High costs biggest challenge for SMEs on journey to net zero

8 December 2022

  • 87% of SMEs understand what the net zero target means for their business.
  • But challenging external factors are negatively impacting their progress. 

The transition to net zero is well underway, with the overwhelming majority (87%) of small and medium enterprises (SMEs) stating that they understand what the target means for their business. However, SMEs – companies with fewer than 250 employees and a turnover of less than €45 million – face significant challenges on their journeys to achieve their targets.

According to Lloyds Bank's Net Zero Monitor, the biggest challenge faced by SMEs on their journey to net zero is insufficient budget and/or the high costs (43%) of transitioning their business. This challenge is something that impacts businesses at every stage of the net zero journey. 

In addition, SMEs also cite difficulties in reducing emissions outside of their own operations (33%), such as among their suppliers, and low return on investment (33%) as key challenges. 

Challenges created by external factors are also negatively impacting SMEs’ ability to continue progressing towards net zero. 

Seven in ten SMEs (72%) say that both the rising cost of energy and rising inflation are having the greatest negative impact on their journey to net zero. This is closely followed by the rising cost of petrol (70%), with supply chain disruption (59%), and increasing interest rates (57%) also seen as significant factors.