Net zero for small businesses

“Net zero” gets used loosely, but it has a specific meaning, and most of what it implies for a small business is voluntary rather than legally required. This guide explains what the term actually means, what you do and don’t have to do, and where to start if you want to genuinely cut your business’s emissions rather than just talk about it.

What does net zero actually mean?

Net zero means cutting greenhouse gas emissions as close to zero as possible and balancing whatever is left with genuine removals, such as tree planting or carbon capture, so the net effect on the atmosphere is nil. The UK’s own legal target, set under the Climate Change Act 2008 as amended in 2019, is to cut the country’s net emissions to 100% below 1990 levels by 2050. That’s a national target, not a legal duty on individual businesses, but it’s the reference point most business-facing net zero language ultimately traces back to.

For a business, working towards net zero in practice usually means:

1. Reducing your own energy use and the emissions that come with it.
2. Switching remaining energy use to lower-carbon sources where practical.
3. Only after doing as much of the above as reasonably possible, considering offsetting for whatever genuinely can’t be eliminated.

Why do small businesses pursue net zero without a legal duty to?

Most commonly, because their customers, lenders or bigger business partners are asking them to, or because it saves money on energy in its own right. A few common drivers:

• Supply chain pressure. Larger companies that do have SECR reporting duties, or their own net zero targets, increasingly ask suppliers, including small ones, for information on energy use and emissions as part of tendering or account management.
• Tender and procurement requirements. Some public sector and larger private sector contracts now ask bidders about their environmental credentials as part of the scoring process.
• Cost. Many of the practical steps that reduce emissions, especially efficiency measures, also reduce your energy bill, so the two goals often point the same way even where the motivation started as cost rather than climate.
• Customer and staff expectations. Some businesses find it matters to their customers or to recruiting and retaining staff.

None of these are legal obligations in themselves, but they’re a common reason a small business ends up needing to answer questions about its energy use and emissions well before SECR or ESOS would ever apply to it directly.

Does your business have to do anything by law?

For most small businesses, no. Net zero itself isn’t a legal duty on individual companies, and the mandatory reporting regimes that do exist apply only to larger organisations. Two schemes matter here:

• Streamlined Energy and Carbon Reporting (SECR) requires quoted companies, and large unquoted companies and LLPs that meet certain size tests, to report their energy use and emissions each year.
• The Energy Savings Opportunity Scheme (ESOS) requires large undertakings to carry out energy audits every four years.

Both have specific size thresholds that exclude the great majority of small and medium businesses. Our SECR and ESOS guide sets out the current thresholds and dates in detail. If your business is genuinely small, you’re very unlikely to be caught by either, but it’s worth checking the thresholds if you’ve grown, merged, or are otherwise unsure.

Where should a small business start?

Measure first, then act on the biggest and cheapest wins before considering bigger investments. A sensible order:

1. Get 12 months of energy bills together and work out where your usage actually goes, split between heating, lighting, equipment and anything else significant.
2. Fix the free and low-cost things first. The Carbon Trust’s guidance for businesses points to heating controls, thermostats, and switching things off when not needed as the starting point, before spending on new equipment.
3. Tackle lighting and insulation next. These tend to have the shortest payback of any capital measure.
4. Consider bigger investments once the basics are sorted. Solar panels, a heat pump, or battery storage make more sense once you’ve cut wasteful use, since you’re then sizing new equipment to a lower, more accurate baseline demand.
5. Look at what you buy and how you travel, not just your energy bill, since for many small businesses, emissions from purchased goods, services and business travel can outweigh what shows up on the electricity and gas bill.

Our guide to reducing business energy costs works through this in more detail, and a structured business energy audit can do much of the measurement step for you.

What is the SME Climate Commitment?

A free, voluntary pledge for small and medium businesses, run through the global SME Climate Hub and its UK partner, the UK Business Climate Hub. Joining means committing to:

• Halve your greenhouse gas emissions within ten years.
• Reach net zero emissions before 2050.
• Disclose your progress on a yearly basis.

The UK Business Climate Hub was developed with government involvement alongside business groups, energy networks and banks, and offers free tools, sector-specific guidance and signposting to funding, aimed specifically at UK SMEs rather than large corporates. It’s a reasonable place to start if you want a simple, public commitment and some structure for measuring progress, without the cost of a formal accreditation scheme.

