CDP Finds 95% of Disclosing SMEs Making Environmental Progress, but Targets Lag

More than 95% of small and medium-sized enterprises disclosing through CDP have made progress on at least one key environmental indicator, according to new analysis covering almost 11,000 companies. But the data also shows a wide gap between building the foundations for action and delivering measurable emissions reductions: only 20% of SMEs have emissions-reduction targets and 32% have emissions-reduction initiatives in place. Nearly two-thirds, or 63%, either have a transition plan or expect to have one within two years, although just 15% currently have one.

 

Most SMEs Are Building the Foundations Before Setting Targets

 

CDP’s findings suggest that many SMEs are strengthening governance, risk management and stakeholder engagement before moving into more formal climate targets and investment programmes. Nearly 40% of the companies assessed meet most or all of CDP’s basic environmental indicators, showing that a significant share have already put some of the underlying systems in place.

The weakness is in execution. With only one in five SMEs reporting an emissions-reduction target, the data suggests that environmental management is moving faster than target-setting. The same pattern appears in implementation, where less than a third currently have emissions-reduction initiatives in place.

 

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Transition Planning Could Be the Next Step

 

The strongest sign of future momentum is the increase expected in transition planning. While only 15% of SMEs currently have a transition plan, 63% either have one or expect to develop one within two years.

That could help close the gap between preparation and action if plans lead to measurable targets and funded initiatives. Simon Fischweicher, CDP Chief Customer Success Officer, said: “The next step is helping SMEs turn preparation into progress: setting and achieving credible targets, investing in emissions reduction initiatives and embedding action throughout their businesses.”

 

European SMEs Lead, While US and Singapore Lag

 

Performance varies significantly by market. Spain, France and Sweden are the strongest performers among the countries assessed, while SMEs in Singapore and the United States show the least progress, with many meeting none or only a small number of the indicators.

Europe’s stronger position comes as sustainability reporting expectations for smaller businesses become more structured. CDP’s SME questionnaire is closely aligned with European frameworks including the Voluntary Sustainability Reporting Standard for SMEs, giving companies a clearer route to respond to customer and market expectations.

 

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Financial Support Could Help Move SMEs Into Action

 

Previous CDP research with HSBC found that suppliers were 52% more likely to reduce annual emissions when buyers offered financial incentives compared with training alone. That suggests finance and commercial support from larger customers could be important in helping smaller companies move from disclosure and planning into actual emissions reduction.

“Foundations alone will not cut emissions,” Fischweicher said. “Buyers, financial institutions and policymakers have an important role to play by making finance, incentives and practical support more accessible.”

 

Manufacturing and Power SMEs Show Stronger Progress

 

SMEs in manufacturing, materials, transportation services and power generation recorded some of the strongest progress against CDP’s indicators. That is significant because these sectors often have higher direct emissions and greater exposure to environmental risks and resource constraints.

Retail and services companies showed weaker progress. For CDP, the next stage will be whether better transition planning, stronger buyer pressure and wider access to finance can translate the current improvements in governance and disclosure into more targets and measurable emissions reductions.

 

Source: CDP