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In each episode of Sustainability Insiders, Kevin Hegarty speaks to business leaders to find out how they're making their companies more sustainable. In season two, Camilla Smith, from specialist sustainability recruiter Sustii, shares what candidates and employers are looking for in this fast‑growing talent marketplace. Ian O’Donnell MBE, from the Federation of Small Businesses, talks about the challenges - and opportunities - small businesses face in operating sustainably. And one of the sector’s standout leaders, Mary Aladegbola, breaks down how she navigates net-zero challenges across NHS England. Other guests include ESG lead Ewan Donald from engineering business Ipsum, and Graham Duxbury, Chief Executive of Groundwork. Hopefully each of their stories will inspire you on your sustainability journey, and give you the ideas and tools you need to make your own company more sustainable in the very near future.
Hi, and welcome to Sustainability Insiders, the podcast that talks to business leaders to find out how they're making their companies more sustainable. I'm Kevin Hegarty, and I work for Cadent, a UK energy network that's on its own sustainability journey. In this episode, I'm joined by Ian O'Donnell, MBE, board member and sustainability policy champion at the Federation of Small Businesses. He tells me about the key challenges small companies face in terms of sustainability, what practical support is on offer and how they can take advantage of the many opportunities available. Ian, welcome to Sustainability Insiders, the podcast.
Ian O’Donnell:Great to be on here. Looking forward to it.
Kevin Hegarty:Okay. So I want to start by explaining what led me to ask you to join us on the podcast. Cadence, who I work for, we published some research earlier this year, which we call energy diaries, and this is what helps us understand what our customers' views are on energy use and sustainability. And for this phase of the research, we spoke to small businesses and charities, and what an eye opener that's been, because the findings reveal both the ambition, but also the obstacles that small businesses face on that road to net zero. I'd encourage listeners to the podcast to search out energy diaries on the Cadence website, and what we found is a sector, which by the way is the backbone of The UK economy, I'm sure you've got some stats to share in a minute, that wants to act and deliver on sustainability, but is facing real unique challenges in order to do, and that's something the Federation of Small Businesses knows only too well isn't it Ian?
Ian O’Donnell:Absolutely, and you mentioned the backbone of the economy, we're talking five and a half million small businesses in The UK, and if we don't help them solve this challenge of that sustainability journey, then The UK as a whole getting to reach its targets is going to be very difficult, so it's an important thing to consider.
Kevin Hegarty:So what are the unique challenges then facing the small business sector?
Ian O’Donnell:Yeah, I think we'll start off with perhaps the most obvious which is that small businesses by their nature are small and therefore don't have the team of people available to them with different types of expertise. A big company will probably have a sustainability manager or similar within their organization whose background, training, knowledge, skills is all around sustainability, they understand scope one, scope two, scope three emissions just like that, whereas a small business owner is also going to be the person responsible for being finance director and is also the person responsible for being sustainability manager and they won't have all of that knowledge and that skills and they don't have the time either, so you know the biggest challenge facing many SMEs when they look at their sustainability journeys, well I know it's important, I know I should be doing something but I've also got to make sure the books balance at the end of this month and I've also got to make sure the client job gets out the door I just don't have the time and I don't have the time to research and understand the topic either, so just getting to grips with the topic and knowing where to start is perhaps the biggest challenge for many small businesses.
Ian O’Donnell:The other big challenge is the ability to actually affect change, so again many larger companies will own their buildings, they'll own their premises, they'll have the finance and the knowledge to make the changes perhaps to the way their building's heated, the way they get energy, etc. Many small businesses will be in rental properties, so you have this challenge of what we call the landlord tenant split, it's in the tenants interests to make their building more energy efficient, reduce their energy bills and to reduce their carbon footprint But they don't actually own the building, so they can't make those changes. For the landlord, it's not a high priority because at the end of the day, they're not paying the energy bill. They're not the ones who are looking after the building day to day and incurring the costs of that. So it's not harm their priorities, so that the tenant, the small business may be keen to do something, the landlord just not high priority and often institutional investors etc, they may not easily be contactable by the small business owner, and then just coming back a bit to the skills gap and knowledge gap piece, like any topic I work in IT, we love our buzzwords in IT and equally the sustainability space is filled with buzzwords, we've already mentioned scope one two three emissions and there are many more, how do you understand that, how do you wrap your head around that when this isn't your core competency, you set up your small business because of what it is you're passionate about, not necessarily because you're an expert on all the other bits that you now need to know about in order to run a business, and then you've got a variety of tools out there, there are I think tens of carbon calculators added to the pool as it were each day, but which one do you choose?
