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November 2025
Built to last: five reasons SMEs should prioritise sustainability
Fiona Hatch, Investment Director and Private Equity Sustainability Lead, sets out how important a commitment to sustainability can be for the long-term trajectory of SMEs
Introduction
In the UK, small and medium-sized enterprises (SMEs) form the backbone of the economy - accounting for three-fifths of employment and around half of turnover in the private sector1. Their collective influence is significant, and their potential to drive meaningful sustainability outcomes is often underestimated.
At Foresight, we believe embracing sustainability can be a strategic asset for SMEs. As an active private equity investor with a portfolio of more than 250 businesses across the UK and Ireland2, we see sustainability as important to achieving strong financial returns. Our approach supports portfolio companies from first meeting to exit, as we partner together to build resilient and prosperous companies that have a positive impact on the communities in which they operate. Here are five reasons why sustainability should be a priority for every SME.
1 - Good governance drives better decisions
Strong governance isn’t just about compliance, it’s about laying solid foundations for future growth. From building a well-balanced board to implementing the right systems and controls, investing in good governance provides a framework for agile and effective decision making. This investment also helps to attract and retain good people, with employees understanding that they are working within a stable governance framework which mitigates risk and supports them in delivering in their roles. Strong governance should always be a priority for SMEs and a commitment to this is a real sign of an effective and forward-thinking leadership team.
2 - People and communities are strategic assets
An engaged workforce is a competitive advantage. We have seen across our portfolio that SMEs that invest in employee wellbeing, development, and inclusion often see higher productivity and lower employee turnover. We know that retained knowledge from long-serving team members can be incredibly important to SMEs and believe that motivated and engaged employees are more likely to stay with businesses. We also know that SMEs play important roles within their local communities. Through engagement with local charities or partnerships with other local businesses, strong ties to communities can enhance brand reputation, build trust, and open doors to new business.
3 – Managing your environmental impact is an opportunity, not a burden
A commitment to limiting a company’s environmental impact can support operational efficiency, as well as help to address climate change. SMEs that manage resources effectively can reduce waste, cut costs, and improve resilience. Whether it’s energy use, engaging with suppliers, or packaging choices, small changes can reduce costs and help maintain margins. The impact of small companies should also not be underestimated. With SMEs generating almost half of the UK’s non-household greenhouse gas emissions,3 in the face of the climate crisis, every organisation - regardless of size - has a role to play.
4 - Customers are paying attention
Consumer expectations are shifting. Research consistently shows that customers are drawn to businesses with strong sustainability credentials and they’re willing to reward them with loyalty4. Sustainable packaging, waste reduction, ethical supply chains and carbon footprints are all issues cited as being important to UK consumers5, with companies that embrace sustainability better able to effectively stand out from their competitors. For SMEs, this represents an opportunity to reinforce their brands, engage with new demographics, and open doors to contracts with customers where sustainable practices are embedded into procurement decisions, such as those in the public sector.
5 - It’s never too early - or too late - to start
Embedding sustainability early builds strength and adaptability. It sets the tone for future growth and helps SMEs prepare for evolving regulations and market expectations - even for more established businesses, it’s never too late to benefit from taking action. Investors aren’t looking for perfection, they’re focused on progress. Companies that take a thoughtful approach to setting out their sustainability priority areas and collaborate with their stakeholders will be able to manage their resources most efficiently as well as deliver the right impact in the right areas.
Conclusion: A catalyst for local value
Active private equity investors such as Foresight are uniquely positioned to support SMEs in their sustainability strategies - including companies operating in some of the most underserved regions in the UK. By integrating sustainability into our investment processes and through the ongoing responsible management of our private equity investments, Foresight reinforces the social value of its portfolio whilst also enhancing the returns it can deliver to investors. Ultimately, we believe that companies that maintain good governance and manage their resources well will ultimately outperform those that do not, with this being why we think sustainability should be a priority for SMEs across the development cycle.
1 https://www.fsb.org.uk/media-centre/uk-small-business-statistics
2 Foresight Annual Report and Accounts 2025, page 17: https://fghl-ar-online-summary.foresightgroup.eu/wp-content/uploads/2025/06/Foresight-Group-Annual-Report-2025.pdf
4 42T: Consumer Sustainability Report 2025: 42T_Consumer sustainability report 2025.pdf
5 Deloitte: The Sustainable Consumer (2024): The Sustainable Consumer | Deloitte UK
