Perseus is supporting UK SME decarbonisation efforts by unlocking green finance from banks and lenders. It does this by automating access to assurable data to support lending decisions and related sustainability reporting.
The upcoming Perseus pilot – in which banks will allow Perseus monthly emissions information to be used in the decision making process for one or more green loans – represents a huge step towards automating reporting for UK SMEs, bridging the gap between the real and financial economy.
In the lead up to the pilot, we’re speaking to those involved in the Perseus – from SMEs, Banks, Carbon Accounting Providers, non-profits and policymakers – to explore what the pilot will mean for their businesses, their customers, and the broader net-zero transition.
In this conversation, Ian O’Donnell MBE from the Federation of Small Businesses (FSB) talks about being a voice for the small business community, sharing insights on how to empower SMEs to report their carbon emissions effectively. With SMEs accounting for 99% of UK businesses and nearly 50% of business emissions, they face significant barriers to carbon reporting, including limited resources, restricted access to energy data, and complex landlord-tenant relationships. The FSB continues to advocate for stronger government support, standardised carbon accounting, and financial incentives to ensure SMEs can play a vital role in the UK’s transition to net zero.
Ian: I’m Ian O’Donnell, I’m deputy chair of policy at the Federation of Small Businesses and one of the non-executive directors there. And as an organisation, our role really is to support and help the small business community, both through a range of sort of support tools, including insurance and things like that. But also, crucially, and the key reason for our being is to talk to stakeholders at national and local level, in government and otherwise, about how they can make sure we have the right environment for the small business community for them to thrive.
Ross: Yeah. And I guess, yeah. So the small business community there, what kind of size are we looking at?
Ian: So we, we represent the SME business community. But the majority of our membership and the businesses we engage with are at the micro end of the small business community. So less than ten employees. Though we have a fair few members as well who are sort of in the 10 to 50 employees and a few who are bigger than that. But primarily we’re there to support sort of the smaller end of the SME community. And to really ensure that they get a voice when individually they wouldn’t have a voice. So obviously each of those individual small business owners don’t have the time or the resources in the way that a large business does to speak to government. So we very much act as a collective voice for that small business community.
Ross: Yeah. No. Really cool. I guess moving in into the net zero space then I guess there’s a, thinking about what you just said there, it’s like, do they have the education? Do they have the power to, you know, track their carbon emissions? You know what’s SMEs plans in that space?
Ian: Yeah. So the challenge here is two-fold. Obviously A. The rules coming down the line in terms of reporting of carbon footprint, carbon calculation. And particularly actually that’s already being felt through the procurement process. Obviously larger businesses have already got to report on scope three. And obviously that inevitably means if they have small businesses in their supply chain, those small businesses are being asked to report on their carbon footprint, even though actually legally as yet, they don’t have to report. And so the supply chain already means that this is coming into effect. And, the problem for many micro and small businesses is they don’t have the knowledge, they don’t have the skills, and they don’t have the access to resources to A. Monitor and measure their carbon footprint. And B. Sometimes don’t have the ability to put changes into practice in order to reduce their carbon footprint, if they’re in shared premises, if they’re in a tenanted building, rather than owning their building, short term leases quite often often means they don’t have the capacity to to make the changes that they want to, for example.
Ross: Yeah, definitely. Yeah, it’s a really good point the, it’s always quite clear when it’s like large corporations what they need to do to stay in line, but the small businesses actually make up the larger businesses supply chain.
Ian: Exactly. And also in terms of the economy as a whole. So it’s why it’s so important that we don’t and the government in particular, doesn’t leave the SME community out of this sort of race to net zero in terms of their support and enablement for that. You know, five over 5 million of businesses in the UK making up over 99% of the business community are SMEs, and over 2 million of those are less than ten employees. So this is a significant proportion of our business community here in the UK. So if we don’t solve the problem for those businesses, we are not going to solve the macro problem of how we get to a net zero carbon neutral economy.
Ross: Yeah. No. Very true. I was reading this SMEs make up around 50% of UK business emissions as well, which is.
Ian: Yes, exactly.
Ross: I guess now it’s good. We’ve, we’ve kind of set the scene now to lead into Perseus. And just where do you see the value of Perseus for FSB and, and your, your SME customer base?
Ian: Yeah. So the real value of this, from our perspective, is if we can automate and simplify the process by which a micro or small business can get the data it needs to report on its carbon footprint, particularly in their scope one and scope two emissions from micro business, because they have less requirement to report on scope three, but certainly their scope one and scope two, they’re having to report up supply chains. It’d be invaluable.
