Accounting for 99.9 percent of all UK businesses, small to medium enterprises (SMEs) are crucial to whether the UK meets its 2050 net zero target.
Their collective contribution to UK business’s carbon footprint is significant, but often overlooked.
The fact is that statistically, SMEs share almost equal responsibility for greenhouse gas (GHG) emissions as large businesses.
SMEs have a huge opportunity to help the UK meet its Net Zero targets. Understanding how their current activity contributes to carbon emissions is the best starting point.
This report explores SME carbon emissions, their significance within a net zero UK economy, and helps business owners understand how their SMEs affect the environment.
According to our analysis:
*We’ve included the most recent data, but as the coronavirus pandemic continues to change business energy consumption, any data from 2020 onwards are provisional.
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Before we get stuck in, we’ve included some example real carbon footprints to give an idea of what they look like.
In the article we explore the sheer lack of data at a industry level for SME data, however we hope these give some context of what different businesses may look like.
Note how much Scope 3 accounts for their total footprint. In all examples, Scopes 1+2, which are most commonly reported, account for less than 25% of their emissions.
130 Tonnes
Digital Agency
70 Employees
31 Tonnes
Coffee Roaster
Roasts 15T of Coffee per Year
61 Tonnes
Jewellery Retailer
2 Retail Shops
Anonymous data supplied by C-Free. All figures are in CO2e.
All figures include Scope 1 and 2 emissions, and also include Scope 3 from a select number of sources*.
SMEs are the bloodline of the UK economy. They make up almost the entire UK private sector and generate 52 percent of GDP.
When considering their sheer number, and the fact that their carbon emissions and GDP are almost equal to those of large businesses, it’s easy to see how underrated their environmental impact has been.
To date, all official emissions-reducing policies have been aimed at large industry.
Even the most recent legislation, the 2020 Ten Point Plan, fails to address SMEs.
This doesn’t mean that SMEs don’t want to change. According to a survey of over 1,000 SMEs and SME decision makers, 50 percent want more government support to become more sustainable.
The latest announcement from climate science says that to meet our 2050 net zero goals, by 2035 the UK will need to cut carbon emissions by 78 percent of 1990 emissions (794.4 mt/CO2e).
Regardless of whatever policies are introduced to meet the 2035 goal, it’s clear that they need to target SMEs, and that greater effort to influence sustainable changes within SMEs needs to be made by the government.
In 2020 of the 6 million UK private sector businesses:
| Industry | Micro | Small | Medium | Total |
|---|---|---|---|---|
| Agriculture, Forestry and Fishing | 151,395 | 3,405 | 455 | 155,255 |
| Mining and Quarrying; Electricity, Gas and Air Conditioning Supply; Water Supply; Sewerage, Waste Management and Remediation Activities | 37,090 | 2,005 | 450 | 39,545 |
| Manufacturing | 259,845 | 21,120 | 6,240 | 287,205 |
| Construction | 972,925 | 16,910 | 2,095 | 991,930 |
| Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles | 510,065 | 36,735 | 5,100 | 551,900 |
| Transportation and Storage | 336,880 | 7,680 | 1,565 | 346,125 |
| Accommodation and Food Service Activities | 18,950 | 31,785 | 3,235 | 53,970 |
| Information and Communication | 369,090 | 10,040 | 2,065 | 381,195 |
| Financial and Insurance Activities | 87,550 | 3,285 | 970 | 91,807 |
| Real Estate Activities | 121,165 | 5,155 | 490 | 126,810 |
| Professional, Scientific and Technical Activities | 846,515 | 22,185 | 3,745 | 872,445 |
| Administrative and Support Service Activities | 504,270 | 16,890 | 4,165 | 525,325 |
| Education | 319,96 | 4,280 | 645 | 324,885 |
| Human Health and Social Work Activities | 355,775 | 19,960 | 3,695 | 379,430 |
| Arts, Entertainment and Recreation | 306,650 | 4,655 | 850 | 312,155 |
| Other Services and Activities | 358,17 | 5,775 | 375 | 364,325 |
| Total | 5,556,322 | 211,845 | 36,140 | 5,804,307 |
Business emitted 14 percent of the total 414.1 million tonnes / CO2e created within UK borders during the year.
*The UK government only records territorial emissions – emissions created within UK borders, not consumed emissions
Put into context, this is roughly the same amount of carbon sequestered by two-thirds of all forest areas in the United States each year.
Carbon dioxide is the dominant gas emitted, so the total amount of GHG emissions is represented as a carbon dioxide equivalent (CO2e).
*CO2e is a collective measurement representing the total warming effect of the various greenhouse gases in terms of the equivalent amount of CO2.
The other main GHGs emitted by business activity are:
The Department for Business, Energy & Industrial Strategy (BEIS) holds businesses accountable for GHG emissions from:
SME energy demand outside of these activities is responsible for a further portion of total UK GHG emissions.
