Achieving carbon-neutral status for her businesses is the latest development in a journey that has taken Emily Smith from the Amazon to Parliament. Jonny Williamson reports.
As a chartered accountant and tax advisor who originally intended to further her career in London, Emily Smith said that her foray into manufacturing, “was only supposed to be for six months.” Plans to only help Michael Smith Switchgear temporarily were quickly forgotten after donning steel toecap boots and walking the factory floor. Emily found herself bewitched by the fabrication process and understanding how to run them as efficiently and safely as possible. Ten years on and she has remained with the Leicester-based business.
Indeed, she and her then-husband bought Michael Smith Switchgear in 2012; a move followed shortly after by the acquisition of AVW Fabrications in 2014. Both of which are now co-located under one roof. Emily is currently the Operations and Finance Director of Michael Smith Switchgear, with responsibility also for HR and Health and Safety, and the Managing and Finance Director for AVW Fabrications. If that wasn’t enough, she sits on the regional board for Make UK and chairs the Manufacturing Advisory Group for the Institute of Chartered Accountants in England and Wales (ICAEW).
It’s a unique portfolio that enables Emily to speak with a broad range of manufacturers operating across all sectors. This, coupled with her own experiences, means Emily has a clear understanding of the challenges facing UK SMEs and the opportunity to help overcome them. Her valuable input is helping inform the lobbying activities undertaken on behalf of manufacturers by both Make UK and ICAEW. Recent policy wins by Make UK, for example, include the Annual Investment Allowance (AIA) being permanently set at £1m, with the proposed reduction to £200,000 from 1 April 2023 being scrapped. Unsurprisingly, top of the list for 2023 are tackling inflation, the reintroduction of a much-needed industrial strategy and the drive to net zero.
Business benefits of climate action
Emily is a committed environmentalist whose dedication to acting on climate change was galvanised after seeing first-hand the extent of deforestation in the Amazon. This set her on a path that saw both Michael Smith Switchgear and AVW Fabrications achieve carbon-neutral status in 2022.
Doing so wasn’t easy but the benefits far outweigh any initial downside, said Emily, adding that concerns among businesses that sustainable changes would be expensive are often misplaced. I sat down with Emily to learn more.
It’s rare for a fabrication company to be carbon neutral, doubly so for a small business. What has been your approach to sustainability?
ES: We’ve worked hard to grow the Michael Smith Switchgear and AVW Fabrications businesses, both of which operate in highly competitive markets, especially in Leicester and the wider Midlands area. We’ve invested heavily in both businesses. AVW, in particular, was a very manual-based operation when we acquired it. Whereas, today, the shop floor is kitted out with a suite of state of-the-art laser cutting and CNC machines.
At the same time as investing to ensure we are sustainable from a business perspective, we’ve also been taking steps to become more sustainable on the environmental side. Small actions we’ve taken include changing all our lighting to LED and introducing recycling initiatives. Installing EV charging points, exchanging a plastic component for one made from cardboard resin and changing our packaging to a more environmentally friendly alternative all took more time and effort. We’re also in the process of switching our vehicle fleet to electric.
Larger undertakings include reducing copper usage by 25% through increased airflow in our switchgear and installing solar panels on our south-facing factory roof. We’re also considering how to install a ‘living’ green roof on the area unsuitable for solar panels. However, becoming more sustainable doesn’t have to cost a fortune. Simple actions like reducing, reusing and recycling might cost you nothing but have an immediate positive impact.
Oftentimes, the only investment needed is time. For example, small rubber caps are used to protect screw threads during our powder coating process. After being used once, these were thrown away. All it took was me asking why and now they’re collected and reused. That’s an immediate cost-saving and it took less than a minute from start to finish. Take the time to look across your operation and identify small, quick changes you can make which will create enthusiasm and motivation for the next change and so on. You’ll be surprised how quickly it will snowball into something much bigger.
In the face of sustained economic challenges and disruption, you’ve continued to invest in sustainability. Why is that?
Part of it was recognising that sooner rather than later, businesses are going to be audited on carbon emissions in the same way as financials. Whether that’s by government, customers or suppliers. Also, less formerly but equally as important, is that employees increasingly want to work for an organisation that has a positive impact on the planet. Taking all that into account, we decided to get ahead of the curve. Investing in sustainability has also helped drive our growth. Already this year, I’ve had several customers say they specifically want to purchase from a carbon neutral business or one with a formalised sustainability strategy. The frequency of such conversations is only going to rise.
What exactly did achieving carbon-neutral status involve?
