The Australian small business community needs more support and clear information to help them deal with rising energy costs and successfully navigate the energy transition.
At a time when rising energy costs are impacting small business like never before, the need to understand how to help small business manage energy hardships and successfully navigate the energy transition has never been greater.
Research released by the Council of Small Business Organisations Australia (COSBOA) provides new and detailed insight into the barriers, hardships, motivations, abilities, and opportunities for small business owners to navigate the energy transition to Net Zero.
The "Small Steps. Bright Future" research project shines a light on this critical but underexplored landscape. The research was funded by Energy Consumers Australia (ECA) as part of its grants process for consumer advocacy projects and research projects for the benefit of household and small business energy consumers.
This innovative work provides an informed and pragmatic framework to understand different small business segments - their motivations, abilities, and opportunities - and help them manage the energy transition.
Over 400 small and medium business owners and managers from across regional and metropolitan Australia participated in the COSBOA research in January 2024. This includes representation from retail, building and construction, health and medical, accounting and financial, manufacturing and wholesale sectors.
The research dissects the ways energy hardship is being experienced by different sectors of the small business community, and presents the evidence from which to design the tools, policies and approaches needed to empower small businesses to successfully navigate Australia's journey to Net Zero.
Key findings from the research show that small business is at the frontline of the energy transition. But it needs help to successfully navigate the change.
● Energy hardship and financial strain is hitting small business harder than COVID-19. Over the past 12 months, 1 in 3 (34%) small businesses experienced financial strain and hardship paying their energy bills, which is 2 per cent higher than that reported in January 2022 when the effects of the COVID-19 response measures were being felt by small business. Energy hardship is being compounded by cost of living and inflationary pressures. 2
● Small businesses are struggling to meet their energy bills and are worried about their ability to pay future bills. 1 in 5 small businesses are struggling to pay their energy bills on time. Nearly half of small businesses (45%) are concerned about their ability to pay future energy bills.
● Most small businesses are yet to take steps toward renewable energy and more energy efficiency. Almost half of small businesses (49%) have not yet taken any steps towards the energy transition. Energy hardship is a powerful motivation for change, with small businesses facing higher energy bills being more likely than others to take steps on energy efficiency measures.
● The cost of transitioning to renewable energy is a major barrier with 63% of small businesses considering the financial outlay to transition as being difficult to manage. Similarly, access
● Access to funds to support energy transition is varied across small businesses, with 1 in 5 (20%) reporting good access, just under half (46%) reporting moderate access, and a third (34%) reporting low access. Similarly Awareness and knowledge among small businesses about where to go for advice and support to support the transition is poor.
● The experience of small businesses accessing supports is mixed. Nearly a third of small businesses (32%) rated the quality and clarity of information as good and easy to understand. Two out of five small businesses (41%) thought the quality and clarity was OK. Over a quarter (27%) considered the quality and clarity to be poor and confusing. Notwithstanding these results there is a clear appetite for more resources, advice and support among small business to help them manage the energy transition.
From the research a small business segmentation framework has been developed, identifying three different segments that can inform the development of practical tools, policy and approaches to assist the varying needs of small business. The three identified small business segments include:
● Fixed (19% of sample) This segment is energy dependent, operating out of premises where rising energy costs impact their financial position, generating a medium level of motivation to make the transition. In terms of ability and opportunity, while this segment a good level of understanding about what is required, they face considerable barriers in terms of access to funds and other support that could enable the transition.
● Swifts (38% of sample). This segment places a high priority on making the energy transition and recognising the benefit to their financial position and is already taking action. They understand what’s required for their business to make the change, are accessing support and services, and are also less constrained in their abillty to make the change than the other two segments.
● Agiles (43% of sample). This segment has low motivation to make the energy transition. With lower power usage than others, this segment is least likely to have experienced energy hardship in the last 12 months. And while there is some interest in exploring options and actions to make the transition, the ability and opportunity to do so is also low.
Better understanding the needs of different segments of the small business community will inform the development of guides for small business advisors, and policy development by governments. It can also 3 inform the scoping of funding models for new tech-based small business advice channels, using emerging technology such as AI and natural language processing.
The next steps for the research project will be to test the research and the segmentation framework with small businesses participating in a series of industry and stakeholder events throughout May.
Quotes to be attributed to Luke Achterstraat, CEO of COSBOA
“Small business is the backbone of the Australian economy, so it’s vital they are given support to deal with energy hardship and the challenges associated with energy transition. This research gives us the chance to get this right.
If we can design the right support and services now, we can make a huge difference to how small business navigate this major change and challenge. Small business is getting smashed by rising energy costs, with financial strain higher now than during the COVID shutdowns.
Cost of living pressures and other compounding factors like high interest rates are causing huge financial stress to the small business sector. The time for action to help small business is now.
This is a major piece of research - with over 400 small business owners and operators participating in the work. It gives us an incredibly informed body of evidence about the challenges of the energy transition and how best to help small business navigate it.
There is interest and appetite among small business to make the energy transition. We’ve already got innovation and adaptation underway, but a lot of small businesses are also constrained in their efforts to make the change. This research gives us the evidence we need to help.
Its clear that how information and support is provided to small businesses - but also the quality and credibility of that information and support - can be improved. Getting these elements and the right settings in place now sets us up for a bright future.
About COSBOA and the research
COSBOA is Australia’s peak body exclusively representing the interests of small business.
COSBOA promotes and supports the development of small businesses in Australia, advocates for policy and regulatory reform, and grows the level of awareness and understanding within government, media and the broader community, about the role and importance of small business to Australia’s economic and social wellbeing.
COSBOA has collaborated with its national membership base to research and better understand barriers and hardships facing small businesses, and their motivations, abilities and opportunities to navigate the energy transition. The research provides an important foundation on which to develop resources, policy and advice to successfully navigate the energy transition.
The research was led by Dr Rebecca Huntley.
The research was funded by Energy Consumers Australia as part of its grants process for consumer advocacy projects and research projects for the benefit of household and small business energy consumers.
For media enquiries or interviews, please contact COSBOA on ceo@cosboa.org.au or call (+61) 433 644 097
Luke Achterstraat
Chief Executive Officer
Council of Small Business Organisations Australia
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