Small businesses are facing a tough choice in the midst of the worst economic crisis in over a century — radically cut greenhouse gas emissions or risk losing their largest clients.
Industry giants including Apple Inc., Microsoft Corp. and Unilever NV have pledged to reduce carbon emissions along their supply chains, which are made up of the kinds of small and medium enterprises that account for over 90% of companies in Europe and employ nearly half of all workers. These firms often don’t have the resources to develop sophisticated climate plans but now, slowly, organizations are stepping in to help.
We Mean Business, a nonprofit that seeks to get large corporations to pledge climate neutrality, recently launched the SME Climate Hub, a platform that encourages small- and medium-sized entities (SMEs) to halve their emissions before 2030 and reach net zero before 2050. It will start by offering training and later add services to help businesses calculate and cut their emissions. The initiative is one of the recipients of Amazon.com Inc.’s $2 billion Climate Pledge, which named We Mean Business as a partner in July.
"These companies can innovate and introduce new business models much faster than big companies, so we should not underestimate their power,” said Maria Mendiluce, chief executive officer of We Mean Business. "But we need to be realistic about the current context where these companies operate and the economic situation.”
Small businesses have been among the hardest hit by the coronavirus lockdowns, and many governments have allocated money in their stimulus packages specifically to help them. The European Commission is also hoping recovery funds can serve the dual purpose of reviving economies and helping to reach its proposed target of cutting emissions by at least 55% from 1990 levels by 2030.The European Union wants SMEs to have direct access to funding vehicles including the €650 billion ($764 billion) InvestEU program and money set aside to encourage companies to undertake building renovations that increase energy efficiency, European Commission Executive Vice President Frans Timmermans said last week.
"I would’ve never thought five years ago that we would be able to lower the threshold for even SMEs to have access to this pool of capital and it’s been extremely successful,” Timmermans said. For example, "if you have an SME that will start specializing in renovations, then that SME can have access to the funding — that’s going to prove a very solid system,” he said.
Suppliers all over the world have been under increasing pressure to fall in line behind their customers’ climate plans. Apple’s target of going carbon-neutral by 2030 prompted suppliers in Taiwan to install solar panels and buy power from offshore wind farms. So far, 71 of Apple’s hundreds of suppliers have committed to using only renewable energy.
In July, when chicken restaurant chain Nando’s drew up a climate plan, it discussed its aims with Avara Foods Ltd., its U.K. chicken supplier. Avara is now working with Carbon Intelligence, the consultancy that helped Nando’s, to reduce the emissions generated from its chicken feed, agricultural supplies and plastic. While Avara, with about 7,000 employees, isn’t an SME, its cooperation is a sign that efforts to cut emissions are trickling down.
The Science Based Targets initiative — often considered the gold standard for setting climate goals — in April introduced a streamlined model for SMEs. The approach doesn’t require them to set targets to cut pollution along their supply chains and by their customers, unlike the commitments SBTi recommends for bigger, better-resourced companies. But it does require the SMEs to measure their entire carbon footprint and commit to reducing it.
One popular way to do that is to buy offsets, which are available for as little as a few dollars per metric ton of carbon dioxide. Leaders for Climate Action, a nonprofit that’s expanding rapidly across Europe from its base in Berlin’s tech community, says it’s helped over 500 companies offset a combined 270,000 tons of carbon dioxide, including Cabify, Spain’s leading rideshare company, and French carpooling firm Blabla Car. Climate Neutral, a similar platform in the U.S., said it certified 130 companies that had offset 200,000 tons of carbon dioxide from March 2019 to April this year.
Such measures typically support reforestation efforts in developing countries, but sustainability experts say that most of these offsets are self-regulated and don’t do what they promise, which is to capture carbon dioxide from the air and store it away verifiably for decades. Methods for calculating and cutting emissions by SMEs haven’t been standardized in Europe, and as the number of green labels and certifications for small businesses multiplies, there’s a risk that legitimate pledges get mixed up with greenwashing.
Still, the new initiatives show the sector is beginning to take emissions reduction seriously. In some cases, the first step is simply boosting awareness.
Northzone, a London-based venture capital firm, signed up to LFCA earlier this year. The organization began by asking the firm’s leaders to calculate and offset their personal carbon emissions so they could better understand how the process works. It then helped them implement the same techniques across the company. Like other members of the initiative, Northzone will have to eliminate 20% of its emissions within the first year of signing up.
Michiel Kotting, a partner at Northzone, described the experience as empowering. "Just measuring creates an impetus,” he said. "It gives you the feeling that, however small you are, you can really do something.”
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