COP26 and Small Businesses
This month we discuss how the COP26 and climate change policy could impact small businesses and how SMEs (Small and Medium-sized Enterprises) can help in the fight against climate change.
With the COP26 coming to a close the main agreements have been established. The Glasgow Pact has been set with a planned net-zero emissions and restriction to 1.5C increase in global warming from pre-industrial levels. Over 60 countries pledged to cut out coal by the 2030s-40s. However, there are some notable exceptions (Australia) and at the last minute China and India changed their commitments to phasing down, not out, of coal.
The UK Government have committed to making clean power more accessible, affordable and reliable. They have also announced that financial firms controlling 40% of global assets have signed up to a net-zero emissions 2050 goal. The agreements that have concluded the COP26 have more of a global outlook. However, this article looks at the influence that SMEs in the UK could have on future emission decreases.
SMEs account for 99.9% of the business population in the UK. They make up 3/5ths of business employment and around half of turnover in the UK private sector. This makes up 16.3 million people and a turnover of 2.3 trillion. Recently, the COVID-19 pandemic has led to a dramatic decrease in the number of SMEs. Nonetheless, SMEs still produce around 50% of the UK’s business emissions and around 1/3rd of all emissions from the UK. Source : Gov.uk – Business population estimates
Many SMEs are not taking strides towards net-zero emissions. Most stated that they are not ready to decarbonise, lack the feasibility, funds or information to do so. Only 1 in 10 SMEs are tracking their carbon footprint. The government have called for small businesses to commit to net-zero emissions by 2050 and have attempted to provide resources and information to help them do so. However, reducing emissions in a small business is a highly specific task. A business that sells food compared to a business that provides valuations will have vastly different ways that they produce and can reduce their emissions. Source: British Business Bank
Large businesses account for 50% of business emissions while only taking up 0.01% of the business population. This means that the emissions produced by large businesses are 75,000% larger by population than SMEs. It is clear that it would be easier and more impactful to organise the roughly 7,700 large businesses in the UK to reach net-zero than attempting to reach all 5.82 million small businesses to do the same.
60 of the FTSE 100 UK companies have done so by committing to net-zero by 2050. The impacts of these large businesses attaining net-zero emissions would be very significant. The UK does have a good track record with reducing emissions with a 44% drop from 1990 to 2019 while the economy grew by 78% making it the fastest reduction in the G7. Source: gov.uk/statistics and gov.uk/news
The consensus is that SMEs could and should have a significant role in reducing emissions. However, the impact of the minority of large businesses in committing and achieving net-zero would likely be easier to achieve. If the government continues to push for cleaner energy methods and transportation, which certainly make up the bulk of our emissions here at JS Reakes, then this would likely be an effective way of reducing emissions for many smaller businesses. Which would hopefully push UK emissions towards the net-zero goal.
For more articles like this, go to our Articles page (or click here for our previous article), and also consider signing up to our Newsletter! We also have some other articles dealing with small businesses here. There are also some dealing with governmental impacts on business:
Additionally, here is a link to our 2021 recap!