A treble win: How SMEs can reap the benefits of the net-zero transition

Are the Government’s objectives of growth and levelling-up compatible with net zero? The conventional wisdom is that they are hard enough to achieve individually, let alone in combination. But from our experience, it’s more than possible.

Let’s start with the fact that half of carbon emissions come from small and medium-sized businesses (SMEs). So anything that can be done to make them greener is going a long way to achieving the net zero goal.

Take a second fact: Yorkshire and the Humber is the largest carbon emitting region of England outside London. So anything that can be done to cut emissions there will make a substantial contribution.

A third fact is that Government innovation funding has been disproportionately funnelled to southern England. So a greater proportion of investment in the northern half of the country will make a big difference to the need to reduce inequalities.

Now put all that together. If more public and private funding were put towards helping SMEs in the north of England innovate to reduce their carbon emissions, wouldn’t that be a win-win-win?

Yes, yes, yes!

Proof

This does work. Since 2017, it’s been happening in Yorkshire and the Humber under the stewardship of the Aura Innovation Centre, part of the University of Hull. Thanks to EU grants, including the European Regional Development Fund (ERDF), we’ve been working with small businesses on over 40 low-carbon innovation projects.

For example, we helped M Meadley & Sons, a family farming partnership, to find ways to reduce horticultural waste on their pea fields. Historically, after harvest, pea stems, pods and leaves have been left in the field to rot and add nutrients to the soil. However, decomposing vegetation is a surprising source of greenhouse gases: composting releases both carbon dioxide and methane. Our scientists provided evidence that pea waste could be suitable for a variety of uses, including water filtration or even as a renewable energy source which could play a valuable role in reducing carbon dioxide emissions. Thanks to the contacts we provided, the firm has now secured additional funding to further explore the viability of using crop waste in the treatment of wastewater.

Challenge

A challenge to this great progress in helping to meet the three Government objectives is that EU funding is coming to an end in 2023. Only around 10% of the value of European grants will be compensated by the UK Shared Prosperity Fund after that.

But every challenge creates an opportunity. Investment in innovation is not reliant on central government funding alone. Local authorities and private sector partners who want to see a more sustainable economy now have the chance to step up and support what is also proving to be an important source of employment and GDP growth.

Public money is available, but it can be complex and administratively difficult to access and manage, and that puts companies off. One-third of businesses in a survey we conducted in 2021 reported that gaining finance was a barrier towards taking low-carbon initiatives. Government has a role to play in simplifying existing routes to finance for SMEs, particularly at a regional level.

Universities are ideally placed to stimulate innovation in SMEs. They bring together academic expertise with big business know-how and the convening power of anchor institutions. Their innovation managers can also provide ongoing support and advice to smaller and medium-sized businesses to help them find their way through the thicket of grant funding.

Universities like Hull have been creating real momentum for green innovation in the small business sector in the north, which have long been areas of relative economic deprivation. If there really is a will centrally to achieve growth, levelling-up and net-zero by 2050, now is the time to work with universities to help small businesses innovate and cut their carbon emissions. With the right focus, it is possible to achieve a treble win.