Enabling Low-carbon Entrepreneurship and SME Development to Drive a Net Zero Future

Total global investment in the low carbon transition amounted to $1.1 trillion in 2022.However, the levels of investment in the technologies, goods and services associated with a low carbon transition will still need to increase significantly to achieve local and national global Net Zero targets. In line with estimates by the Energy Transition Commission, levels will need to more than triple based on 2022 levels, with $3.5 trillion required every year to meet global ambitions for Net Zero economies by 2050.

Investment in enabling low-carbon entrepreneurship – which can be summarily defined as innovative solutions to environmental problems – and sustainabilityfocused small and medium-sized enterprises (SMEs) is essential to driving the technological innovation needed to address climate change and the associated new market and regulatory demands. This has been recognised by policymakers around the world, leading to policies and frameworks to support low-carbon entrepreneurship, with a prominent example being the European Union’s (EU) Green Deal Industrial Plan. The European Commission’s 2022 SME report noted that SMEs are “critical to the success of the sustainability transition”, accounting for over two thirds of business employment. They are a source of sustainable innovation and entrepreneurship in exploiting new green markets. However, as OECD analysis points out, many have limited access to finance, expertise, skills and human resources. Policy responses at the regional level are still evolving with a lack of knowledge on good practice. ESPON research has shown how the potential for SMEs to exploit the potential varies across European regions, depending on the capacity of public and private sectors, governance, and the ability to stimulate bottom-up informal initiatives through partnership and collaborative working. Both EU and OECD advocate better understanding of the policy mix to support greening of entrepreneurship and SMEs, especially recognising the diversity of SMEs and entrepreneurs, and the role of local and regional governments. This brief seeks to explore the current context driving low-carbon entrepreneurship, as well as existing opportunities and barriers that need to be leveraged and addressed by policy decision-makers at supranational, national, regional, and local levels, as well as entrepreneurs themselves. The brief was developed in collaboration with partners across the NICE network who are actively involved in stimulating entrepreneurial activities focused on low carbon technologies, goods and services, and will feature examples of best practice from across the NICE network.