CISL report reveals how banks and corporations can better support SMEs on the path to net zeroCambridge Institute for Sustainability Leadership, BSR, We Mean Business Coalition, SME Climate Hub
A new report by the Cambridge Institute for Sustainability Leadership (CISL), Business for Social Responsibility (BSR), the We Mean Business Coalition and the SME Climate Hub highlights the role of commercial banks and multi-national corporations in helping small- and medium-sized businesses (SMEs) reach net zero.
SMEs account for 99% of businesses globally and, in the OECD region, are responsible for more than half of industrial emissions. But the majority of SMEs don’t have the right skills, knowledge, or resources to reduce their carbon emissions. There is a $50 trillion net zero financing gap for SMEs.
HSBC, Barclays, Microsoft and Mastercard, among others, took part in a series of innovation sprints in the summer of 2022 to address barriers SMEs are facing in reducing their carbon emissions. These were short, time-boxed periods where teams worked together to come up with a series of solutions to the financial gap around the net zero transition for small businesses.
The report, Financial Innovation for SME net zero transition: Role of Banks and Buyers, is informed by research undertaken as a part of the SME Climate Hub, a global community and free online resource platform for SMEs looking to transition to net zero, led by the We Mean Business Coalition. The report identifies the obstacles that can hinder SME decarbonization, from a lack of knowledge and limited time to a lack of standardized guidance on emissions reporting.
It lays out how banks and corporates, those that finance and buy the products and services of SMEs, are well equipped to support net zero action. Through their own net zero commitments these major players can help bridge the net zero financing gap for SMEs by experimenting with both incremental and radical solutions. “It is essential that they do so,” the report states, alongside ongoing action from policymakers.
Grant Rudgley, Banking Environment Initiative Lead, CISL said: “Small businesses are the backbone of global economies. Supporting them on their journey to net zero is a key priority of their banks, requiring new financial products and advisory solutions. This report begins to meet that requirement, summarizing innovations bankers themselves see as necessary and feasible to accelerate small business decarbonization.”
The potential solutions that emerged from the sprints, co-designed by banks and buyers, and reviewed by SMEs, highlight areas where more can be done. These fall into four categories, including knowledge, technology, behaviour and a shift in business model.
Numerous case studies suggest how this would work. NatWest Group created the NatWest Carbon Tracker application, a knowledge-based solution that provides SMEs with an estimate of their carbon footprint. Equally, Asda has developed a behaviour-based solution called the Sustain & Save Exchange, a free, online tool to support supplier interaction in resource efficiency and emissions reduction.
Giulio Berruti, Director, Climate, BSR said: “Small and medium enterprises make up a significant portion of the world economy, and while their actions are critical to reaching net zero globally, support is currently lacking.
“Most large companies rely on several thousand SME suppliers, and banks often serve large numbers of SME customers. As such, both banks and large companies have an important role to play in incentivizing SME action to net zero. I am proud of the work that BSR and CISL did with this report, co-creating solutions that could drastically accelerate the pace of net zero transformation for SMEs.”
Pamela Jouven, Director, SME Climate Hub said: “The SME Climate Hub was founded to help small- and medium-sized businesses reduce their carbon emissions and access the business incentives of taking climate action. We cannot reach our global net zero goals or create thriving economies without bringing these businesses on board, and they cannot take the action needed without the proper tools and support.”
The report emphasizes that these solutions are mutually supportive – stemming from the need for a user-friendly platform dedicated to SME net zero action and uniting around the need for a one-stop platform for banks and buyers too.
Notes to editors
The innovation sprints formed phase two of a partnership that began in 2021. In phase one, CISL and BSR focused on identifying barriers to SME climate action.
For media enquiries and interviews with report author Dr Mohsen Gul, please contact [email protected]
The University of Cambridge Institute for Sustainability Leadership (CISL) partners with business and governments to develop leadership and solutions for a sustainable economy. CISL aims to achieve net zero, protect and restore nature, and build inclusive and resilient societies. For over three decades they have built the leadership capacity and capabilities of individuals and organizations, and created industry-leading collaborations, to catalyze change and accelerate the path to a sustainable economy. Their interdisciplinary research engagement builds the evidence base for practical action.
BSR is a sustainable business network and consultancy focused on creating a world in which all people can thrive on a healthy planet. With offices in Asia, Europe, and North America, BSR provides its 300+ member companies with insight, advice, and collaborative initiatives to help them see a changing world more clearly, create long-term value, and scale impact.
The SME Climate Hub is an initiative of the We Mean Business Coalition, the Exponential Roadmap Initiative, and the United Nations Race to Zero campaign. In collaboration with Normative and the Net Zero team at Oxford University, the SME Climate Hub provides tools and resources to enable SMEs to make a climate commitment, take action, and measure their progress towards emissions reductions. The SME Climate Commitment is the official pathway for small- and medium-sized businesses to join the United Nations global Race to Zero campaign. Over 5,300 businesses across 107 countries have already made the commitment.