Number of ‘green’ SMEs tripled since start of 2023

New research from Aldermore’s ‘Green’ SME Index – which tracks businesses’ transition to net zero – has revealed that 715,000 (13%) UK small and medium-sized businesses (SMEs) qualify as ‘green’, meaning they have put formal measurements and commitments in place which will see them transition to sustainability by 2050. This number has more than tripled; only 220,000 (4%) were ‘green’ at the start of 2023.

Overall, 3.5 million (65%) UK based SMEs have started on the road to making their business fit for net zero. One in four SMEs has ‘green intentions’ and is currently assessing its sustainability goals (26%). Meanwhile, one in 14 SMEs (7%) could be described as ‘greening’, being further along in the journey to transition.

While the introduction of sustainable practices has increased in recent years, the number of businesses using formal measurement has remained a sticking point. Scopes 1, 2, and 3 focus on emissions produced directly and indirectly by what the business does whereas Scope 4 highlights the positive environmental impact of its products or services.

On average, SME leaders spend about 18 hours a year considering their approach to sustainability. This saw leaders investing an estimated total of £47,900; £10,827 in investigating how to be more sustainable and an additional £37,073 on initiatives to ‘green’ the business. This represents a significant drop from last year, where businesses were investing an average of £83,517.

SMEs feel that strong government legislation needs to be in place to support them as they attempt to tackle climate change (73%). Seven out of 10 SME decision-makers (71%) think larger businesses need to tackle the issue first.

“We are seeing many businesses become ‘green’ in a relatively small space of time, this is hugely encouraging as 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.

“However, SMEs need more help if we’re going to achieve our ambitious net-zero targets. We can already see that SME business leaders are struggling to fund sustainability initiatives and have not been able to make the formal commitments which will be required for us to really assess the impact of their efforts on our environment.

“For businesses that do embrace change, there can be commercial opportunities. SMEs estimate they could add thousands to their bottom line according to our data. At Aldermore, we’ve seen many of our customers pivot or diversify into exciting new spaces which meet the growing demand for ‘greener’ solutions.”