Report: British SMEs investing more in sustainability post-lockdown, despite cost of living challenges

The research surveyed 997 senior decision-makers at SMEs across the UK, with all major economic sectors and geographical regions being covered. It was carried out in March, with the findings published today (20 June) by finance firm Aldermore.

Overall, 53% of the survey respondents said their company has made an investment in environmental sustainability within the past 12 months. The average spend in this area was £61,250.

The survey also revealed that most businesses plan to either maintain or increase spending on environmental sustainability this financial year, despite potential cost increases for their utilities, raw materials and products. Aldermore estimates that, on average, the businesses covered by its survey will spend almost £78,400 on sustainability-related activities this financial year – a year-on-year increase of 27%.

For spending over the past financial year, the most popular focus was creating or improving workplace recycling schemes. Investments were made by 65% of the businesses surveyed that had made some kind of eco-investment.

Initiatives to reduce the emissions of commuting and business trips also proved popular, with 55% of businesses surveyed having invested here recently. This indicates that SMEs are going further and faster in this respect than their large, multinational counterparts – a recent Transport & Environment report found that less than one-quarter of big businesses have commitments to reduce transport-related emissions this decade.

For forthcoming spending by SMEs, recycling, low-carbon transport and sustainable materials and packaging are set to be key focus areas. Growing areas of interest include changing a product or service to decrease its environmental impact, and investing in offsetting. One-fifth of businesses surveyed are interested in the former, and one-tenth in the latter, for this financial year.

“It’s hugely encouraging to see that businesses are increasingly willing to address the issue of sustainability and it will be the ingenuity and drive of SME owners that will help make much of the UK’s green transformation possible,” said Aldermore’s managing director of business finance Tim Boag.

Despite this, the survey did find that some SMEs are concerned about their ability to become more sustainable this year. 27% said that the current economic climate will likely limit their environment-related investments this financial year.

SME challenges and resources

More than nine in ten businesses in the UK are SMEs. In terms of climate impact, SMEs are collectively responsible for around the same level of emissions as large firms, with the UK Government recording splits of almost 50/50 for several years now.

While SMEs can be more agile than large firms – and may well have a lower environmental footprint in the first instance – their sustainability challenges are many and increasingly well documented.

One survey of more than 2,000 UK SMEs, published this spring by tech and software firm Sage, revealed that 75% do not expect their business to become more environmentally sustainable within 12 months. Key challenges documented in that research included upfront costs and a lack of in-house skills.

The UK Government has already published guidance on how SMEs can and should measure and report emissions, following a call to action from Prime Minister Boris Johnson in May 2021.

Other supporting tools include an online hub enabling businesses to access practical information on how to approach the net-zero transition, from O2 and the British Chambers of Commerce; and the SME Climate Hub, which recently worked with CDP to launch a new framework for measuring, reporting and reducing environmental impacts.