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Business of Tax 2020

How small businesses can do big things for sustainability

iStock / Getty Images Plus / Ridofranz

Martin McTague

FSB Chairman

The UK energy sector is facing the biggest transformation since the Industrial Revolution, but this change means a huge cost burden. How can small businesses address sustainability issues while staying afloat?

The 26th UN Climate Change Conference (COP26) is on the horizon and attention is focused on how businesses will play their part to tackle climate change.

Many big corporations have big budgets for green initiatives, but many smaller firms – which are the lifeblood of the economy – will need support to make sure they do not get left behind.

All political parties support legislation committing the UK to becoming carbon neutral by 2050. So, what can the Government do to make sure businesses are able to play an active role in this transition, but are not disproportionately hit by costs and burdens?

How government can help small businesses

Most small businesses are enthusiastic about energy efficiency and this desire needs to be capitalised upon.

However, small firms still struggle to engage with utility markets. Looking for new deals can be a hassle too, so as we head to a low carbon future, it is down to the Government to reward good behaviour, empowering all small businesses by removing needless barriers and using targeted support and incentives where appropriate.

Solar panels are a good way for businesses to keep their energy costs to a minimum, while keeping their carbon footprint low. But they also add value to a building which, in turn, causes business rates to rise.

The burden of this extra tax simply is not worth it for some businesses – you shouldn’t face extra charges for doing the right thing.

More widely, the Government needs to come forward with innovative, targeted initiatives which reflect the diverse nature of small firms to help them reduce their consumption.

The pluses and minuses of smart meters

Smart meters, to an extent, will help. The Government wants all homes and small businesses in England, Scotland and Wales to have smart meters as soon as possible, but the roll-out of around 50 million meters by 2020 has now been delayed.

The benefits are clear: they allow businesses to control their energy consumption in real time, meaning consumers pay for the energy they use as opposed to how much they are predicted to use. This will allow consumers to make sensible choices when it comes to energy use.

But they come with problems too – those who opted for first generation smart meters soon found they were unable to change suppliers, forcing them into contracts that were no longer viable or meaning they went to waste altogether. If Wi-Fi signal is poor, they will not work. They can also be disruptive to install.

Businesses need to be supported through the smart meter journey, as without a clear strategy for ongoing customer engagement and empowerment, the cost and benefits of this new technology will not be equally distributed.

How small businesses can increase sustainability

Energy is just one small part of a wider sustainability agenda which is set to dominate through 2020 – a year that began with the publication of the ambitious Environment Bill in Parliament, and ends with the UK hosting COP26, when the world’s eyes will be on our country as we try to set a new global mission to save the planet.

Small businesses want to do the right thing by the environment and demonstrate to their customers that they are doing so. But they need policy certainty and a clear pathway to help them change.

A key aspect of the way forward is creation of a new energy market which helps small businesses reduce their usage as much as their costs and empowers them to make holistic decisions about the services they pay for.

With the right support they can play a critical role in helping the UK reach its green targets and help shore up supplies for the future.

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