What does “scope 1, 2 and 3” mean, and do you need to track it?

These are standard categories for where emissions come from, and government’s own environmental reporting guidance uses them, though only larger businesses are required to report this way.

Scope	What it covers	Example
Scope 1	Emissions from sources you own or control directly	Gas boilers, company vehicles
Scope 2	Emissions from energy you buy	Purchased electricity, heat or steam
Scope 3	Everything else in your wider value chain	Purchased goods and services, business travel, waste, water

A small business isn’t required to report this way unless it’s caught by SECR, but the framework is still useful informally: it’s a reminder that your gas and electricity bill (scope 1 and 2) is often the smallest part of your total footprint once you account for what you buy and how goods and people move around your business (scope 3). If you’re serious about cutting emissions rather than just your energy bill, scope 3 is usually where the bigger numbers are, even though it’s the hardest to measure precisely.

If a customer or lender asks for your emissions broken down this way, scope 1 and 2 are usually straightforward to work out from your fuel and electricity bills. Scope 3 is harder, since it depends on data from your suppliers, and a full inventory is often more effort than a small business needs to put in unless someone specifically requires it. A reasonable starting point is to estimate your largest few scope 3 categories, such as your biggest purchased materials or your most frequent business travel, rather than attempting a complete inventory from day one.

What practical steps cut emissions fastest for a small business?

Beyond the general order set out above, the specific measures that tend to matter most depend on your premises and sector, but commonly include:

• Heating. Usually the single biggest energy use in a building. See our guides to cutting business heating costs and heat pumps for business.
• Lighting. LED upgrades are one of the fastest-paying-back changes most premises can make.
• On-site generation. Commercial solar panels let you generate lower-carbon electricity on site, and the Smart Export Guarantee pays you for what you don’t use.
• Vehicles. If your business runs vehicles, EV charging infrastructure and the Workplace Charging Scheme grant are worth checking.
• Your electricity tariff itself. A renewable electricity tariff doesn’t reduce your usage, but it does change what’s behind the electricity you buy, and can be a reasonable interim step while you plan bigger changes.

What funding is available?

Several routes exist, though none of them cover everything, and availability changes. The Boiler Upgrade Scheme, capital allowances for qualifying equipment, and separate schemes in Scotland, Wales and Northern Ireland can all help with the capital cost of specific measures. Our energy efficiency grants for business guide sets out what was genuinely confirmed as open in September 2026, and flags schemes that have since closed, since this area changes often enough that older articles can be misleading.

How do you talk about your progress without over-claiming?

Any claim you make needs to be accurate, clear and backed by evidence, whether you’re talking to customers, suppliers or investors. The Competition and Markets Authority’s Green Claims Code sets out principles that apply to any environmental claim: it must be truthful, clear, not omit important information, make fair comparisons, consider the full lifecycle of what you’re claiming about, and be substantiated. In practice, that means:

• Being specific about what you’ve actually done (“we’ve cut our office electricity use by switching to LED lighting and a renewable tariff”) rather than an unqualified “we’re net zero” or “carbon neutral” unless you can back that up in full.
• Keeping records of what backs any claim, including supplier confirmations, invoices for measures you’ve installed, and your own usage data.
• Not implying your whole business, including your supply chain, is covered by a claim that only applies to your own premises or electricity.

Our renewable energy for business guide covers this in more detail, including the specific rules around green electricity tariffs and REGO certificates.

A simple starting checklist

1. Pull together 12 months of energy bills and work out where your usage goes.
2. Fix free and low-cost issues first: heating controls, timers, and switching things off.
3. Join the SME Climate Commitment if a simple, public pledge and some free tools would help structure your effort.
4. Check whether SECR or ESOS applies to you, using our SECR and ESOS guide, even if you’re fairly confident you’re too small.
5. Plan bigger measures, such as solar, a heat pump or battery storage, once the basics are sorted.
6. Check current grants and tax reliefs before committing to a big purchase.
7. Keep evidence for anything you plan to say publicly about your progress.

Cutting emissions and cutting costs usually point in the same direction, but they’re not identical, and a lower bill doesn’t always mean lower emissions if you’ve simply switched to a cheaper, high-carbon fuel. Once you’ve worked out what you actually need to buy, compare business energy quotes to make sure you’re getting a fair price for it.

Frequently asked questions