A greener future for SMEs

New research from Aldermore has found that UK small and medium-sized enterprises (SMEs) invested an average of £61,250 on their own sustainability during the last 12 months.

Investing in sustainability

With the green agenda becoming more prominent across society, businesses have been increasingly willing to take action, with over half (53%) of SMEs investing in their own sustainability during the last 12 months. This represents a significant shift from the research Aldermore conducted among SMEs in early 2021, which found that only 12% of businesses saw sustainability as a significant priority. The high-profile nature of events like COP-26 and the Government’s own green agenda has likely emphasised the importance of green transformation to SMEs.

SMEs have employed a wide variety of strategies to become more sustainable. The leading approach has been recycling, with two thirds (65% – 3.3million) of UK SMEs investing in workplace recycling schemes. Meanwhile 55% (2.9 million) of UK SMEs have consciously reduced their business travel and half (50% – 2.5 million) have changed the materials they use to be more sustainable.

The future is green

The research reveals that businesses plan to increase their investment in sustainability in the next year, spending on average £78,392, an increase of 27% (£17,142) compared to the previous year.

SMEs are willing to take more significant steps to tackle sustainability in the next year. One in five (21% – 1.1 million) SMEs are considering changing to an eco-friendly product or service. Furthermore, over one in ten (12% – 550,000) will invest in carbon offsetting.

In terms of the barriers to embracing more sustainable practices, just over one in four (27%) SMEs think Covid and the broader economic climate are a limiting factor, whilst less than one in ten (7%) found access to finance was a barrier.

Funding sustainability

While 31% of UK SMEs plan to fund their investment in sustainability with business savings, the vast majority will turn to personal finance products such as personal savings (22%), personal investments (12%), their overdraft (18%) or a personal line of credit, like a credit card (8%).

Many SMEs recognise the importance of having a lender who understands funding around sustainability, with nearly half (45%) wanting a partner with experience funding green projects.

Tim Boag, group managing director, business finance at Aldermore, said: “Businesses across the country are now re-evaluating their priorities and looking ahead to how they can innovate in the future, and a particular area of focus for many SME businesses is the responsibility they have for the UK’s ‘green transformation’. SMEs are going to see increasing demand and expectation from their customers to deliver more sustainable products and services and will face scrutiny in terms of their own operation’s impact on the environment. There are a wide range of strategies that businesses can employ to improve their sustainability, such as the Green Finance Institute and the SME Climate Hub.

“It’s hugely encouraging to see that businesses are increasingly willing to address the issue of sustainability and it will be the ingenuity and drive of SME owners that will help make much of the UK’s green transformation possible. At Aldermore, we work closely to support our SME customers, helping them to access specialist funding which can help accelerate the transition to net zero practices.”

For mighty businesses

Aldermore recently launched its ‘For mighty businesses’ campaign, profiling stories of its SME customers who are looking to grow and innovate their business in a rapidly changing world.

Sid Sadique, chairman of Electra Commercial Vehicles, led his team in creating unique heavy-duty electric vehicles. While the need for large vehicles that were also electric was apparent, he understood that such a big change for his customers would take some convincing.

Commenting, he said: “This is a new technology- we took a decision to build trial vehicles for customers and got them used to electric vehicles. What we’ve got to remember is we’ve used diesel or petrol vehicles for decades and moving to an electric process took customers by surprise. Doing what we’ve done is ground-breaking but it was a challenge”.

“A lot of funders are a little bit nervous, whereas Aldermore understood the market and were listening to customers about the drive for zero emissions. I remember bringing them to our factory and they were amazed by what we were doing.”