Small and medium-sized enterprises (SMEs) comprise around 90% of businesses globally, accounting for more than 50% of employment worldwide. Yet, despite their size, their collective environmental impact is far from small. According to the OECD, SMEs account for over 60% of industrial carbon emissions in many regions.
That matters not just for the planet, but for business. Regulatory frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) are starting to affect SMEs indirectly through supply chain pressures. Meanwhile, procurement departments, investors, and consumers are all demanding greater environmental accountability, pushing sustainability from optional to essential.
This shift isn’t just about risk mitigation. Studies show that sustainable business practices improve operational efficiency and reduce long-term costs. In fact, companies that actively manage and plan for sustainability secure an 18% higher return on investment than those that don’t.
In short, carbon reduction is becoming a competitive advantage, and SMEs that act early will be better positioned to thrive in tomorrow’s economy.
This guide outlines practical steps SMEs can take to reduce their carbon footprint without breaking budgets or business models. Because sustainable change doesn’t have to be complicated—it just has to start.
You can’t reduce what you don’t measure. Understanding your carbon footprint is the first—and arguably most important—step for any business looking to become more sustainable. It provides a baseline, highlights your biggest impact areas, and helps you prioritise actions that actually matter.
Carbon footprints are typically broken down into three categories:
For SMEs, Scope 3 can account for up to 70–90% of total emissions, depending on the sector. That means even if your office is paperless and solar-powered, your footprint might still be high if your suppliers or logistics partners are carbon-intensive.
You don’t need an environmental science degree to get started. Today, there are accessible tools specifically designed for small businesses. Look for platforms that:
Beyond regulatory prep and environmental goals, measurement unlocks insight. You may discover that a small change, like switching suppliers or adjusting shipping methods, significantly cuts emissions. Plus, having a carbon footprint report can support funding bids, tenders, and partnership negotiations where sustainability is now a key criterion.
Once you've measured your carbon footprint, the next step is to act on it. But that doesn’t mean overhauling your entire business overnight. In fact, many of the most effective carbon reduction strategies are straightforward, cost-saving, and already within reach. Here are some of the easiest places to start:
In the UK alone, SMEs could save up to $3.38 (£2.5) billion annually just by improving energy efficiency.
For most SMEs, the supply chain is the elephant in the emissions room. While you may have control over your office energy use or business travel, the majority of your carbon footprint—sometimes as much as 90%—lies in the hands of your suppliers, distributors, and service providers.
Here’s how to get a grip on it:
Even informal engagement can send a strong signal that sustainability is a priority.
Most SMEs don’t have the leverage to force big supply chain shifts—but they do have the power to build partnerships.
This collaborative approach builds trust—and often uncovers shared savings.
Closed-loop thinking isn’t just for giant corporations—it’s increasingly practical for SMEs through shared platforms and local partnerships.
Employees often spot inefficiencies long before leadership does. Set up a green taskforce or encourage teams to flag carbon-saving ideas in procurement and logistics.
Once you've begun identifying and acting on emissions hotspots, it’s time to formalise your efforts. Setting targets gives your sustainability strategy direction. Reporting your progress builds credibility and encourages long-term follow-through.
Targets provide clarity. They turn vague goals like we want to be greener into defined milestones, such as:
Targets also allow you to benchmark against peers and industry standards. And importantly, they help rally your team around a shared purpose.
According to the Science-Based Targets initiative (SBTi), over 7,000 businesses worldwide—including many SMEs—have committed to science-based environmental targets.
Frameworks like SBTi for SMEs offer simplified pathways without the need for complex modelling.
Reporting doesn’t have to mean a glossy 40-page PDF. Start small:
Transparency builds trust—and often leads to unexpected partnerships or opportunities.
When you hit a target (or even make strong progress), don’t keep it quiet. Celebrate internally to keep your team engaged, and externally to show that you're walking the talk.
Even with the best strategies, not all emissions can be eliminated immediately. That’s where carbon compensation—also known as offsetting—comes in. It’s not a get-out-of-jail-free card, but it is a vital tool for managing unavoidable emissions while you continue working towards long-term reductions. It’s a complementary approach to your carbon strategy, and helps you act now and achieve your goals faster and with more efficiency.
Not all offsets are created equal. Look for credits that are:
Bonus points if you’re buying carbon credits from nature-based projects that restore ecosystems, protect biodiversity, and support local communities. These deliver co-benefits that go far beyond CO₂.
For example, reforestation, peatland restoration, and agroforestry initiatives not only absorb carbon but also improve water cycles, soil health, and local livelihoods.
Source: https://www.green.earth/projects/hongera-reforestation-project-kenya
Let’s be clear: compensation is not an excuse to avoid reductions. It’s a way to act now while you work on the harder stuff.
For SMEs, this hybrid model—reduce what you can, offset what you can’t—strikes a realistic balance between ambition and pragmatism.
Sustainability is no longer a side initiative or branding exercise—it’s fast becoming a competitive necessity. For SMEs, reducing carbon emissions isn’t just about doing what’s right for the planet. It’s about building a future-ready business that can thrive in an economy being reshaped by environmental realities, policy shifts, and consumer expectations.
Companies that embed sustainability into their operations tend to see:
In short, sustainability isn't a sunk cost—it's an investment. And one that pays dividends in performance, partnerships, and purpose.
Crucially, SMEs don’t need to wait for perfect conditions or big budgets to start. With the right tools, a clear roadmap, and a willingness to learn and adapt, any business—no matter the size—can lead on nature-positive initiatives.
The journey begins with a single step. Measuring your carbon footprint, acting on what you find, and being transparent about your progress sends a powerful signal: that your business is not only ready for the future, but helping shape it.