Environmental sustainability holds key to future for SMEs

Leading industry figures predict that in the coming years there will be a bigger focus on remanufacturing and repair, at the expense of disposability and designed obsolescence

Neil McDonnell, chief executive of Isme: ‘Every SME in Ireland has an interest in reducing their CO2.’ Picture: Siobhán Taylor

Carbon costs money, according to Neil McDonnell, chief executive of Isme. “Every SME in Ireland has an interest in reducing their CO2, for financial as well as environmental reasons,” he said.

As smaller operations, SMEs and start-up businesses often underestimate the value of their contribution towards supporting environmental sustainability. However, it is more important than ever for SMEs to evaluate their strategy, as environmental practices draw increasing scrutiny from consumers and the social responsibility of businesses within the local community becomes ever more central to brand reputation.

Isme is the largest representative body for small businesses in Ireland, and is independent of large business and multinationals in its lobbying efforts and policy-setting.

McDonnell said that over the coming years there will be an increased focus on re-manufacture and repair, rather than disposability and designed obsolescence. “This will reduce demand for primary extraction of oils, metals and materials, and increase demand for recycling services,” he said. “This will be more difficult to execute in a small economy like Ireland’s with only five million people, but it will be done. This will also reorient manufacturing and services.”

There are very few businesses which will thrive through climate action change directly, said McDonnell. “Windmill and PV cell manufacturers will do well. There is an upfront capex cost to a lot of the initiatives we will collectively need to take. However, businesses which make the transition from extraction to repair and repurpose will do well.”

“For the next number of years [10-15 plus], those businesses in aligned services such as insulation and deep retrofit will also do very well.”

McDonnell said that the sole fly in the ointment, for both consumers and the small business sector, is funding the capex problem.

“The typical family household energy bill was €2,500 per year before the energy crisis,” he said. “The typical cost of a deep retrofit for the average 1970s, 1980s or 1990s house will be €30,000 to €40,000 net of SEAI grants, meaning the payback time for capex was 12-16 years. While the payback time has decreased as energy costs increase, consumers have less money to spend, and don’t want to take on debt.”

“Therefore, Government will have to come up with ways to convince average householders to front-up the capex cost. This is likely to involve state funding, with interest-only payments by consumers, and the bill being held as a lien/mortgage against the property until there is a sale, disposal or inheritance.”

Fergus Sharkey, head of Business Supports and Transport with SEAI: ‘We drive the reduction and replacement of fossil fuel usage.’ Picture: Naoise Culhane

SEAI offers a range of financial supports, training, networking opportunities and expert advice for Irish businesses. “We will train thousands of businesses this year and expect to provide approximately €35 million in capital supports to 2000+ businesses via our grant schemes,” Fergus Sharkey, Head of Business Supports and Transport with SEAI, said.

SEAI’s mission is to be at the heart of delivering Ireland’s energy revolution. “We drive the reduction and replacement of fossil fuel usage,” Sharkey said. “SEAI is a knowledge-led organisation. We partner with citizens, communities, businesses and the government, and are trusted collaborators, innovators, funders and educators.”

He added that the current energy price crisis is putting extreme pressure on businesses and driving a renewed focus on energy among small and large organisations.

“In the immediate term, businesses can make reductions in energy consumption through behavioural and energy management changes. Depending on the business, this may amount to reducing temperature set points, using timers, ensuring equipment is powered down and plugged out every day, and reducing energy usage for things like external display lighting.”

Sharkey said that a good energy measurement and management system can identify your significant energy users. Simple housekeeping and awareness can achieve larger gains than many expect. “There will absolutely be energy-saving opportunities in your organisation,” he said. “It takes a focused effort to understand energy use and where immediate opportunities exist. This effort is more valuable than ever.”

Although Ireland has committed to reducing our CO2 emissions by 4.8 per cent per annum from 2021- 2025 under the first carbon budget, SEAI data shows that energy related emissions were instead up 5.4 per cent in 2021. The energy cost crisis does not change this undesirable situation, said Sharkey.

“There is a notable trend in recent years of larger corporates making strong commitments to emissions reductions, and many leading companies are making real initial steps in this regard,” he said.

“This is driven by a range of factors from investor and shareholder pressure, energy costs, consumer trends and employee sentiment. This trend is also trickling into smaller businesses, with many gaining a competitive edge by having a unique lower carbon product – this can be quite common in retail, hospitality and food and beverage sectors.

“From a technology perspective, the adoption of low carbon technologies among businesses is accelerating. There is enormous demand for solar PV among businesses, as a positive marketing statement and strong economic investment. More and more businesses are also decarbonising their heating with renewable heating technologies, mostly heat pumps and biomass heating.”

To help businesses get started on their energy-saving journey, SEAI has developed a free online training resource. The SEAI Energy Academy can help business reduce their energy costs by educating employees on changing their energy use behaviours and effective energy management.

“In addition, the SEAI Support Scheme for Energy Audits provides businesses with a comprehensive energy audit on their premises,” said Sharkey. “These are valuable first steps, and can identify the opportunities for immediate low and no cost savings, and for longer term investments.”

Sharkey said that there are a few options for capital supports. “The Community Energy Grant, EXEED Grant and Support Scheme for Renewable Heat can all provide capital grants and support tariffs for a range of energy efficiency and renewable energy technologies,” he said. “We will be launching a new solar PV grant scheme this month for small business, farming and public bodies like schools.

“Your energy supplier through the Energy Efficiency Obligation Scheme, can also support you on your journey with financial or in-kind supports to develop and deliver your investments.”

Sharkey said that SMEs are spending more than €2 billion annually on energy, with sharp recent increases making this an underestimate. “Ten per cent can be saved through good energy management practices. Businesses that employed energy efficiency systems and measures, and switched to renewable energy sources, in recent years are better insulated from energy price spikes, driven by natural gas prices.”

Climate action can help businesses on many levels, said Sharkey. “Reducing costs is the obvious example, but it can also help with branding, attracting investment, retaining employees, and creating a competitive advantage,” he said. “There’s also an enormous business opportunity in supplying sustainable products and services to other businesses. Demand for expertise is currently extremely high.”

Over the coming years, Ireland must use less energy, move to clean energy, and innovate to create new solutions to meet our energy needs. “The good news is, there is significant potential for businesses and for those who own or manage a business, to reduce their energy costs and influence Ireland’s sustainable energy future,” Sharkey said.