Sole traders and micro businesses risk being left behind if they ignore Net Zero transition
New research from Santander UK finds sole traders are at risk of being left behind, with just one in six (17%) and one in five (20%) micro businesses believing they have sufficient resources to become more environmentally sustainable, which could affect growth or seriously devalue their business.
Four in five SME decision makers (80%) say environmental sustainability is important when making business decisions, yet the bank’s research shows that when it comes to taking action on making businesses sustainable, it varies according to business size
Wendy Whewell, head of ESG & Climate Change, Corporate & Commercial Banking at Santander UK, commented: “Sole traders and smaller businesses are at real risk of being left behind, stunting their growth or suffering a devaluation if they don’t embrace the net zero transition. Although many SMEs are on a pathway to becoming more environmentally sustainable, there is still a lot of work to be done, and businesses are seeking out more support.”
When businesses were asked whether they have plans in place to become more sustainable in the future, 84% of small and 94% of medium-sized businesses confirmed they have a sustainability plan in place, but this drops to less than half (45%) among sole traders. Similarly, it is medium-sized businesses who are the most likely (64%) to be extremely or very knowledgeable about the impact of their business on the environment, in contrast to less than a third of sole traders (31%).
Overall, SMEs account for between 43-53% of UK greenhouse gas emissions. As well as presenting a significant decarbonisation opportunity in themselves, many SMEs will facilitate wider decarbonisation, working with and influencing households and bigger businesses, often forming part of wider supply chains. Naturally, SMEs are coming under increasing pressure from these customers and supply chains to implement and communicate their own sustainability strategy.
The research found that the key barriers preventing sole traders from transitioning to net zero are lack of financial resource (30%), lack of time (21%) and lack of awareness of financial support offered by government (17%). For micro businesses, more than a third (37%) find the key barrier the lack of financial resource, followed by a lack of understanding of steps to be taken (25%) and similarly to sole traders, 23% have a lack of awareness of the financial support offered by the government.
Government intervention
Based on the research less than a third (30%) of SME businesses surveyed feel supported by government to transition to net zero, this drops to 8% for sole traders and 15% for micro businesses Currently, there is no government-led SME decarbonisation strategy, which has likely led to a lack of awareness among SMEs about the steps they need to take to become more sustainable, and what government support is available to do so.
A majority of SMEs (62%) said they would like to see grant funding from government to support with decarbonisation. SMEs also agreed that sustainability workshops (43%) and climate hubs (32%) are key government measures. Two in five SMEs surveyed believe government is accountable for ensuring businesses align their portfolio to net zero, but currently there is no policy framework for this.
At Santander, Corporate and Commercial Banking relationship teams have undertaken sustainability training to enable them to have constructive conversations with their customers to help them identify the risks and opportunities that are facing their clients. The bank also regularly hosts thought leadership roundtable events, to bring together businesses from different sectors to discuss their journeys and to share their experiences.
Through the Santander Navigator tool, businesses can connect with a range of sustainability solutions platform providers to cover areas such as carbon accounting and building a sustainability strategy, including looking at sustainable freight routes. Santander also provide green finance to support the acquisition of renewable energy and energy efficiency equipment.
