Decarbonisation Plans: A Key to Future-Proofing SMEs

7 October 2024

In recent years, the term "decarbonisation" has gained significant traction among businesses and policymakers alike, especially in light of the growing urgency to combat the challenge of climate change.

For small and medium-sized enterprises (SMEs) in the UK, decarbonisation is not just a buzzword - it’s a crucial component of future-proofing business and ensuring sustainability. In this blog, we will delve into what decarbonisation entails, why UK SMEs should prioritise it, the benefits of implementing a decarbonisation plan, and how businesses can go about developing one.

What is Decarbonisation?

Decarbonisation is:

'The removal or reduction of carbon emissions output into the atmosphere to reduce an organisation’s carbon footprint and impact on the climate. This is the process by which businesses can reach net zero through reducing, eliminating, and offsetting carbon emissions.' British Business Bank*.

Decarbonisation does not just consider CO2 emissions but also includes other key greenhouse gases to give values as a Carbon Dioxide Equivalent (CO2e).

For SMEs, decarbonisation often involves assessing their current carbon footprint and calculating their baseline as the starting point to develop their goals and strategy for carbon reduction. Strategies to reduce emissions could include reducing energy, switching to renewable energy sources, optimising production lines, improving supply chains and eliminating waste.

The end goal is to develop a Decarbonisation Strategy to achieve net-zero carbon emissions. Although there is often a focus to reduce emissions, we also cover in our workshops the carbon management hierarchy and how creative thinking can help eliminate emissions before they are created.

Why do UK SMEs need a Decarbonisation Plan?

1. Regulatory Compliance and Anticipation of Future Legislation: The UK government has committed to achieving net-zero emissions by 2050, a goal that aligns with the Paris Agreement. To meet these targets, the government is likely to introduce stricter regulations and policies which businesses may need to comply. Having a decarbonisation plan in place ensures that SMEs are not only compliant with current regulations but are also prepared for future legislative changes.
    
2. Customer and Supplier Expectations: Customers are increasingly making purchasing decisions based on the environmental credentials of a business. Many businesses are actively including Net Zero and Social Value as part of the weighting in their procurement process, with some businesses losing out if they cannot provide the relevant information. For example, the NHS and Tesco are two big organisations in the UK who are putting pressure on their suppliers to provide their carbon calculations.
    
3. Competitive Advantage: Decarbonisation is becoming a key differentiator in the market. SMEs that can demonstrate a commitment to reducing their carbon footprint are likely to stand out in competitive sectors.
    
4. Future-Proofing Against Climate Risks: Climate change poses a risk to businesses in the UK, regardless of size or type. SMEs that proactively engage in decarbonisation can better mitigate these risks, ensuring they are more resilient in the face of climate-related disruptions. This could involve everything from supply chain disruptions to changes in market demands.

Benefits of Implementing a Decarbonisation Plan

1. Enhanced Reputation and Brand Loyalty: Demonstrating a commitment to sustainability and decarbonisation can increase an SME’s reputation and provide positive publicity. It can also increase brand loyalty and customers are more likely to remain loyal to brands that reflect their values.
    
2. Cost Savings and improved efficiency: Many decarbonisation measures, such as improving energy efficiency, reducing waste, and adopting renewable energy sources, can lead to significant cost savings over time leading to profitability. Decarbonisation often leads to improvements in operational processes, leading to greater efficiency. This can result in reduced energy consumption and lower operational costs, thereby improving the bottom line. Energy prices within the UK have seen significant increases recently and are predicted to continue rising this autumn. While the initial investment might seem high, the long-term financial benefits—coupled with reduced operational risks—make it a wise economic choice.
    
3. Access to New Business Opportunities: Companies with strong decarbonisation strategies are more likely to win contracts and partnerships with organisations that have their own sustainability targets or who include Carbon Management within their procurement process.
    
4. Increased Employee Satisfaction and Attraction: A company’s commitment to sustainability can be a powerful tool for attracting and retaining talent, especially among younger employees who prioritise working for environmentally responsible organisations.

How to Implement a Decarbonisation Plan

1. Assess Your Carbon Footprint: The first step is to understand the current state of your carbon emissions, i.e. carbon footprint. This involves conducting a thorough carbon emissions audit to identify sources of emissions within your business operations, from energy use to supply chain activities. This assessment is used to create your baseline as per a specific year, against which all future carbon reduction targets will be measured for monitoring progress.
    
2. Set Clear and Measurable Goals: Once you have a clear understanding of your carbon footprint, set realistic and measurable targets for carbon emission reductions in your business. These targets should be aligned with broader industry standards and local, national or international commitments such as the UK's net-zero by 2050 goal.
    
3. Develop and Implement Strategies: Identify specific actions to achieve your decarbonisation goals. This could involve a range of initiatives such as switching to renewable energy sources, improving energy efficiency, optimising logistics, or eliminating waste streams. Start with no and low-cost measures first and then explore measures which might involve cost. Developing a detailed decarbonisation plan that outlines these strategies, timelines, and responsibilities is crucial to ensure the targets are met.
    
4. Engage Stakeholders: Decarbonisation is not just a top-down process. Engage and educate your stakeholders such as employees, suppliers, and customers in your decarbonisation initiatives. Collaborate with suppliers to ensure they align with your sustainability goals. There may be support available to you locally, nationally or internationally in the form of grants and business support programmes to ensure you can meet your decarbonisation targets.
    
5. Monitor and Report Progress: Regularly track your progress against your decarbonisation targets. Use key performance indicators (KPIs) to measure success and identify areas for improvement. Transparency is key, so consider publicly reporting your progress. This not only builds trust with stakeholders, but also helps to keep the business accountable. It can be beneficial to align your monitoring with your financial procedures in order to track any cost savings made and identify which strategies are more economically viable.
    
6. Continuously Improve: Decarbonisation is an ongoing continuous improvement process. Stay informed about new technologies, regulations, and good practices in sustainability and decarbonisation. Continuously review and refine your decarbonisation plan to ensure it remains effective and aligned with the latest guidance and standards. Make use of peer networking and support for decarbonisation as it helps.

Conclusion

Decarbonisation is no longer optional for UK SMEs. It is an essential part of being a responsible, competitive, and forward-thinking business. By developing and implementing a robust decarbonisation plan, SMEs can not only contribute to the global fight against climate change but also reap numerous business benefits, from cost savings and risk management to improved reputation and market opportunities. Creating a decarbonisation plan provides you with a clear strategy to reach Net Zero that you can work on across your business. Now is the time for SMEs to take action, lead by example, and pave the way for a sustainable future.

Call to Action

If you are a business who would like support with measuring and managing carbon emissions to become more sustainable, join the next FREE workshop - How to drive Carbon Reduction and Sustainability in your Business.

The workshops are offered by Nottingham Business School, Nottingham Trent University in collaboration with East Midlands Chamber. Our workshops are designed to take you through step by step how to develop a Decarbonisation Strategy and Plan for your business. Not only will you gain knowledge from the workshop content, but the peer-to-peer learning is highly valuable, allowing you to understand how other businesses in your area are working toward Net Zero and the challenges they are facing as well as insights into possible solutions.

As part of the Carbon Management Programme, you can possibly access a free Carbon Audit of your premises and a one-to-one consultancy meeting to support your decarbonisation journey.

Visit our events pages for all our Current Sustainability events

This article has been kindly supplied by Dr Rose Deakin, Carbon Management Consultant and co-authored by Dr Muhammad Mazhar, Associate Professor of Sustainability and Carbon Management from Nottingham Business School, Nottingham Trent University.

*British Business Bank

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