Ian O’Donnell:What's one's right for your business? How do you know which one's giving the right information? So you know that knowledge, that skill, that understanding, again those are all inhibitors on making the start of that journey, and then finally access to finance, again for many small businesses they've been through some pretty turbulent years and trying to navigate through that means many of them got quite weak balance sheets, they don't have the capital to invest, they perhaps when they go out to look for finance it's not easily accessible and again the landlord tenant split thing, you can't raise finance against an asset because you don't own the building or even if you do own the building perhaps you're looking to scale the size of your company and move again in five years time, you won't get ROI on the investments you're making on that building in the short term, so the right type of finance to allow you to make the transition is not necessarily available. So those are just a few of the things which can perhaps create a bit of a challenge for small businesses when they're looking at this space.
Kevin Hegarty:It's such an important sector as well isn't it, the ninety nine percent, more than 99% of The UK business is small businesses. It's incredible isn't it? There's so many and such a diverse group of businesses as well, so no two businesses really or few businesses will have the same route to net zero. They've all got their own different challenges given by the nature of the business they operate, that's right isn't it? Yeah absolutely, and 90 over 99%
Ian O’Donnell:of business and over 50% of private sector employment, so not only is it directly those businesses but also their sphere of influence in terms of the people they employ as well, it makes a significant proportion of The UK's carbon output and yet dealing with the differences between those businesses, I own business, we're we're a virtual business, we don't have a physical premises but you're also gonna have manufacturing businesses with all the challenges of manufacturing on a reduced carbon footprint. You're gonna have businesses which are logistics and with all the challenges of running a fleet and the carbon footprint of a fleet. Some people will actually never go more than a couple of miles perhaps from where their office based or where they're working from home, other people will be travelling all over the country or all over the world delivering what they do as a business. So every single one of those differences needs a different approach to your carbon planning, to the way that you're looking to go on a sustainability journey.
Kevin Hegarty:So we've set the scene then, we can see what the issues are and the big challenges that are there. Let's talk through some of the solutions that for both from a policy perspective and a practical perspective, know, what's here now and what might be needed in the future for small businesses in this sector.
Ian O’Donnell:Yeah, so I think the first piece to look at is that skills and knowledge piece, how do we provide the right information in an accessible format to small business owners so that they can make the start of the journey, and I think we need to de jargonize it, we need to stop using some of the terminology that maybe we all understand for those of us who are around the net zero space, the sustainability space day in day out and just talk in very practical terms and also to focus some of that terminology and that thinking not just on the pure carbon footprint element but actually the reality that going on a sustainability journey makes good business sense, you're going to often reduce costs, reduce waste within your business and a whole lot of other things that we can talk about perhaps a bit later in terms of the external benefits of this, so talk in those practical terms for the business owner, we need to perhaps look at supply chains and say those towards the top of a supply chain, you've got the knowledge, you've got the skills, you understand your vertical, how about supporting and enabling those who are within your supply chain to make that transition and it's in their interest as well because obviously they are required to report on their scope three emissions, their supply chain will make up some of those scope three emissions by supporting and helping their supply chain in their carbon reduction journey it will help them reducing their scope three emissions as an organization, there's a should be a vested interest in there for them, but we just need to facilitate and support that and encourage that I think within supply chain verticals, so that's the sort of skills and knowledge piece, so you know government supply chains helping to support and enable information to small business owners in this space.
Ian O’Donnell:Access to finance, I think we need to get a bit more creative about what options there are on finance, recognizing that small business owners don't want to have to keep giving personal guarantees and putting their house on the line in order to access finance, to look at property linked finance and ideas like that where the finances lent against the premises for the sustainability improvements to it, which means if they move out, another person moves in that finance goes to the with the building rather than with the business, which is obviously far more suitable when we're talking about things like solar, air source heat pumps etcetera and the sort of return on investment timeline for those, but we also need to think about the risk factor perhaps for finance organisations, some of this technology is still relatively new, they need a bit of certainty that it's going to be the right technology, right investment cycle and can the government step in a bit to provide some of that certainty back in some of the risk within the finance markets to make it affordable for small businesses to then access the finance rather than it being priced out of their reach because the finance organizations still see it as too risky within that space, so that's some of the finance piece.
