“Unlocking Sustainable Finance for SMEs” is a global report which exposes a gap between SMEs’ sustainability ambition and their ability to take action, preventing them from accessing vital green finance needed to drive their initiatives.
Created in partnership with the International Chamber of Commerce (ICC) and Sage, a leader in accounting, financial, HR, and payroll technology for small and medium-sized businesses (SMBs), launched the report which highlights that while 86 per cent of SMEs say that sustainability is important to their business, only 9.1 per cent formally report on their impact, citing complex reporting requirements as a major roadblock (74 per cent).
The data revealed a “virtuous circle” between sustainability reporting, green finance and climate action – SMEs that report on their impact are then more likely to secure funding to become more sustainable, which in turn, helps them take further steps towards net-zero. This would also help financial institutions who say data challenges are a huge barrier to offering green loans (84 per cent). Currently, however, only 1.2 per cent of SMEs are leveraging this virtuous circle to grow sustainably.
“There’s no path to net-zero without SMEs, which make up over 90 % of the world’s businesses,” said Surinder Sond, executive vice president of Sustainability & Society at Sage. “For years, we’ve been championing the tools SMEs need to embrace sustainability. This report’s ‘virtuous circle’ offers a powerful way forward to build prosperous businesses and sustainable communities—through simplified reporting and accessible finance enabling climate action.”
Sage and ICC launched this report at COP29 in Baku, urging global decision-makers to bridge the gap between SMEs’ growing sustainability ambitions and their ability to act, by calling for simplified reporting standards and access to green finance.
To fully unlock the potential of SMEs in combating climate change, Sage calls on governments, financial institutions and technology partners to:
- Simplify sustainability reporting – Implement proportionate and streamlined reporting standards tailored to SMEs, making it easier for them to access green finance.
- Expand access to digital tools – Equip SMEs with affordable, automated tools to track emissions and streamline reporting.
- Increase financial incentives – Offer tax credits, grants, and favourable loan terms to motivate SMEs to measure their environmental impacts and invest in sustainable practices.
The report also provides the following takeaways:
- Interest and engagement with climate change is fast rising. 86 per cent of SMEs state that sustainability is crucial to their business, up from 83 per cent last year, and 72 per cent believe they can contribute to tackling climate change. However, only 63 per cent are currently taking steps to reduce their environmental impact.
- Action is growing but at a much slower pace. 68 per cent of SMEs say the cost of implementing sustainability initiatives is too high, and 67 per cent cite time constraints. These barriers are growing rather than decreasing, slowing down climate action.
- Finance is key to unlocking more action. 89 per cent of SMEs that secured green finance say it was crucial to their sustainability efforts, but only 19 per cent have considered external financing for environmental initiatives.
- SMEs are looking to technology to help bridge the gap between intention and action. 73 per cent of SMEs are concerned about the upfront costs of sustainability reporting, and 66 per cent are worried about its complexity. However, 65 per cent believe digital tools could help simplify the process and unlock the benefits of green finance.
Country Breakdown: Canada
Canada: Canadian SMEs Drive Sustainability with a Focus on Local Environmental Impact
Canadian SMEs are highly committed to sustainability, with a resounding belief that sustainability is important to their business. Many Canadian SMEs have sought green financing and believe that reporting is key to obtaining this financing.
Key data points for Canadian SME sustainability:
- 76% of Canadian SMEs have a sustainability policy.
- 69% believe sustainability is “central” or “important” to their business.
- 44% of Canadian SMEs report cost as the highest barrier to making their business more sustainable
- 81% have plans to improve their environmental impact over the next few years
- 51% are adopting renewable energy sources, with 42% achieving this goal entirely
- 63% of Canadian SMEs report a “very high” or “high” understanding of climate change
- 68% believe their business can play a “very significant” or “somewhat significant” role in combating climate change
- 69% of Canadian SMEs have a sustainability reporting system in place
- 73% of Canadian SMEs believe that reporting will make them either “very” or “somewhat” attractive to lenders or investors
- 54% of Canadian SMEs have sought green financing options
- 82% believe that their sustainability reporting was helpful in accessing green finance opportunities
- 37% report that their required reporting to access green financing was “detailed and informal”
- 69% of Canadian SMEs would be “very” or “somewhat” likely to increase their sustainability action if they had easier access to sustainable financing
Key differences:
- Canadian SMEs report cost as the highest barrier to making their business more sustainable (44%), second only to Spain (45%)
- Canadian SMEs, more so than global peers, report that their required reporting to access green financing was “detailed and informal”
- Canadian SMEs are on par with peers in a strong belief that they can play a role in climate change, and that green financing would greatly increase their likelihood to take action in their environmental initiatives
Read and download the full Unlocking Sustainable Finance for SMEs report.