These extra emissions, however, are attributed to the energy supplier, and not businesses (more on net zero scopes here).
This means that the individual SME is only held accountable for a portion of the total amount of carbon emissions for which it creates both directly and indirectly.
To better understand this, consider the resources that a cafe in the UK needs to make a coffee.
The coffee beans need to be grown, processed and shipped to the UK — all of these steps taking place in foreign countries. Then the cafe demands energy, which a power station produces.
All of these processes create carbon emissions. As BEIS attributes emissions to the sector that directly emits them, despite it being the cafe creating the demand for coffee and energy, the coffee producers (located abroad) and the energy sector (UK) will be attributed these emissions.
This important aspect of which sector carbon emissions are attributed to is referred to as scopes of emissions, and is explained in more detail here.
The 14 percent contribution to 2020 overall UK carbon emissions came from businesses of all sizes and not only SMEs.
SMEs contribute to this 14 percent through a number of activities, the main ones being:
The vast majority of SME GHG emissions come from energy consumption. This makes energy consumption the most important aspect of SMEs’ environmental impact to regulate.
By switching to a renewable energy supplier SMEs can do this and drastically reduce their GHG emissions.
Thanks to the increasing numbers of renewable energy providers, this can easily be done.
Calculated estimates cannot be made for SME vehicle and landfill emissions, but observations can.
Construction firms are the most popular type of business in the UK, representing just under 1 million of the total 5.8 million SMEs.
By looking at what the government considers to be construction, it’s evident that some sort of vehicle is needed to carry out all types of construction work.
As 99.9 percent of this most popular type of UK business are SMEs, which also highly likely use a company vehicle, a fair assumption is that SMEs contribute significantly to total UK business vehicle emissions.
Biodegradable waste sent to landfill breaks down releasing large quantities of methane (CH4).
Annual landfill methane emissions are currently estimated to be 17 mt/CO2e.
This means that SMEs that generate biodegradable waste must also accept responsibility for some of the GHG emissions which are released from landfill sites across the UK.
Official GHG emissions data isn’t separated by business size. But analysing energy consumption data provides an alternative way of estimating SME emissions:
If all SMEs with company buildings ensure that their electricity is 100 percent renewable, then a chunk of 99 percent of the UK private sector could mitigate energy consumption carbon emissions (practically all SME GHG emissions) by 42 percent.
Assuming the average annual UK Small business (10-49employees) electricity use of 16,000 – 20,000KWh, an annual bill with a leading provider of 100 percent renewable electricity costs around £2500 – £3000.
This is equal, and in some cases cheaper than an annual electricity bill from a provider which cannot guarantee 100 percent renewable electricity.
Increased government incentive to switch to renewable energy providers would be beneficial.
However, with 100 percent renewable electricity prices already economically viable, SMEs can take comfort in knowing that by making the switch they wouldn’t be out of pocket.
Businesses consume energy for both industrial processes and within non-commercial buildings.
SMEs don’t represent enough of the industrial sector to be attributed industrial energy consumption. Industrial process energy consumption is, therefore, disregarded.
To better understand the scale and impact of SMEs on emissions, our initial aim was to show statistics clearly separated by micro, small and medium sized businesses, respectively.
However, official government data is almost never separated beyond SMEs collectively and large businesses. We responded by changing the scope of our analysis to SMEs as a whole.
The government uses several reports with differing methodologies to calculate GHG emissions.
This can be problematic:
These limitations highlight that GHG emissions data is never 100 percent accurate.
It’s almost certain that official data underestimates the full extent of UK SMEs contribution to global warming. This is especially the case where often government data focuses on emissions generated (such as by domestic electricity production) and not emissions consumed (such as from the sale of imported products).
For the individual small business owner, underestimation of your operation’s emissions further highlights the importance of making energy efficient and carbon-emissions reducing changes as soon as possible.
For SMEs to effectively reduce their carbon emissions individual business owners must take action.
Understanding your business’s carbon emissions and treating them as a budget with limits, much like finances are, is important, but also only the first step to begin improving your SME’s environmental impact.
The fastest and most high-impact way to immediately begin mitigating SME carbon emissions is to switch to a 100 percent renewable electricity provider.
Use our carbon scorecard app to assess your business’s environmental impact and begin reducing carbon emissions today, or let our partner switch energy for you.
Carbon emissions
Energy use
Electricity price comparison
70 employees
Annual carbon footprint – 130 tonnes of CO2e
This includes all scope 1 and 2 emissions, and scope 3 from the following sources:
15 tonnes of coffee per year
Annual carbon footprint – 31 tonnes of CO2e
This includes all scope 1 and 2 emissions, and scope 3 from the following sources:
2 shops
Annual carbon footprint – 61 tonnes CO2e
This includes all scope 1 and 2 emissions, and scope 3 from the following sources:
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