A growing market for SME decarbonisation

SMEs matter! They are part of corporate and public sector supply chains, employ millions of people, are key stakeholders in our communities, and many act as drivers of technology-innovation. But, our 5.5 million SMEs also emit around half of the UK’s business carbon emissions.  We know that small businesses are concerned about the climate, indeed 47% identify decarbonisation as a business priority, and yet, change is limited by a lack of time and knowledge, and of course, cost. External pressures, such as the regulatory environment that larger companies operate within just don’t exist for most SMEs and market drivers are much more limited. To try and overcome these barriers successive governments have offered energy efficiency audits and grants to support SMEs yet, they are estimated to have reached only 1% of the SME population. So how do we speed up SME decarbonisation, and at scale? How can the market and government collaborate to drive this change?

We considered these questions in our six-month study of the current market for SME decarbonisation support. We mapped 20 distinct products and services that covered both the planning and implementation phases of carbon reduction- from awareness raising , to carbon calculators, energy demand management and comprehensive sustainability platforms offering ongoing monitoring and improvement.

Encouragingly, business models are rapidly evolving, especially within the planning phase of the decarbonisation journey, with more than 270 carbon accounting providers targeting SMEs. Carbon footprinting is increasingly being offered as a ‘free’ service, with software suppliers Sage now including emissions tracking into their standard accounts packages. Technology is reducing entry barriers, enhancing guidance, enabling app-based training and increasingly, through artificial intelligence, the opportunity to offer large-scale ‘personalised’ SME action planning. Our report offers greater detail on each of these areas, providing information on developing trends and business examples.  

Whilst we see growth and diversification of offers, we acknowledge a continued imbalance between supply and demand: only a few SMEs are engaged in the market. Lack of knowledge, or low perceived business relevance endure, and for SMEs looking to make an investment there is a general reluctance to borrow money, even at preferential rates. But there is change and we have identified three market routes that appear to overcome the inertia:

value chain: Large organisations include supplier emissions reporting as a procurement requirement. Within the public sector the NHS is highlighted as having a particularly strong engagement with SMEs. Demand for better quality carbon data and collection automation is enhancing the asset value of emissions data.  Recent research suggests that 56% of FSB members have been asked to provide emissions data to business customers. This is the strongest of the three routes.

evident benefit: here motivation is cost reduction and operational improvements, often led by rising energy prices and falling technology costs. For example, the levels of return on investment are high for LED lighting and increasingly solar.

‘walk the talk’: SMEs have sustainability at the centre of their identity and seek certification and recognition for decarbonisation to support market offer. Research suggests this is a growing but small group. 

And the future? Whilst these routes suggest positive signs of growth, the market can’t achieve decarbonisation on its own. Government too has a role, but rather than offering large scale grant programmes, it is much more likely we will see it use soft policy levers around procurement, emissions reporting, value chains and private sector finance to help drive change. 

The full report: SME decarbonisation in the UK: emerging market trends and their implications for government by Sam Hampton, Lucia Burtnik and Erica Russell

A version of this article first appeared in the ISEP magazine TRANSFORM in Autumn 2025.