A new study has revealed that millions of small businesses are struggling to put net-zero plans in place, with one of the main barriers being cost. As the need to reduce carbon emissions becomes increasingly urgent, how can these firms afford to act?

According to research from Lloyds Bank Business, over 75% of small businesses, equal to more than four million firms, do not have a fixed business strategy to reduce their carbon footprint in the short term.

While more than eight in ten business owners recognise the importance of operating more sustainably, almost 2.5 million don’t know what net zero means, with just 12% of firms aware of their carbon footprint. Findings from the Azets SME Barometer Spring 2022 report paint a similar picture, with over 70% of SMEs not currently acting to reduce carbon emissions and 85% not measuring their carbon footprint.

What is stopping small firms from going greener?

The main barrier to action, according to the Lloyds study, is a lack of knowledge, followed closely by cost and a lack of time. The prominence of cost on this list is telling at a time when small businesses are facing unprecedented headwinds and urgently calling for greater support.

While going greener holds mid-to-long-term benefits, the process can involve changes to core products and services, and development carries significant costs and potential pressure on cashflow.

With small businesses already being stretched to breaking point, it comes as little surprise to learn that they are struggling to find the money needed to ramp up sustainability strategies and invest in plans such as greater use of electric vehicles, renewable energy or credible sustainability practices.

Reducing SME carbon emissions and how alternative finance can help

For small businesses to find the room to increase investment in going green and increase their contribution to the net-zero targets, they need to improve their access to finance and this is where the services of alternative lenders can help.

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic and amid challenging market conditions in 2022, services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery and regrowth. Furthermore, alternative lending has played a prominent role in the government’s headline emergency support scheme, the Recovery Loan Scheme. Invoice finance and asset finance between £1,000 and £10 million per business was available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

SME sustainability planning and small firm finance options

Small businesses are a key role to play in reducing carbon emissions and effectively tackling climate change, and while conditions are very challenging, it is important that they are able to increase their contribution to net zero going forward. This is why it is vital that business owners are aware of all the finance options available to them, including alternative finance.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.