Reading Time: 6 minutes

Financial benefits to support SMEs to become environmentally friendly

SMEs are being challenged by a growing magnitude of environmental problems, from global pressures to act or requirements from various stakeholders to facilitate environmentally sustainable strategic action plans, it is clear SMEs are realising the importance of considering their impacts. 

There are 3 main reasons why you should look carefully at your environmental metrics and understand your impact:

The first and most clear reason being the climate crisis as one of the biggest risks that we face. We all have a responsibility to support overcoming this challenge whether that's individuals, NGOs, large corporations’ governments or indeed small or medium size enterprises.

The second is the impact of advocacy. By advocating and leading the way on your environmental credentials this will have an impact on your employees, your customers and your supply chain. The ripple effect of what you can do here will not only give you brilliant PR but it will also encourage other people and other organisations to rise to the challenge. 

The third is the increased availability of financial incentives. The time pressure we are under has resulted in increasing financial incentives from the UK government to encourage businesses to either change their practises to improve their environmental friendliness and/or innovate new products or services and new ways of working that will reduce the impact on the environment. 

So today, we're going to look at the financial incentives that are available within the UK that will support your SME organisation to be the change the world wants to see.

What kind of incentives are available?

There are several financial incentives available to businesses.

They can be identified in 5 clear categories: becoming more energy efficient, providing solutions to our environmental challenges, managing your waste recycling and reduction, purchasing capital equipment which is environmentally friendly, and changing your purchasing choices and operational practices. 

Today we’ll provide some examples of where you can look to make a positive impact on the planet and profit.

Becoming more energy efficient

The energy efficient grant also known as the Green Deal fund is worth between £5,000 and £100,000.

Eligibility criteria that apply would need to be looked at carefully, but there is support available for you from the government and European Union to help you if you need this. 

We can provide signposts to the people that can help you with this if you decide to go down that route.

Providing solutions to our environmental challenges

The Innovate UK Smart Grants are a great example.

There are also several regional grants available and we'll share a few here but you can also have a look at

Eco innovation grants are available to SMEs who have developed a product or a service that has a low environmental impact or a business process which is a more efficient use of resources and materials.

Managing your waste recycling and reduction

If you have an ambitious idea for waste recycling and reduction you could consider entering the most prestigious environment prize this decade through WRAP - Waste and Resources Action Programme.

WRAP is proud to be partnering with The Royal Foundation in the launch and delivery of The Earthshot Prize.

The Earthshot Prize is the most ambitious and prestigious of its kind – designed to incentivise change and help to repair our planet over the next ten years. 

Purchasing capital equipment which is environmentally friendly

You can receive financial benefit through taxation (capital allowances).

If you buy an asset that qualifies for first year allowances you can deduct the full cost from your profit before tax. You can claim the first-year allowances in addition to annual investment allowances.

Examples of things which qualify are: 

  • Cars with low CO2 emissions.
  • Equipment relating to energy technology product list.
  • Water saving equipment.
  • Plant and machinery for gas refuelling stations storage tanks.
  • Gas, biogas and hydrogen refuelling equipment.
  • Zero emissions good vehicles.

It generally does not apply to businesses which buy to then lease on to others.

Green Business Fund

The Carbon Trust is providing an attractive and accessible green business fund support package to help small and medium sized companies in England, Wales and Scotland identify energy saving opportunities and install energy efficient equipment in their business.

This Green Business Fund includes a 30% financial contribution towards the cost of your energy saving equipment, up to £10,000.

The contribution is available to small and medium sized businesses for projects that comply with the requirements of the fund. Delivery of projects funded through the Green Business Fund is limited to Carbon Trust Accredited Suppliers

Changing your purchasing choices and operational practices

Aside from grants and tax incentives you can also make cost savings changing your practices such as:

1. Switch to renewable energy. 

The bottom line is that renewable electricity is, for all intents and purposes, as cheap as fossil fuel-powered electricity. Let’s take a look at why that is.

Recent trends indicate that we are well on our way to making renewable energy as cheap as, if not cheaper than, fossil fuels. 

2. Manage your renewable energy usage. 

You can use the Carbon Trust’s energy benchmark tool,  which we think is great if you want to compare your company to similar companies in your sector. 

You really get a good idea of how you are performing. Make a plan off the back of the findings and implement it.

3. Responsible purchasing. 

Think about how you can save money by purchasing refurbished laptops, upgrading your fleet and you can look at your other energy efficiency savings such as lighting and heating.


Written by:
Sarah Whale, FCCA
Sarah is the founder of Profit Impact, which guides businesses to measure and grwo long-term positive social, environmental and financial impacts. Sarah has over 20 years experience as a senior financial professional as well as a qualified in Cambridge Institute Sustainability Leadership and B Corp Leader.