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82% of UK SME leaders recognise importance of achieving net zero – but action risks being held back by cost pressures and lack of clarity

share: Updated:2023-06-21 00:00:00

Consumers are keen to see progress, with 73% willing to spend more with greener organizations

Progress towards a sustainable world risks being held back as UK businesses grapple with increasing costs and a lack of clarity around a credible path to net zero, despite a tripling of awareness of the importance of reducing emissions and the potential commercial opportunity amongst small and medium-sized enterprises (SMEs), according to research published by BSI.

BSI, the UK National Standards Body, today publishes the third annual Net Zero Barometer. The research, drawn from interviews, a survey of 1,000 senior decision makers at UK SMEs and another of 1,000 UK consumers, finds that awareness of the importance of achieving net zero targets has almost tripled to 82% in two years, highlighting the opportunity for organizations to partner across their supply chains to accelerate progress. With many SMEs now also identifying the resulting cost benefits as a major reason to increase efforts in this area, it also suggests there’s a competitive edge to be gained by those that collaborate to pursue their net zero goals.

Currently, only a third of SMEs are extremely confident as to how to reach net zero, suggesting more clarity about doing so is needed. The report recommends that SMEs:

Shift their culture to approach decarbonizing as a commercial opportunity drawing on guidance like the ISO Net Zero Guidelines and standards for meaningful measurement and setting an action-led strategy.

Plot a course and chart the journey – Only 20% of SMEs are currently measuring progress in a standardized way, but setting and sharing interim milestones can help build consumer trust and credibility.

Collaborate with other organizations to build a sustainable supply chain, given that for a third of SME leaders this is their biggest barrier.

Become a trusted supply chain partner, as net zero increasingly becomes central to winning many more contracts.

While many SMEs have already delivered on ‘quick wins’, such as reducing waste (44%) or switching to LED bulbs (38%), the research finds there is more to be done on strategic thinking. 52% of those questioned had a net zero policy, while 17% - some 929,900 organizations - have still to take key actions on becoming more sustainable, meaning they may risk falling short of realizing their ambitions without further action.

SMEs contribute over £2 trillion to the UK economy, giving them a critical role in progressing its net zero transition. Yet while Covid-19 pressures have somewhat subsided, the current geopolitical context means cost remains a vital obstacle. Nearly two-thirds (63%) cited the cost-of-living crisis as the biggest inhibiting factor, followed by the energy crisis (50%). Many are calling for extra financial support: over half believe that clean energy subsidies (56%) and government grants for new projects (52%) would help them meet targets.

The barriers to progress come despite a separate survey showing that three quarters (73%) of consumers would pay more for an item or service from a company with good environmental credentials and a real commitment to hit net zero, with 93% of those in Gen Zlikely to be loyal to a climate-friendly brand. Although value for money and factoring in inflation came top, in the same survey 48% of people noted environmental concerns as a consideration when they purchase goods or services.

Notably, SMEs are increasingly recognizing the financial value of accelerating progress towards net zero. Two-fifths cited the prospect of reduced costs as one of the main benefits, while 31% believed that doing so would be positive because it would enhance their image and reputation. Equally, with organizations looking at not only their own emissions but Scope 3 emissions in their supply chain, the report notes that for those organizations who supply others, transparency and clarity of carbon accounting are set to become an asset in winning contracts and growing the bottom line.

The research emphasizes the importance of verifying environmental claims, with 94% of consumers saying that proper verification was important to them Two-thirds of these said verification mattered because it demonstrates organizations aren’t just greenwashing, while 32% said verifying against best practice standards can provide a benchmark by which they can compare one business with another.

The 2023 Net Zero Barometer also found that:

Only 47% of SME respondents were either confident they know how to reach net zero.

The number of SME leaders claiming full awareness of the meaning of net zero and true understanding of The Climate Change Act has doubled in two years, from 21% to 43%.

Those who had purchased standards to help them reach net zero were more likely to be confident of how to achieve that as a business – 36% were extremely confident.

A significant percentage reported experiencing pressure from customers (29%), employees (25%), clients (20%) and investors (17%) to actively show their commitment to achieve net zero.

Scott Steedman, Director-General, Standards at BSI said: “This year’s barometer gives me cause for optimism. With 82% of business leaders telling us that sustainability and achieving net zero is important to their business practice, we are seeing a growing commitment to decarbonizing by 2050, along with confidence that it is meaningful to turn long-term ambition into immediate action.

At a time where the attention of many SME leaders is being diverted by economic pressures, they want help to navigate a path that is both credible and realistic. SMEs want to understand both where they are on this journey, and what that transition means for them and their stakeholders. They can benefit from having a clear roadmap to how they’re going to achieve net zero, not only in their own operations, but also in their supply chains. Our research shows that with the right guidance – including the use of standards – SMEs are more than able to rise to this moment.”

Small businesses contribute more than £2 trillion in turnover to the UK economy. The collective impact they can have if they pull together and collaborate to meet net zero goals and ultimately accelerate progress to a sustainable world is significant.”