Ian O’Donnell:The landlord tenant split, I mean that that's a big one it's one that we are very much talking to government and saying look you need to have a look at this and the challenges within this, if we want to make this most small businesses will be in leased space rather than owning space, how do we encourage and incentivize landlords to to make the changes and to see that as not something they can just keep putting to the bottom of the to do list but to work with their tenants on making the improvements that are necessary, and then just some of the challenges, so for example all the carbon calculators are right there and the myriads of different pieces of data, we need to get some consistency around this, so again one of the major benefits for many small businesses of going on a sustainability journey of reducing their carbon footprint is the opportunity to go on supply chains, access procurement opportunities but every single one of those has perhaps a different framework that they want you to report into and the carbon calculators want different sets of data and report in different ways, so government stepping in and looking at a consistency of standard, a consistency of approach so that small business owner doesn't have to keep doing that in different ways and one of the projects for example I've been involved in is looking at how automated reporting from your energy provider aligned to your banking, so that in effect you've got your energy bill coming in and alongside it is the carbon reporting for your business aligned with that energy spend.
Kevin Hegarty:Such great tips there and I guess we should say now let's encourage people to go to the Federation of Small Businesses website where I know I've already seen lots of stuff that's on there that that points you in the right direction and gives you a really good start, or in fact in whatever stage of the journey you're on there are lots of helpful resources there and reach out to the organisation itself.
Ian O’Donnell:Yes certainly we've got our report out looking at some of the both the challenges but also some of the solutions for government, but also some of the case studies of businesses who've been there and done that and what their experience has been, what challenges they faced but also how they've got around some of those challenges and one of the things I would recommend is go and talk to your peers, go and talk to people in the same sector, FSB does some great networking events, go along to some of those and say what I'm trying to do this, what have you found about this, wherever your experience, go and talk to those trusted advisors and others that you have within your network and see where you can access some of that support and help.
Kevin Hegarty:That leads us brilliantly onto the fact that sustainability must be seen as an opportunity as much as it is seen as a challenge and I know you've some examples to share which is great of some businesses who've done just that and seen the opportunity that is within your business more sustainable and have done it in a brilliant effort to a brilliant effect already.
Ian O’Donnell:Yeah I think sometimes we can see this very much as something you've got to do, governments telling us you've got to do it and so therefore you do it under duress but actually especially as an early adopter which many businesses still will be at the moment, there is some great stories to tell which can make a difference. We all are facing the challenge of attracting great customers at the moment, it's a difficult business environment out there and so if we've got an added story tell for our business then it's going to encourage customers and many especially younger audience customers are looking, if you're looking in the business to consumer space are looking for a business that doesn't just purely care about the bottom line but cares about the whole sustainability space, so this isn't just carbon, this is the whole sustainability space, are you caring for the environment within which you're based, so we've got we've got plastics, we've got carbon, we've got different types of pollution etcetera etcetera that we want to consider and by telling that story you can attract customers that otherwise would have gone to one of your competitors or perhaps been uncertain about buying at all because they want to know that the company they're buying from is a good company.
Ian O’Donnell:Just to give you one example of that, perhaps not normal type of business perhaps that many of us run but Nevis range who are responsible for running the the mountains and or the wilderness area up around Nevis, skiing, mountain biking, actually all the things which can cause damage to the environment, so they've during Covid decided to double down on their sustainability credentials, including building a hydroelectric power station, probably not something that most of us can do but for perhaps for us it might go about switching to a green energy provider, they've been doing things around sourcing locally so there were less carbon miles in their products and food and all the rest of it, they're then selling to customers, reuse the materials within their construction, for example they're reusing the steaks and so on from some of the ski routes to make bar tops and so on within their restaurant, which probably had quite a quirky feel to it as well I would think, and what they found out of all of that is that customers are therefore choosing to come there over other similar resorts because they know that by doing so they're supporting and going to somewhere that cares about the environment that they love, obviously very much aligned therefore with what their customers are looking for, but there are many others who've seen similar, let's take another global name Patagonia Outdoor Clothing who have been absolutely focused on being sustainable in the way they source, the way they do everything and have built a following of people who are prepared to pay a premium price for their products partly because of the sustainability credentials of that.
