Access to financing and lack of regulatory certainty, including at the EU level, remain key concerns for French SMEs on their green transition path

Théo Bourgery-Gonse writes on the EURACTIV website about what small and medium-sized enterprises need in France to decarbonise. Is it any different in your country?

 

French SMEs asked to decarbonise, want regulatory certainty

Access to financing and lack of regulatory certainty, including at the EU level, remain key concerns for French SMEs on their green transition path, though fears could be quelled as the government hopes to encourage collaboration between small and big businesses.

To finance the green transition in France to the estimated tune of €60 billion a year from 2030, it has become clear that small and medium-sized enterprises (SMEs) – which in France generate between 20-30% of greenhouse gas emissions – cannot be left behind.

Showcasing the importance of SMEs in this green shift, France’s SME and Trade Minister, Olivia Grégoire, is due to unveil a new “SME Pact” on Thursday (13 July), partnering small firms with large industry players so the former can learn from the latter’s decarbonisation efforts.

No need convincing

The initiative first came to fruition due to the energy crisis, which “accelerated the move by businesses towards decarbonisation, if only to reduce energy prices”, François Perret, ‘SME Pact’ chief, told EURACTIV.

Businesses’ energy bills increased by an average of 32.3% across all sectors from April 2021 to April 2022. The latest data from France’s statistical institute, INSEE, found that year-on-year figures also increased by 21.7% between December 2021 and December 2022.

“The effort to convince [business leaders to move towards decarbonisation] is behind us”, Éric Versey, Bpifrance’s executive director in charge of Financing and the Network, who pilots the bank’s Climate Plan, told EURACTIV.

However, SMEs do not always know how to benefit from relevant financing tools or set out a decarbonisation strategy.

“Many SME owners are asking for Micro, Small and Medium-size Enterprises), SMEunited, an association of small and medium-sized enterprises in Europe, is calling on ” themselves: ‘I know I need to improve my carbon footprint, but how?” Versey explains.

Perret shares this view: “SMEs fear that committing to a decarbonisation programme will require resources and time that they don’t have”, he said.

Access to funding instruments

Measures have been put in place or are being implemented at the government level to provide French SMEs with technical support and facilitate their access to dedicated and incentive-based financial instruments.

French businesses are the first beneficiaries of the Recovery and Resilience Facility (RRF), a financial instrument developed by the European Commission in 2020 to help member states cope with the aftermath of the pandemic.

Indeed, of the 331,000 SMEs receiving support from the EU instrument across 13 countries in April 2023, 234,312 are French, according to a note from the European Parliament’s Research Department.

At the same time, Bpifrance set itself the goal of helping 20,000 SMEs decarbonise by 2028, with the help of a mass ‘door-to-door’ campaign as part of the Green Industry Action Plan.

Since 2020, it has also set up a dedicated green loan in partnership with relevant authorities, which can be reimbursed in ten years and reach €5 million to improve a company’s energy processes or encourage green mobility.

Bpifrance is also preparing to implement a ‘green guarantee’ to encourage private financial players to invest in risky, innovative green transition projects.

More generally, private financial institutions view the decarbonisation economy favourably: “The financial sector is very keen to finance SMEs”, a high-ranking official from a public financial body, who agreed to speak under the condition of anonymity, explained.

In their view, the problems that need correcting lie in financing innovative and risky projects, for which public-private co-financing can prove necessary.

“Profitability is a key factor for investors. So, we need the government to enact climate policies that influence economic decisions directly”, he said.

Lack of regulatory certainty

Meanwhile, Gerhard Huemer, director of economic affairs at SMEunited, an EU-wide SME interest group, wants EU institutions to step in to provide more regulatory certainty, which has prevented long-term investments in the green transition.

The granting of permits for the construction of new infrastructure, which can take up to 18 months, is also seen as a key disabler for decarbonisation efforts: “The emphasis must be on reducing the waiting time for permitting procedures and requirements”, said Huemer, who welcomes the Commission’s stated intention to reduce administrative burdens on SMEs “by 25%”.

“Priorities as set out in the European regulatory agenda are not always very clear”, the public official source also said, adding that this can weigh on companies’ economic decisions and hinder meaningful green investments.

The last Eurobarometer on SMEs, published in March 2022, revealed that 34% of SMEs complain that administrative and legal procedures are too complex, while 24% say they are discouraged by the cost of climate action. At the same time, 43% would like dedicated financial tools to provide greater incentives to invest in decarbonisation.

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