© Getty/NataliaDeriabina

In practice

The Green Enterprise Partnership

Summary

London Borough of Sutton, United Kingdom—

  • The Green Enterprise Partnership (GEP) brings together local enterprises, leading business and organised interested groups to test net-zero business models and foster innovation for new sustainable products and services in Sutton High Street (South London).

  • Through the GEP, the London Borough of Sutton hopes to improve revenues for local businesses and tackle business closures, support the regeneration of the central district, and achieve borough-wide emissions reduction targets.

  • At an early stage of the project, the main learnings highlight the importance for local governments to explore the full extent of their powers to effectively address the challenges of the climate emergency. Local governments can embrace risk tolerance and allocate sufficient resources for policy development and project planning, as well as build on the best scientific and empirical evidence available.

What are the objectives?

Sutton is a key retail centre in southwest London. The central district, which includes a pedestrianised high street and shopping malls, provides a diverse range of big-box retailers, local shops and hospitality establishments. However, Sutton High Street been facing increasing pressures in recent years. Its vacancy rate has been on an upward trajectory between 2015 and 2020, underperforming most neighbouring boroughs and London as a whole. Although there have been significant improvements in the 2021-2023 period, the vacancy rate still falls above the London average. Additionally, Sutton High Street is situated within the 7th and 17th most deprived areas in the borough (out of 122 Lower-layer Super Output Areas). A town centre regeneration programme is being delivered in response to these economic challenges. To support this programme, and to achieve climate goals, the Green Enterprise Partnership was established.

The Green Enterprise Partnership (GEP) brings together local enterprises, leading business and organised interested groups to test net-zero business models and foster innovation for new sustainable products and services in Sutton High Street. In 2022, the London Borough of Sutton secured enabling funding from the Mayor of London’s High Streets for All Challenge to bring forward an innovative high street recovery strategy. The Council partnered with Sutton Business Improvement District (Sutton BID), and the Sound Lounge Trust to co-design a green economic transition strategy for Sutton High Street. In 2023, the Green Enterprise Partnership launched the ‘Go Green Scheme’ in collaboration with Sutton BID and Green Mark. This scheme is the first in the UK to offer tax incentives to small businesses to adopt green practices. The partnership is supporting the first cohort of 50 businesses to develop and implement environmental strategies to move towards low-carbon circular economy models, in an effort to combat economic and climate-related challenges.

The main aim of the Green Enterprise Partnership is to work with local businesses and key stakeholders to accelerate the transition to a prosperous and thriving low-carbon future, by closely supporting businesses in:

  • Understanding the sources of their emissions and helping them identify practical steps to minimise their environmental impact;

  • Developing and implementing strategies to reduce emissions such as improving energy efficiency, adopting renewable energy sources, and reducing waste; and

  • Implementing their plans to reduce emissions and effectively communicate their progress to their consumer base through a green certification scheme.

How does it work in practice?

The London Borough of Sutton has identified a viable incentive to support small businesses in their transition towards greener practices: discretionary business rates (i.e. commercial property tax) discounts; and has developed the Green Enterprise Partnership to deliver this. Sutton’s pioneering model enables the Council to recover the costs granting business rates discounts through a partnership fee contributed by businesses. In the UK, local governments collect business rates, but they retain only a portion of the taxes collected. In Sutton's case, the Council retains 30% of all business rates, while the Central Government receives 37% and the Greater London Authority receives 33%. By enacting Section 47 of the Local Government Finance Act 1988, as amended by Section 69 of the Localism Act 2011, Sutton Council can provide a 100% discount on business rates without compensating other tax recipients. Through the partnership fee, equivalent to 30% of rates liability of participant businesses, the Council is able to recover the costs of granting tax reliefs while still offering a substantial 70% discount on the business rates bill for those businesses.

The partnership includes a green business certification scheme and a dedicated infrastructure and support system which enables participant businesses to measure, track and manage their environmental impact and carbon footprint. The green business certification is a four-level scheme, ranging from member standard (by joining and committing to halve emissions by 2030 and achieve net zero before 2050) to gold standard (by implementing emission reduction strategies and reducing at least 5% of carbon footprint annually). Tax incentives are limited to a two-year period and commensurate with the level of effort in meeting specific milestones within the certification standard. The aim of the two-year pilot is to build evidence and learning for future phases.

A review will be conducted at 6, 12, 18 months, and a final evaluation at 24 months to draw out learning and build evidence of impact. Economic and environmental metrics will be used to measure the success of the scheme, including variance in turnover, gross profit as a percentage of turnover, labour turnover, headcount, and nominal and percentage emissions reduction in scopes 1 (operations), 2 (energy purchase), and 3 (supply chain).

What has been the impact?

As the Green Enterprise Partnership’s “Go Green Scheme” has just started in 2023, the full impact is yet to be seen. However, the London Borough of Sutton hopes to achieve far-reaching impact through the initiative:

  1. 1.

    Stable revenue for small enterprises that result in averted business closures. Evidence shows that environmental sustainability can contribute to healthy and successful businesses. Supporting small enterprises to improve and green their operations can help to tackle business closures in the central district and its knock-on effects in local employment.

  2. 2.

    Economic recovery in a pocket of deprivation. Inducing a green transition in Sutton High Street will support local employment and address current inequalities in line with local regeneration strategies.

  3. 3.

    Borough-wide emission reduction in line with the Corporate Plan and net-zero targets. Supported businesses will be required to reduce at least 5% of carbon footprint annually in line with science-based targets.

  4. 4.

    Increased positive reputation leading to access to future funding through government, foundations and other financial mechanisms. Donors and leading green business transition organisations are interested in supporting and scaling this model. This highlights the potential of the Green Enterprise Partnership to increase the Council’s influence and therefore its ability to secure funding and resources to deliver on the ambition of a sustainable and prosperous borough.

The London Borough of Sutton’s overarching goal with this project is to test whether tax incentives are an effective tool to drive business action on climate. It also aims to demonstrate on a practical level what the corporate sustainability literature has identified as a “statistical correlation between business environmental and economic performance”. The Council intends to validate these assumptions and achieve value for money in the process. If successful, the Council intends to expand the pilot to include more businesses and demographics.

What can other communities learn from this example?

To successfully build such a project from scratch, it is important to allocate ample time to basing decisions on best scientific evidence available, getting the right stakeholders on board, and launching effective advertising campaigns targeting local businesses and organizations. To ensure buy-in for this project, Council officers reviewed best practices and existing models, developed a business case for the pilot, built the innovation into an existing partnership model, and sought buy-in across relevant teams and departments.

When tackling the daunting challenges posed by the climate emergency local governments must explore the full extent of their powers, be more risk tolerant, break out of routines, and be open to experimentation in order to develop innovative solutions.

OECD resources

OECD (2023), Job Creation and Local Economic Development 2023: Bridging the Great Green Divide, OECD Publishing, Paris, https://doi.org/10.1787/21db61c1-en.

OECD Platform on Financing SMEs for Sustainability

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