The former CEO of Unilever, Paul Polman, co-authored a thought-provoking book called Net Positive: How Courageous Companies Thrive by Giving More Than They Take. In it, he argues that the companies of the future will profit by fixing the world’s problems, not creating them. It’s all about focusing on long-term value creation rather than short-term dividends. We know manufacturing is a significant contributor to carbon emissions and that achieving net zero is critical in addressing climate change. Becoming carbon neutral is an important step on our journey to net zero.
The two aren’t the same thing, as some mistakenly believe. Being carbon neutral means offsetting or balancing out your emissions. Net zero is not producing any carbon emissions in the first place. We’re not net zero yet but we’re working towards that. We’ve partnered with Carbon Neutral Britain which funds projects in Britain and around the world to reduce the amount of CO2e in the Earth’s atmosphere. All of the offsetting projects are verified to the highest standards via the four largest carbon certifications in the world, including by EU and UK Trading Standards and the United Nations.
The certification process is hard. That’s likely what puts people off. Also, you have to be recertified every year. It’s not one-and done. But the first year of anything is always the most difficult. Certification involves calculating and submitting your Scope 1, 2 and 3 emissions and, at the time, I didn’t know what they were or how we were ever going to find the data. We’ve subsequently introduced processes that mean the information is continuously being collated.
There is a fair amount of estimation involved, especially when it comes to things like suppliers’ mileage. You know the distance between their site and yours, but did they deliver to another customer en route? Fortunately, Carbon Neutral Britain takes that into account and the fact that all our vehicles are tracked clearly helped. As did our solar installation and being zero waste to landfill. When we submitted our report, they described it as one of the most detailed they’ve ever received; that was nice feedback.
Measuring Scope 3 – indirect emissions that occur in your value chain – is proving difficult for many businesses. What advice can you offer?
Luckily, the lifespan of our products is quite long and on the switchgear side, our output is high value, low volume. That makes it relatively easy to find the information. What’s key is building communication channels and speaking with suppliers and customers. If they’re not on board, you’re fighting a losing battle. Most businesses have implemented or are considering implementing some form of sustainable initiative and by sharing experiences and innovations, we can all help each other.
We’ve had really positive feedback from our suppliers to the extent they want to work with us to adopt the same strategy in their business. I’m also the person in every meeting who asks what the sustainability impact will be of taking a decision or not. Investing in a new piece of equipment will make our production process more efficient but what will it mean for our energy usage? Is there a better way to achieve the same result? Does it have to be new or could we buy refurbished? Sustainability is on the agenda for our management meetings and in every business decision we analyse the impact of whether it’s going to reduce our Scope 1, 2 or 3 emissions as a consequence. If it’s not, why are we doing it?
The benefit of buying refurbished machines is quite a hot topic isn’t it?
Yes. Capital allowances and tax breaks are available for buying new but nothing is given for reusing or refurbing. Modern equipment is more energy efficient and capable, but equally, you want to avoid having working machines being thrown away. We’ve just received a grant for a new machine but it had to be new. Why? If we can prove that refurbished would be better for us and more sustainable, why does it have to be a new product? Small business owners face a real balancing act of trying to grow the business without growing their carbon footprint. Similarly, R&D tax credits have recently been changed in response to abuse of the system by a tiny minority.
If I had a pound for every time someone contacted me to say they can claim us R&D tax credits for X, Y and Z, and clearly, not everyone was doing it properly. Large companies have entire departments to deal with these things. SMEs don’t and they rely on external advisors to help them. It’s so often small businesses who end up suffering the most. Changing the energy relief scheme to a discount scheme, a higher rate of corporation tax; the SME business community was just starting to have the money to reinvest and now it’s being taken away from us. That’s why the lobbying done by Make UK and ICAEW is so vital to raise these issues and persuade government to provide better, more targeted support.
What are you hoping to achieve in 2023?
On the business side, we want to move the business forward in terms of growth and further streamline production. We also want to become far more digitalised, something that will also help progress our sustainability journey. We already align with some of the UN Sustainable Development Goals and I’m keen to identify what more we can do. I also want to get into schools and raise young people’s awareness of manufacturing and the breadth of careers available both on and off the shop floor. I’m an Enterprise Advisor and as part of that, I want to engage with both the younger generation and teachers, open our factory doors and get them on-site to see it with their own eyes. That’s so important. Someone will shortly be coming to us for work experience. She wants to go into finance and accountancy but is unsure exactly where or how. She didn’t realise you could be an accountant working in manufacturing.
- Companies of the future will profit by fixing the world’s problems, not creating them
- Stakeholders increasingly want to work with organisations that have a positive impact
- Look across your operation and identify small, quick changes
- Implementing these will create enthusiasm and motivation for subsequent bigger changes
- Question your normal business decisions, could you do things differently? Will the decision help reduce or increase your carbon footprint?
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All images courtesy of Michael Smith Switchgear and AW Fabrications