2023 Budget : Sustainability and SMEs

From the perspective of a small business owner interested in sustainability, the UK Spring Budget underscores the importance of monitoring the government's environmental policies and spending priorities.

Matt GregMatt Greg

Matt Greg, 17 March, 2023

2023 Budget | Sustainability and SMEs2023 Budget | Sustainability and SMEs

I just finished reading the thrilling 120-page Spring Budget. Why? I am not an economist or a finance expert by any means, and if we’re being completely honest, most of it went over my head. However, as an SME owner with sustainability high on our agenda, I was curious to understand where the environment sits within this document. What should we be doing? Is there anything interesting in the pipeline? This article explains my thoughts. 

Why should small businesses care?

Isn’t all of this too big for a small business? Well, not really.

Yes, the budget highlights the big things, counted in millions and billions. But what happens on the macro scale will soon effect us on the micro too. It’s important we keep track of how the government is thinking about the environment and where money is being spent.

This will allow our small businesses to keep ahead of legislation, become more competitive and most importantly, have a positive collective impact on the planet.

TurbinesTurbines

Large Focus On Clean Energy & Energy Saving

The Budget’s Summary is somewhat what I expected. Inflation is rather rubbish. Debt is rather rubbish. Energy prices… you guessed it, rather rubbish. In fact, the energy situation is the only real mention of anything related to the environment in the Summary.

“To increase resilience to future energy price shocks, the government is supporting investment in the energy system by launching Great British Nuclear to support new nuclear builds, making up to £20 billion available for Carbon Capture, Utilisation and Storage (CCUS), and extending the Climate Change Agreement scheme for a further two years to encourage energy efficiency.”

Bringing this back down to our SME-earth, it seems we will soon be given more opportunities to reduce Scope 2 CO2e emissions. How? These investments (amongst many other factors) will enable more choices of clean energy tariffs for our businesses.

Of course, we have to actually be aware of our business’ emissions to even consider how we can reduce our Scope 2. As an example, we expanded our Environmental Management System (EMS) earlier this year, and we invested in a Carbon Footprint calculator. This will allow us to make changes and reduce. One of these choices may be to take advantage of the Clean Energy investments the Budget mentions.

I also spotted mentions of a VAT relief for energy-saving materials:

“The government has published a call for evidence on options to reform the VAT relief for the installation of energy-saving materials in the UK.”

As well as £20 billion in funding for early deployment of Carbon Capture, Usage and Storage (CCUS). These are both worth keeping an eye on.

eye oneye on

After reading the Summary of the Budget, I wasn’t actually sure what the Climate Change Agreement was. A quick Google later:

“...voluntary agreements made between UK industry and the Environment Agency to reduce energy use and CO2 emissions. In return, operators receive a discount on the Climate Change Levy (CCL), a tax added to electricity and fuel bills. The Environment Agency administers the CCA scheme on behalf of the whole of the UK.”

Ok, so this is being extended until 2025. Sounds good.

I also noticed a note between the lines: “In addition to the measures in the Spring Budget, the government will set out further action later this month to ensure energy security in the UK and meet our net zero commitments.” Another item worth keeping an eye out for.

Department for Energy Security & Net ZeroDepartment for Energy Security & Net Zero

Department for Energy Security and Net Zero

Amongst others, the budget announced the creation of a new Department for Energy Security and Net Zero. The actual budget for this new department is on-par with the (also new) Department for Business and Trade, whilst being considerably higher than the other two new departments created (Science, Innovation & Tech, and Culture, Media and Sport).

The Resource (£1.6b) and Capital (£5.9b) expenditure limits 2023-24 for this new department are relatively small compared to the likes of Education or Health and Social Care, but that’s understandable. I think it’s good to see some focus on Net Zero. 

How might this effect us? Small businesses will likely have more opportunities coming up for grant funding, tax relief or access to growth capital, related to Energy and Net Zero. Further areas of the Budget support this theory.

menmen

Great Time for Net Zero Investment and R&D

‘Green Industries’ are defined by the government as a ‘Sector of the Future’. I prefer to think of it as a ‘Sector That Enables a Future’. The budget identifies that Green Industries companies need access to sufficient finance to be able to start, scale and stay in the UK. That sounds great if you’re one of them!

“To develop the next generation of globally competitive companies that grow and list in the UK, and to bolster the retirement incomes of millions of ordinary people, it will be critical to unlock defined contribution (DC) pension fund investment into the UK’s innovative firms.”

This foreshadows that finding investment for green SMEs will become easier.

Things are also looking good in the Budget for companies investing heavily in Research & Development (R&D):

“From 1 April 2023, the government will introduce an increased rate of relief for loss-making R&D intensive SMEs. Eligible companies will receive £27 from HMRC for every £100 of R&D investment. The government remains committed to supporting R&D, and recognises the important role that R&D and innovation play for the economy and society.”
flexworkflexwork

Consider Flexible Working

Majority of sources state that offering flexible working conditions is better for the environment, as long as a ‘sustainable culture’ is practiced at home. The Budget makes a point that employees will have more flexibility.

“Working flexibly can help employees balance work commitments and personal circumstances, such as parenting, caring, managing a health condition, or transitioning from full-time work later in life. The government is reforming the statutory framework for flexible working to provide employees with a day-one right to request their job be done flexibly. The government will work with employers to demonstrate the benefits of offering flexible working”

Therefore, if you haven’t already, consider your flexible working policy. This has done wonders for our business from a culture perspective, and plays part in our CO2e reduction plans.

It’s good for your people. It’s good for the planet.

wastewaste

Reinvent Your Packaging and Avoid Waste

The Budget indicates that producing waste is just… not good (duh!)

We have the 2023-24 Plastic Packaging Tax rate: “The government will uprate the Plastic Packaging Tax rate in line with CPI, from 1 April 2023.” and the 2023-24 & 2024-25 Landfill Tax.

I think the key takeaway is that this is just the beginning. Consider how much less packaging or more sustainable packaging solutions you see in your everyday life. Circularity and avoiding waste will only become more important. 

Your business should get ahead and consider / implement options before you legally have to.

One additional consideration for us, and maybe for you, is Digital Waste and when this will become a bigger deal in government policy. We know the internet produces heaps of CO2. For us, as a Creative Agency, this is the biggest form of Scope 3 emissions.

Summary

This exercise somewhat hurt my brain. For a non-budget person, the document is quite overwhelming. Yet the underlying message seems clear: it is financially better for small businesses to operate in a sustainable way, and it will be even more so in the future.

From tax reliefs and reducing your operating costs, to a better investment landscape and other growth support.

Oh, and there is no business on a dead planet!

I’d love to hear your thoughts on whether I missed anything environment-related in the Budget. Thanks for reading.

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