Getting to net zero: a how-to guide for small businesses

Here we explain what net zero is, why it’s a good idea for your business and how to get started.

A modern office, colourful decor and a green wall

Small businesses are a huge part of the UK economy, making up over 99% of UK businesses and providing 60% of private sector jobs. No attempt to achieve a net zero economy can succeed without them on board. Yet a recent study found that most small businesses are confused about the concept of net zero. They are getting conflicting messages about the environment, they aren’t clear what action they need to take, and some even see carbon reduction as a barrier to business growth. Here we explain what net zero is, why it’s a good idea for your business and how to get started.

What is net zero?

To prevent the worst effects of climate change, the world needs to reduce its greenhouse gas emissions to zero as soon as possible. 

There is huge potential for cutting our emissions, from lifestyle changes such as driving and flying less to technologies such as carbon capture and storage. But it would be impossible to reach a point where humans produce zero greenhouse gas emissions. This is why we talk about “net zero” rather than absolute zero: it means that we remove enough emissions from the atmosphere to balance what we are producing. We can do this through supporting the earth’s natural tendency to absorb carbon through “carbon sinks” such as forests and wetlands. (Everybody has heard of planting a tree to  help the planet, but restoring wetlands and peatlands is even more crucial.) In this way, we can reach a point where the emissions created by human activity are completely balanced by the emissions our activity removes from the atmosphere: a state called net zero. 

The UK is one of six countries to give itself a legally binding deadline for reaching net zero, which will require both drastically reducing our emissions and investing in ways to remove the remaining emissions from the atmosphere.

Climate is Covid on steroids. You can’t isolate from it, we’re all going to be brought into it. It’s the money not spent on preparing which is wasted.”

—Mark Carney, former Governor of the Bank of England

Why set a net zero target?

The “big picture” reason is of course the climate emergency. The Intergovernmental Panel on Climate Change (IPCC) has warned that global warming of just 2°C above pre-industrial levels would have drastic consequences. As well as changing the face of the planet and wiping out many species, it would threaten the resources that human life depends on, such as energy, water and food. We are on track for this scenario unless there is a significant drop in the greenhouse gas emissions we generate. But there are also more short-term, business-specific reasons to get involved in the push towards net zero. 

Public concern about the climate is growing, with 80% of UK residents reporting that they are either “concerned” or “very concerned” about climate change. Not surprisingly, they are increasingly seeking out more environmentally sustainable products and services. In other words, making a visible effort to cut your emissions is good for business. It also helps when you’re hiring; over a quarter of UK workers are so keen to work for a company that cares about the environment that they would actually take a pay cut to do so

The international goal for climate change is to limit warming to well below 2°C above pre-industrial levels, ideally keeping it at 1.5°C or below. Nearly every country on earth has signed the 2015 Paris Agreement, an international treaty committing them to emissions cuts in line with this goal. This means reaching net zero by the middle of this century, which is why so many countries have made 2050 their deadline and many businesses have followed suit. 

Unfortunately, whether you’re a government or a business, the danger of setting a target to be achieved in the distant future is that you are less likely to take the urgent action needed today. Aiming to reach net zero at the last possible moment is also an inherently risky move; many big projects end up going over deadline, but in this case the consequences could be runaway climate change. 

The IPCC advises starting the kind of transformational change needed to achieve net zero as soon as possible: “Lower GHG emissions in 2030 lead to a higher chance of keeping peak warming to 1.5°C.” This is why many companies have set themselves more ambitious climate targets. Over a hundred companies, including giants such as PepsiCo and Amazon, have signed a pledge committing themselves to net zero by 2040. 

Getting started: measuring your emissions

This doesn’t mean that you have to start by setting a target. Whether you’re a corporate giant or a small business, the first stage of your net zero journey should involve calculating your current emissions. Trying to achieve net zero without first doing this is like trying to map out a route without knowing where you’re starting from. 

To do this, you need to set the boundaries of your business. Where does it begin and end? Which operations and sites does your business directly control? If the structure of your business is very simple, this might seem like a silly question, but it is important to be clear on this.

Then you will need to measure all the emissions from your company’s operations. This means measuring the sources of emissions (e.g. energy consumed), then calculating the actual emissions, which will vary depending on which greenhouse gas is being generated. 

For example, most businesses will be emitting a lot of carbon dioxide through their energy use. You would measure your gas and electricity used in kWh and your transport fuel consumption in litres. But a business in the agricultural sector might have the bulk of its emissions in the form of methane, so it would be important to measure that. The global warming potential of different gases varies, but is measured in “carbon dioxide equivalent”, or CO₂e. For example, one tonne of methane has a carbon dioxide equivalent of 28 tonnes. The UK government regularly publishes conversion factors allowing you to calculate the CO₂e of different gases. 

