Small and Medium Enterprises and resource efficiency, between investment fears and the energy crisis

Small and Medium-sized Enterprises (SMEs) have a tremendous collective footprint on the environment and aspire to become more resource-efficient. Yet, they have been struggling to make structural changes that can substantially impact the environment. The current energy crisis and the spectrum of the economic recession could halt new investments in resource efficiency and undermine the European SME strategy for a sustainable and digital Europe. Policymakers must navigate the crisis and keep boosting long-term investments in resource efficiency, eliminating barriers, and facilitating access to environmental expertise.

The author(s)

  • Sharon Belli Public Affairs, Europe
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Europe aims to evolve into the first climate-neutral continent by 2050

In July 2021, the European Commission revised the Energy Efficiency Directive, emphasizing the importance of practical applications in policy and investment decisions at regional and local levels. This directive targets big energy consumers such as large enterprises but also small and medium-sized enterprises (SMEs). SMEs are considered the backbone of the economy. There are over 23 million SMEs in the EU, and they represent about 60% of the EU GDP, accounting for 67% of all jobs in the private sector. As such, they also embody an enormous energy-saving potential for the EU.

The realization of SMEs‘ environmental footprint has led the European Commission to put forward the 2020 European SME Strategy for a Sustainable and Digital Europe. The EU SME Strategy aims to support and strengthen the capacities of SMEs to overcome the challenges they face when implementing resource efficiency measures, which range from difficulties in accessing finance to regulatory burdens.

SMEs have been undertaking concrete actions to become resource-efficient

The Flash Eurobarometer 498 - conducted in December 2021 by Ipsos’ European Public Affairs team for the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs - provides fascinating insights into how SMEs have been acting in light of the EU SME Strategy. In particular, the study shows that European SMEs are highly motivated to become energy-efficient. Of 13 343 European SMEs interviewed, 89% report having undertaken at least one measure to reduce energy consumption. Among those that have already launched resource efficiency measures, a large majority (83%) plan to take additional steps over the next two years.

Yet, these resource-efficient measures consist mainly in making good use of existing internal systems and reducing costs, the most common being minimizing waste, saving energy, saving materials, recycling by reusing material or waste within their company and saving water. As shown in the figure below, SMEs are hesitant to apply resource-efficient measures requiring structural changes or significant investments. For instance, less than three in ten European SMEs are designing products that are easy to reuse, recycle and maintain and less than two in ten use predominantly renewable energy from their production (i.e. solar panels).

The overall investment in resource efficiency measures has remained low across European SMEs

In the Flash Eurobarometer 498, we also observe that 35% of SMEs report having invested at least 1% of their annual turnover in this area in the previous two years. However, a similar proportion reported having invested nothing at all in resource efficiency actions.

SMEs have been struggling to take investment risks as they fear being unable to absorb overhead investment costs and low returns. As shown in the table below, part of the problem is also that SMEs face critical barriers to implementing long-term energy efficiency solutions.

The escalation of the energy crisis has changed the scenario dramatically. The current energy costs are making SMEs unprofitable, and policy responses are country-level focused. Consequently, this context challenges the EU-integrated strategy and the extent to which SMEs can effectively contribute to the Green Deal with investment in long-term energy efficiency solutions.

Policymakers should keep sight of the Green Deal and push SMEs' behavioural shifts to boost resource efficiency. One way to do so is to reduce barriers by simplifying access to information for SMEs. Namely, make them aware that investing in efficient energy solutions could increase their performance and that long-term resource efficiency investments will keep businesses competitive in times of crisis.

An additional step would be to build awareness concerning returns of long-term resource efficiency investments, starting by facilitating SMEs' accessibility to environmental expertise. Facilitating accessibility to environmental expertise can offer an excellent opportunity to narrow the gap between good intentions and the fear of resource-efficient investments. But this opportunity is also an enormous challenge that policymakers must take to pursue the Green Deal objectives in the middle of the most severe energetic crises in the last 50 years.

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About this study

Flash Eurobarometer 498 was carried out by Ipsos' European Public Affairs team in 27 Member States of the European Union, Albania, North Macedonia, Montenegro, Serbia, Turkey, Iceland, Moldova, Norway and the US. Between 8 November and 10 December 2021, more than 17 500 enterprises (both SMEs and large companies) were interviewed via telephone on behalf of the European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs. The analysis presented in this article focuses on SMEs in the EU (13 343 interviews).

The author(s)

  • Sharon Belli Public Affairs, Europe

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