Kiran Kachela Founder and Managing Director of Continuous Improvement Projects Ltd (CI Projects),
Stephen Entwisle, a Sustainability Change Leader at Continuous Improvement Projects Ltd (CI Projects).
Dr Suman Lodh, Assistant Professor in Finance, Middlesex University London
Dr Monomita Nandy, Associate Professor in Accounting and Finance, Brunel University London
Why we need to consider SME in Net Zero discussion?
In October 2021, the UK government published the Net Zero strategy (HM Government, 2021). The aim is to halve UK emissions in little over a decade and to eliminate them by 2050. Carbon dioxide is the most abundant greenhouse gas (GHG), which is why cutting carbon emissions, carbon footprints or seeking low-carbon alternatives are encouraged as ways to address climate change. According to the British Business Bank (British Business Bank, 2021 ), smaller businesses (less than 249 employees) account for almost a third (30%) of all current UK GHG emissions and around half (50%) of total emissions from UK businesses. The report also states that although nearly 60% of smaller businesses are aware of net zero, 76% have yet to implement comprehensive decarbonisation strategies. Just 3% have measured their carbon footprint in the last five years and subsequently set an emissions reduction target. Thus, in our research, we try to understand the main challenges for the SME in achieving Net Zero and how a collaboration between universities and professionals can introduce an applicable model for the SME.
SME Net Zero Challenges
Widely voiced barriers (Walker, 2021) for SME’s include cost, lack of appropriate skills, the speed at which change is required, short-term priorities such as recovery from the pandemic, and supply chain problems. Furthermore, unlike larger businesses, SMEs often do not have dedicated teams to help them make the transition. Research studies on sustainability have not focused much on SME’s net zero. No benchmarks exist. While most UK SMEs are in the service sector, research studies on sustainability have been largely conducted in the manufacturing sector. Given that SME’s make up approximately 99% of all UK businesses, and about 75% of all UK businesses are in the service sector, it means that nearly all SMEs are in the service sector (Ward, 2021).
Our Suggestion for SME : Lean Green Approach
Lean Six Sigma (LSS) focuses on waste elimination, so, unsurprisingly, it has been widely used in carbon reduction efforts. However, while some research has been undertaken to integrate LSS and sustainability into one framework, it has again been limited to the manufacturing sector. Hence, for service sector businesses to set out plans for achieving net zero, it requires that a model appropriate to the service sector is made available. To that end, we are developing the Lean Green Six Sigma (LGSS) model, which builds on work undertaken by other researchers for the manufacturing sector. ). Our approach fully utilises the techniques called funnelling and backcasting. Funnelling allows organisations to plan backwards (backcasting) from a desired sustainable state to the current state within boundaries that portray the constraints, for example, regulatory requirements and sustainability principles, that the organisation must operate within in pursuit of its sustainability goals. The model will additionally include an integrated carbon footprint calculator.
Figure 1 ROADMAP DEVELOPMENT PROCESS (click on the diagram to enlarge)
Here, VSM is Value Stream Mapping, SICA is Sustainability Life Cycle Assessment, SCI stands for Sustainability Compliance Index (SCI), and CF is the carbon footprint
The process is designed to be used flexibly across all sectors to identify lean improvements in environmental and socio-economic aspects, thereby enabling the creation of a lean and sustainable roadmap.
By including SMEs in an inclusive model of net zero, we would like to support the government in eliminating carbon emissions to zero by 2050. We seek feedback from stakeholders, policymakers, and researchers to help us continually improve the model. Together, we can create lasting organisational change through sustainable cost reductions, improved profitability, and enhanced customer experience even for SME by applying the lean green six sigma model.