Over half of UK SMEs have invested in sustainability in the last year, research says

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UK small and medium-sized enterprises (SMEs) invested an average of £61,250 on their own sustainability during the last 12 months, new research from Aldermore has found.

With the green agenda becoming more prominent across society, businesses have been increasingly willing to take action, with over half (53%) of SMEs investing in their own sustainability during the last 12 months.

This represents a significant shift from the research the bank conducted among SMEs in early 2021, which found that only 12% of businesses saw sustainability as a significant priority.

Tim Boag, group managing director, business finance at Aldermore, commented on the findings: “Businesses across the country are now re-evaluating their priorities and looking ahead to how they can innovate in the future, and a particular area of focus for many SME businesses is the responsibility they have for the UK’s ‘green transformation’.

“SMEs are going to see increasing demand and expectation from their customers to deliver more sustainable products and services and will face scrutiny in terms of their own operation’s impact on the environment.

“There are a wide range of strategies that businesses can employ to improve their sustainability, such as the Green Finance Institute and the SME Climate Hub.”

According to Aldermore, high-profile nature of events like COP26 and the government’s own green agenda have likely emphasised the importance of green transformation to SMEs.

SMEs have employed a wide variety of strategies to become more sustainable. According to the research, the leading approach has been recycling, with two thirds (65% – 3.3million) of UK SMEs investing in workplace recycling schemes.

Meanwhile 55% (2.9 million) of UK SMEs have consciously reduced their business travel and half (50% – 2.5 million) have changed the materials they use to be more sustainable.

The research reveals that businesses plan to increase their investment in sustainability in the next year, spending on average £78,392, an increase of 27% (£17,142) compared to the previous year.

According to Aldermore, SMEs are willing to take more significant steps to tackle sustainability in the next year. One in five (21% – 1.1 million) SMEs are considering changing to an eco-friendly product or service. Furthermore, over one in ten (12% – 550,000) will invest in carbon offsetting.

In terms of the barriers to embracing more sustainable practices, just over one in four (27%) SMEs think COVID and the broader economic climate are a limiting factor, whilst less than one in ten (7%) found access to finance was a barrier.

While 31% of UK SMEs plan to fund their investment in sustainability with business savings, the vast majority will turn to personal finance products such as personal savings (22%), personal investments (12%), their overdraft (18%) or a personal line of credit, like a credit card (8%).

According to Aldermore, many SMEs recognise the importance of having a lender who understands funding around sustainability, with nearly half (45%) wanting a partner with experience funding green projects.

This research was conducted by Opinium Research between 9 and 16 March 2022 with a nationally representative sample of 997 senior decision makers in UK SMEs.

More information about this research is available on the Aldermore website.