SME climate focus falls due to pandemic, survey suggests

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SME sustainability plans have been negatively impacted by the need to make further progress on recovery from the pandemic, according to new data from NatWest’s Sustainable Business Tracker.

Survey data highlighted that UK SMEs have reduced their focus on sustainability action in comparison to the levels seen prior to the pandemic. This is in despite of green policies boosting recovery and growth, such as lower prices and greater efficiencies.

By contrast, large companies reported a considerable increase in their prioritisation of sustainability action in 2022, which extended the gap between plans among smaller businesses.

Andrew Harrison, Head of Business Banking for NatWest Group, commented on the findings: “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.”

Turning to what has the biggest influence on SMEs’ efforts to improve environmental sustainability, customer expectations was the highest ranked influence, followed by government legislation.

Overall, motivation to pursue sustainability plans remained higher at large firms (51% versus 35% for SMEs).

SMEs also faced rapid increases in expenses, which in turn drove an unprecedented rise in selling prices during December. Nevertheless, according to the Tracker, firms remain highly optimistic about 2022 growth prospects, with confidence holding steady despite sharply rising COVID-19 cases. Furthermore, employment at SMEs increased at a faster rate than that seen for large companies.

On average, around 41% of SMEs stated that sustainability action was a high priority in the next 12 months, down from 44% in February 2020. This compared with 60% of large companies, up from 57% prior to the pandemic.

The Tracker is a quarterly report designed to monitor business performance and sustainability at enterprises with 1-249 employees.

More information about the Sustainable Business Tracker is available on the NatWest website.