Government support, new technology and resources needed for small to medium-sized enterprises to be greener

Smaller businesses are keen to improve their sustainability practices, but they’re held back by lack of technology, resources and government support, a new study has found.

The researchers explored the behavior and perspectives of the owners of small to medium-sized enterprises (SMEs) towards moving to a greener economy and its implications for the net zero carbon emissions target.

The study was carried out by experts from the universities of Portsmouth, Reading, Brunel and Kingston.

One of the authors, Professor Khaled Hussainey, is from the University of Portsmouth’s School of Accounting, Economics and Finance. He said, “This is the first study to examine the perceptions and behavior of SMEs towards the ongoing pursuit of a greener economy in the UK, including the key factor driving their actions and reasoning.”

“There are over 5.7 million SMEs in the UK and they generate around 60 percent of commercial waste and cause over 43 percent of industrial pollution. They are critical to cutting carbon emissions, but if they’re overlooked by the government, they won’t help achieve the net zero target by 2050.”

“There needs to be an open dialogue between policymakers and SME owners as the attitude and behavior of smaller businesses have significant potential to generate sustainable economic benefits in the UK.”

The researchers interviewed owners and managers from 26 businesses across seven industries, including construction, health and safety, food and beverages, and tourism. Prior studies have shown that these sectors are the largest contributors to the total carbon footprint of the UK and other countries such as Japan, US, China, Australia and Canada.

The study reveals there is a misalignment between SMEs’ management system, culture, knowledge and their actions towards achieving net zero carbon emissions.

They do not have appropriate technologies—such as environmental management systems—and they can’t see the benefits of improving their sustainability, which means there is a reluctance to invest in the right tools.

One of the main problems which hinders SMEs’ environmental efforts are complexities around their supply chain. It is difficult to source the data required to manage carbon emissions when a supply chain is fragmented.

Professor Hussainey said, “We found there is a lack of support and enthusiasm within the supply chain which hampers SMEs’ behavior towards engaging with better environmental management systems and carbon management systems.”

“In turn, this hinders their contribution towards the pursuit of net zero carbon emissions. This shows that SMEs can’t act alone; they require support and effective steering mechanisms to decarbonise their supply chains.”

The authors also found that SMEs lack trust and are skeptical about the government’s net zero emissions agenda, and there is a lack of understanding and perceived benefits. But pressure from external stakeholders, such as banks and customers, encourage SMEs to be more effective with sustainability and environmental impact disclosure.

Professor Hussainey added, “By looking at the internal behavior of SMEs, we can explore the factors driving their reasoning and look at actionable strategies to get them working toward a greener economy.”

The paper is published in the Journal of Applied Accounting Research.