Survey: Most British SMEs switching to more local suppliers for climate and resilience reasons

Overall, the survey revealed the highest sustainability intentions from SMEs since before the pandemic was declared

With the results published today (25 July), the ‘NatWest Sustainable Business Tracker’ survey polled decision-makers at 850 UK-based SMEs in the services, manufacturing and construction sectors.

Overall, the survey found that SMEs have “the strongest sustainability intentions” recorded by NatWest since pre-Covid-19. This was despite a generally low level of optimism about business performance in general, amid the ongoing cost-of-living crisis. NatWest was able to track attitudes towards – and responses to – economic and environmental trends as it conducts this survey every quarter.

Regarding supplier engagement, the survey found that 46% of SMEs have already changed at least one supplier contract from an international contract to one within the UK. A further 20% plan to make this change within 12 months. When asked why they were making this change, the business respondents did note the importance of responding to international supply chain disruptions, thereby building resilience. The importance of supporting the domestic economy was also raised. But climate also played a major role in the decision for most; respondents were keen to improve traceability and avoid emissions related with transporting goods internationally.

NatWest estimates that, within five years, 75% of UK SMEs will be using more local suppliers than they were pre-pandemic.

The survey also uncovered greater supplier engagement on sustainability certifications and environmental impact. 28% of those surveyed said their business has already assessed the environmental credentials of suppliers and switched at least one contract using these findings. A further 20% said they plan to switch at least one supplier contract on environmental grounds this coming year.

This finding chimes with the results of a separate survey from Barclays, first published in February, which found that one-fifth of retailers have recently cut ties with suppliers on the grounds of poor environmental, social and governance (ESG) efforts.

NatWest’s head of business banking Andrew Harrison said: “Global supply chain pressures have focused SME’s priorities on switching to UK suppliers. This ensures they have the consistency they need while matching up to their increased sustainability priorities.”

Energy in focus

The survey also looked at which environmental actions, aside from supplier engagement, would be a priority for SMEs in-house this coming year. Four actions areas are covered: recycling and resource management; low-carbon energy; investment in sustainable product launches and ‘cleaner business processes’. This latter category covers activities such as energy efficiency and pollution management.

Using low-carbon energy was the category which saw the biggest increase in prioritisation by the businesses quarter-on-quarter. 51% of those surveyed said this was a priority for this quarter, up from 42% in the previous edition of the Tracker. This is understandable given the rising price of gas.

Investing in sustainable product launches was the only category where prioritisation had dropped. A 6% decrease was revealed compared to the previous Tracker. Again, this reflects concerns about the state of the economy.