'Encouraging' signs that UK firms making supply chains more eco-friendly

There are “encouraging” signs that UK businesses are working to reduce the carbon footprint of their supply chains, according to new data from Royal Bank of Scotland owner NatWest.

The lender has revealed its latest Sustainable Business Tracker, saying that more than four in ten small and medium-sized enterprises (SMEs) said in June that sustainability action was a priority, up from 40 per cent in March. Additionally, nearly half have already switched to a domestic supplier due to sustainability concerns.

A further 20 per cent are looking to re-shore at least part of their supply chain to boost sustainability during the year ahead, with NatWest saying this suggests that about two-thirds of SMEs will have switched at least some of their external vendors to domestic suppliers by the summer of 2023, rising to three quarters on a five-year horizon.

Another way firms have readjusted their global supply chains has been switching to suppliers that have strong environmental credentials, with 28 per cent of surveyed SMEs having done this already, and a further 20 per cent planning to do so over the next year.

Three of the five sustainability priorities of the Sustainable Business Tracker increased since March 2022, with low-carbon energy consumption seeing the biggest rise, and 51 per cent of SMEs citing green energy as a key focus for the year ahead, up from 42 per cent in March and the highest percentage in the survey’s history.

NatWest however also flagged a considerable slowdown in business activity growth at SMEs across the UK, with the speed of recovery the weakest since February 2021.

Andrew Harrison, head of business banking at NatWest Group, said: “Global supply-chain pressures have focused SME’s priorities on switching to UK suppliers. It’s good news that it’s been paired with a higher prioritisation of low-carbon energy consumption as well as ambitions to increase recycling.

Nearly half of all SMEs have already switched to a domestic supplier due to sustainability concerns, NatWest has found. Picture: Niklas Halle'n/AFP via Getty Images.

“NatWest’s Springboard to Sustainability report, published in October 2021, found that 50 per cent of the UK’s carbon reduction ambition can be delivered by the SME sector. This could also unlock a £160 billion opportunity for them. Sustainability, recovery and growth go hand in hand – and SMEs need to be supported to know how to make the most of the opportunities that lie ahead.”