New Growth: How Small Businesses Can Power the UK's Net Zero Ambitions

The Federation of Small Businesses (FSB) has long championed the needs and interests of the UK’s small business community. With around 160,000 members, the FSB is one of the country’s largest and most influential business organisations, advocating for firms that are central to both the economy and the net zero transition. FSB is also a proud member of Climate Action for Associations (CAFA), and CAFA is currently working with FSB to develop and deliver its Responsible Business programme - a national support offer helping small firms take practical steps towards sustainability.

In its latest report, New Growth, supported by Zurich and published in May 2025, the FSB presents a timely and in-depth assessment of the progress small businesses are making towards net zero, the challenges they face, and the support they need. Building on the organisation’s 2021 Accelerating Progress report, this new research offers fresh insights and a practical roadmap to help unlock the full potential of the UK’s small business sector in the low-carbon economy.

The report reveals strong enthusiasm among small firms to be part of the solution. Nearly two-thirds believe that sustainability should be a high priority for the Government, and over half already see it as a priority within their own business. But this commitment is not being matched by practical support. Only one in four say they have the knowledge to make the transition, and even fewer feel they have the time to do so. As a result, many small firms are willing, but unsure of where to start or how to move forward.

Much of the challenge lies in the diversity of the small business community. What works for a food producer in rural Wales is unlikely to be suitable for an urban tech start-up in Manchester. Despite this, some broad patterns do emerge. The most widely adopted measures are low-cost and relatively simple. Sixty per cent of firms have switched to energy-efficient lighting, while a growing number have installed smart meters or moved to green energy tariffs. A smaller proportion, around 17 per cent, now have solar panels.

More complex technologies such as battery storage and heat pumps remain rare. For many small firms, the cost of these solutions is prohibitive. Government schemes do exist, such as the Boiler Upgrade Scheme, but very few businesses are accessing them. Some are unaware, while others find the eligibility criteria too restrictive. In fact, many businesses that have already invested in energy-saving measures have done so using their own cash reserves or personal savings. External funding is limited, and where it exists, awareness is low.

One of the clearest messages from the report is that knowledge and communication are key. Businesses are not just short of time and money; many also feel lost in a sea of technical terms, changing regulations and unclear guidance. A majority of small firms struggle with the language of carbon accounting, including terms like Scope 1, 2 and 3 emissions. The result is confusion, and in some cases, inaction.

Government messaging, too, has come in for criticism. Around six in ten businesses in England said they found net zero communications from Westminster unclear, and confidence was even lower in Scotland and Wales. The report recommends greater use of trusted organisations like the FSB and local business networks to share clear, practical information tailored to small businesses.

Transport presents another significant challenge. Only 16 per cent of small firms currently use a zero-emission vehicle, and almost half say the cost of switching is their main barrier. Support schemes do exist, such as the Workplace Charging Scheme, but again, awareness is low. Just 16 per cent of businesses surveyed had heard of it. There is support for government grants and clearer policy direction, particularly as firms make decisions on future investment.

The geographical picture is uneven. Businesses in London, supported by targeted schemes such as the Net Zero Accelerator, are more likely to have taken steps towards decarbonisation. In other regions, support is patchy and progress slower. In Scotland, where the national net zero target arrives five years earlier than in the rest of the UK, only just over a quarter of small businesses believe they will be ready by 2045.

The report sets out a wide-ranging series of recommendations. These include rolling out the Business Energy Advice Service nationally, expanding grants and tax incentives, and building low-carbon transition plans that reflect the realities faced by small businesses. It also calls for reform of funding schemes to make them more accessible, particularly in sectors such as manufacturing and construction, where current grant thresholds often exclude small firms.

Despite the challenges, there are opportunities to seize. Small businesses are often more agile than larger organisations, able to adapt quickly and innovate when the right support is in place. The transition to net zero brings the chance to reduce long-term costs, tap into new markets, and meet the rising expectations of customers and supply chains.

As one business owner quoted in the report put it, “We are doing the best we can to be sustainable, but we still have to be profitable in order to keep going.” This balance between environmental responsibility and commercial viability lies at the heart of the issue.

If the UK is serious about its climate commitments, then empowering small businesses must be a central part of the strategy. They are ready to act, and what they need now is the right support to get there.

Read the full report here: New Growth: How to support small businesses to cut carbon and costs on the road to Net Zero

If you're a membership organisation wishing to know more about what you can do to support your members with sustainability and addressing climate risks, join Climate Action for Associations here.