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SMEs critical to cutting UK carbon emissions but overlooked in government’s net-zero plans

New research from Sage and International Chamber of Commerce (ICC) reveals: small and medium-sized enterprises (SMEs) are generating 44% of the UK’s non-household greenhouse gas emissions; SMEs want to be greener but 90% feel restrained by obstacles such as cash flow and difficulty finding the right solutions to improve their environmental impact; only 36% of SMEs have publicly communicated a net-zero target as part of their efforts to fight climate change 

London - 7 November 2022: The SME Climate Impact Report from Sage – the leader in accounting, financial, HR and payroll technology for SMEs – today calls for the UK government to not overlook these businesses in the fight against climate change given the influential role they play in the economy: SMEs contribute 50% of the country's Gross Value Added to GDP (worth £1.0 trillion in 2021) and support 52% of total employment with 18.2 million jobs, the report highlights. Commissioned by Sage and published in partnership with Oxford Economics and ICC, the research features insights from 2,000 UK SMEs and showcases Oxford Economics’ impact modelling, which, for the first time, quantifies these businesses’ impact on the environment and economy.  

Launching at COP27, the SME Climate Impact Report also strengthens Sage’s dedication to sustainability. In addition to pledging to halve its own emissions by 2030 and becoming net-zero by 2040, Sage is committed to supporting small and medium businesses to get to net zero, and to advocating for policy and regulatory frameworks that support UK's transition to a low-carbon economy. As part of this strategy, Sage recently completed the acquisition of Spherics, a carbon accounting solution to help businesses easily understand and reduce their environmental impact. 

The report finds that despite being deterred by high upfront costs, inaccessibility of tools to understand their footprint, and lack of guidance on next steps from the government, more than half of SMEs recognise the importance of prioritising sustainability towards a cleaner, greener future. It also highlights that without urgent support from policymakers, millions of SMEs are at risk of being left behind in UK’s fight against climate change. 

Key findings from the report include:  

  • In 2021, UK SMEs contributed an estimated 160 million tonnes of greenhouse gas emissions (Scope 1), representing 44% of the total UK non-household emissions. This rises to 63% once their supply chains are also accounted for. 
  • SMEs clearly recognise the importance of becoming greener, with over half (53%) stating that sustainability was either a priority or central to their operations.  
    • This figure is highest amongst medium-sized firms (66%), who are also the most likely to have a sustainability plan in place (63%). 
  • 90% of businesses can identify at least one way tech can help them become greener, and a third of SMEs are already using technology to measure their environmental footprint. Tracking energy consumption (38%) and directly reducing carbon emissions (35%) are seen as the most important uses of technology here. 
  • SMEs don’t see business growth and sustainability at odds with each other: in fact, lowering costs is seen as the biggest potential benefit of becoming greener (33%), especially against the backdrop of rising inflation. Reducing waste (46%) and energy use (42%) are among the most common proactive steps being taken by SMEs to reduce their operational costs while also becoming more sustainable. 
  • 90% of SMEs believe that they face barriers to taking climate action, with cash flow constraints and difficulty finding the right solutions to manage their impact being identified as the top two. 

In light of these findings, Sage and ICC are today calling for governments to create a comprehensive plan that empowers SMEs to reduce greenhouse gas emissions and support the country’s overall plan towards net-zero. Specific policy recommendations include: 

  • Tailor all existing and future environmental standards and reporting requirements to SMEs so they are not overly complex or costly 
  • Equip SMEs with adequate data, technology and training to ensure they can easily measure and reduce their environmental footprint  
  • Provide a comprehensive suite of fiscal interventions, including tax credits, that can support SMEs to take more ambitious climate action and invest in net zero emissions technologies 

“The overall climate footprint of SMEs shows just how vital they are to tackling climate change. There is an urgent need to help them understand their emissions and arm them with guidance so they can formulate their sustainability plans: only 36% of SMEs have communicated a net-zero target so far,” said Elisa Moscolin, Executive Vice President, Sustainability and Foundation at Sage. “The good news is that the vast majority of UK SMEs already recognise the importance and urgency of becoming more environmentally friendly. Considering the significant role they play in our economies – and our environment -- the UK government has a responsibility to level the playing field for SMEs in the race to a net-zero society.” 

Andrew Wilson, Global Policy Director, International Chamber of Commerce said: “At ICC, we believe climate action is everyone’s business and we must act in concert to ensure that micro, small and medium-sized businesses are both sufficiently heard and fully equipped to take ambitious climate and environmental action. We are thrilled to partner with Sage to address this critical issue head-on and chart a course that can help deliver the change we need. The stakes are high, as are expectations, and working together with our global partners and network, we are determined to empower small businesses to build a more sustainable and prosperous future for the planet.”  

To learn more about how Sage is helping SMEs decarbonise their business, please go here. To read the full SME Climate Impact report, please go here.


About Sage

Sage exists to knock down barriers so everyone can thrive, starting with the millions of small- and mid-sized businesses served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology, and experience to tackle digital inequality, economic inequality and the climate crisis. Learn more at www.sage.com/en-gb/ 

About ICC

ICC is the world business organization, enabling business to secure peace, prosperity and opportunity for all. We are the institutional representative of more than 45 million companies in over 130 countries with a mission to make business work for everyone, every day, everywhere. Through a unique mix of advocacy, solutions and standard setting, we promote international trade, responsible business conduct and a global approach to regulation, in addition to providing market-leading dispute resolution services. Our members include many of the world’s leading companies, SMEs, business associations and local chambers of commerce. Find out more at https://iccwbo.org. Follow ICC on Twitter and LinkedIn.

About Oxford Economics

Oxford Economics is the world's foremost independent economic advisory firm. Covering over 200 countries, over 100 industrial sectors and 8,000 cities and regions, we provide insights and solutions that enable clients to make intelligent and responsible business decisions faster in an increasingly complex and uncertain world. For more information, visit https://www.oxfordeconomics.com/. Follow Oxford Economics on Twitter and LinkedIn

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