Newbury-based Azets said recent SME Barometer Spring 2022 survey shows SMEs are not acting to reduce carbon emissions

Nearly three-quarters of SME businesses are not currently acting to reduce their carbon emissions.

Their environmental, social and governance (ESG) performance is downgraded as digitalisation, employee wellbeing, cost inflation and recruitment take priority.

The UK is committed to net zero emissions by 2050, in the transition to a green and sustainable future, with businesses and consumers moving to clean power.

Azets SME Barometer Spring 2022, which surveyed 1,093 SMEs from all sectors in the UK, Denmark, Finland, Norway and Sweden, reveals ESG is on most company radars, but specific action lacks urgency, with sharper focus on people, technology and cost amid economic turbulence.

With an office in Newbury, Azets a regional accountancy firm and business advisor to SMEs.

More than half of respondents (57 per cent) agree they have a good understanding of what ESG means and have the skills and competencies in the business to address it.

However, most do not think ESG will have a big impact on their business in the next two years.

On reducing carbon emissions, 71 per cent are not currently acting and 85 per cent are not measuring the carbon footprint of their business.

Fifty-four per cent of SMEs say they will increase digitalisation in the year ahead, while employee wellbeing has risen to be SMEs’ second highest priority, after securing their financial health.

Cost inflation and recruitment are SMEs’ biggest day-to-day challenges.

Almost two-thirds (64 per cent) of SMEs are struggling to recruit talent with the right skills, leaving little “bandwidth and urgency” for ESG.

Head of growth at Azets Donald Boyd said: “The SME Barometer shows that many businesses, including in Newbury, want to focus on ESG and sustainability to a far greater extent than before.

“But it also highlights an alarming number that do not keep climate accounts today.

“There is a clear focus on digitalisation, cyber security, wellbeing and costs, leading to a downgrading of ESG as a priority.

“For some SMEs rooted in their local community, ESG appears as common sense.

“For others it poses challenges in terms of cost and the expertise and resources required to implement it.

“However, ESG represents a great potential and opportunity for SMEs.

“With legislation coming down for EU SMEs on sustainable products, and funding likely to be harder to come by as banks increasingly look at sustainability as a condition of lending, ESG is set to become increasingly important.

“Businesses should be thinking ahead and taking specialist advice.”