SMEs struggling to keep sustainability top of the agenda, survey finds

A survey of hundreds of UK-based SMEs has revealed a drop in the proportion positioning environmental sustainability and a priority issue in the short-term, with Covid-19 and the energy price crisis taking precedence.

SMEs struggling to keep sustainability top of the agenda, survey finds

Natwest is striving to help businesses frame sustainability as an opportunity for growth 

Conducted by bank NatWest, the research used the responses to IHS Markit’s Purchasing Managers Index survey conducted in December 2021. In total, 850 decision-makers at UK businesses were surveyed. Sectors represented include professional service provision, manufacturing, retail, construction and hospitality and leisure.

Of the representatives of SMEs, 41% said improving sustainability was a “high priority” for the coming 12 months, down from 44% in the same survey conducted a year prior. For large companies, 60% said improving sustainability was a “high priority” for the coming 12 months, up from 57%.

Actions that have fallen in priority for SMEs include recycling and developing new sustainable products. The need to purchase low-carbon energy and to monitor supply chain sustainability, however, remained as high on the agenda as it did in 2020. Nonetheless, large companies were found to be more focused on low-carbon energy procurement than their smaller counterparts.

NatWest has stated that “scarring from the pandemic” is likely the biggest challenge holding most SMEs back from increasing sustainability-related ambitions and investments. Pressures from the rising costs of energy, raw materials and road transport fuels have also been “intense”, it noted, which have been compounded by supply shortages.

Nonetheless, the survey revealed a generally high optimism about growth prospects among UK SMEs for 2022.

When asked what the biggest driver was for improving environmental sustainability in the short term, SMEs cited customer expectations and changing legislation from the UK Government. 50% of the SME representatives said customers will influence environmental sustainability actions to a “large extent” in 2022. The proportion stood at 44% for legislation.

Other key factors include company reputation, improved profitability and changing investor demands.

Natwest Group’s head of business banking Andrew Harrison said: “It’s been a challenging 18 months for UK SMEs, and not surprising therefore that the climate agenda has slipped back on the agenda for some small businesses. But it’s important that SMEs know that sustainability measures can boost their recovery, and even fuel their growth, for example through increasing efficiency, lowering energy bills and by future-proofing their operations.”

Every three months, an update to the research will be published by NatWest. The bank has notably pledged to provide £100bn of climate and sustainable funding and financing by the end of 2025, with a focus on SMEs in its plans for allocation.

SME support

A recent report from the British Business Bank, which polled 1,200 decision-makers at SMEs on their approach to reducing emissions, found that 76% are yet to implement comprehensive decarbonisation strategies. Barriers include a lack of in-house environmental expertise and limited finance.

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.

Sarah George

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