Sustainability is slipping down the SME agenda and why that’s a mistake
Written by Rod Hutchiston
For the past several years, sustainability and a focus on environmental, social and governance (ESG) have steadily climbed the boardroom agenda for small and medium-sized enterprises (SMEs).
Not long ago, many saw environmental and social commitments as a competitive differentiator, helping win contracts, attract talent and futureproof operations. But that momentum now appears to be slowing.
Our latest SME Business Outlook survey suggests that while sustainability remains important, it is no longer the immediate priority it once was. In 2025, more than half (52%) of SMEs told us they intended to invest in ESG or sustainability initiatives over the following year. This year, that figure has fallen sharply to 36%.
The same pattern is emerging across sectors. In energy, traditionally one of the most engaged industries for its net zero ambitions, planned investment in sustainability and ESG has dropped from 53% to 41%. Food and drink has fallen from 49% to 33%, while retail declined from 53% to 37%.
At first glance, it looks like a retreat. Yet the picture is more nuanced. Two thirds of SMEs believe the energy transition presents an opportunity for their business, up 8% from last year, rising to 77% in the energy sector itself, an increase of 12% from a year ago.
The reality is that businesses are operating in a tougher climate than they have for some time. Demand is softer, margins are tighter, borrowing costs remain elevated and many firms face skills shortages. When confidence dips, priorities naturally shift.
Management teams are focusing first on operational resilience, investing in technology, AI, productivity improvements and workforce capability. These are tangible, near-term decisions that protect cashflow and competitiveness. In comparison, ESG projects can feel longer term or less urgent, particularly for smaller firms with limited budgets.
That’s understandable. But it may also be short-sighted.
What’s changing isn’t necessarily commitment to sustainability, but how it’s being delivered. A few years ago, ESG often meant standalone strategies and ringfenced budgets. Now, it’s increasingly embedded in everyday decisions.
Digital transformation reduces energy use. More efficient premises cut emissions. Skills investment supports greener working practices. Supply chain reviews improve both resilience and environmental performance.
In other words, many businesses are still achieving ESG outcomes, they just don’t always label them that way.
That integration is positive, but it carries a risk. If sustainability becomes invisible, it can slip off the strategic agenda altogether.
The commercial case hasn’t weakened. Procurement requirements are tightening, lenders are assessing environmental risk more closely, and customers expect credible commitments. In sectors such as energy, construction and manufacturing, alignment with net zero goals is fast becoming a prerequisite for winning work.
The answer isn’t costly headline initiatives. It’s about embedding sustainability into core decisions, choosing efficient equipment, upgrading property responsibly and measuring environmental gains alongside productivity improvements.
From what we see across our clients, the most resilient businesses treat sustainability not as a separate project, but as part of how they operate every day. ESG may have slipped down the priority list, but maintaining steady progress now will almost certainly prove less costly than catching up later.
