How do SMEs perceive Energy Efficiency Improvements?

23/07/2018

How do SMEs perceive Energy Efficiency Improvements?

According to UK government online portal, 99% of the UK’s businesses are SMEs, 60% of employment in the UK private sector and £49.6 billion of business energy spend. The Government’s energy projections suggest energy price increases between now and 2020 and with electricity prices for medium-sized companies predicted to rise by 30%. By installing energy efficiency measures, businesses can take control of their energy use, reduce avoidable loss and cut their energy bills.

Despite the tangible and quantifiable financial savings which can be made through improvements in energy efficiency, those savings are unlikely to be a key business driver for many SMEs in the context of their wider business costs. Moreover, SMEs frequently fall outside the legislative requirements for energy reporting such as the ESOS – a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria – and CRC – a scheme that aims to incentivise energy efficiency and cut emissions in large energy users in the UK’s public and private sectors – programmes. This suggests that legislative compliance is currently not a strong motivator driving SME energy efficiency either. Despite the lack of compelling cost or legislative drivers, there is still evidence to support the fact that cost savings are one of the greatest motivators for influencing SMEs to implement energy efficiency improvements.

The nature of SMEs means that they often have “fewer technical and financial resources or less operational and management capacity” than larger firms, meaning that even when financial savings are available, SMEs might not have enough staff time or availability to objectify those savings. Additionally, for some SMEs (specifically start-ups) the business owner may have strong intentions of selling the business in the short to medium term, enhancing the need for very short payback periods. The average life of an SME is approximately five years, implying that any payback periods of greater than five years may present as only marginally attractive to SME owners and management.

The business owner may have strong intentions of selling the business in the short to medium term, enhancing the need for very short payback periods

Research on how SMEs could reduce energy costs has shown that many of those firms were pragmatic when it comes to energy efficiency measures. A typical small-medium commercial firm is able to manage top 5 costs and energy, representing average 10% of their fixed costs, never makes the cut.

Perhaps, with the Minimum Energy Efficiency Standards (MEES), SMEs will start looking more seriously to their energy usage and how that can affect their balance sheets. Nevertheless, the lack of technical resources and expertise is still a barrier to the majority of these firms. SmartKlub builds resilient communities around energy by helping them achieve their social goals. whether it’s tackling fuel poverty, improving sustainability or connecting residents in a place or in cyberspace. If you can help us while delivering your CSR objectives too, please get in touch.