Why is it so hard to engage SMEs on climate change?

A report on the Zero Emissions Enterprise (ZEE) SME Engagement Workshop, discussing the challenges of SME engagement and how these can be overcome.

The ZEE Network was established in Autumn 2021 by researchers at University of Oxford, Open University and Sheffield Hallam University. The network aims to provide a focal point for scholars working on the urgent challenge of SME decarbonisation, to share and create new knowledge, to build collaborations, and to provide a point of connection with policy and industry professionals.

Following the first Zero Carbon SMEs workshop on 22 September 2021, a second Zero Carbon SMEs Workshop was held online on 24 March 2022. The central focus for this second online workshop was What are the challenges when engaging SMEs on climate change, and how can they be overcome? The 2-hour workshop was structured around three presentations and two plenaries, which made use of online ‘Jamboards’. The workshop was attended by researchers from a range of institutions and disciplines working on the challenge of SME decarbonisation.

To begin, Sam HamptonOpens in a new tab, researcher from the University of Oxford and workshop organiser, welcomed the attendees and outlined the context of the workshop. This included a presentation on the background of the history of SMEs and energy efficiency, and a broad overview of the challenges faced by a variety of actors when attempting to engage SMEs on climate and energy issues. Drawing on his work with energy auditors and low carbon advisors, he offered principles for successful engagement with SMEs. This includes working with established networks and other intermediaries such as B2B suppliers, avoiding relying on financial ‘win-win’ messaging, and aligning approaches with an SME’s organisational values.

Why is it so hard to engage SMEs?

Following this introduction was a plenary, whereby attendees were invited to contribute to an online ‘Jamboard’, and open discussion. Attendees were asked to consider what are the challenges to engaging SMEs for (1) research purposes; (2) local intermediaries seeking to provide advice, audits and grants; and (3) national scale initiatives.

When engaging SMEs for research, delegates highlighted the lack of staff capacity and resource by SMEs to engage in voluntary research: and yet small cash incentives were seen to be less motivating for businesses than for individuals.

For local intermediaries, barriers included struggling to find partners that have aligned interests and timescales and difficulties acquiring data on SMEs.

At the national scale, the issue of competition for funding was raised. The last few years has seen a growth in private sector intermediaries, such as those offering financing to SMEs for energy efficiency and renewables. However, the availability of free audits and match-funded grants is limiting their success. As European Regional Development Funding expires, UK policymakers will face difficult decisions about which activities and sectors warrant public funding, and where the private sector might be capable of responding to growing concern for climate change amongst SMEs.

After the plenary, the second presentation was provided by Katherine SugarOpens in a new tab, a postdoctoral research fellow from Heat and the CityOpens in a new tab research team at the University of Edinburgh. Using the Energy Efficient Scotland programme as a case study, she described the challenges faced by local authorities in engaging SMEs. These included the lack of formal powers and diminishing resources amongst councils, the diversity of SMEs and their energy using activities, and the lack of quality data to target engagement efforts. Recommendations arising from Katherine’s research highlight the benefits of energy efficiency to SMEs, and include:

• The need for regulation and enforcement of energy efficiency measures
• A collective data-sharing platform
• Increase of government funding allocated to local authorities
• Values-based (or co-benefits) approach which enables targeted messaging.

The third presentation was provided by Sam Lux, a Policy Advisor in Net Zero Business Engagement at the Department for Business Energy and Industrial Strategy (BEIS). In the run up to COP26, BEIS launched a campaign, in collaboration with the SME Climate HubOpens in a new tab, to encourage SMEs to make a net-zero pledge, as part of the UN’s Race to Zero initiative. With BEIS’ support, the number of UK SMEs making pledges is the highest in the world, at over 3000 businesses. However, there remains a need for broader promotion and awareness raising, as this represents a tiny fraction of UK SMEs. We were pleased to hear that Sam’s team has been funded to continue these efforts. BEIS’ SME Working Group that was created to support the campaign includes a wide range of industry stakeholders and researchers has been reconvened, and represents a platform for knowledge sharing and dissemination.

Recommendations for more effective engagement

Workshop participants suggested several practical recommendations for more effective engagement by contributing ideas to the Jamboard and plenary discussion.

Attendees noted the need for more collaboration between academics and SME owners and managers in empirical research, including the co-creation of research results. They also emphasised the importance of long-term, ongoing partnerships, which extended beyond the lifetime of  an individual research project.

The main outstanding research challenges included:  identifying key decision points in an SME’s decarbonisation journey; working out how best to achieve the largest impact in terms of emissions; and designing more effective interventions to deliver these reductions. In addition, research should take into consideration the complexity of the SME population, for example through conducting more place-based and sector-specific research.

For local intermediaries, there is a need increased training, particularly with respect to values-based and co-benefits approaches and sharing of data and experiences between intermediaries.

At the national scale, questions were raised on the opportunities for SME-specific policies, and the coordination of centralised resources (e.g. using the government website) and local support.

BEIS’ support for the Race to Zero campaign with a specific focus on SMEs was welcomed by delegates. However the difficulties with SME engagement are demonstrated by the limited number of signatories, and some workshop attendees highlighted the need for policy and regulation besides awareness raising campaigns.

To finish, Will EadsonOpens in a new tab, Professor of Urban and Regional Studies at Sheffield Hallam University closed the workshop by highlighting key points of the afternoon. Attendees and presenters were thanked for their contribution, and the stimulating discussion in the workshop is a stark reminder on the need for greater attention to be made on the SME sector and their journey to net zero.

Following the success of both workshops, it was noted that the ZEE network will be establishing a website to formalise the network and to enable future activity in the forthcoming months, for which there was continued enthusiasm and support.

Banner photo credit: Alexandre Godreau on Unsplash