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How small firms can afford growing sustainability costs

COP28 is a reminder of the role that businesses have in tackling climate change. However, for smaller firms, the net-zero journey is proving far from straightforward. What’s holding them back and how can they accelerate action?

Are SMEs making progress on net zero action?

New research from the British Chambers of Commerce has highlighted a lack of knowledge of the country’s net zero target among businesses, with 40% of companies not knowing the details of the plan. Knowledge is lowest among smaller firms.

While the findings are hardly encouraging, awareness is growing in the small business sector, with more firms prioritising lower-carbon-led development. However, there remains a disconnect between awareness and action.

According to a new survey from Sage, ICC and PwC UK, while an increasing number of SMEs understand the importance of sustainability and the role it has in driving business growth, they are facing significant barriers to acting on their plans, in particular around measuring and reporting on impacts.

What is the major barrier to green-led investment?

A major factor behind this gap is cost. Affording the investment required to embrace the energy transition in the current climate is a significant challenge for smaller firms. And this burden is only set to grow as the pressure grows on companies to further embrace sustainability, and such action is expected by customer expectations and regulatory authorities alike.

Notably, with regard to reporting on sustainability impacts, the government is said to be contemplating extending mandatory emissions reporting to SMEs, with voluntary efforts proving insufficient. While the move highlights the issue of the pace at which smaller firms are embracing net zero-led development, it also raises concerns about affordability.

Net zero investment and how alternative lenders can help

The recent surveys from the British Chambers of Commerce and Sage are a fresh reminder of the importance of turning the prioritisation of sustainability-led development among small business into concrete action, and the role that facilitating investment has in this process.

Given the current economic climate, it is hardly a shock to learn that cost is an issue, with accessing finance from traditional lenders proving increasingly difficult for small firms in 2023. This is where alternative finance can help.

Services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses in the current funding climate. These alternative finance facilities, which offer a more easily accessible, affordable and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth.

This profile has helped cement the reputation of alternative finance in the business sector, with a new study showing that more than 50% of small businesses are looking to use finance to achieve growth in 2023.

SME finance options for net zero planning

With investment in sustainability-led practices set to become increasingly intrinsic to business development and performance, it is vital that smaller firms turn vision into reality when it comes to making their operations fit for net zero. As recent reports show, this is as much about measuring and reporting as it is about physical changes. This is why it is essential that firms are aware of all the finance options available to them, including the services of alternative lenders.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.

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