Sutton is a key retail centre in southwest London. The central district, which includes a pedestrianised high street and shopping malls, provides a diverse range of big-box retailers, local shops and hospitality establishments. However, Sutton High Street been facing increasing pressures in recent years. Its vacancy rate has been on an upward trajectory between 2015 and 2020, underperforming most neighbouring boroughs and London as a whole. Although there have been significant improvements in the 2021-2023 period, the vacancy rate still falls above the London average. Additionally, Sutton High Street is situated within the 7th and 17th most deprived areas in the borough (out of 122 Lower-layer Super Output Areas). A town centre regeneration programme is being delivered in response to these economic challenges. To support this programme, and to achieve climate goals, the Green Enterprise Partnership was established.

The Green Enterprise Partnership (GEP) brings together local enterprises, leading business and organised interested groups to test net-zero business models and foster innovation for new sustainable products and services in Sutton High Street. In 2022, the London Borough of Sutton secured enabling funding from the Mayor of London’s High Streets for All Challenge to bring forward an innovative high street recovery strategy. The Council partnered with Sutton Business Improvement District (Sutton BID), and the Sound Lounge Trust to co-design a green economic transition strategy for Sutton High Street. In 2023, the Green Enterprise Partnership launched the ‘Go Green Scheme’ in collaboration with Sutton BID and Green Mark. This scheme is the first in the UK to offer tax incentives to small businesses to adopt green practices. The partnership is supporting the first cohort of 50 businesses to develop and implement environmental strategies to move towards low-carbon circular economy models, in an effort to combat economic and climate-related challenges.

The main aim of the Green Enterprise Partnership is to work with local businesses and key stakeholders to accelerate the transition to a prosperous and thriving low-carbon future, by closely supporting businesses in:

• Understanding the sources of their emissions and helping them identify practical steps to minimise their environmental impact;

• Developing and implementing strategies to reduce emissions such as improving energy efficiency, adopting renewable energy sources, and reducing waste; and

• Implementing their plans to reduce emissions and effectively communicate their progress to their consumer base through a green certification scheme.

The London Borough of Sutton has identified a viable incentive to support small businesses in their transition towards greener practices: discretionary business rates (i.e. commercial property tax) discounts; and has developed the Green Enterprise Partnership to deliver this. Sutton’s pioneering model enables the Council to recover the costs granting business rates discounts through a partnership fee contributed by businesses. In the UK, local governments collect business rates, but they retain only a portion of the taxes collected. In Sutton's case, the Council retains 30% of all business rates, while the Central Government receives 37% and the Greater London Authority receives 33%. By enacting Section 47 of the Local Government Finance Act 1988, as amended by Section 69 of the Localism Act 2011, Sutton Council can provide a 100% discount on business rates without compensating other tax recipients. Through the partnership fee, equivalent to 30% of rates liability of participant businesses, the Council is able to recover the costs of granting tax reliefs while still offering a substantial 70% discount on the business rates bill for those businesses.

The partnership includes a green business certification scheme and a dedicated infrastructure and support system which enables participant businesses to measure, track and manage their environmental impact and carbon footprint. The green business certification is a four-level scheme, ranging from member standard (by joining and committing to halve emissions by 2030 and achieve net zero before 2050) to gold standard (by implementing emission reduction strategies and reducing at least 5% of carbon footprint annually). Tax incentives are limited to a two-year period and commensurate with the level of effort in meeting specific milestones within the certification standard. The aim of the two-year pilot is to build evidence and learning for future phases.

A review will be conducted at 6, 12, 18 months, and a final evaluation at 24 months to draw out learning and build evidence of impact. Economic and environmental metrics will be used to measure the success of the scheme, including variance in turnover, gross profit as a percentage of turnover, labour turnover, headcount, and nominal and percentage emissions reduction in scopes 1 (operations), 2 (energy purchase), and 3 (supply chain).

As the Green Enterprise Partnership’s “Go Green Scheme” has just started in 2023, the full impact is yet to be seen. However, the London Borough of Sutton hopes to achieve far-reaching impact through the initiative:

The London Borough of Sutton’s overarching goal with this project is to test whether tax incentives are an effective tool to drive business action on climate. It also aims to demonstrate on a practical level what the corporate sustainability literature has identified as a “statistical correlation between business environmental and economic performance”. The Council intends to validate these assumptions and achieve value for money in the process. If successful, the Council intends to expand the pilot to include more businesses and demographics.

• The Green Enterprise Partnership – London Borough of Sutton Website

OECD (2023), Job Creation and Local Economic Development 2023: Bridging the Great Green Divide, OECD Publishing, Paris, https://doi.org/10.1787/21db61c1-en.

OECD Platform on Financing SMEs for Sustainability