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Global industrial technology leader Schneider Electric asks 911½ñÈÕºÚÁÏ experts to explore the barriers to decarbonisation for SMEs

Small and medium-sized enterprises (SMEs) are the backbone of the UK economy, accounting for 60% of the employment and 48% of the turnover in the private sector.  

They also account for 36% of domestic greenhouse gas emissions. However, recent data reveals that few are taking steps to decarbonise.  

If the UK is to achieve net-zero by 2050, what needs to be done to assist SMEs, without affecting their continued growth? 

To find answers, 911½ñÈÕºÚÁÏ Business Partners member Schneider Electric commissioned Dr Gbemi Oluleye, Dr Aidan Rhodes and a team from 911½ñÈÕºÚÁÏ’s Grantham Institute – Climate Change and the Environment, the Faculty of Engineering and Centre for Environmental Policy. 

Challenges of decarbonisation - capability and capital 

Successive Governments have defined policies to accelerate decarbonisation. However, data from the British Business Bank reveals that most SMEs are yet to implement comprehensive strategies, despite having access to a range of decarbonisation technologies, including, clean energy generation, low-carbon heating and cooling, and operational energy efficiency.  

Clean technologies have the potential to deliver long-term cost savings, but the high upfront investment required remains a substantial barrier for many businesses. What with lower profit margins, limited internal knowledge, and higher cost of capital, SMEs often put big investments on the back-burner unless they have an immediate effect on their customers.  

“We’ve also found that current policies to support their decarbonisation are fragmented and largely indirect. Many SMEs are not eligible for national climate schemes and therefore rely on devolved or local initiatives - and whilst tax relief and discounted loans exist, uptake remains low.” explained team lead Dr Oluleye. 

“And to further complicate matters, emission sources and decarbonisation pathways across sectors unsurprisingly differ, so ‘one solution doesn’t fit all’” 

Recommended remedies to help SMEs decarbonise 

In their report, delivered via , the team from 911½ñÈÕºÚÁÏ suggest a suite of interventions to get SMEs decarbonising, ranging from awareness and education- to targeted grants, green finance and regulatory reform. These include… 

• Helping SMEs better understand their energy and carbon footprint with subsidised sustainability audits and standardised reporting 

• Educating on the cost and competitive advantages of decarbonisation  

• Optimising government funding schemes such as the Industrial Energy Transformation Fund (IETF) and Made Smarter Adoption programme to increase uptake 

• Improving access to innovative low-cost finance to allow adoption of new technologies [Although, without clear incentives, uptake will remain suboptimal] 

• Funding renewable subsidies  

• Reviewing business and energy taxation policies to ensure that capital allowances incentivise investment in decarbonisation measures and enable SMEs to participate in net zero initiatives while achieving emissions reductions.  

By investing in this transformation, we can future-proof the businesses that make up the backbone of our economy, and unlock new opportunities for productivity, international competitiveness, and green growth.  Kelly Becker President at Scheider Electric, UK & Ireland, Belgium & Netherlands

Kelly Becker, President at Schneider Electric, UK & Ireland, Belgium & Netherlands said: “This new report urges Government to continue to put decarbonisation and net zero at the heart of its policy programme. It also makes a compelling case for a joined-up approach by the private sector, and central and local governments.  

“Decarbonisation is not just vital for the planet; it comes with huge business benefits too.”  

 Read the full report and recommendations

written by Dr Gbemi Oluleye, Dr Aidan Rhodes, Luke Hatton, Zhenyu Tan and Elsy Mila, researchers and analysts dedicated to designing and optimising sustainable market-based policy mechanisms to bring about economically viable pathways for large-scale decarbonisation. 

Read about the Government’s approach to supporting SMEs - and their commitment to tackle the inflated cost of energy for businesses of all sizes in their