As you gather the data which will make up the total emissions footprint of your business, it’s a good idea to get as much detail as possible. Installing sub-meters will let you measure the energy use in different parts of your sites and perhaps the energy used by specific processes. You can then use this information to identify which areas should be targeted as a priority. 

Categories of emissions

The Greenhouse Gas Protocol, the internationally recognised standard for reporting greenhouse gas emissions, puts them into three categories, or scopes. 

At a glance: the three scopes

  • Scope 1: Direct emissions from facilities or equipment your business owns or controls. So, for example, if you are burning coal to generate heat for manufacturing processes, the emissions from this would be Scope 1, and so would any emissions from fuel burned by company vehicles. Reducing Scope 1 emissions may involve replacing equipment or changing processes.
  • Scope 2:  Indirect emissions from energy you buy from suppliers. This can be the easiest area to decarbonise, because if you switch to a supplier that only buys renewable energy, you can legitimately state that your purchased energy use has no associated emissions. But beware the greenwash. Don’t accept a “100% renewable” tariff at face value, because it’s perfectly legal for suppliers to market their energy under this label without having any contact with renewable generators. Our article on REGOs explains why. You will need to ask the supplier about how their energy is sourced. Good Energy is very transparent about our sourcing; we have direct power purchase agreements with renewable generators, and every unit of electricity our customers use is matched with a unit sourced directly from those generators.
  • Scope 3: Indirect emissions from your company’s value chain: suppliers, distributors, etc. They can be the toughest to get to grips with, but these emissions are also the most important. They are the greenhouse gas emissions linked to the activities of your business, but not directly generated by you or the energy you buy. They’re also called “value chain emissions” because they are generated by other organisations you work with: suppliers, distributors, waste management, customers, third-party transport services and so on. For most businesses, Scope 3 emissions will make up over 80% of the total. Any net zero target that doesn’t include Scope 3 is simply not valid.

“Climate change is the Big Daddy of all risks.”

—Mark Wilson, CEO of Aviva

Setting your targets

Rather than taking 2050 as the default for reaching net zero, set the earliest target that seems remotely possible. Your business may end up behind schedule on its net zero strategy, but it’s better to set a 2040 target and perhaps be a couple of years late in reaching it than it is to decide in advance that you won’t get there until 2050 (and possibly still fall behind schedule).

But one target isn’t enough: you need a whole series of targets. To reach your ultimate goal, what emissions reductions will be required each year? These short-term measures of progress should become formal targets as well. You may be surprised by how much action is required right now just to get on track for a net zero target decades in the future. Setting interim targets will give you a chance to keep monitoring the strategy and correcting your business if it goes off-course. Missing a target should trigger a process in your business where you review what went wrong and take steps to fix it as soon as possible.

You may decide that an early net zero target is simply unfeasible for your business, particularly if you are in an energy-intensive sector. If this is the case, it is even more important for you to set interim targets and take them seriously.

For many businesses, the biggest obstacle to reaching net zero early is their Scope 3 emissions. These tend to be harder to eliminate than those in Scopes 1 and 2, but leaving them out of your target-setting is not an option if you want your net zero goal to be valid. One possible option is to set a very ambitious deadline for getting the more straightforward Scope 1 and 2 emissions to net zero, then a more distant deadline for Scope 3. But your plan should involve getting emissions from all three scopes to zero by 2050.

Setting yourself up for success

Net zero can seem like a huge, unattainable goal, but approaching it with the right mindset will make success more likely.

It’s OK to do the easy things first. It’s not “cheating” to start with the easy wins, such as making cheap energy efficiency improvements or switching energy supplier. It’s a good idea to make these kinds of changes as early as possible. But you do need to have a plan for how you will approach the trickier areas.

Go public. Be open about your company’s net zero journey and share your progress publicly. Write about it on your website and in your annual report. Share more regular updates with customers and employees. This is a great way to hold yourself accountable, and it’s also good public relations.

Celebrate the wins. When your business hits an interim target, celebrate and share the news just as you would if the business had a boost in profits or expanded into a new area. Make it clear that your goals around emissions reductions are taken as seriously as other business goals.

Leave offsetting until last. Offsetting, provided it’s done in the right way, is a valid way to balance out the truly unavoidable emissions. But it shouldn’t be done as a substitute for actually cutting your company’s emissions as much as possible.

Keep it positive. Net zero is a huge challenge, but most businesses find that embarking on their net zero journey brings many benefits: cost savings, a reputational boost and better relationships with their value chain. Your communications about your net zero plans should reflect the fact that you are taking a hugely positive step.

Choosing renewable power is one of the simplest and most impactful decisions a business can make towards its net zero target. To learn more, visit https://www.goodenergy.co.uk/business/supply.

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