This report outlines seven principles for place-based approaches to decarbonisation for SMEs (small and medium-sized enterprises). Drawing from extensive research across the UK and lessons from different sectors, it sets out policy-focused recommendations for achieving transformative change in SME climate action.

The SME net zero policy challenge

SMEs – businesses with up to 250 employees and turnover under £50m – are essential yet largely neglected actors in the UK’s energy transition. Collectively, SMEs consume about 50% of commercial and industrial energy, and produce a similar proportion of emissions.

Every business needs to radically reduce its carbon emissions if international climate goals are to be met. The challenge is increasingly urgent, yet this urgency has not filtered through to policy for SMEs, which have been largely neglected in decarbonisation policy.

SMEs are increasingly being recognised for their important role in responding to the decarbonisation challenge in the UK and globally, but the policies and support arrangements remain relatively underdeveloped. While a diverse array of initiatives has sprung up in recent years, action by SMEs and support providers is relatively uncoordinated, and less effective than it could be.

Action and coordination are required across different jurisdictions and scales. Recognising both the importance of place as a factor in effecting change, and the focus of many existing initiatives on place-based support, this report focuses on the place-based governance challenge.

Principles for action

In the report, we outline seven principles for harnessing the potential of place-based actions and three cross-cutting challenges. These principles focus both on the potential strengths of place-based organisations as facilitators and coordinators of action, especially their potential to engage with SMEs with different characteristics, and on possibilities to ensure a voice for SMEs within wider change programmes, such as new transport and energy infrastructure provision.

We also set out challenges for place-based organisations to move beyond existing practices to achieve more transformational change, including working with a wider range of organisations to engage with ‘harder-to-reach’ SMEs. Finally, we explore the limits to place-based action and set out principles for operating in the context of national and international policy, as well as sector-focused initiatives.

Webinar: Join the SME Governance for Net Zero team for ‘Where Next for SMEs and Net Zero?’, a free UKERC webinar on 18 June 2024, 1.00-2.00pm, details here.