Despite recent falls during the Covid-19 pandemic, the number of new businesses in the UK has grown substantially since 2000. House of Commons research opens in new window found that private sector businesses grew from 3.5m in 2000 to 5.6m in 2021, with micro-businesses (0-9 employees) accounting for 95% of all companies.
While the pandemic has brought enormous challenges for the business community, many have seized the opportunity to start their own business. One area of growth is in sustainable business launches – green companies focused on launching products and services designed to tackle environmental issues such as plastic use, climate change and energy consumption.
According to research by Tech Nation opens in new window, investment in European Net Zero companies raised over £2.21bn in 2019, a 129% increase over 2018. It cites examples such as InFarm opens in new window – an indoor vertical farming company – which raised £286m in investment. According to the Department for Digital, Culture, Media & Sport opens in new window, start-ups in the UK dedicated to tackling issues such as climate change and food insecurity raised over £2bn in investment in 2021.
While launching a green start-up doesn’t require goals on a global scale, creating a business dedicated to helping tackle sustainability and environmental issues can be rewarding. Research by Deloitte opens in new window found that ethical and sustainable issues are a key factor for around one-third of consumers in choosing where to spend their money.
But launching a green, sustainable business isn’t a walk in the park. You’ll need to develop your idea, test your market, create a business plan and ensure your supply chain meets your green business ambitions.
We’ve broken the process down into six steps, each with various resources to set you on your green business journey.
Help ensure your business decisions make a positive impact on the environment with our free Introducing environmental decision-making course opens in new window. As part of our Learn with Start Up Loans opens in new window partnership with The Open University, our online course is free to join, delivered by experts and includes a free statement of participation on completion.
Six steps to building a green business
1. Conduct market research
Market research is a good place to start. It allows you to find out what consumers want, how much they’ll pay, who your competition is, what’s already available and identify any gaps in the market that your business can address.
It can be conducted in several ways, including social listening via Twitter and Reddit, focus groups, online sustainability forums, and research reports by green organisations such as Greenpeace opens in new window and Carbon Trust opens in new window. You can use green research to discover sustainability problems or environmental issues that your business could help tackle.
Read our guide to primary market research opens in new window for more guidance to help you get started.
2. Create a business plan
A detailed business plan is essential. However, remember that it is not a rigid document and will likely change as you make progress.
A business plan should detail all the elements of your business. It describes your goals and expected growth timeline, and includes key assumptions you discovered during market research, such as sustainable materials you want to use, supply chain details such as transport and associated costs, and projected growth.
Download our free business plan template opens in new window.
3. Establish the right structure
There are many factors to consider when deciding on a legal business structure for your green start-ups. A common choice for green, sustainable businesses is to become a social enterprise opens in new window. This is a specific legal structure where the start-up has a clear social or environmental mission, and where the majority of business profits are reinvested into the enterprise.
Our guide on how to set up a social enterprise opens in new window provides more information.
A green business isn’t limited to operating as a social enterprise. You can choose the best structure for your venture, such as:
- sole trader
- limited companies
Read our guide to the different business structures opens in new window to help you choose the right one for your start-up.
4. Find funding
Unless you can self-fund your green business, you may need some money to get it off the ground. Start-up costs can escalate, so sticking to your budget and business plan is important.
A solid business plan is key, especially if you are trying to secure external funding. Finance can include a variety of sources, such as angel investors, bank loans, grants, and local or national government help. You can apply for a loan of up to £25,000* with Start Up Loans opens in new window to help get your business off the ground.
Various regions across the UK have grants available, so search directories such as Grants Online opens in new window and the Gov.UK finance and support finder opens in new window. It’s also worth checking with your local council to check if they have any funding or resources available.
Read our guide to green business grants opens in new window for more information.
5. String together a green supply chain
Ensuring your supply chain meets your environmental goals and values is essential.
From sourcing sustainable products and materials to accessing local ingredients and ensuring packaging materials are environmentally friendly, you’ll need to confirm your supply chain meets requirements.
Sourcing legitimate green suppliers can be challenging if you’re not sure what green credentials to look out for, as sometimes suppliers can make inaccurate sustainability claims.
Read our guide to finding green suppliers opens in new window for guidance on what to look for when building a sustainable supply chain.
6. Visibly green marketing
You’ve completed all the previous steps, so now to figure out how to let consumers know how green your business is.
Depending on your target audience, you may consider different marketing strategies. For example, using social media influencers for the impact-aware Millennial and Generation Z markets.
One option is to become certified with an environmental standards body.
Being certified and displaying that certification in your marketing materials lets consumers know that you are a legitimately green and sustainable company, helping to build brand trust and increase sales. There are various green certification schemes to apply to, such as B Corp opens in new window, Green Mark opens in new window or becoming a Fairtrade opens in new window licensee. Around 93% of UK shoppers recognise the Fairtrade mark, so using it in marketing materials could increase your brand visibility.
Ecolabels add a level of trust to your marketing materials. You can find a list of all the available green ecolabels in the UK at the Ecolabels directory opens in new window.
* Eligibility criteria and terms and conditions apply
Thinking of starting a sustainable business? Check out our free online courses in partnership with The Open University on environmental decision-making and how organisations impact the environment.
Our free Learn with Start Up Loans courses opens in new window include:
- Financial methods in environmental decisions opens in new window
- Future energy demand and supply opens in new window
- Energy in buildings opens in new window
Plus free courses on finance and accounting, marketing, project management, management and leadership.
This article and the content provided therein is exclusively for informative purposes. Nothing in this article or in its contents is intended to provide advice of any kind (including legal, financial, tax or other professional advice) and should not be relied on as such. You should get professional or specialist advice before doing anything on the basis of the content contained in this article.