Correspondence from the Federation of Small Businesses
Northern Ireland Policy Unit
Federation of Small Businesses
Cathedral Chambers
143 Royal Avenue
Belfast
BT1 1FH
Environment Committee Office
Room 245
Parliament Buildings
Stormont
BT4 3XX
www.fsb.org.uk
20th February 2009
Re: Committee for the Environment – Inquiry into Climate Change
The Federation of Small Businesses is Northern Ireland’s largest business organisation with almost 8000 members drawn from across all sectors of industry, and over 210,000 members throughout the UK.
The Federation lobbies decision makers to create a better business environment and welcomes this opportunity to input into the Northern Ireland Assembly Environment Committee Inquiry into Climate Change.
We trust that you will find our comments helpful and that they will be taken into consideration. The FSB is willing for this submission to be placed in the public domain. We would appreciate being kept apprised of further developments.
Regards
Wilfred Mitchell OBE
Northern Ireland Policy Chairman
Introduction
The FSB is supportive of measures to protect the environment and human health and encourage resource efficiency; however environmental legislation to date has continued to apply a ‘one-size fits all’ approach which presents many barriers for small businesses in their efforts to seek effective environmental solutions.
The current debates on climate change are very academic in nature and tend to focus on large businesses or householders. There must be a change in this focus, taking into the account the dominant role (98%) that small businesses play in the Northern Ireland economy.
Impact on Small Businesses
Future policy on climate change will have a significant impact on small businesses. Small businesses behave in a similar way to householders, in terms of expertise levels. The energy market remains a difficult one for small businesses and micro-businesses in particular, and their perception is that the situation will only get mor difficult for them, in terms of cost, regulation, and the potential for legal penalties, and that this could have a knock-on effect on their ability to survive.
Professor Rob Baldwin of the LSE found that the burden of small businesses from regulation is five times higher than that of large businesses (employing 250 or more).(1) As with all types of legislation and red tape, the FSB calls for a reduction in regulation, not an increase, and where possible, simplification and clear guidelines.
The long term risks to businesses not engaging in the climate change programme include increased costs and loss of revenue. However, climate change will also provide new markets and technologies for many small businesses. Energy prices are a particular and immediate concern. However, businesses who understand the issues surrounding climate change will be better equipped to maximise opportunities and mitigate negative impacts/risks.
A Mori survey in 2005 found that 87% of SMEs were of the view that climate change offered considerable opportunities to business yet only 19% saw climate change as a significant opportunity for their own business.
Lack of resources and awareness remain a barrier to small businesses exploring ways to mitigate rising energy costs. They know they have to do something but are unclear about the next steps.
The FSB has found that lack of clear advice and information, together with the constraints faced by SMEs has prevented many small businesses from taking steps to improve energy efficiency. A recent survey(2) found that 60% of SMEs have taken some steps to increase energy efficiency (e.g. changes to heating and lighting) but notably 40% have taken no action. For small companies, technical problems and the cost of changing production processes are barriers to increasing efficiency but so too is a lack of quality information and advice.
In a recent FSB survey on Corporate Social Responsibility (2008), well over a third of respondents reported that they engaged in energy efficiency measures. Approximately 70% of those that provided information on energy efficiency did the following:
- Utilised low energy light bulbs
- Invested in low energy lighting
- Turned of PC/lights etc
- Changed heating systems
- Minimised electrical usage
- Reduced temperature in office
Engaging SMEs in the climate change debate will require a major shift in this perception of the opportunities and also the risks of climate change.
Environmental Taxation
The FSB is opposed to environmental taxation, which burden small businesses disproportionately. We would highlight the Climate Change Levy in particular, which FSB research ( The Climate Change Levy – ‘Another Cost for Small Business’ 2002) demonstrated did little to improve energy efficiency among small businesses (and had no measurable effect on environmental behaviour).
Recommendations
Government initiatives to date have had a negligible impact on small businesses as FSB research demonstrates.
To be effective, the Northern Ireland Assembly needs to raise awareness of the requirements and objectives of legislation and to explore ways to incentivise support the small business sector in relation to environmental issues.
- A clear regulatory framework will reduce uncertainty but the particular position of small businesses must be taken into account at the outset.
- A practical, joined-up approach to climate change policy, including consideration of planning policy, is required. The technical nature of the language associated with debates on climate change is inaccessible to the average small business owner.
- Legislation/regulation to be applied proportionately and take into consideration the particular position of small businesses.
- Investment in technical innovation , capital and financial incentives on energy efficiency for small businesses would be an important contribution to these targets.
- Reduction of VAT on green energy sources to encourage take-up among small businesses.
- Present both the risks and opportunities tackling climate change and what it could mean to small businesses.
- Statutory authorities, together with suppliers should promote energy efficiency measures that SMEs can easily apply to their businesses. This should be developed in tandem with practical support and clear examples of how small businesses can maintain and improve profitability through energy savings.
References
(1) “Better Regulation – is it better for business?” written for the FSB by Professor Rob Baldwin, LSE.
(2) Npower Business Energy Index, Summer 2006