Ian O’Donnell:Another example, a little soap company based here in the Cotswolds whose story is about making sure that the soaps that we use in our bathroom are not filled with water and not in plastic bottles but are traditional soap, massive environmental improvement because actually you means your packaging is cardboard rather than plastic, there's no wasted weight in water, it's just the soap itself, actually better for your skin, they've by doing that getting that story out there they've now in every major supermarket and other chemists and things like that across The UK including they they do use palm oil and many people oh you can't use palm oil but they've really made sure that they're sourcing from sustainable projects which actually have a positive impact on the environment where they're sourcing from and they share that story through their social media, through their website and encourage people to think about is what you're buying and using actually more or less sustainable than this, we are absolutely certain of our sustainability credentials including various standards and so on that they've got to prove that and they're sharing that story everywhere they go, so not only they've got a sustainable product, they're sharing the sustainability story, that's building credibility for them and allows them to be sold in those major retailers and resonates with their customers so their customers almost become advocates for the product like I am being right now as one of their customers.
Ian O’Donnell:Those sort of things, how can we share this story as part of the story of your business means that you will attract customers who share that concern and that passion, but there's another key thing for many small businesses is attracting the right type of employees, employees that care about your brand, care about your culture, want to be on that journey with you not just turning up to work for a paycheck and again a company that really buys into the sustainability journey can tell that story to its employees as part of its culture is going to attract people who share that interest and that concern, those often that's your best of case talent for your organization, so by going on a sustainability journey sharing that as part of your company culture not just a tick in the box allows you to attract the very best talent leaving our universities, going through their careers so that they want to come and work for you rather than just a another job.
Kevin Hegarty:Well I hope we send web search engines crazy with people now hunting out those case studies to go and have a good read of and catch up on because they sound amazing. So what's clear talking to you Ian is you've got your own personal passion for this particular topic, What drives that for you?
Ian O’Donnell:I've always been concerned about the environment, but I guess when I started my business then in in my early twenties was running my business, you tend to get a bit more focused purely on running the business, but then I had my children in my late thirties and you suddenly start thinking about what world am I leaving my children, what's that look like and I really started to rethink perhaps some of the things that I got lazy about the way I did things and making journeys unnecessarily, all of those sort of things in the car and buying stuff just because it was convenient and sort of thinking well actually I can make positive choices about the way I do things both personally and in business to make a difference, so I'm a massive advocate of active travel now not only for the environmental benefits but actually for the health and well-being benefits as well. I'm fairly busy, finding time to exercise can be challenging at times but I get 40 or 50 miles cycling in a week just by using my bike as a means of transport and then combine that with trains means actually my car rarely leaves my drive now most weeks and actually I love it.
Ian O’Donnell:It's actually now I've got used to it I can't imagine going back to using the car because I get to start the day outside in the fresh air knowing that I'm having zero impact on the environment around me, get I to travel on a train and enjoy the view while getting on with some work and you just feel better about it all, that's been a big change for me and then just looking all the little details of our day to day lives, going out for a meeting have you got your reusable coffee cup with you, have you got a bottle of water with you rather than going and buying one when you're actually back because you get a bit thirsty, have you got a spork with you so you don't have to take disposable cutlery when you get to go and buy your lunch at lunchtime or whatever else it might be, these are all things which we can all do but we're often just a bit this is not part of our routines and our habits, and much of the sustainability space is about just changing some of those day to day habits which actually will have no impact on your quality of life, fact I would argue that some of them actually improve your quality of life, but and also will make a difference to the environment around you.
Kevin Hegarty:Ian that's inspirational, I've really enjoyed talking to you, thank you for joining us on the podcast today.
Ian O’Donnell:It's been great fun, loved having a chat and hopefully just inspire one or two more people to consider their sustainability journey, because the one thing I always make clear to people is sometimes we can look at all this and goes, it's a really big challenge, there's so much to take in, there's so many things to think about and we do paralysis by analysis don't we? We look at it all and go, I can't cope with it all and so the outcome is we do nothing at all and what I would encourage on an individual or on a business basis is just take one small step. What can you do tomorrow that mean your business is slightly less damaging to the environment or is slightly more sustainable and make that one change. Write about it, document it, tell the story. You'll inspire others and also will empower you then to take the next step and the next step, and before you know it, your business is transformed in terms of its sustainability journey, and actually, it wasn't as complicated as you thought it was in the first place.
Ian O’Donnell:I'm in. Thanks Ian.
Kevin Hegarty:Thanks for listening. Before we wrap up, I'd like to encourage listeners to visit the Cadent website and check out our energy diaries research. While you're there, download the practical tips booklet designed specifically for small businesses. It's full of simple, actionable ideas to help reduce energy use and improve efficiency, even when budgets are tight. If you've enjoyed this episode of Sustainability Insiders, please give the show a follow and a review in your podcast app.
Kevin Hegarty:Speak to you again soon.