What does net zero mean for small businesses in the UK?

Published Wednesday 30 July 2025

Table of contents

• What is net zero?
• How your business benefits from net zero
• Ways to make net zero work for your small business
• Take action towards a sustainable future with Xero
• FAQs on net zero for small businesses

Key takeaways

• Net zero is the UK government’s commitment to cut its net greenhouse gas emissions to nothing (net zero) by 2050.
• Net zero aims for no net impact on the climate – it means reducing greenhouse gas emissions as much as possible and offsetting the rest.
• It’s a long-term target for the UK – small businesses aren’t yet required to act, but government policies are evolving fast.
• Going green brings real benefits – by adopting sustainable practices you can reduce costs and make your business attractive to eco-conscious consumers.
• You don’t have to do it all at once – starting small and building momentum is the best approach for most small businesses.

What is net zero?

Net zero is the UK government’s commitment to cut the UK’s net greenhouse gas emissions to nothing by 2050. This means that the UK aims to stop adding greenhouse gases to the atmosphere by 2050, as outlined in its Net Zero Strategy.

In practice, this means the government aims to drastically reduce emissions and offset remaining emissions with initiatives like reforestation (converting land back to forest) and carbon capture technologies.

How your business benefits from net zero

Net zero isn’t just good for the planet – becoming a net zero business could strengthen your brand and open the door to new partnerships.

• Reducing your waste and investing in cleaner, more efficient technologies could lower your costs, expanding your margins and your profits.
• Taking a greener approach might give you a competitive edge. You can appeal to today’s eco-conscious consumers by working with suppliers that make a clear commitment to sustainability.

Ways to make net zero work for your small business

Making net zero part of your strategy doesn’t have to be overwhelming. Here are practical tips to help your small business stay competitive, compliant, and sustainable.

Stay updated on regulatory and legal considerations

Staying on top of regulatory developments helps you avoid costly compliance surprises in the growing net zero economy. Small businesses are not legally required to take action towards net zero, but that could change. New policies aim to reduce emissions to support the UK’s net zero goal – and more are expected, such as:

• Expanded carbon reporting requirements
• Financial penalties for high-emission operations
• Higher taxes and levies on carbon output

Don’t forget: Although many of these compliance pressures affect larger companies most, they can quickly cascade down supply chains, forcing you to change your operations.

Invest in your small business to achieve net zero

To transition your business to net zero you may need to make some upfront investments in things like green technologies and new equipment – and also make your daily operations more sustainable. You might also need to train your staff to use new systems or adopt new practices.

Although these investments can be daunting for small businesses, many of them will help you boost efficiency, cut waste, and make better use of renewable resources. This can lead to long-term savings on energy, materials, and operating costs.

Tap into government support to ease the transition

Depending on your sector, your business may be able to access government grants, tax breaks, or incentives to encourage the uptake of clean technologies – especially if you move fast. The government has pledged to invest £12 billion and create 30,000 green jobs as part of its UK net zero strategy to support everything from R&D for carbon-cutting innovations to upskilling the workforce.

Start small to overcome net zero challenges

You can’t achieve net zero in your business overnight. You’ll need to start small, prioritise, make trade-offs, and do the best you can with what’s available.

Don’t try to do everything at once. It’s easier to break the journey into stages and make small improvements – and you’re more likely to stick at it. Begin with something simple, like installing energy-saving lightbulbs, then find the next quick win to build momentum. As long as you’re making progress, you’re on the right track!

Xero’s blog has more info on how subscribers can track their business’s carbon emissions with Sumday or Ecologi.

Use technology to reduce emissions and save costs

The latest tech tools can help reduce emissions and improve efficiency in your business.

Here’s how you can use technology to help your business get closer to net zero:

• Track and measure progress: Cloud-based software like Xero helps you monitor emissions, identify inefficiencies, and track your progress. Software tools also give you real-time insights, helping you visualise your output and make data-driven decisions.
• Save energy in small ways: Switching to LED lighting, smart thermostats, or energy-efficient appliances can deliver immediate energy savings. These small changes add up.
• Take advantage of falling tech costs: Prices often come down as the technology matures. Solar panels and other renewable energy solutions are now more affordable and accessible for small businesses.
• Encourage greener transport: Installing EV charge points at your workplace can help cut your transport-related emissions by making electric vehicles more viable for staff and logistics.
• Keep your finger on the pulse: Stay on top of developments in your industry so you can anticipate and adopt emerging technologies that could boost your sustainability efforts.

Take action towards a sustainable future with Xero

Because sustainability now matters to most consumers, most businesses need to follow it. Progress is the name of the game. If you’re doing better today than you were yesterday, you’re moving in the right direction. So stay informed, innovate, and make meaningful changes where you can. Adopting greener can help you build a more resilient, successful business.

Let Xero help you stay on top of your finances and sustainability efforts. Xero’s intuitive accounting software makes it easy to manage your expenses, send invoices, and stay on top of your cash flow, all in one place. Whether you’re just starting out or looking to streamline your workflow, Xero helps you organise and stay in control of your small business.

Try Xero for free

FAQs on net zero for small businesses

Here are answers to some commonly asked questions about net zero and the decarbonisation of the UK economy.

Can small businesses partner with others to achieve net zero together?

Definitely. Partnering with other organisations helps small businesses reduce costs by sharing resources and industry expertise. For example, a joint investment by two or more businesses in eco-friendly technologies makes them more accessible than buying alone. To make this work for your business, formalise the agreement, define each party’s responsibilities, and set clear objectives.

What’s the difference between net zero and carbon neutral?

Net zero and carbon neutral both aim to reduce the impact of emissions, but they approach the goal differently. Net zero means cutting your greenhouse gas emissions as much as possible, ideally to zero, by changing how your business operates. It’s a long-term commitment to reducing emissions at their source. Carbon neutral, on the other hand, means offsetting your emissions—by investing in environmental projects—without necessarily reducing the emissions your business creates.

Do I need to change my supply chain to achieve net zero?

Possibly. You’ll need to look at how raw materials are sourced, how goods are manufactured, and how they’re transported to market. To reduce emissions across the entire value chain, work openly with your suppliers. What are their sustainability goals? What are they doing to cut emissions? If you work with like-minded partners you’re more likely to hit your own goals and thrive in a net zero economy.

How can I get my team to help achieve a net zero business?

Start by teaching your team about sustainability and why it matters for the business. Introduce eco-friendly practices in the workplace, like reducing energy use and recycling. Involve staff directly – for example, by appointing a keen team member as a sustainability champion and including them in decisions on net zero.

And offer incentives like a step-count challenge to promote walking, or rewarding eco-friendly ideas.