Widespread small business adoption of sustainability held back by costs, knowledge gaps and lack of finance
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Posted: Fri 6th Jun 2025
A government-backed review has found small businesses could benefit from considerable financial gains by embracing sustainability, but there are major barriers to widespread sustainability adoption.
The report from The Willow Review revealed that among SMEs benefitting from sustainability practices, 67% enjoyed reduced operational costs, over half are attracting new customers and a third are seeing improved customer loyalty.
But the study said that more widespread adoption of sustainable practices by small businesses is blocked by barriers including upfront costs, knowledge gaps, and financial support limitations.
Small business owners said they struggle with complexity, mixed messaging, and a lack of time, funding or accessible support, with 72% saying the perceived cost of implementation or access to finance are key barriers to sustainability.
With SMEs accounting for 99% of British businesses and responsible for around half of all UK business carbon emissions, the reiview made recommendations to small businesses, government, and financial services.
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Recommendations to government
Local sustainability champions: Assign sustainability champions at the council level to provide tailored support to SMEs, linking to local funding.
Reframe sustainability messaging: Focus on growth, competitiveness, and profitability rather than compliance to better engage SMEs.
Campaign to enhance uptake of existing resources: Develop ways to enhance uptake of existing resources such as UK Business Climate Hub
Support SME transition through engaging landlords to facilitate SME energy usage transition.
Improve access to finance: Improve visibility and accessibility of existing sustainability grants by simplifying application processes and enhancing signposting; British Business Bank should also consider adapting existing initiatives such as Start Up Loans with Green Up Loans to support transition.
Expand the Growth Guarantee Scheme to include green initiatives: Consider expanding existing government guarantee schemes to enable access to green finance for SMEs, to incentivise larger-scale sustainability investments.
The British Business Bank has launched a pilot to support this type of lending and, using insights from the pilot, should develop the proposition further with the aim of announcing a permanent Green Guarantee Scheme by the end of 2025.Drive forward fiscal incentives for SME sustainability: Work collaboratively with the Department for Energy Security and Net Zero, HM Treasury and the Department for Business and Trade and The Willow Review to develop a set of recommendations by the end of the year focused on improving fiscal incentives for small businesses.
This will include but is not limited to: simplifying existing schemes and boosting awareness and accessibility.Integrate sustainability into the core offering of the Business Growth Service: Ensure that SMEs receive clear, consistent, and practical support for their sustainability transition.
Recommendations to small businesses
Adopt a five-point plan for sustainability:
Switch to sustainable materials.
Reduce travel and optimise logistics.
Minimise waste.
Take action on energy.
Partner with sustainable suppliers and clients.
Participate in mentoring programmes and networks to share best practices, facilitated by government, financial services and business support organisations.
Investigate informal and formal tracking of sustainability measures (such as carbon emissions and waste reduction) as a tool to demonstrate and motivate progress.
Recommendations to financial services
Provide green finance education: Offer advisory services to help SMEs understand green commercial opportunities.
Support sustainable business planning: Help SMEs develop business plans that clarify return on investment (ROI) for sustainability initiatives, and champion the digitisation of carbon and energy data to better understand the opportunities and long-term benefits.
Innovate green finance: Champion innovative funding mechanisms and greater access to support from public and private sector, to enable green finance demand to grow.
Related resources
Webinar: Why small businesses should take sustainability seriously
How to navigate your small business towards sustainability
Small business sustainability: How your business can make a difference