New research shows signs that UK businesses are seeking to reduce the carbon footprint of their supply chains. According to the NatWest Sustainable Business Tracker, nearly half of all SMEs (46%) have already switched to a domestic supplier due to sustainability concerns. A further 20% are looking to re-shore at least part of their supply chain to boost sustainability during the year ahead. This suggests that approximately two-thirds of SMEs (66%) will have switched at least some of their external vendors to domestic suppliers by the summer of 2023. On a five-year horizon, this figure rises to three-quarters of SMEs.
Another way that firms have readjusted their global supply chains has been through switching to suppliers that have environmental credentials, with 28% of surveyed SMEs having done this already. A further 20% of SMEs are planning to switch to suppliers with better environmental credentials over the next year.
Three of the five sustainability priorities of the Sustainable Business Tracker increased since March 2022, with low carbon energy consumption seeing the biggest rise in prioritisation. Some 51% of SMEs reported green energy as a high priority for the year ahead, up from 42% in March and the largest percentage in the survey history. Firms shared their plans to boost low carbon energy consumption by installing solar panels on site, as well as investments in battery storage and electric vehicle charging infrastructure.
SMEs indicated that increasing recycling (60%) and having cleaner business processes (54%) were the biggest focus areas of sustainability, with both rising in priority since March. Results also highlight a considerable slowdown in business activity growth at small and medium-sized enterprises across the UK, with the speed of recovery the weakest since February 2021. Weak customer demand in response to the passing of sharply rising input prices on to them, as well as the uncertain economic outlook, was cited by survey respondents.
The increasingly challenging global economic backdrop did not prevent an increase in the prioritisation of sustainability action among SMEs though. At 43% saying it was a priority in June, up from 40% in March, this was the highest since the start of the pandemic (44% in February 2020).
Andrew Harrison, Head of Business Banking at NatWest Group, said: “Global supply chain pressures have focused SME’s priorities on switching to UK suppliers. This ensures they have the consistency they need while matching up to their increased sustainability priorities. It’s good news that it’s been pared with a higher prioritisation of low carbon energy consumption as well as ambitions to increase recycling.
“NatWest’s Springboard to Sustainability report, published in October 2021, found that 50% of the UK’s carbon reduction ambition can be delivered by the SME sector. This could also unlock a £160 billion opportunity for them. Sustainability, recovery and growth go hand-in-hand and SMEs need to be supported to know how to make the most of the opportunities that lie ahead.”