A new report by Sage, a leader in accounting, financial, HR, and payroll technology, has revealed a $789bn opportunity for green finance aimed at small and medium-sized enterprises (SMEs).
Launched in partnership with the International Chamber of Commerce (ICC) at COP29 in Baku, the report, titled Unlocking Sustainable Finance for SMEs, explores the gap between SMEs’ sustainability ambitions and their ability to access essential funding.
The report highlights that while 86% of SMEs view sustainability as a priority, only 9.1% formally report on their environmental impact. This disconnect stems largely from complex reporting standards, with 74% of respondents identifying this as a major obstacle. Moreover, just 1.2% of SMEs are currently utilising the “virtuous circle” of sustainability reporting, which could help secure green finance and foster further climate action.
Access to green finance is critical to driving sustainability, as evidenced by 89% of SMEs that reported such funding as vital to their efforts. However, uptake remains low, with only 2.8% applying for green finance over the last three years. Barriers like a complex application process, stringent reporting requirements, and data quality challenges deter many SMEs from securing this crucial funding.
Sage and ICC have called on policymakers, financial institutions, and technology partners to address these issues. They propose streamlined reporting standards tailored to SMEs, increased access to digital tools for emissions tracking, and expanded financial incentives such as tax credits and grants. By simplifying these processes, SMEs could better contribute to achieving global climate goals.
The report also found growing awareness of climate change among SMEs. Over 86% acknowledged its importance, up from 83% last year, and 72% believe they can play a role in tackling the crisis. However, only 63% are actively reducing their environmental impact, citing high costs (68%) and time constraints (67%) as barriers to action.
Sage’s Executive Vice President of Sustainability & Society, Surinder Sond, emphasised the need for SME involvement, stating, “There’s no path to net-zero without SMEs, which make up over 90% of the world’s businesses. 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.”
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