There are challenges to it, and it’s great that you know what Project Perseus has also given that opportunity to discuss some of the challenges around how this happens, because what with many small businesses being in tenanted premises or even in shared premises, they often don’t have direct access to metering and details of their energy consumption. And so I know it’s been really good recently through Project Perseus, to have some of those discussions about how do we still enable those small businesses through other forms of technology, to be able to report in using the project Perseus mechanism, to then allow that data to be transferred.
Ross: Yeah. Yeah. That’s amazing. Really good. Really good to hear that you’re working through those challenges. And I guess you work through the challenges in a collaborative environment as well, so you can hear other people’s pain points.
Ian: Yeah. Exactly that. You know, it’s been great with Project Perseus that you’ve got, you know, a good range of people, from the financial institutions to the those involved in the metering through to representatives like myself, representing the business community. And sort of all looking at the problem in different ways, but all with an overall passion to say, how do we make it as easy as possible for the SME community to be able to get the data it needs to be able to report accurately?
Ross: Yeah. And how do you think, thinking more long term. How do you think Perseus could slot into you know, what you offer SMBs? Could it be part of your offerings, like education, teaching them on sustainability? Could Perseus that slot in there.
Ian: Yeah. So I think for us it’ll be about connecting people up. So you know what carbon calculators are out there. Accountancy packages, all the rest of it. How do we work with those to make sure they’re plugging in data when it’s available through Project Perseus and other things that may become available to simplify for SMEs that process of producing a carbon report.
We’re also involved in organisations like UKAS, which is the UK accreditation service, on how do we make sure that there is a common standard and universality about data reporting, because at the moment, as many, you know, and we’ve discussed again through Project Perseus, is actually you can go to several different tools and get several different answers on what your carbon footprint is. So how do we create some consistency and some certainty about the data, which is obviously vital when it comes to SMEs accessing. Two key things one procurement opportunities and second biggest issue affecting many SMEs – access to finance. And with banks obviously requiring to know what the carbon footprint is. And wanting some assurity of that data. Anything we can do to help create that is vital. But notwithstanding that challenge of making sure that all SMEs have access to the data. Which isn’t necessarily going to come through half hourly metering for all of those SME community.
Ross: What do you think the barriers might be for SMEs engaging with Perseus. We can help with this kind of work we’re doing right now. But how can we improve engagement?
Ian: The reality is SMEs themselves are probably not going to be engaging with Project Perseus directly. They’re going to be engaging with the partners who come on board, who provide that mechanism for that data, to then become available in the tools that SMEs are using. So when we look at accountancy packages; Xero, QuickBooks, Sage, etc. you know, it’s vital that they engage with Project Perseus because then that data flows naturally into those systems and they, you know, just the same way as I can do my balance sheet of my accounts, I can go on there and I can get my carbon report. If we connect all the dots well, through Project Perseus, that’s where SMEs are really going to see a benefit for those that have got access to that data in the current form. And also I think where Project Perseus, as it starts to see that success and that enablement, there’s increasing pressure to say, how do we solve the problem of businesses that don’t have access to half hourly metering? And, you know, I’m sure you know, as a collective we’ll be able to create pressure and, and also create some of the solutions to how that data can be sourced.
Ross: Yeah, definitely. And there’s also the fact that, you know, this is our first use case is electricity. And then it could move into to, a lot of people are saying gas, at the moment. But there’s loads of other ways to go.
Ian: Water is, you know, the three big ones for any micro business, small business is going to be electricity, water, gas. So if we can solve those, those big three and automate that, and then obviously we then move into many other areas in terms of travel and so on. But those are more in scope three. But if we look at scope two, those are the biggest. How can we make that simple and straightforward for the SME community?
Ross: Yeah. Really cool. Yes. I’ve spoken to Sage and I’ve spoken to a few others, but, I think FSB is interesting in the sense that you work with government and policy makers. I wanted to talk about what inkling you get from the government on, you know, on this topic and how important it is tracking SMEs emissions. How important is that for the government?
