Despite the vast majority of small businesses saying they are focussed on addressing green issues, around nine in 10 small business owners (89%) say a combination of lack of knowledge, support from the Government and cashflow issues are barriers preventing them from doing more on sustainability.

At a time when the Chair of the Environment Agency, Emma Howard Boyd, has hit out at greenwashing by businesses saying ‘deception’ gives false impression firms are addressing climate crisis, the new research shows the complexity of the wider issue, and the dangers of tarring all businesses with the same brush.

A new report from Novuna Business Finance outlines UK small businesses’ approach to sustainability and carbon reduction and the challenges they face in becoming green.

Willingness from small businesses

The research found that 85% were focused on becoming greener as a business with two thirds (66%) saying that environmental concerns had become more important than they were a year ago. Additionally, three in five small business leaders (57%) had major frustrations with climate change inactivity within their sector and broader community and 27% said that Government and big businesses should be leading the change by example.

The sustainability knowledge gap revealed

Nine in ten small businesses said they could be doing more on sustainability with a range of factors holding them back: Nationally, 17% of small businesses cited a lack of understanding on what sustainability entailed, 14% said they didn't know how to measure its business impact – and 12% said they didn't know where to turn for trusted advice on the subject. Linked to these two factors, 15% of business leaders said their small business lacked a designated Sustainability lead to coordinate a programme of activity – and, perhaps a consequence of this, 9% reported disinterest on sustainability issues from their staff members. Alarmingly, almost one in 10 respondents (9%) thought it was too early to invest in a sustainability programme – despite recent alarm bells ringing loudly on the climate emergency.

Financial considerations: Investment and business impact

For many small businesses surveyed, finance and cashflow were the biggest challenges to doing more on sustainability. Overall, 24% of small business leaders said they didn't have the budget to do more on sustainability. In addition, 16% said they did not know how they could do sustainability profitably and 13% said it didn't make economic sense. In addition, 15% of enterprises reported that the investment they had planned to make on sustainability projects had been put on hold, as they reacted to the immediate impact of the rising costs and its impact on the supply chain.

Sector appraisal

• Manufacturing – this was the sector where small businesses had been notably impacted by geo-political uncertainty (18%) and were also most likely to say they had had put on hold sustainability plans, whilst dealing with the rising cost of living (24%). These enterprises were also most likely to call on the Government to do more incentivise and support small businesses on sustainability projects (29%).
• Finance/Accounting and Media – for sectors known for compliance and governance, it was a surprise that these small businesses were least likely to have nominated a colleague to coordinate work on sustainability (20% and 24% respectively) – and, as result, to least know how to measure the positive impact of being a sustainable business (19% and 21%).
• IT, Transport and Retail – small business owners in these sectors were, equally, most likely to be baffled on how to do sustainability profitably (20%) – whilst, worryingly, small businesses in the hospitality sector were most likely to say sustainability didn't make economic sense (18%).

Regional highlights

• Small businesses in North East (95%) and North West (92%) were most likely to admit they could do more on sustainability – with Scotland and Wales the least (85% and 88%).
• In Scotland and Wales, small business owners were most likely to say they simply didn't have the budget to do more on sustainability (40% and 31% respectively) and they were also most likely to say they didn't know how to do sustainability profitably (24% and 23%).
• London had the highest level of disinterest in sustainability from staff members (12%) – and it was also the region where small businesses were most likely to not have a designated colleague that looked after sustainability matter in the business (19%).
• In the North East, small businesses were most likely to say they had more pressing priorities to keep the business afloat (29%) and, once again, this was linked with businesses being most likely to call on the Government to do more to help them (29%).
• In Yorkshire/Humber, small businesses were most likely to say they did not know enough about sustainability (23%) and this was linked with them also being the most likely to believe it was too early for their business to invest in sustainability (15%).

Jo Morris, Head of Insight at Novuna Business Finance commented:

“The climate crisis requires action from everyone, in all fields of life and business. The conversation around greenwashing begs the question as to how much enterprises of all sizes really know about the issues and consequently how best to handle them. It is becoming clear from our new research that there are a range of barriers that are holding enterprises back, particularly centred around knowledge and how to implement sustainability. Some enterprises don't know how to measure the impact of being sustainable, others can't see how it can make real business sense – and there is confusion on who to turn to for good advice. What really stands out though, is the evident willingness to act from members of the small business community. Encouraging and sustaining this momentum is key, and this is done by giving people the means to achieve the goal that we all have.

“At Novuna Business Finance, sustainability is at the heart of our business and provide finance to help small businesses grow as sustainable enterprises. This new research allows us to better understand how small businesses see the issues – what they are doing well, when it comes to sustainability, and where the challenges are that need to be tackled.”