Climate change, the transition to net zero and the role of climate reporting are hardly untrod territory in the global press these days. But in recent months and weeks, debates on the role of businesses in reducing their climate impact have been heating up as corporations come under increased pressure from shareholders and stakeholders alike to align their ESG commentary with tangible actions.
The gulf between intentions and actions around reducing climate impact has been thrown into sharp relief by Aviva’s latest SME Pulse survey which reviewed the climate opinions and activities of more than 500 UK SMEs. Perhaps the most significant takeaway of the report is that while 76% of SMEs agree that businesses should work on reducing their impact on the climate, only 14% have a structured plan to reduce their carbon footprint/climate impact.
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In the report, Aviva highlighted that SMEs make up 99% of British businesses and are collectively responsible for one-third of UK emissions, as reported by the British Business Bank.
Despite the relatively small number of SMEs which have a structured plan in place, however, it was made clear that many SMEs are working to reduce their emissions output - with 38% using renewable energy to power their operations, 35% of which generated their own renewable energy. Meanwhile, over one-third of SMEs (35%) reported reviewing their own supply chain to identify areas that need to be more sustainable.
Aviva’s report identified the potential benefits awaiting those SMEs who do plan to take climate action, as those businesses with a structured plan to reduce their climate impact in place had higher growth expectations compared to those who did not have a plan in place (40% compared to 34%).
Recent conversations around Environmental Societal Governance (ESG) risk have encouraged businesses to think about more than just the ‘E’ of ESG risk as Aviva’s report emphasised. Twenty two per cent (22%) of businesses are now looking to make sure they are better prepared for the future by including business resilience planning in their 2022 priorities, the research found, and SMEs are looking to a wide range of sources for information and advice when planning how to make their business more sustainable.
Thirty one per cent (31%) of SMEs are looking for government advice, while 29% rely on desk-based research and 20% approach peers and business groups for information. Aviva noted that this suggests that SMEs could benefit from clearer guidance on where to turn for reliable sources of information when making plans around sustainability.
Commenting on the temperature of the SME market, CEO of Aviva UK & Ireland General Insurance Adam Winslow said it was “heartening” to see that SMEs – a fundamental part of British business – are increasing their sustainability activities as part of the fight against climate change.
“The sad fact, however, is that more and more businesses will be impacted by climate-related events such as floods, subsidence and heat-related risks as temperatures rise, putting their survival under threat,” he said. “At Aviva, we see first-hand the long-term effect of these events on financial resilience and wellbeing.
“But there are positive signs: one-fifth of SMEs have business resilience planning as one of their top focus areas for this year, demonstrating that they are aware of the need to be prepared for the unexpected. If we have learnt anything from the last two years it is the importance of this preparation.”
Winslow noted that a structured approach to sustainability makes commercial sense, in addition to being environmentally responsible. He highlighted that those businesses producing their own sustainable energy will be better insulated from the increases in energy prices being felt at the moment.
Aviva is supporting SMEs in a number of ways to improve sustainability and mitigate the impacts of climate-related events, he said. These include the work on ‘Loss Prevention Standards’ on the Aviva Risk Management Solutions website and its ‘Building Future Communities’ work which calls for the government to better support SMEs in preparing for climate events.
He also highlighted that the UK-headquartered insurance giant is working with its partners at Enterprise Nation to deliver guidance for businesses to implement a structured plan that will build on the efforts many SMEs are already making.
It’s an interesting question – how linked are your climate change actions to your location? Aviva’s report found that businesses in the East of England were the most likely to have a plan in place to reduce climate impact (at 21%) while businesses in the North & Yorkshire were the least likely (at 8%).
Perhaps even more noteworthy, however, is the difference belonging to a certain industry sector has on the actions taken by SMEs to reduce their impact on climate and the environment. The research identified that businesses in the public sector and transportation/motor trade sector were the most likely to take action. Meanwhile, the lowest ranking sectors were professional & bus services, and construction & real estate.
Aviva outlined how individual sectors rank for actions reducing climate impact, as seen in the table below (highest rank highlighted in green, lowest rank highlighted in grey):
