Number of SMEs ‘going green’ has doubled – but it hasn’t been easy

The number of UK small and medium-sized enterprises (SMEs) that have “gone green” doubled last year, research shared exclusively with City A.M. has found, but it wasn’t an easy feat.

Some 489,000 UK businesses have formally committed to reaching “sustainability” by the government’s net zero 2050 deadlines, up from 220,000 at the beginning of 2023, according to Aldermore’s Green SME Index.

While the numbers showcase those who have formally committed, the number of SMEs embarking on the road to net zero is even bigger — some 2 million, the index shows.

But the journey of “going green” for SMEs has its challenges. The standards for becoming a certified B Corporation — those dedicated to impact above all — are about to get tougher.

John Carter, commercial director for commercial real estate at Aldermore, told City A.M. the “macroeconomic outlook” has made the market for SMEs and start ups “a difficult one”.

“There are several challenges facing SMEs to varying extents such as supply chain issues, interest rates, access to skills and labour, and increased regulation for UK-EU trade,” he added.

Carter said to still see SMEs make the green transition regardless is an “encouraging” feat.

He added: “SMEs make up the majority of private sector businesses in the UK and as such, they will always be at the heart of our national transition to net zero.”

While 68 per cent of SME decision-makers said their business is meant to help fight climate change, barriers are still getting in the way for some.

Cutting costs within operations could be becoming the new norm, with 34 per cent considering it a “greater priority”.

Some 73 per cent of SMEs have expressed the need for government legislation to help combat these challenges, which Carter believes can be achieved through improved infrastructure to adapt green technologies, or upfront grant deposits — like the return of the Regional Growth Fund (RGF) launched in 2010 — to “stimulate investment”.

Carter continued: “SMEs need government incentives to encourage them to make the necessary investments that will make a difference.”

“For businesses that do embrace change, there can be commercial opportunities. We’ve seen many of our customers pivot or diversify into exciting new spaces which meet the growing demand for greener solutions.”