The C Word: a guide for SME’s navigating the climate chaos

The UK government’s Companies Act 2006 requires that all businesses must publicly report on their carbon emissions if they are listed under the following criteria:

• The UKLA (UK Listing Authority e.g. the London Stock exchange)
• Officially listed in any EEA state
• The NASDAQ or NYSE in the USA.

Falling into this category are typically large, multinational firms with resources. Some of these are taking carbon emissions seriously – a letter by BlackRock CEO Larry Fink in January this year, for example, clearly laid out that “Climate Risk is Investment Risk”.

Many large business such as Sainsbury’s, Amazon and Microsoft have made pledges – Sainsbury’s will rework their refrigeration and transport to go zero carbon by 2040, Amazon is seeking to electrify their delivery fleet and be carbon neutral by 2040, and Microsoft has pledged to be carbon negative by 2030. Meanwhile, Ecotricity became the first business to declare a climate emergency — committing to carbon neutrality by 2025.

The government asks for specified businesses to report, and those businesses are producing better and better impact statements. There is plenty of debate on which of these are examples of green washing, and which detail actual progress, but there is little debate that these requirements are a positive step towards achieving the 2030 target set by the UK government to reduce carbon emissions by 57% on 1990s levels.

Whilst these large corporations are responsible for just about half of the annual turnover and 40% of the employees in the UK, they only represent approximately 0.05% of the 5.9 million private sector businesses operating in the UK, or approximately 1,600 businesses, and just about half of the private sector carbon emissions. The remaining private sector emissions derive from the other 99.9% of businesses, made up of micro, small or medium-sized enterprises.

Without significant forethought, this could result in a multisided blow to SMEs. First, small businesses often lack the resources to track their carbon footprint. Secondly, most SMEs and sole traders do not have a PR department to promote their changes - a boon for large companies pursuing zero carbon targets. Third, small businesses are often left paying needlessly high energy bills or left confused from conflicting information around waste and resource management.

But perhaps the biggest motivator for smaller companies is that if a larger company wants to claim to be carbon neutral, they must account for every business within their supply chain. The validity of a large firm claim can be debated, but SMEs will lose out if they cannot provide some carbon emissions reporting.

Though there is no legal requirement for smaller businesses to report on their overall carbon footprint, firms that do will have a stronger chance of competing for tenders. As well as the positive PR of being a socially responsible company.

With each of these positive steps, we must be careful not to enact laws and regulations that are well intentioned but put us further from where we need to be.

These types of laws undergo what is called the “cobra effect” — where an attempted solution to a problem makes the problem worse.

Applying that to the levy on the production and import of plastic packaging with less than 30% recycled content — any company responsible for sourcing their packaging will be liable. There are a few potential problems here: First of all, this assumes that what we put in the recycling bin actually gets recycled and then sent somewhere that it can be included in new packaging. With the vast majority of recycling shipped abroad — creating high emissions due to transport — there is no transparency into whether this is recycled or not.

Could this incentivise businesses to produce more plastic packaging just so they have more recycled material? A better policy might be to reward businesses who implement a circular economy system, skipping the heavily polluting recycling stage altogether.

There are other policies and guidelines that, if allowed to continue unabated and inflexible, could end up increasing our carbon emissions. For example, plastic bag charges may not be the obvious solution once hoped for (there are relatively higher emissions for single-use paper bags than plastic – the key is to eliminate single-use products).

“Going paperless” is a move that without complementary policies around unnecessary emails and attachments provides another example: an average letter embodies approximately 28.37 g CO2 – as compared with a typical email, which has approximately 4 g of CO2 (or 0.3 for a spam email). But this quickly goes up to 50 g of CO2 when we include a “tiresome attachment”. The Carbon Literacy project estimates the average office worker emits 1.652 kg CO2 per day in emails alone.

Businesses should seek to reduce their overall amount of waste or enforce a “no unnecessary emails” policy, and look to collaborate with other businesses to create a circular system.

Expectations are changing fast, and businesses can be the leaders in this rapid transition. We are moving into unfamiliar territory, but what is clear is that the public expect businesses to step up.

Practical advice for businesses

1. Step one is to conduct a carbon audit. There are groups who can help with this and lots of resources online. The Carbon Trust provides lots of help for businesses, as does the government
2. Look for solutions that are both easy to implement (mandating work from home policies, video meetings where possible, discounted public transport for employees, vegetarian catering), and bigger investments such as renewable heating or replacing gas powered appliances with electric ones
3. Get help. Some universities have business support programmes with State Aid funding. Other resources such as the Carbon Trust or the Carbon Literacy Project can help too
4. Make strategies, not policies. Create room for change and adaptation as the new strategies are implemented and more information is learned
5. Collaborate to increase your voice. If a government policy will incentivise the wrong behaviour, i.e. with the recycled packaging levy, collaborate to develop a circular system and pressure the government to reward these systems.

Dr Ariel Edesess, is a low carbon postdoctoral researcher in the Low Carbon Lancashire (LoCal-i) ERDF project.