How to Help Small Businesses Make it Through Energy Crisis and Become More Sustainable

Published on: 15 October 2022
by KnowESG
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In parts of the U.K., the number of companies in financial difficulties has reached its highest level since the 2007-2008 global financial crisis crippled the global economy. According to the most recent official data, more than one in ten UK businesses showed a moderate to severe risk of going out of business in August. Nearly one-fourth of these businesses cite energy costs as their primary concern.

Annual energy expenditures for small businesses in some parts of the UK can start at £3,000 and rise to £5,000 per year. And more businesses, particularly smaller ones, are concerned about the impact of rising energy costs on business growth.

According to the Federation of Small Business, 53% of the UK's small and medium-sized enterprises (SMEs) (private firms with less than 250 employees) are likely to close or downsize their operations in this environment.

In September, the UK government's energy bill relief programme for non-household consumers, such as SMEs, went into effect. This was done to deal with the very real threat of rising energy costs. For the next six months, the programme will help businesses whose gas and electricity costs have gone up a lot because of the recent rise in energy prices around the world.

However, the programme may not be sufficient to assist all businesses with their energy bills, given that it will only run for six months initially. Additionally, it could impede the transition to a more sustainable economy.

SME businesses make up 99% of the country's business environment. They are also responsible for about 60% of the country's business waste and more than 43% of its industrial pollution. As such, responsible behaviour by these businesses towards the environment is crucial.

But recent research shows the UK government’s green finance policy will mostly benefit large infrastructure projects. It includes, among other things, the new jobs in the low-carbon sector that were talked about at COP 26 in Glasgow last year and the government's plan to create a green industrial revolution by increasing the capacity of offshore wind farms.

SMEs are a big part of the UK business scene. To reach the government's net-zero goals, efforts to keep their growth going must be combined with support for sustainable green business models. It must be included in any conversation regarding the present energy issue.

Many SMEs use rented premises. So, if you want to use less fossil fuels to heat and power your home, you need to persuade landlords to install solar panels, smart metres, and other green technology. If the government gave landlords more incentives, they would work with SMEs to find cleaner, cheaper, and more sustainable energy sources.

And the government could offer green incentives to SMEs that own their own buildings by lowering taxes on commercial property. A government task force could also help SMEs cut down and manage their use of fossil fuels. It could also explain things like how a VAT-registered business can get its energy costs back under such a scheme.

Any support from the government should also be tailored. Using one programme to help all SMEs assumes that all businesses are dealing with the energy crisis in the same way. A traffic light system could help to flag the most vulnerable companies. These “red light” firms would get more short-term government support to survive the energy crisis than those in the amber or green groups, for example.

Energy providers could also use the traffic light system to change how they do business to help SMEs. For instance, suppliers could keep contracts with red-light companies that don't pay their bills if they knew the government would give these businesses more money. Suppliers could even consider cutting upfront charges for such companies.

This type of business recovery model will help smaller companies not only get through the energy crisis but also switch to cleaner sources of heat and electricity. It will make growth models in this important sector more stable.

Source: Brunel University London

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