Case Study
Driving local regeneration – economic and environmental
Small businesses employ around 60% of the workforce in the UK – and generate 1/3 of territorial greenhouse gas emissions1. With a target to reach net zero as a borough and 93% of businesses in the borough being classified as ‘micro’, Sutton are making smart use of business rates relief to support businesses and reduce emissions. Discover how they did it and the impact this will drive.
Challenge – how to reduce emissions not directly controlled by the council?
In common with lots of UK authorities, Sutton declared a Climate Emergency, supported by specific plans of action to make Sutton carbon neutral. While addressing ‘in-house’ emissions is relatively easy (through switching to renewable power, upgrading to LED lighting, installing smart meters etc2), the council has thought hard about how to enable emissions reduction across the wider group of stakeholders in the borough.
Small and medium enterprises (SMEs) are an important constituency and typically lack the bandwidth and resources to focus on decarbonisation. They are also under significant commercial pressure following the covid-19 pandemic with the rate of business ‘deaths’ in the borough increasing and Sutton High Street vacancy rate on an upward trajectory since 2015.
Solution – a cost effective way to improve SME robustness and reduce emissions
Sutton has created a model which both financially supports small businesses and incentivises them to reduce their emissions. Using powers under section 69 of the Localism Act 2011, the council is offering business rates relief to SMEs which commit to a 4-step decarbonisation pathway.
| Step | Standard | Milestone | Rates Discount |
| 1.Commit | Member | Join the Partnership by committing to halve emissions by 2030 and achieve net zero before 2050. | None |
| 2.Assess | Level 1 | Measure carbon footprint and set emissions reduction baseline. | None |
| 3.Plan | Level 2 | Have strategies in place to halve emissions by 2030 and achieve net zero before 2050. | 100% FY 2023-24 |
| 4.Reduce | Level 3 | Implement emission reduction strategies to cut carbon emissions annually by at least 5%. | 100% FY 2024-25 |
Typically business rate payments are split between the council (30%), the GLA (33%) and central government (37%). The council has made this initiative cost effective for them by charging SMEs a fee equivalent to 30% of business rates to participate in the scheme – thereby resulting in a ‘net’ reduction of 70%. The administration of the scheme (including provision of technical assistance by delivery partners, Green Mark3, supporting businesses in target setting and verification) is funded from this fee.
Importantly, to access the rates relief in the second year, the scheme requires participating SMEs to be able to demonstrate to a third party (Green Mark) that they have truly reduced emissions by at least 5% against their baseline, meaning that Sutton will be able to provide credible evidence of progress towards their wider area target. In addition, although businesses receive free technical assistance for ‘baselining’ of emissions and emissions reduction ‘planning’, they can only access relief once they have completed these steps and it has been validated, ensuring that they are truly committed partners.
Impact – initial 63 tonnes annual CO2 reduction, driving progress to net zero
Sutton administered an open competition amongst businesses to access the rates relief and 77 companies have signed up for the first year cohort. If each of these businesses reduces emissions by 5% this would equate to approximately 634 tonnes annually, an equivalent to the entire carbon footprint of 5 people.
Sutton’s goal with this pilot is to test whether tax incentives are an effective tool to drive business action on climate. It also aims to demonstrate on a practical level what the corporate sustainability literature has identified as a ‘statistical correlation between business environmental and economic performance5.’
The council intends to validate these assumptions and achieve good value for money in the process. If successful, Sutton will explore opportunities to expand the pilot to include more businesses and demographics.
What next? – measuring and maximising impact
The GEP has just launched, and Sutton will be measuring the impact across both economic and environmental indicators:
● Economic: variance in turnover, gross profit as a percentage of turnover, labour turnover and headcount.
● Environmental: nominal and percentage emissions reduction in scopes 1 (operations) and 2 (energy).
The team is mapping out additional support to SMEs in the partnership, including enabling joined-up procurement to access sustainable products and services at scale.
Momentum is building around the GEP initiative and Sutton and partners are in discussion with a variety of organisations to help scale the concept more widely, in the UK and beyond.
Find out more
[1] https://www.british-business-bank.co.uk/wp-content/uploads/2021/10/J0026_Net_Zero_Report_AW.pdf
[4] https://esgpro.co.uk/what-is-the-average-carbon-footprint-of-a-small-business-in-the-uk/
[5] https://eprints.lse.ac.uk/100900/