SMEs struggle to keep sustainability top of agenda, survey finds

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

Natwest strives to help companies define sustainability as an opportunity for growth

Conducted by NatWest bank, the research used responses to the IHS Markit’s Purchasing Managers Index survey conducted in December 2021. A total of 850 UK business decision makers were interviewed. Sectors represented include professional service delivery, manufacturing, retail, construction, hospitality and leisure.

Among SME representatives, 41% said improving sustainability was a “high priority” for the next 12 months, up from 44% in the same survey conducted the previous year. For large companies, 60% said improving sustainability was a “high priority” for the next 12 months, compared to 57%.

Among the actions that have become priorities for SMEs are recycling and the development of new sustainable products. The need to purchase low-carbon energy and monitor supply chain sustainability, however, remained as high a priority as in 2020. Nonetheless, large companies were found to be more focused on energy supply. low-carbon energy than their smaller counterparts.

NatWest said “pandemic scarring” is probably the biggest challenge preventing most SMEs from increasing sustainability ambitions and investments. Pressures from rising energy, raw material and fuel costs for road transport have also been “intense”, he noted, which have been compounded by supply shortages.

Nonetheless, the survey revealed generally high optimism about UK SME growth prospects for 2022.

When asked what was the main driver for improving environmental sustainability in the short term, SMEs cited customer expectations and changing UK government legislation. 50% of SME representatives said that customers will influence environmental sustainability actions “to a great extent” in 2022. The proportion rises to 44% for legislation.

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

Natwest Group Head of Corporate Banking, Andrew Harrison, said: “It has been a difficult 18 months for UK SMEs, so it is no surprise that the climate agenda has returned to the agenda of some small enterprises. But it is important for SMEs to know that sustainability measures can boost their recovery and even fuel their growth, for example by increasing their efficiency, reducing their energy bills and ensuring the sustainability of their operations.

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

Support for SMEs

A recent report by the British Business Bank, which surveyed 1,200 SME decision makers on their approach to reducing emissions, found that 76% have yet to implement comprehensive decarbonisation strategies. Barriers include a lack of in-house environmental expertise and limited funding.

The UK government has already released advice on how SMEs can and should measure and report their emissions, following a call to action by Prime Minister Boris Johnson in May 2021.

Other support tools include an online hub enable businesses to access practical information on how to approach the transition to net zero, provided by O2 and the UK 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 Georges

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