Ian: I think, you know, overall, this government has continued to be fairly positive on the discussion around how do we reach a low carbon economy. And so continue to have that as a focus, or at least there’s been some consistency for a while now around the importance of reducing carbon footprints for all businesses. Um, I think the challenge, as inevitably government understands big business a bit more readily than it understands small business. And I think the reduction in carbon and the way that a big business can adapt is very different from a small business. And I think one of our key roles has been to sort of have that constructive discussion with the government to sort of say, yeah, that that scheme, that program you’ve got over there works very well if you’re a big business. But actually small businesses are different. And how do you help them and support them in a slightly different way. So. And one of the key areas of that is around education. So it’s great that we’re through Project Perseus creating the tools. But we’ve also got to provide the education and support for that small business to be able to adapt and change and deliver on a carbon reduction plan within their business over the next few years.
And alongside that, also, we’re very much in discussion with government about, well, how do you facilitate that? So I know I keep going on about it, but the sort of the tenanted aspect, small businesses do not generally own their own premises – actually creates not just the challenge of access to data, but it also creates a big challenge in terms of the ability to affect change. If I own my premises and it’s a big premises, it’s no problem to stick solar panels on the roof. It’s no problem to switch over to air source heat pumps. If I don’t own my premises. I don’t necessarily have the access and the ability to make those changes. And also, if I’m perhaps only got a five year tenancy as opposed to a 25 year tenancy that a bigger business might have if it is a tenant, I don’t have the ability to finance that and get return on investment within that relatively short timescale. So how do we again looking to government for support and perhaps creating the frameworks whereby you can have transferable finance around, adaptations to buildings and things like that?
Ross: Yes. Is that a data problem or a legislative problem?
Ian: It’s partly a legislative problem. It’s partly just a you know, the finance industry is not used to the fact that who owns the the asset is quite challenging in that scenario. So if I as the business don’t own the building, but I’m the one who wants to put on the solar panels, but I might be moving out in five years, how does that journey look from a financing perspective? That’s not something that is a traditional financing model that they’re comfortable with. Especially as some of the technologies we’re talking about are emerging technologies. And so again, financiers are also slightly wary of that. So really we’re looking for business to step in and give some assurity to those who are providing finance, to be able to give confidence in the data about carbon reduction that these will provide. How, through Project Perseus, we can get accurate data about the impact it’s having for that business. And how do we solve the problem of, in effect, the landlord tenant split on these things.
Ross: Yeah, fantastic. And just thinking there on, this is again more geopolitical. But you’re talking about big businesses and banks there, and there’s this trend that seems to be coming from across the pond. HSBC, BP now changing its sustainability targets when you’ve got these big businesses changing their net zero plans. Do you think that’s going to have a knock on effect for SMEs, or is it more time to double down on SME emissions?
Ian: It’s really interesting sort of seeing the way different big businesses are responding. So, some are actually responding by saying no, we think this is the right thing to do. We are in, we actually want to locate in the UK because it’s a good place to be from a support and a framework around low carbon. But other businesses, obviously, as we’re seeing perhaps located elsewhere, are reducing their targets. And I think it does create a challenge for SMEs because any business wants certainty, any business wants to know the landscape into which it’s planning. When you’ve got a lack of certainty and moving targets, then it becomes very difficult to plan. Bearing in mind that a small business needs ROI on a much shorter timescale than a large business can afford to have when making investments such as carbon reduction, type investments will tend to be. So yeah, one of the things that’s really vital is that we we have a consistency of approach, and that deadlines and timelines don’t keep moving for SMEs, because otherwise I know from experience, from conversations that we’ve had in the community, is that if the timelines keep moving and keep getting pushed back, the response is, well, actually what I will do is not bother because it might never come anyway.
Ross: Yeah, definitely. And that’s really, really interesting. I don’t know if you wanted to add anything to discuss on Perseus itself or, or even anything coming up for FSB you think might be relevant?
Ian: No, I mean, I think the key things that I think we are affecting the small business community is simplicity and a assurity of data, so that if data is available, that we can know it’s good and that it’s simple and easy to report on. And that we give access to data for the whole small business community. So solving the problem around access to data, if you don’t have half hourly metering available in whatever building you do, bearing in mind, as I was talking to somebody just earlier, you know, working in a garden office in their home, you know, what does that look like from an energy reporting business for a small business, when it’s part of your overall household energy bill? And then making sure that we maintain access to procurement and access to finance for SMEs and don’t exclude them as carbon accounting and the sort of requirement for scope three emissions reporting becomes ever more prevalent. Let’s not exclude small businesses, but let’s use supply chains to help and enable them to make that transition effectively.