Recent report reveals financial barriers to British SMEs' sustainability

Sustainability has turned out as a powerful factor driving the actions and strategies of small and medium-sized firms (SMEs) in the UK business sector.

As the world's push for environmental responsibility becomes louder and cultural expectations increase, these businesses have undergone a remarkable transformation. A recent report has unveiled that over three-quarters of UK small business owners (78%) say sustainability is a cornerstone of their business strategy.

However, this fervent commitment poses a challenge – the prohibitive cost of implementing "green" business infrastructure – that stands in their path.

The insights are gleaned from the SME Insights Report, which questioned over 1,000 UK small business owners. Financial costs stood out as a drag on their sustainability efforts for more than half (57%) of small businesses.

However, financial constraints were not the only stumbling block; a confluence of factors played their part. Customers' limited interest in sustainable solutions (16%), a lack of time (26%), and a lack of expertise or experience (25%) were also cited as affecting their aims.

Despite the passion to make strides, only 13 per cent of small businesses claim they have achieved their sustainability goals. To achieve this, some had to reluctantly compromise on environmental practices to maintain cost-effectiveness.

Taylor Rutter, a contract carpenter based in Northamptonshire, said: "Adding a sustainability offering to my work would definitely help with getting more work in the future."

However, he candidly acknowledged that the cost of upgrading vital equipment, like switching his van to electric, is a looming challenge. Factors such as initial expenses, charging infrastructure, trip planning logistics, maintenance costs, and even potential adjustments to accommodate electric vehicles make this transition a daunting prospect.

Speaking from the perspective of self-employed individuals like himself, Rutter asserted that radical transformations to ensure business sustainability often feel like a distant dream. He lamented that even essentials can be a struggle to afford in the current economic climate, rendering sustainability, to some extent, a luxury.

Another small business owner, Sarah Jordan, the visionary behind sustainable clothing brand, Y.O.U undies, echoed similar sentiments. She believes that "it's tough being a small, sustainable business".

She noted that as a starting point, costs are significantly higher across the board.

From responsible sourcing to transparent supply chains, fair wages, and even integrating charitable components, Jordan explained that each step toward sustainability exacts a toll on margins, directly impacting profitability.

"It often doesn't feel like a level playing field," Jordan lamented, "and with customers feeling the pressure at the moment, as well as frequently having price expectations, it's certainly a tough space to be in."

However, she mentioned that it is incredibly encouraging when they receive positive feedback from consumers and see the difference businesses are making.

Aside from sustainability struggles, the report found additional challenges in the sector. The growing cost of living is viewed as the most significant challenge by almost half (48%) of SME owners. The report revealed that more than half (63%) believe that rising taxes, interest rates, and inflation are eroding business margins. A quarter (26%) of small business owners fear they may be compelled to close their doors if the prognosis for their company does not improve, which could be a blow to the UK economy.

Alan Thomas, UK CEO at Simply Business, acknowledged the UK government's ambitious climate commitment to slash the UK economy's greenhouse gas emissions by 2030 and achieve net zero by 2050. However, Thomas stated that findings from the SME Insights Report show that SME owners are finding it increasingly difficult to integrate more sustainable practices into their operations.

Thomas went on to emphasise that the UK's thriving landscape of 5.6 million small businesses contributes more than 99.9 per cent of all corporations within the nation, significantly bolstering the economy. In light of this, he noted that these small businesses stand as pivotal players in the UK's pursuit of sustainability goals. Nonetheless, Thomas urged for government intervention, maintaining that tangible support is imperative to enable these enterprises to surmount the obstacles and transition toward greener pastures.

If the UK government is genuinely committed to meeting the ambitious sustainability milestones for 2030 and 2050, it is crucial, as Thomas asserted, to take an astute look at the role of small businesses, the challenges they confront, and the tailored support they necessitate.

The fate of the UK's sustainability journey is intrinsically linked with the fate of these entrepreneurial forces, he concluded.