Two-thirds of those surveyed in the new Tracker said that the challenging economic outlook and worries about high inflation are continuing to delay work on sustainability plans. 

Of the small to medium enterprises (SMEs) surveyed only 39% intend to prioritise climate action over the next 12 months. This is the joint-lowest figure since the survey began in February 2020.  

But the new research also points to the value of carbon management tools, like NatWest’s Carbon Planner and Carbon Tracker  – as one in three businesses said that difficulties in measuring their carbon footprint is the biggest obstacle to achieving their goals.

Nearly a third (29%) of the SMEs pointed to difficulties in measuring their carbon footprint. These challenges were also the second-biggest issue cited by large businesses (28%). Many firms showed concern about a lack of information on carbon emissions across their international supply chain, especially in relation to basic materials sourced from abroad.

Around two-thirds of SMEs cited rising business costs in 2023 as a constraint on climate action in the next 12 months. The manufacturing sector was most likely to report hikes in cost burdens as an obstacle (76%).

More than two-thirds also highlighted that greater operating expense is an obstacle to becoming more sustainable.

The survey, conducted in December, showed that hikes in energy and material prices were important problems for manufacturing SMEs, as 76% cited higher costs. 

Manufacturing firms also reported difficulties in finding cost reduction through sustainability initiatives (32%). While 29% found falling customer demand to be an obstacle.   

Manufacturing SMEs were also especially concerned about securing investment and funding (25%).

The obstacles to becoming more sustainable differed between SMEs and large firms, with the former much more likely to report difficulty navigating government regulation. 

Large firms cited constraints on their sustainability goals from a lack of sustainable suppliers (25%) and staff skills shortages (25%). 

Devoting greater resources to increasing the skills of current employees, alongside near-shoring supply chains were often suggested as factors likely to combat these obstacles.

Andrew Harrison, Managing Director, Business Banking & International Retail, said:

“It’s concerning that businesses are saying that they’re experiencing challenges measuring their carbon footprint, and that this is standing in their way to becoming more sustainable. There are a wealth of tools that we’ve developed to help companies with this, and a lot of them are free.

“We have launched our free Carbon Planner tool which helps businesses measure their carbon output and recommends ways to identify potential cost and carbon savings. All our Business Banking colleagues have also been trained by the Universities of Edinburgh and Cambridge in helping businesses with their carbon reduction.”

Want to know more about funding, carbon footprints, decarbonisation opportunities, and where to find resources? Visit our climate hub.

The NatWest Sustainable Business Tracker is a quarterly report, designed to monitor business performance and sustainability actions at UK enterprises with 1 – 249 employees. Results are compiled from responses to S&P Global UK Purchasing Managers’ Index (PMI) surveys.