To achieve the ambitious goal of net zero emissions, SMEs are crucial. They account for a substantial share of domestic emissions, but also have considerable emissions savings potential.
By ratifying the Paris Climate Agreement in 2015, Switzerland committed to halving its annual greenhouse gas emissions by 2030 compared to 1990, and even to achieving «net zero emissions» by 2050. These ambitious goals can only be achieved with drastic measures in which both households and businesses play a crucial role. Although the focus is currently on large companies, SMEs, which form the backbone of the Swiss economy, are also likely to come under increased pressure in the future. This is the finding of a recent Credit Suisse study.
It is not enough for only large companies to reduce their emissions
The Swiss corporate landscape is strongly characterized by SMEs. Measured in terms of the number of companies, SMEs account for around 99% of all companies. If the number of employees in full-time equivalents is taken as the reference figure, SMEs account for almost two-thirds of the Swiss corporate landscape. However, company size cannot automatically be equated with domestic emissions per group of companies, as companies emit different amounts of greenhouse gases depending on the sector they belong to or their position in the value chain. Industries with high CO2 emissions, such as the cement or metal industries, require significant initial investment and therefore tend to be dominated by larger companies. McKinsey & Company estimates (2022) that around 40% to 50% of economic domestic emissions are caused by SMEs. This result illustrates that SMEs can make a decisive contribution to achieving the net zero target. At the same time, it becomes clear that it will not be sufficient if only large companies reduce their emissions.
New technological innovations are indispensable for achieving goals
However, the importance of companies for achieving ambitious climate targets goes beyond their own emissions savings potential and includes their innovation contribution. According to the International Energy Agency (IEA), new technological innovations are likely to become established on the market in the coming years, which will be essential for achieving the targets, the authors explain: «In the Faster Innovation Case scenario, 45% of emissions savings in 2050 are projected to come from technologies that are not currently commercially available.» This finding underscores the need for steady investment in new technologies as the economy decarbonizes. The authors of the study note that the implementation of sustainability measures and the introduction of innovations involve hurdles that are generally somewhat higher for SMEs than for large companies.
Access to financial resources is important
One important aspect, for example, is access to finance. Banks support companies in implementing their sustainability strategy by increasingly offering financing solutions that are linked to a specific sustainability target. With the Technology Fund, the federal government also has a climate policy instrument for granting loans to innovative Swiss companies in a simplified manner and thus promoting novel products that enable a sustainable reduction of greenhouse gas emissions.
Environmental regulations focus primarily on large companies
Another reason why SMEs are less likely to take sustainability measures may be related to legislation. It is true that environmental regulations have changed quite a bit in recent years, and a clear majority of Swiss companies are affected by environmental regulations, as the authors point out. But environmental regulations focus primarily on large companies: While around two-thirds of large Swiss companies have seen an increase in environmental regulations relevant to them over the past three years, the proportion among SMEs is significantly lower at around 50%.
Sustainability pressure increases
A clear majority of Swiss SMEs feel sustainability pressure at various levels. In addition to external interest groups, a certain amount of pressure can also be exerted on the company from within its own ranks. Sustainability has long since become an important competitive factor, which many decision-makers within companies have recognized. According to the survey conducted by the Lucerne University of Applied Sciences and Arts and the Cologne University of Applied Sciences, Swiss companies feel the strongest influence from their own management (69%), followed by employees (58%). Particularly in times of a shortage of skilled labor, a focus on sustainability could be a decisive competitive advantage when recruiting qualified employees.
Focus increasingly on the little ones as well
Pressure from the business owners (51%) and - where present - the board of directors or senior management (49%) should not be underestimated. An analysis by company size again shows that large companies more often feel pressure from within when it comes to environmental responsibility. This result is hardly surprising, since it is also the large companies that have a higher profile due to their size and for which reputational risks are therefore greater than among SMEs. However, given the central role of SMEs in achieving the net zero target and the still untapped potential, the focus is likely to be increasingly on the «small ones».
The complete study can be found at this link.
