The 5 whys of Net Zero

The business community has a major role to play in the transition to net zero. Most businesses in the UK are categorised as SMEs, which means the importance of smaller businesses in that transition should not be underplayed.

• SMEs have the advantage of flexible, agile teams, shorter supply chains, and the ability to rapidly implement changes.
• Customers have increasingly high expectations around the sustainability credentials of a business, and half of businesses have already felt pressure from customers to be more environmentally sustainable.¹
• The carbon footprints of SMEs are often counted towards the Scope 3 emissions of the larger corporations they supply to. Scope 3 emissions are emissions that a company causes indirectly, both up and down the value chain. This could be emissions associated with products purchased or with the end use of that product. For large firms, the emissions of their suppliers are often the largest part of their carbon footprint. As such, SMEs are increasingly expected to align with the net zero agendas of bigger businesses.
• SMEs can take small steps that still have a big impact. Simple changes such as installing LED light bulbs or smart switches may significantly reduce electricity usage and could set you on the path to reduced emissions.

A changing climate and mounting consumer pressure means businesses can no longer justify ignoring the transition to net zero.

• In today’s business landscape, profit and purpose are often intertwined. Defining your purpose is now vital when creating a competitive brand.
• Nearly 1 in 3 consumers value sustainability as a key purchasing criteria² and over 85% of people in the UK aged 18 to 36 consider sustainable investing to be important to them.³
• The challenges created by our rapidly changing climate, such as extreme weather, pollution, and rising temperatures, are having an impact on our health, quality of life, and ability to preserve the planet for future generations.

Maximise the potential internal and external benefits to your business, by starting your net zero journey now.

• Measuring environmental metrics can be challenging, but a careful analysis of your carbon footprint can also help boost performance and minimise inefficiency.
• Combat soaring energy costs by reducing unnecessary consumption. You can start with simple steps, such as switching to energy-efficient light bulbs.⁴
• Consider installing on-site renewable energy options, such as solar panels, to reduce your carbon emissions.
• Becoming a first mover in this area could give you a competitive advantage, open up a wider customer base or new market, and have a positive impact on profit.

Support is widely available to help SMEs transition towards net zero-aligned business practices.

• Financial, practical and technical resources exist to help guide SMEs on their net zero journey, such as HSBC’s Sustainability Hub. It features a range of support and advice, such as simple, actionable steps to make your small business more sustainable with our range of Climate Action for Associations (CAFA) guides and access to our comprehensive sustainable financing [link to: https://www.business.hsbc.uk/en-gb/campaigns/sustainability-for-business] services and products.
• The growth of the sustainable investment space has picked up pace in recent years, with sustainable assets increasing by 34% globally since 2016⁵.
• Grants and funds have been set up to support businesses improve their eco-credentials. For example, the Sustainable Innovation Fund was announced in the UK to help support businesses cut carbon emissions. Additional sources of business financing can also be found on the government’s website.

Increasing regulations mean developing a strategy for reaching net zero strategy is important to businesses.

• The UK has published its Net Zero Strategy, setting out policies for decarbonising the economy to meet net zero targets by 2050.⁶
• The government has set intermediary targets to achieve a 78% reduction in emissions by 2035.⁷
• We can continue to expect stricter climate policies looking ahead. 2024 will see the introduction of rules and guidance relating to anti-greenwashing and fund labelling as part of the FCA’s Sustainability Disclosure Requirements (SDR) and fund labelling regime, for example.⁸ By 2035, new diesel and petrol vehicles will be phased out⁹.

Today we finance a number of industries that significantly contribute to greenhouse gas emissions. We have a strategy to help our customers to reduce their emissions and to reduce our own. For more information visit www.hsbc.com/sustainability

¹ https://www.about.hsbc.co.uk/news-and-media/hsbc-uk-launches-500m-green-sme-fund

² https://www.business.hsbc.uk/en-gb/insights/sustainability/small-business-guide-to-sustainable-suppliers

³ https://www.assetmanagement.hsbc.co.uk/-/media/files/attachments/uk/common/20-07-ameu-br-hsbc-gif-ma-sustainable.pdf (pdf download)

⁴ https://www.business.hsbc.uk/en-gb/insights/sustainability/building-a-sustainable-business-where-to-start-and-why

⁵ https://www.oecd-ilibrary.org/docserver/7cd0e90e-en.pdf?expires=1710247474&id=id&accname=guest&checksum=1996C0DD56E380DB8CAA0E80B2BDE2D0

⁶ https://commonslibrary.parliament.uk/research-briefings/cbp-9888

⁷ https://www.gov.uk/government/news/uk-enshrines-new-target-in-law-to-slash-emissions-by-78-by-2035

⁸ https://www.fca.org.uk/publication/policy/ps23-16.pdf

⁹ https://www.reuters.com/world/uk/britain-delays-ban-new-petrol-diesel-cars-2035-pm-sunak-2023-09-20