Ollie Finkill and George Littlewood, Siemens Financial Services in the UK explain how finance can enable SMEs to bridge the investment gap and realise efficiency gains and decarbonise.
UK businesses of all sizes are looking for ways to support the UK’s drive towards net zero. Not only is it good for business – end-customers are increasingly choosing vendors and suppliers based on green credentials – but it also serves the UK’s net zero commitments.
The UK remains a global leader in the global Race to Zero. According to the government’s Net Zero Growth Plan[1], nearly 4,000 SMEs and two thirds of FTSE 100 companies have committed to cut their emissions to net zero by 2050 or sooner. Given the average UK SME generates around 15 tonnes of CO2 equivalent (tCO2e) annually,[2] this is no small contribution.
But analysts emphasise that this green transition is likely to be even more disruptive than the digital one, with global spending on physical assets alone estimated at $275 trillion by 2050.[3] That means SMEs will need to be strategic in their respective approaches to sustainable projects.
Small-scale projects with large-scale impact
There are a number of smaller projects, relevant to a wide range of businesses, that can generate both carbon and financial savings for a company. Here are three quick wins for businesses looking to start the transition.
LED lighting
- Commercial LED lighting is now one of the most common and popular forms of energy efficiency for businesses to consider.
- Compared to older technologies, LED lighting can help achieve energy savings of 50-70%.[4]
- This is because it is up to 80% more efficient than traditional incandescent bulbs and has a significantly longer lifespan. On average LEDs last for circa 50,000 hours (10 years).
- The relative simplicity of the solution, low maintenance requirement and reducing cost make it a quick win for many businesses.
Electric Vehicle Charging
- The UK electric vehicle (EV) market is accelerating at a rapid pace.
- This trend is dominated by fleet and business buyers who represent two-thirds of all registrations.[5] The employee BIK benefits combined with company ESG strategy makes electric vehicles highly attractive.
- However, access to public charging is a challenge –research estimates the density of public EV chargers (as a proportion of the electric vehicle ‘fleet’) is worryingly lowin the UK.[6]
- Therefore, providing EV charging onsite at work can encourage take-up and make an important contribution to reduced transport emissions.
Solar
- As companies increasingly look to decarbonise their operations, the solar market offers an attractive route to net zero.
- Businesses that install solar panels can reduce reliance on the grid, lowering utility costs and generating energy savings.
- The cost of solar power is expected to continue to fall which is expected to further encourage the adoption of solar panels by more businesses.
Making investments affordable
The rising cost of energy has made it more important than ever for SMEs to invest in efficiency projects. But it also means businesses want to preserve cash flow to keep operations flexible and agile in the face of uncertainty.
Private sector financing solutions can help bridge the gap between what a business can invest, and what is needed to see meaningful return on investment with a broad range of clean technologies.
This is particularly useful to vendors who can leverage flexible finance at point-of-sale to enable customer investment, by working with a financier to design the lease structure to align with a business’ unique requirements.
Such financing is offered by specialist financiers who offer a deep understanding and knowledge of the industry (and relevant tech), and can enable the acquisition of technology and equipment for competitive advantage in a financially sustainable way i.e. tailored to an organisation’s business and cash-flow needs. Specifically, it makes investments possible and affordable by aligning costs with revenues.
Conclusion
For SMEs unsure where to start, these are just a few of the small-scale projects offering serious potential for energy savings.
Businesses that work with specialist financiers who finance a broad range of clean tech can benefit from bespoke financing solutions that ensure cash flow flexibility and provide an affordable, incremental path to the net zero transition.
[1] HM Government, Powering Up Britain – The Net Zero Growth Plan (March 2023), p. 115.
[2] Carbon Trust (2023) https://www.watermagazine.co.uk/2023/07/27/uk-smes-emit-nearly-15m-tonnes-of-co2-a-year-yet-77-have-no-plans-to-reduce-carbon-footprint-over-next-three-years/
[3] McKinsey, The anatomy of the net-zero transition (March 2022) https://www.mckinsey.com/mgi/overview/in-the-news/the-anatomy-of-the-net-zero-transition
[4] Climate Group, LED (Accessed August 2023) https://www.theclimategroup.org/led
[5] https://www.fleetnews.co.uk/news/fleet-industry-news/2016/11/08/69-of-company-car-drivers-say-they-would-choose-an-electric-car-if-offered
[6] Siemens Financial Research, Financing EV Charging Infrastructure (Autumn 2023)
