UK small and medium-sized enterprises (SMEs) have been leading the way in decarbonisation, according to Joe Phelan, business loans expert at money.co.uk.
According to the latest research, Phelan noted that UK SMEs are outpacing many of their European counterparts.
He said: “However, access to finance remains a major barrier for those aiming to accelerate their progress.
“Going green is not just good for the planet – it’s good for business. Larger firms and public sector buyers increasingly demand transparency around sustainability, with 90% only working with ESG-conscious suppliers.”
Phelan said that for brands dealing directly with customers, having strong environmental credentials can build loyalty and trust, particularly among younger people.
He noted that companies making improvements to their environmental performance are also more likely to see financial gains, showing that sustainability and profit can go together.
Additionally, he said UK SMEs have been ahead in using structured and measurable methods to reduce their carbon footprint.
Phelan pointed to research from Equans, which found that 94% of UK industrial SMEs working on decarbonisation are using a formal framework, compared to 80% across Europe.
Phelan noted this shows UK businesses are taking practical steps towards net zero, such as boosting energy efficiency, reducing waste, using renewable energy and switching parts of their operations to electric.
He added that despite these efforts, many firms still face financial barriers which can slow down progress.
Phelan added: “According to a 2024 survey by BT, Small Business Britain, and Oxford Brookes Business School, nearly two-thirds of UK SMEs are struggling to cut their carbon emissions due to financial pressures.
“41% of business owners admit that monetary constraints are holding them back, while 64% say they need more support to make meaningful changes.
“This is where finance, such as business loans, can play a pivotal role in helping SMEs scale their sustainability efforts.”
Phelan said business loans can help cover the cost of green technology, expansion, or infrastructure upgrades.
Early-stage companies can access the government-backed start up loan scheme with fixed-rate loans up to £25,000.
The Growth Guarantee Scheme allows eligible businesses to borrow up to £2m, with Government backing to reduce the lender’s risk.
Phelan added: “With the right financial support, UK SMEs can tackle ambitious sustainability projects without hampering their cash flow, turning environmental goals into long-term business gains.”
For SMEs looking to decarbonise, Phelan recommended running an energy audit to find where energy is used most, switching to a renewable energy supplier or on-site generation, and upgrading to energy-efficient equipment.
He suggested exploring government grants, local green schemes, or business loans to cover upfront costs.
Phelan also advised involving staff in sustainability initiatives and setting clear targets to track progress.
He said: “Even small changes can lead to a measurable impact over time, and with the right funding in place, businesses can move faster and more confidently toward their sustainability goals.”
