Sustainability is stalling for SMEs, but the green opportunity is still there

The clock is ticking on the UK’s net zero goals, yet for many SMEs, sustainability has slipped down the priority list.

According to Aldermore Bank’s latest Green SME Index, only 13% of SMEs are currently on track to meet net zero by 2050. That figure hasn’t moved since 2024, raising questions about whether smaller firms are being left behind in the green transition. While 1 in 4 are at least reviewing their goals, the majority remain at an early stage, or are simply not engaging at all.

This matters – not only for climate targets, but for business survival. With UK Sustainability Reporting Standards (UK SRS) due to come into force from 2026, SMEs that don’t act risk being locked out of supply chains and contracts that increasingly demand carbon transparency.

Why SMEs are stalling on sustainability

For many small businesses, sustainability barriers can feel daunting. Aldemore’s study found that 82% of SMEs view sustainability regulations more as a hurdle than an opportunity, and that’s hardly surprising given the complex, often confusing landscape of rules, frameworks and jargon.

In fact, two-thirds of SME leaders admitted they had never heard of Scope 1, 2 or 3 emissions – the categories that underpin most carbon reporting frameworks. These terms are just as unfamiliar outside the business world, so it’s hardly surprising that many SMEs struggle to engage with them. If the language has to be deciphered first, it’s little wonder they aren’t giving it their full attention.

Cost pressures are another major sticking point. The cost of keeping a business afloat is hitting many SME owners hard. In that context, investing in green tech or upgrades can feel like something to push down the road. When the choice is between immediate survival and longer-term sustainability, it’s clear why many owners put green investment on the back burner.

Time and expertise are also major barriers. Unlike larger corporations, most SMEs don’t have sustainability officers or teams to navigate the complexities of carbon reporting. For many owners juggling multiple roles, deciphering emissions frameworks or drafting green policies simply can’t compete with day-to-day demands.

The hidden upside of going green

Yet, while the barriers are real, so too are the benefits. The Index found SMEs believe becoming more sustainable could generate an average of £52,198 in additional annual income. That’s nearly ten times what the average business has spent exploring greener options (£5,566).

The financial upside can come in multiple forms.

• Energy savings: Upgrading to more efficient systems can reduce utility bills significantly.

• New customers: Consumers are increasingly choosing brands with strong environmental credentials.

• Supply chain access: Larger corporations are under pressure to prove their supply chains are sustainable, and will often favour SME partners who can provide carbon data.

• Talent attraction: Younger workers, in particular, prefer employers with a clear commitment to sustainability.

In short, while sustainability may feel like a challenge, it also offers SMEs a chance to stay competitive and build resilience for the future.

What SMEs can do now

While the road to net zero may feel overwhelming, progress doesn’t have to mean sweeping overnight transformations. Even small, practical steps can make a difference:

• Measure what you can: Start tracking energy use, waste or business travel. Free online calculators can help SMEs get a first look at their carbon footprint.

• Target the quick wins: Switching to LED lighting, reducing packaging, or renegotiating energy contracts can deliver immediate cost and energy savings.

• Seek support: Banks, local councils and industry bodies increasingly offer grants, loans and guidance for green initiatives. If a loan feels like the right route, money.co.uk can help you check your eligibility with multiple lenders in minutes, with no impact on your credit score.

• Engage employees: Staff often have ideas for reducing waste or improving efficiency that are easy to implement.

• Think long-term: Embedding sustainability now can mean fewer headaches, and more opportunities, when reporting standards tighten.

Shifting the mindset

The stalling of SME sustainability efforts isn’t about apathy. Rather, it reflects genuine challenges around cost, complexity and capacity. But the danger is that SMEs view sustainability solely as a regulatory burden rather than an opportunity.

Flipping that mindset is crucial. Green practices don’t just reduce emissions – they can boost efficiency, cut costs, win contracts and enhance reputations. In other words, sustainability should be viewed as more than a box-ticking exercise. And, for SMEs willing to engage, it could be a catalyst for growth in both the short and long term.

As the net zero deadline looms, small businesses that act now, even in modest ways, will be better positioned to navigate regulation and reap the rewards. The green transition may feel stalled, but for SMEs, the opportunity is still firmly on the table.