How finance can help UK SMEs stay ahead on sustainability
Joe Phelan, money.co.uk business loans expert says: “UK SMEs are making significant strides on the road to decarbonisation and are currently outpacing many of their European counterparts. However, access to finance remains a major barrier for those aiming to accelerate their progress.
Going green is not just good for the planet – it’s good for business. Larger firms and public sector buyers increasingly demand transparency around sustainability, with 90% only working with ESG-conscious suppliers.
For customer-facing brands, eco-credentials boost loyalty and trust, especially among younger consumers. And it pays off – companies improving their environmental impact are more likely to see financial growth, proving that sustainability and profitability often go hand in hand.
In fact, UK SMEs are leading the way in adopting structured, measurable approaches to decarbonisation. According to research from energy services provider Equans, 94% of UK industrial SMEs that have started decarbonising are doing so through a formalised framework – significantly higher than the European average of 80%.
This highlights the proactive steps UK businesses are taking toward achieving net zero, from improving energy efficiency and cutting waste to adopting renewable energy and electrifying parts of their operations. Yet, despite this progress, many businesses still face financial hurdles that risk slowing momentum.
According to a 2024 survey by BT, Small Business Britain, and Oxford Brookes Business School, nearly two-thirds of UK SMEs are struggling to cut their carbon emissions due to financial pressures. 41% of business owners admit that monetary constraints are holding them back, while 64% say they need more support to make meaningful changes.
This is where finance, such as business loans, can play a pivotal role in helping SMEs scale their sustainability efforts.
How finance can help with the heavy lifting
Whether it’s adopting green technology, expanding operations, or upgrading outdated infrastructure, business loans can make a real difference.
For early-stage companies, the government-backed Start Up Loan Scheme offers fixed-rate loans of up to £25,000. And there’s the Growth Guarantee Scheme, which lets eligible businesses borrow up to £2m, with the government backing part of the loan to reduce lender risk.
With the right financial support, UK SMEs can tackle ambitious sustainability projects without hampering their cash flow, turning environmental goals into long-term business gains.
Practical steps for green-minded SMEs
If you’re ready to start — or scale up — your decarbonisation journey, here are some actionable ways to make a real impact:
1. Run an energy audit
Start by understanding where your business uses (and wastes) the most energy. Some utility companies or local councils offer subsidised audits or online tools to help SMEs pinpoint quick wins and longer-term improvements.
2. Switch to a renewable energy supplier or explore on-site generation
Changing to a green energy tariff can often be a simple, cost-neutral way to reduce emissions. For businesses with the space and resources, installing solar panels, for example, can provide long-term savings and energy independence, and may qualify for tax breaks or grants.
3. Upgrade to energy-efficient equipment
Old or poorly maintained machinery and appliances can be major energy drains. Replacing them with modern, energy-efficient models — such as LED lighting, HVAC systems, or certified office equipment — can lower your energy bills and your carbon footprint.
4. Explore funding options to cover upfront costs
Sustainable upgrades often come with upfront costs. Investigate government grants, local green schemes, or business loans designed to support environmental improvements. Financing solutions can bridge the gap between intent and action.
5. Involve your staff in sustainability initiatives
Get your team on board by creating a culture of sustainability. This could mean encouraging low-carbon commuting or reducing office waste. When employees understand and support your goals, you’re more likely to make lasting changes.
6. Set clear targets and track your progress
What gets measured gets managed. Define achievable sustainability goals, such as reducing emissions by a set percentage or switching entirely to recycled packaging, and monitor them regularly. Sharing progress internally and externally can also enhance accountability.
Even small changes can lead to a measurable impact over time, and with the right funding in place, businesses can move faster and more confidently toward their sustainability goals.”