The New Growth report, published by the Federation of Small Businesses (FSB) in partnership with Zurich UK, sets out practical steps which can be taken by Scottish and UK governments, as well as local authorities, to support small businesses in the transition to net zero.

The Scottish Government has committed to the country reaching net zero emissions by 2045, five years earlier than the UK government. 

While nearly two-thirds of small firms (64%) think that sustainability should be a high priority for government, less than a quarter (22%) of those in Scotland expect to transition their own business to net zero by 2045. 

With small firms making up somewhere between 43% and 53% of the UK’s business emissions, there is clearly a mismatch between their expectations of preparedness for 2045, and the work that will be needed to get them there, the FSB says.

Two in five small firms (38%) cite a lack of capital as a barrier to transition, while a third (33%) say the return on investment for green tech is too long.

Only one in eight small firms (13%) say they have the appropriate finances to transition to net zero, while under a fifth (18%) say they have the right skills to make the change, and only a quarter (26%) have the right knowledge.

Lower energy bills were the most popular incentive to get small firms to install low carbon improvements, selected by three in five small firms (61%). When FSB asked small businesses a similar question in 2021, energy costs only made third place.

Tina McKenzie, FSB’s policy chair, said: “The incredible inventiveness and entrepreneurialism among the small business community will be a powerful tool when it comes to cutting carbon, growing the green economy, and hitting the country’s net zero targets – if small businesses are given the tools and support they need to thrive. 

“Many small firms still bear deep scars from the energy price crisis, which saw their energy bills rocket by three-, four-, or five-fold – or even more. Having seen too many of their peers not make it through the crisis, it’s not surprising that they are looking for ways to become more energy-independent. 

“The sustainable economy has absolutely enormous potential for growth in coming years. This is growth that we as a country need, and small firms must be given the chance to benefit from the opportunities on offer.”

Guy Hinks, FSB Scotland chair, added: “While small businesses in Scotland recognise the importance of net zero, less than a quarter expect to reach that target for their own operations by 2045. 

“By reviewing their delivery plan and offering tailored support, the Scottish Government can help to restore confidence among small businesses in their ability to transition to net zero by 2045.”

David Nichols, head of retail at Zurich UK, said: “It is clear from our customer feedback that small businesses are facing multiple challenges at the moment with further economic pressure on them.

“Whilst these businesses clearly want to do the right thing in their journey to net zero, it has to be made as easy and cost-effective as possible for them, coupled with complete support from the government.”