New sustainability reporting standards are bearing down on UK businesses, and the vast majority of small firms have done next to nothing to prepare.
That is the blunt conclusion of research showing that only 13 per cent of SMEs have put in place the formal measurements and commitments needed to cut their carbon emissions to net zero by 2050.
The figure is all the more concerning because it has not improved since the same survey was carried out in 2024. Two years of headlines about climate targets, supply chain pressure and green procurement, and the needle has not moved.
From 2026, a growing number of firms will be required to comply with new UK Sustainability Reporting Standards, expected to align closely with international climate disclosure frameworks. While the mandatory requirements initially fall on larger companies, the effects are already cascading down the supply chain. Big businesses that need to report on their Scope 3 emissions, those generated by their suppliers, are increasingly asking smaller firms for data, evidence of carbon reduction plans and, in some cases, making sustainability credentials a condition of continued contracts.
For the average small business, this creates an uncomfortable gap between what the market is beginning to demand and what most firms are able to provide. The research found that 82 per cent of SMEs see sustainability requirements as a barrier rather than an opportunity. More than three-quarters are either at an early stage of thinking about their environmental impact or have not engaged with the issue at all.
Yet the same data points to a significant commercial opportunity being missed. SMEs surveyed estimated that improving their sustainability credentials could generate an additional £52,000 in revenue each year, through winning contracts with sustainability-conscious buyers, attracting environmentally minded customers and accessing green finance products that offer preferential terms.
The barriers holding small firms back are familiar: a lack of knowledge about what is required, limited resources to invest in measurement and reporting, and difficulty accessing the capital needed to make physical changes such as improving energy efficiency or switching to lower-carbon suppliers.
None of this is straightforward for a business owner already juggling rising costs, staffing pressures and an uncertain economic outlook. But the firms that are moving, even modestly, are finding that the first steps are neither as expensive nor as complicated as they feared. Measuring energy use, waste and basic carbon output can often be done with free or low-cost tools. Setting a simple reduction target and communicating it to customers and suppliers signals intent, even before significant investment is made.
The risk for small businesses that continue to do nothing is twofold. They miss out on the commercial advantages that sustainability credentials increasingly unlock, and they leave themselves exposed when mandatory reporting requirements eventually extend to smaller firms, as most experts believe they will within the next few years.
Getting ahead of the curve now, even with modest steps, is considerably easier than scrambling to comply under pressure later.
