*4.1. Barriers to SME Net Zero Activities*

Different studies describe a variety of barriers to the adoption of energy efficiency measures by SMEs. These barriers usually vary by industry/sector, size of SME, geographies, market behaviour and amount of legislative support [51–53]. For example, a lack of legislative support in certain sectors typically reduces the probability of the adoption of cleaner technology in those sectors. The take-up of measures by SMEs to adopt net zero measures could be low due to such barriers [69].

The literature seems to agree that the most significant barriers are the costs of transitioning to cleaner technology, access to capital, uncertainty about the business environment and usefulness of greener technologies, lack of specialist knowledge about greener technologies, scarcity of time and resource constraints, unclear energy management responsibilities, split incentives and priorities, and a lack of control over some aspects of SME operations (for example domestic and international supply chains and short-term tenancy agreements) [7,31,50,52]. These barriers generally do not incentivise SME owners to make long-term investments that could contribute to reaching net zero.

SMEs might also often be hampered by a lack of strategic alignment between their goals and that of the net zero agenda [6]. This might be especially true for manufacturing sector SMEs that typically report other priorities not aligned towards the net zero agenda, less time to implement sustainability measures, and a lack of information about energy efficiency measures [51]. Some authors also stress that trading opportunities may not be present for green-minded SMEs and so there may be low financial rewards for adopting cleaner technologies [33,70].

Related to this line of thought, SMEs may also suffer from having internal and external stakeholders that may not benefit from the net zero agenda [54]. This is because greener technology innovations may not be suitable for some risk-exposed SMEs and their stakeholders [50]. Other SMEs report that the cost of meeting regulations or standards and the uncertain demand for low-carbon products or services are major obstacles to committing to net zero practices [7]. Other researchers also highlight barriers on the supply side (e.g., financial costs), and the demand side of cleaner technologies (e.g., conflict with traditional methods). These studies identify low awareness of climate change, limited understanding of what works in different contexts and difficulties in proving the added value of CSA technologies as factors constraining the adoption of clean technologies [50]. Furthermore, false claims on climate change undermine the existence or impacts of climate change, the unambiguous human influence on climate change, and the need for corresponding urgent action. Such disinformation erodes trust in climate science and its perpetrators increasingly use 'distract and delay' tactics to delay much needed action.

While government support is seen as a driver of net zero activities, there are barriers to the adoption of low-carbon technologies even when there is government support, as has been seen in the case of European Regional Development Fund (ERDF) funded projects. These are mostly due to the short project timeframes of most government projects, the involvement of partners with limited experience in net zero projects, lack of learning and knowledge exchange between projects, lack of coordination with other government SME decarbonisation policies, and the possible 'crowding-out' of private activity [31].

The time horizon for net zero itself could be a potential hurdle as SMEs may be particularly concerned about the payback time for investment in decarbonisation and other sustainability initiatives. The year 2045 appears so far in the future for many that it seems out of reach for many SMEs who could find it both impractical and unrealistic [10]. As one might expect, the COVID-19 pandemic was also a major obstacle to clean technology adoption reported by SMEs in Northern Ireland and the rest of the UK [7], although some researchers report that even in the context of the COVID-19 pandemic, there was a strong, statistically significant relationship between both technological and organisational net zero practices and business performance, proxied by employment growth [30].
