The future is green: hedging the net zero transition
The shift to net zero is already actively changing the cost and availability of key commodities
For UK SMEs operating across energy, agriculture, and manufacturing, this is not just a policy shift; it directly affects input costs, supply stability, and margin predictability. This raises a pressing question:
What does the green transition really mean for business, and will it create opportunity or risk?
While policy remains fluid, understanding both the significant growth opportunities and potential for heightened financial uncertainty here is key to navigate the evolving demand patterns and cost pressures.
If you want to understand how these shifts affect your own cost base, tools like the Explore Zone can help you map your exposure across different commodities.
But first, it helps to understand what is actually moving in the markets.
- What Is the Green Transition Doing to Metals Markets?
The build-out of renewable energy, EV infrastructure, and electricity networks is creating a sustained surge in demand for steel, copper, aluminium, and silver, but this rise arrives at a time of tightened supply.
For SMEs, this translates into higher and less predictable material costs, particularly where projects or contracts are priced months in advance.
Copper and aluminium markets were already stretched before recent disruptions. The Iran war has caused severe shipment halts, putting strain on a critical 9% of global aluminium supplies that flow through the Persian Gulf.
Silver, essential for high-performance electrical applications, is both difficult to substitute and slow to scale regardless of broader market conditions. Recent price spikes have underlined just how exposed electrical value chains are given their dependence on these materials for cabling, transformers, and specialist components.
Steel tells a different story, but not a simpler one. Potential reductions in tariff-free imports, combined with a global glut from record Chinese exports, are creating a volatile pricing environment for network contractors and equipment manufacturers. SMEs reliant on competitively
priced imported steel face real uncertainty, while manufacturers have limited scope to switch to alternative conductive metals.
For most businesses, metals are only one part of the picture. These pressures often sit alongside rising energy and transport costs, creating combined margin pressure.
With materials scarcer and more expensive than they were, a return to previous price levels looks unlikely. Businesses that take time to understand their specific exposure and plan ahead will be far better placed than those reacting to each move as it comes.
- How Are Energy-Intensive Businesses Affected?
For manufacturers, hauliers, and other energy-intensive businesses, the transition adds a new layer of cost complexity on top of already volatile energy markets.
UK SMEs roughly spend £2-5bln per annum on transport fuels, but with oil now surging past $100 a barrel for the first time since 2022, they’re facing up to £1 billion in additional operational costs if current market volatility is sustained.
The UK’s diminishing North Sea output has created a critical dependency on imports, leaving British businesses to bear the brunt of global price swings dictated by the escalating US-Iran conflict. The combination of recent market disruptions, and industrial decarbonisation aims makes forward planning harder than it has been in a generation.
For SMEs without the ability to lock in prices or absorb fluctuations, this creates immediate pressure on margins. We have seen this recently, as those who have delayed hedging amidst the conflict are now facing 26% higher costs on average.
However, managing energy exposure alone is no longer enough. SMEs must factor cost planning across critical material inputs to better manage unexpected pressures later down the line.
- What Does Net Zero Mean for Agriculture?
Agriculture, another cornerstone of the UK’s commodities sector, sits at a precarious intersection.
Input costs – fertilisers, fuel, machinery – are rising, while net-zero regulations impose additional annual costs on the farming sector. The Resolution Foundation has warned that average farm profits could fall from £34,500 per year to as little as £1,414 if decarbonisation costs fall entirely on farmers.
At the same time, there are genuine opportunities emerging. Government-backed innovation funds are enabling new projects in climate-resilient crops, low-emission fertilisers, and sustainable land management, creating new income streams for farmers willing to invest in the transition.
The challenge for agri-commodity SMEs is that both costs and revenues are shifting at the same time, making traditional planning approaches less reliable. In a sector defined by cross-commodity exposure, safeguarding agricultural margins depends on an integrated approach to risk.
Understanding how these global pressures overlap is the first step toward building long-term resilience.
How Should SMEs Respond?
The future is undeniably green, and for many SMEs, the challenge is not a single volatile input, but multiple costs moving at once.
The starting point is knowing which parts of your cost base are most exposed, how those costs move together, and how sensitive your margins are to those changes.
From there, a considered plan, whether that involves long-term supplier agreements, forward contracts, or investment in lower-emission inputs, will be far more effective than reactive decision-making.
The green transition is reshaping multiple commodity markets simultaneously, creating both risk and opportunity for businesses.
For most SMEs, the risk is not just volatility, but not knowing where exposure sits across their cost base.To start mapping how these changes affect your business, visit the Explore Zone or speak to one of our specialists today.
