Small and medium-sized enterprises (SMEs) are increasingly recognizing the urgency of tackling climate change, but a recent report sheds light on the significant hurdles they face in transitioning to sustainable practices.
Entitled “Mobilizing small businesses to net zero', the report published by the SME Climate Hub (funded by the We Mean Business Coalition) sheds more light on the challenges and opportunities for SMEs around climate action, writes esgnews.com.
There are approximately 400 million small and medium-sized enterprises (SMEs) in the world today, which make up 90 percent of global business. In the EU, these companies account for two-thirds of private sector jobs and contribute to more than half of the total value added created by businesses. The U.S. economy boasts about 30 million businesses with fewer than 500 employees, and these companies have created nearly two-thirds of net new private sector jobs in recent decades," commented Maria Mendiluse, CEO of We Mean Business Coalition.
She adds that a significant percentage of these companies will be important in providing the products and workers needed to transition the world from a fossil fuel economy to a clean energy economy.
As global regulations and customer expectations increase, SMEs derive business benefits from operating with a more concentrated customer base, staffing and localized sourcing,” she emphasises.
Growing awareness among SMEs of the environmental impact of business operations
The report highlights a noticeable shift in priorities among SMEs, with 44% of businesses surveyed expressing an increased emphasis on reducing greenhouse gas emissions by 2023. This reflects a growing awareness of the impact of business operations on the environment and the need for decisive action.
Despite this increased focus, SMEs face barriers that hinder their ability to implement meaningful climate initiatives. According to the report, 52% of respondents cited the lack of government-backed policies or incentives as a significant barrier. This highlights the critical role of supportive regulatory frameworks in driving climate action among small businesses.
The report also reveals a worrying trend in terms of financial incentives, with 84% of SMEs reporting that they have not been offered incentives to reduce emissions. This highlights the need for governments and other stakeholders to provide financial support and incentives to encourage SMEs to adopt sustainable practices.
Lack of stakeholder engagement
Another key finding of the report is the lack of stakeholder engagement. While SMEs express a willingness to take climate action, 63% of respondents have not been asked by stakeholders to take action to reduce emissions. This suggests a potential divergence between SMEs and their stakeholders in terms of climate priorities and commitment.
Taking action on climate change isn't just an environmental necessity, it's a smart business move and the right thing to do,” says Sarah Goodell, founder of Autumn Dahlia Creative Services.
Her perspective highlights the dual benefits of sustainability, including improved brand reputation and cost savings.
Avyannaa founder Vishakha Vidhani emphasizes the importance of clear policies and regulations to support small businesses' climate goals.
Significant initial investment is often required to implement sustainable initiatives”.
The report provides valuable information on the challenges and opportunities for SMEs in addressing climate change. The data-driven analysis reveals the need for supportive policies, financial incentives and stakeholder engagement to enable SMEs to accelerate their transition to net zero consumption.
Governments, financial institutions and corporate partners must work together to provide the necessary support and resources for SMEs to thrive in a sustainable future.