Business and climate action

They include:

• • Meeting the expectations of customers, both consumers and businesses, for low carbon and circular products and services
  • Cost savings from efficient use of energy and resources
  • Staying ahead of regulation and taking advantage of opportunities
  • Attracting and retaining staff, especially talented younger people, who expect to work for responsible and proactive organisations
  • Anticipating how climate change will impact business, and responding appropriately

There are some key foundational elements:

• • Understanding impacts through standards-based emissions accounting (organisation and product level) and third party verification
  • Signing up to robust net zero emissions reduction targets and external commitments
  • Developing comprehensive action plans which are consistent with targets
  • Transparent and regular reporting of impacts and progress
  • Avoiding any elements of greenwash

The opportunities for action include:

• • Driving positive change in supply chains through responsible procurement policies and practices
  • Developing low emissions operations
  • Innovating and investing in the development of low emissions products and services
  • Divesting from emissions intensive activities and investments
  • Influencing customers to demand low emission products and services
  • Collaborating with other organisations to address sector-wide and systemic issues
  • Supporting regenerative projects, especially when buying carbon offsets
  • Understanding business risks from a changing climate and developing a comprehensive risk management plan

Examples of leading actions

• • Setting of science-based targets using the SBTi’s Net-Zero Standard, including third-party verification
  • Joining the Climate Leaders Coalition 
  • Third-party verification or certification of emission inventories, such as Toitū and Ekos

Main roles for SMEs

There are three main roles for SMEs in climate action:

1. 1. As innovators - creating new low carbon products and services
   2. As producers - transitioning to low carbon operations
   3. As consumers - buying low carbon products and services

Many key innovations arise from the drive of entrepreneurs and inventors. They need to be enabled, supported and encouraged. They are frequently the cradle and proving ground for ideas that are later adopted by larger businesses.

As consumers, SMEs can use their significant collective business-to-business (B2B) purchasing power to support innovation themselves. But to do so they need to know about these options, understand their value, and be incentivised to buy them.

The opportunities for SMEs

SMEs can benefit from climate action in all the ways identified above.

Many have the opportunity to pivot to offer new products and services to appeal to changing customer preferences. All can benefit from being more efficient with energy and resource use. Taking action can help to attract and retain valuable people to work in the business.  

The challenges for SMEs

However, many SMEs do face challenges. These include:

• • Time, resource and financial constraints
    Smaller business owners and managers are typically busy and focus on immediate priorities. Many don't have the time or resources to consider how they might reduce their impacts. They may expect higher costs from taking action, and not see the opportunities.
  • Lack of knowledge and understanding
    Given the lack of time, smaller business owners and managers have struggled to understand their impacts and opportunities. Until recently, there hasn't been an easy way for businesses to get started with climate action.
  • Inadequate drivers and motivation
    The situation is changing, but the drivers for small businesses are limited. More customers are demanding low carbon products, but many may not be willing to pay a premium. Carbon pricing is beginning to have an impact, but it is at the margins and may take time for the system to respond. However, an increasing number of smaller business owners and managers recognise the need for change and want to play their part.
  • Complacency
    For some, their small size may lead to complacency that they can't make a difference, or that they are already doing what they can. Many businesses will have low impact, but for every business, there are opportunities to contribute. 
  • Not normalised
    There is evidence of a small but growing number of ‘early adopter’ SMEs taking climate action. These examples may struggle for visibility within the mainstream business community. Seeing businesses taking action and achieving business success is a powerful motivator for others to follow.  We need more inspiring case studies.

How SMEs can get started

The Climate Action Toolbox has been developed to address the challenges mentioned above. The Toolbox provides an easy way for smaller businesses to start taking action.

Visit the Toolbox here.

SMEs can continue their journey by: 

• • Understanding impacts through standards-based emissions accounting (organisation and product level) and third-party verification
  • Signing up to robust net zero emissions reduction targets and external commitments
  • Developing comprehensive action plans which are consistent with targets
  • Transparent and regular reporting of impacts and progress

This can be described as the 'Motivate - Measure – Minimise – Mitigate - Manage' pathway.

The components are:

• • Motivate: Gain an understanding and the motivation to act, and then do something to start the ‘climate action journey', for example, by using the Climate Action Toolbox.
  • Measure: Measure or estimate your emissions, or carbon footprint. This may include scope setting, data collection, footprint calculations and developing an overall greenhouse gas/carbon inventory. The measuring phase also includes reporting, either internally or publicly. There is also optional verification and certification.
  • Minimise: Set a reduction target, develop a plan and take action. Action often starts with simple and cheap ‘low hanging fruit’ options. They might continue with operational process changes and develop longer-term actions relating to system change and financial investment. The minimise phase also includes monitoring and reporting progress.
  • Mitigate: The most quantifiable and direct way companies can mitigate any unavoidable greenhouse gas emissions is through carbon offsetting using certified credits. This offsetting can be limited to specific activities (e.g. flights) or for the full organisational footprint. Carbon neutral or carbon positive claims can be made when the footprint has been verified by a suitably accredited third party and certified offsets have been purchased. 
    Other positive steps where offsetting is too costly or difficult may be other forms of mitigation. This might include supporting ecological restoration projects that don’t necessarily issue carbon credits. It might also include ‘carbon insetting’. This is where companies invest within their business to reduce emissions, such as electric vehicles for their fleet or supporting staff to buy e-bikes for their commute.
  • Manage: Businesses increasingly need to plan for climate change adaptation. This will help ensure the business can meet the operational demands of the changing climate and its associated effects. It will also help develop business resilience and long-term sustainability, especially in how it plans to adapt to a changing climate. This requires consideration of local operations but also the full supply and value chain.

It is through these steps that the work of the Climate Action 20/25 programme seeks to shepherd New Zealand SMEs through.