, terminology and information around carbon emissions reduction are overcomplex.

Sixty-one per cent say they would find more information and advice about taking action to measure and reduce their business’ carbon emissions helpful, with over half of those wanting advice on measuring their business’ carbon footprint, and 51 wanting information to help work out if reducing carbon emissions makes financial sense for their business.

Forty-four per cent don’t know where to get information on reducing their carbon emissions and how best to approach related commercial or financial opportunities.

The British Business Bank’s recently established ‘Green To Grow‘ campaign was created to demystify and alert smaller businesses to the commercial benefits of investing in decarbonisation.

Resources include a new ‘green decoder’, an online guide co-created with Nottingham Business School of Nottingham Trent University to help smaller businesses decipher the terminology surrounding decarbonisation.

The British Business Bank’s online finance hub also provides a series of guides and information about sustainability issues and how smaller businesses can start their journey towards net-zero.

Shanika Amarasekara, chief impact officer for British Business Bank
Shanika Amarasekara

Shanika Amarasekara, chief impact officer for British Business Bank, said: “Smaller businesses are far too often put off by the over-complex ‘carbon jargon’ that comes with reducing emissions. By helping decipher some of the terminologies around decarbonisation the British Business Bank hopes to show smaller businesses that simple, incremental changes, such as switching off equipment when not in use can make a difference in their net-zero transition.

“This will become an increasingly important businesses requirement. Given that many consumers now consider sustainability when they make a purchase, by becoming greener, smaller businesses can enhance their competitive edge and expand their customer base.

“Our new mission at the Bank is to continue to drive sustainable growth across the UK, and to enable the transition to a net-zero economy, by improving access to finance for smaller businesses. This new ‘Green To Grow‘ campaign will help more businesses find the information they need to move toward transition.”

Dr Muhammad Mazhar, a senior lecturer in sustainability, Nottingham Business School, Nottingham Trent University
Dr Muhammad Mazhar

Dr Muhammad Mazhar, a senior lecturer in sustainability, Nottingham Business School, Nottingham Trent University, added: “Smaller businesses are key to our economy and have a significant carbon emissions impact. They can act as agents for change to meet the UK government’s net-zero targets.

“Most smaller businesses are at the initial stage of their carbon management journey and will benefit from the support provided through the British Business Bank’s ‘Green To Grow‘ campaign.

“Smaller businesses have been overlooked in the past and this is changing. The business case for carbon management is stronger than ever and smaller businesses have an opportunity to act now to remain competitive.”

Smaller businesses to play a bigger role

The British Business Bank’s ‘smaller businesses and the transition to net-zero‘ report, published in October 2021, found that smaller businesses account for around half of total emissions from UK businesses.

However, 45 per cent believe that a reduction in their carbon emissions will not make a significant difference to the environment, whilst three in four believe large corporations are responsible for most of the business carbon emissions in the UK.

Finance as an enabler to ‘net-zero’ transition

Only five per cent of small businesses say reducing their carbon footprint and environmental impact is their number one priority for 2022. The report also found that more than a third cited costs as a barrier to reducing their carbon emissions, particularly upfront capital costs.

So far, 11 per cent 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, with 1.3 million of them saying that they are prepared to access external finance to support ‘net-zero’ actions in the next five years.

And according to Tandem Bank

Research by the UK-based digital bank Tandem found that over half of the UK is more worried about the rising cost of living than about the effects of climate change.

The data estimated that, on average, each UK home will have to reduce 3.6 tonnes of carbon emissions by 2030 to hit the government’s 2050 net-zero goal.

Looking at how consumers view the current climate change debate, Tandem’s research points to significant challenges in the UK’s race to net-zero.

With consumers no longer prioritising the issue, questions are beginning to swirl around whether the UK will even be able to obtain its targets.

And even for those who may understand the priority, the research shows that just under one in four Brits don’t think they need to change or don’t even know where to start.

With around every four in five people feeling that it is important to reduce their personal impact, the issue remains of key importance.

Again though, even despite last year’s COP26 summit making clear just how real the dangers of climate change were, over half of Brits feel that the event made no difference in persuading them to change their carbon footprint – with almost one in ten not even knowing what the summit was.

For British homeowners, the issue is even more pressing given that over 15 per cent of emissions come from our homes. The Government’s heat and buildings strategy has set out the need to retrofit over 29 million homes.

Tandem’s research shows that only 30 per cent of Brits understand their energy performance certificate (EPC) rating and less than one in five of the population think that making their home greener is the single biggest change they would consider.

With the Climate Change Committee estimating that the total cost on individual homes to transition to become more energy-efficient solutions is going to be £10,000 on average, and a lot more for many homes, the research highlights both the affordability challenge and the information gap to make such changes.

Almost half of the respondents feel they cannot afford to make any changes to their home, with another 14 per cent thinking that there’s a lack of help and information on what to do.

And while the Government has made clear its plans to replace around 1.7 million fossil fuel boilers annually by the mid-2030s, only around 3.3 million of the UK’s population – around five per cent – would consider changing their boiler to reduce their home’s footprint; with one in ten thinking their current boiler is working fine and they wouldn’t consider greener alternatives.

Tandem’s CEO, Susie Aliker
Susie Aliker

Commenting on the survey, Tandem’s CEO, Susie Aliker, said: “This research shows conclusively the scale of the challenge for Brits to meet net-zero commitments by 2050. Whilst greening homes is at the heart of the UK’s plans, it’s clear we need increased awareness and support to equip them to tackle this important challenge.

“Tandem’s made great progress in helping customers green their homes, supporting them with £230million green lending for home improvements, which last year alone financed a reduction of 12,000 tonnes in CO2 emissions.

“But there’s much more to be done – it will require a collaborative approach between Government and industry to ensure a comprehensive policy and funding landscape, and a coordinated plan.”

Emma Harvey, programme director at the Green Finance Institute
Emma Harvey

Responding to these findings, Emma Harvey, programme director at the Green Finance Institute, who leads the Coalition for the Energy Efficiency of Buildings, added: “Improving the energy efficiency of UK homes offers a rapid solution to the cost of living, energy security and climate crises.

“A national retrofit drive can unlock multiple benefits, however, the research shines a light on the knowledge and funding gaps that homeowners experience when looking to decarbonise one of the most energy-intensive assets – their home.

“The finance community can play a vital role in educating customers on the benefits of an energy-efficient home, as well as innovating financial solutions that are attractive to customers and help achieve their net-zero ambitions.

“The Green Finance Institute welcomes the findings and looks forward to continuing to work with organisations like Tandem Bank to co-design, pilot and rapidly scale the financial solutions and data tools needed to help consumers on their decarbonisation journey.”

Author

  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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