Small Businesses Suffering ‘Environmental Inertia’

British businesses’ efforts to improve their green credentials are at risk of faltering because of a recession-borne focus on cost savings, according to a new study from Lloyds TSB Commercial.

The study shows that although the downturn has spurred some businesses to adopt green initiatives in their drive to cut costs, this focus on finances means many firms are losing sight of the broader risks of environmental inertia, and the commercial opportunities to be gained from boosting green credentials.

The key findings of the study are:

  • Only two fifths (38%) have taken steps to analyse the environmental risks to their businesses.
  • Half of the firms canvassed (51%) cite cost as the principle barrier to pursuing environmental initiatives.
  • However, half of businesses questioned (48%) believe that ‘going green’ would result in a positive reaction from customers.

John Maltby, managing director, Lloyds TSB Commercial, said:

“As hard as this recession has been, it has spurred thousands of small firms to think more carefully about their environmental responsibilities. It is clear that businesses do seem to recognise the value of improving their green credentials, and the dangers of not doing so. Coming out of the recession many firms do seem focused on the costs savings to be gained from environmental improvements, but many are being held back because they fear the cost of taking action.”

Causes of ‘environmental inertia’

According to the report, the most common cause of ‘environmental inertia’ is the financial cost of taking action. Half of the firms canvassed (51%) cite cost as the principle barrier to pursuing environmental initiatives. Two fifths (37%) say they have not taken steps to improve their green credentials because they are concerned about the time and financial burden of doing so. More than a quarter (29%) say they are putting environmental improvement plans on hold until they have recovered from the impact of the recession.

Ironically, 23% of firms admit that the reason they haven’t adopted environmental practices is because of worries about environmental legislation, but by failing to put environmental practices in place, they are leaving themselves open to falling foul of legislation and exposed to hefty financial penalties.

Other reasons for a lack of action amongst businesses include; a lack of understanding of the risks and opportunities (19%); a perception that customers are not interested (16%) and a belief that their business doesn’t face any increased risks (16%).

Steps businesses are taking

Where firms have taken action, their efforts have been more focused on ad hoc steps which help to cut costs, however far fewer have invested time or money to develop more comprehensive strategies. Two thirds of firms (67%) have implemented environmental policies such as waste reduction schemes or energy saving programmes, but only two fifths (38%) have taken steps to analyse the environmental risks to their businesses.

Understanding the issues

This lack of action to address environmental issues comes despite the fact that two thirds (65%) of businesses claim they fully understand the environmental issues on which they need to act. One in five (20%) firms go as far as to say that the environment is their top priority while half of the businesses interviewed (50%) agree they cannot afford to ignore the risks and opportunities associated with the ‘green’ economy.

The two most widely recognised risks of not becoming a greener business are the potential of being seen as outdated and falling foul of legislation (48% each). The potential backlash from customers is also a concern for around a third (32%). Only one in ten (10%) believe that a do nothing approach is risk free.

Rewards for environmentally responsible businesses

There is also recognition across the board that there are rewards to be gained from becoming environmentally responsible. Almost half (48%) of the businesses questioned believe that ‘going green’ would result in a positive reaction from customers, while a similar percentage (47%) think they would benefit from reduced operating costs. Profitability, staff retention and morale, market leadership, and improved ability to win contracts were also high on the list of recognised benefits.

Action for small firms

In order to help small businesses across the country understand and respond to environmental risks and opportunities Lloyds TSB Commercial is putting in place a 200-strong network of regional business and environment managers. This network will be expanding further throughout 2011 and will be able to advise customers on the issues facing their particular businesses and the action they can take.

The issue of sustainable business is also a key theme of the bank’s nationwide programme of SME roadshows. These events form one of the main pledges in the Group’s SME Charter and more than 200 are being staged each year in the run up to 2012.

John Maltby continued:

“We are committed to helping businesses across the country implement sustainability related policies and have pledged to create a network of 200 business and environment managers by the end of this year, and to have even more in 2011. These managers will provide the valuable support companies will require to make significant changes.”

“The fact is that no business can afford to ignore the environment. There are huge risks for any company that does not improve its credentials and there are huge opportunities to be seized as well. Businesses that can think strategically about how environmental responsibility can help attract customers will position themselves well for future growth.”

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