Rising costs tops list of sustainability challenges for SMEs

SMEs currently account for more than 99% of all businesses in the UK.

This is according to NatWest’s Sustainable Business Tracker, a quarterly report of 850 organisations, designed to monitor business performance and sustainability actions at UK enterprises with 1-249 employees.

According to the tracker, 35% of UK SMEs viewed sustainability action as a high priority for the upcoming year, down from 36% in Q3 and the joint-lowest since the survey began in 2020.

According to the survey, the primary challenge for 60% of SMEs lies in the increase of business costs. Manufacturers appear to bear a heavier burden, with 66% pinpointing rising costs as a significant constraint, in contrast to the 54% reported by services companies.

NatWest’s chief economist Sebastian Burnside said: “Costs are clearly a concern and rising wages, especially the national minimum wage, means businesses are going to be working hard to find efficiencies this year.

“That may mean sustainability initiatives slide down the priority list for some, but investments in energy efficiency will make even more sense for others.”

The second most commonly reported challenge remains the difficulty in precisely measuring carbon footprints, highlighted by 31% of SMEs.

Many companies expressed difficulty in obtaining information from suppliers, especially those based overseas, hindering their ability to calculate their overall carbon footprint.

Additional challenges for SMEs

Other concerns encompass a lack of customer demand for sustainable products (26%) and difficulties in constructing a compelling business case for sustainability with regard to cost savings (25%).

Additionally, nearly 30% of respondents expressed reservations about the uncertainty surrounding government regulations.

A poll conducted by BSI last year illuminated a lack of confidence among decision-makers in UK-based small businesses, with only one-third feeling extremely confident about achieving net-zero emissions.

Another report from the British Chambers of Commerce and Lloyds Bank last year underscores the crucial role of the Government in guiding SMEs through their net-zero journey, providing essential education, support and incentives where feasible.

SME support

In the realm of SME support, the UK Government has already issued guidance on how these businesses can effectively measure and report emissions.

Furthermore, the Government launched the Business Climate Hub last year, with the goal of assisting 5.5 million SMEs in reducing both energy costs and emissions as part of their journey toward achieving net-zero objectives.