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How SMEs can take steps towards net zero

Author: ICAEW Insights

Published: 05 Nov 2021

Electrical engineer company Michael Smith Switchgear has been lauded for its progress in reducing its emissions this year. Its finance director explains what they’ve done so far, and how other SMEs can follow suit.

Michael Smith Switchgear decided to take its environmental efforts to the next level and start seriously pushing for net-zero carbon emissions. It had invested in recycling schemes and biodegradable packaging in previous years, which proved that small changes could make a big difference without breaking the bank. But reaching net zero would be a more complicated and costly journey. 

The business decided to take bold, immediate action, investing in solar panels and LED lighting to reduce emissions from utilities. It purchased ancient forestland to help offset carbon, and is starting a tree-planting programme to further remove carbon from the atmosphere. Replacing its fleet with electric vehicles and investing in electric charge points is the next big step. 

The company’s efforts have been impressive enough to be cited by the government’s net zero business champion Andrew Griffiths MP as an example of a business making great progress towards completely reducing its carbon emissions. 

It's all breaking down the business into different areas and looking at the climate impacts of each of them, says Emily Smith, the company’s finance, HR and H&S director. “Also, what are our suppliers doing? They're fundamental to achieving net zero. You need to make sure your suppliers are doing the same things as you.”

Smith wrote to all of Michael Smith Switchgear’s suppliers announcing a supply chain review, highlighting its preference for partnerships with businesses that are taking significant environmental measures. 

The company has also been working with suppliers to help them improve their processes, consolidating deliveries into one a week, eliminating unnecessary emissions. 

“They were sending everything in individual cardboard boxes, so we asked them to deliver them loose,” says Smith. “We've bought plastic stillages; they deliver everything into them.” 

Pursuing net zero involves a big cash investment upfront, so cashflow has to be taken into account as part of your net zero strategies. 

“We have to set a budget for it,” says Smith. “A lot of our board meetings now have a whole section dedicated to environmental issues. We have to allocate spending to make sure that we stay at the forefront of it. As an SME, it's so difficult to do, particularly at the moment.”

It also requires a willingness at board level down to be able to make it work. This can be particularly challenging below management level, as it can be difficult to engage them in something that doesn’t seem to directly impact them.

“I’m looking at running some lunch and learns, outlining how devastating the effect is if we don't make a change. But everyone's an individual, and everyone has their own opinions.”

Another challenge is measuring success. SMEs need to find a balance between what has the most impact and what’s the most achievable impact. It’s important to be really strict when calculating payback periods, Smith explains, you need to have rigorous data to back it up. 

Smith would also like to see more government support to allow them to invest in more carbon-curbing measures. There aren’t many finance options for businesses looking to invest in net zero measures at the moment, and SMEs are reliant on the grants that are currently available. “It's time consuming and it's hard work. A lot of SMEs don't have Finance Directors that can do that sort of thing, so they have to bring in outside help, which is a big cost for companies.”

With the progress that the company has made, Smith wants to set a good example to other organisations, influencing them to take similar steps. She advises businesses to start with the small simple changes and build up from there. 

“Don't run before you can walk, you don't need to have a huge budget for it. The smallest thing can have a big impact. Collectively, if all SMEs made one small change, it could make an astronomical difference.”

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