*4.2. Drivers for SMEs Net Zero Activities*

The principal reasons for SMEs to take part in net zero activities have been framed as drivers [6,30]. There are two categories of drivers, namely external and internal. External drivers are those forces outside the SME that encourage it to engage in net zero activities while internal drivers are forces within the SME that stimulate it to engage in net zero activities. External drivers entail government policies that encourage SMEs to reduce carbon emissions, voluntary regulations imposed by SMEs themselves, conditions for access to external finance, the desire to improve corporate reputation, and pressure from customers, whereas internal drivers include the motivation of businesses to improve their image, generating comparative advantage, environmental concerns and to reduce costs [6,35].

Government policies, either employing coercion or persuasion, can induce SMEs to adopt net zero practices. For example, mandatory social and environmental regulations (MSER) have been found to have an impact on firm innovation in China [71]. However, such policies need to be implemented coherently across different sectors and a mix of policies seems to be more effective [30,31]. Voluntary agreements by SMEs across the supply chain could induce businesses to commit to net zero [52,55]. In the same manner, voluntary GHG reporting might be relevant for SMEs, because it can be effective in monitoring how SMEs reduce their GHG emissions [60]. Such net zero strategies that focus on re-organising distribution processes across the supply chain can also reduce carbon emissions [72,73].

Some external funding from banks is only available to SMEs that engage in capitalintensive net zero practices. In the UK, for example, the now-privatised Green Investment Bank played a key role in financing renewable energy projects, as did the government's creation of the First Infrastructure Bank [30,53]. SMEs may invest in net zero practices to legitimise their business activities and gain approval from various national and international stakeholders. SMEs may also undertake net zero activities to enhance their image and reputation and these activities could be a result of customer feedback/demand or the desire to attract customers who prefer to patronise businesses that engage in net zero activities [26,56].

There is research that shows that environmental corporate social responsibility is positively associated with green innovation performance and also that shared vision capability mediates environmental corporate social responsibility, a green innovation performance link [74]. Interestingly, numerous SMEs, particularly those in the manufacturing of apparel and restaurant sectors, exhibit energy efficiency and differentiation in being environmentally friendly or sustainable [31]. Thus, being engaged in net zero activities may be a source of competitive advantage for SMEs. SMEs might simply want to 'do the right thing' and run their businesses responsibly and ethically, which benefits the planet [28,31]. Finally, the increasing costs of energy for heating, running machinery, and transportation could drive SMEs to adopt net zero practices.
