Demand for Carbon-Neutral suppliers on the rise as SMEs set stricter partnership conditions

Wednesday 6th December 2023

  • SMEs prioritising suppliers with robust green credentials and scrutinising every aspect of a supplier’s environmental commitment.

  • 40% increase in number of businesses calling for clearer guidance from the UK Government (42% Q3’23 vs 28% Q3’22)

Novuna Business Finance’s latest research reveals a bold shift among UK SMEs, with 89% actively pursuing suppliers who have solid green credentials and a shared commitment to carbon neutrality.

As government initiatives urge business to commit to climate change pledges[1], and recent policy[2] make it mandatory for SMEs to present verified carbon reduction plans to potential suppliers in the future, the research found that SMEs are not only anticipating these requirements but are also implementing thorough ‘sustainability checks’ to identify suppliers who align with their carbon-neutral objectives.

A survey of over 1,000 small business leaders (nationally representative and multisector) by Novuna Business Finance asked business owners about their own carbon emission targets and supply chain considerations, specifically what they look for when working with a supplier.

High standards and thorough research

  • Small Businesses are raising the bar for sustainability standards, with 35% seeking suppliers who share their values and commitment to carbon neutrality. A further 23% of businesses insist on reviewing suppliers’ green credentials, including conducting internet searches, while 41% research and assess their green credentials online.

  • Greater research is also being conducted into suppliers’ terms of reference, with 23% of businesses now insisting on seeing the suppliers’ green credentials and 41% carrying out internet searches on their green credentials.

  • Accreditation is also high on the checklist, with 35% requesting evidence of a supplier’s green accreditation from reputable bodies such as the Federation of Small Business or internationally recognised bodies. Word of mouth remains a powerful research tool for the business community with 33% saying they would consult with network contacts about suppliers’ sustainability attitudes, while 29% would also request green references.

  • Businesses are also placing increasing importance on sourcing materials responsibly, with 45% of businesses’ citing this as key evidence of their record on sustainability.

Regional insight

There are notable differences in the requirements placed on suppliers by region.

  • Businesses based in the North East are more likely to focus on internet searches for green credentials (48%) and signs of green accreditation when evaluating supplier credentials.
  • London based business focus more in website research and reviewing suppliers’ attitudes and intentions when it comes to carbon neutrality (42%).
  • Businesses based in the North East place more importance in a business’s mission statement (43%) when evaluating whether to partner with a supplier.

It is evident through the research that Small Businesses are changing the way they select the suppliers to work with and are actively seeking out suppliers who care about the environment and are working to reduce carbon emissions. This is an encouraging and welcome trend and proves that businesses place great importance on building relationship with suppliers who share the same commitment to being eco- friendly. Novuna Business Finance is here to help support businesses, ensuring they are in the best position to be able to sustain and build on those relationships in the future.

Jo Morris

Head of Insight

Novuna Business Finance

Notes

The research was conducted by Sago Quantitative Research Service among a representative sample of 1,027 small business decision makers.

[1] https://smeclimatehub.org/

[2] The introduction of the UK Government’s Procurement Policy Notice (PPN), whilst only applicable to contracts over £5 million per year, could impact small businesses involved in these contracts. The business community can effectively gain a competitive advantage by being able to show a verified carbon reduction plan also known as a carbon management plan to potential suppliers. This will make them more attractive to those larger corporates and for government contracts over the £5 million threshold.