SME appetite for climate action grows, but finance barriers remain
The majority of small and medium enterprises (SMEs) believe that taking climate action is the right thing to do and will help improve competitiveness, but many businesses are being held back due to finance and resource challenges.
The SME Climate Hub has today (14 February) unveiled the results of its annual study into climate action amongst SMEs.
The SME Climate Hub is an initiative of the We Mean Business Coalition, the Exponential Roadmap Initiative, and the United Nations Race to Zero campaign. It provides tools and resources to enable SMEs to make and act upon climate commitments.
The Hub’s annual study of almost 350 SMEs from 40 countries and more than 20 industries found that the majority of SMEs want to ramp up climate action. The survey found that despite 77% of SME respondents not being asked to reduce emissions by customers, 80% are doing so as they believe it is the right thing to do.
With SMEs accounting for 90% of businesses globally, 70% of the world’s workforce and contributing more than half of global GDP, according to the International Labour Organisation, many feel empowered that collectively they can make a real difference. Indeed, 65% of respondents stated that climate action would differentiate their business from competitors, with 73% viewing climate action as a way to enhance their reputation.
However, the survey showcased that common barriers are still facing the SME community. Almost three-quarters (70%) stated that they need more available funds to help take action or accelerate emissions reduction plans. In total, 47% of SME respondents claimed they would need up to $100,000 to reach net-zero. Respondents claimed that more public and private sector investment would help them with their decarbonisation goals.
Other barriers include a lack of skills, resources and knowledge, cited by 58% of respondents as barriers to taking more action, mainly due to how small SME teams are.
The SME Climate Hub’s director Pamela Jouven said: “Despite their collective impact on communities and economies, small businesses are often amongst the most vulnerable to change and disruption. Rising global temperatures and weather-related disasters particularly impact SMEs given their localized supply chains, centralized infrastructure, and dependence on the communities in which they operate.
“At the same time, SMEs have been the least equipped to mitigate their role in the climate crisis. Small businesses are facing greater risk while also potentially missing out on the benefits of building more resilient businesses and cutting costs.”
The survey notes that despite the relatively low amount of requests, more suppliers are now being asked to measure, report and ultimately decrease their emissions. SMEs tend to account for the Scope 3 emissions of larger corporates and for those larger firms wishing to have targets verified in line with 1.5C or Net-Zero by the Science-Based Targets Initiative (SBTi), they will need to set Scope 3 goals.
However, SMEs still require access to better measurement and monitoring tools, according to 61% of respondents. The SME Climate Hub, which aims to provide such tools, has seen its membership grow to more than 5,500 businesses across 112 countries since it was launched two years ago.
At the start of 2023, a report from the Cambridge Institute for Sustainability Leadership (CISL), the We Mean Business Coalition, the SME Climate Hub and Business for Social Responsibility recommended solutions to barriers commonly faced by SMEs as they look to decarbonise.
Shared barriers already uncovered by the SME Climate Hub’s previous work include a lack of in-house expertise on environmental sustainability and a lack of finance, plus confusion on how to navigate reporting and certification schemes, which are often designed for larger businesses.
A proposed solution is the creation of a centralised emissions data repository, triangulating data held by SMEs, corporates and banks. This can save SMEs the time and effort of collecting their own data; provide reassurance that data is credible and ensure that SMEs and their partners are working using the same emissions estimates. It can also make the task of improving data over time simpler, with different organisations able to share findings of their own research.
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