In the European Union, an unprecedented shift is taking place in climate matters. The regulatory push has been a major catalyst for large companies to overhaul their strategies to capitalise on the opportunities inherent in the transformation driven by climate change. For their part, banks are not only seeking to adapt in order to finance this transformation and capture the opportunities that arise from this alignment process towards a decarbonised economy; financial regulation, determined to promote transparency, curb greenwashing (greenwashing) and safeguard financial stability, places institutions at the centre of a puzzle in which they must strive to mitigate climate risks with the same rigour with which they oversee other financial parameters.
At the same time, the signals in our environment are clear: the strong commitment of European recovery funds to sustainability-related projects (which in Spain rises to 40% according to the Recovery, Transformation and Resilience Plan); the financial sector’s strong commitment at COP26 through the Glasgow Financial Alliance for Net Zero; the unstoppable rise in the prices of CO2 emission allowances in international markets as the most efficient way to advance emissions reductions; the European Commission’s Fit for 55 or Spain’s Climate Change and Energy Transition Act are compelling signs that suggest looking beyond profitability and the short term.
However, in this complex ecosystem, a key player is still missing for this climate change-related transformation to become a true revolution: small and medium-sized enterprises, a segment that represents more than 96% of Spain’s productive fabric. Although the heterogeneity of the companies that make up this business segment must be taken into account, in general they all view sustainability through a similar lens and suffer from common problems that must be addressed before requiring them to integrate into this process of change.
First, SMEs tend to associate sustainability solely with energy efficiency and, even so, a very significant percentage is insensitive to the impact that decarbonisation has on their competitive position. In addition, according to some CEPYME surveys and others conducted in-house, more than 50% of SMEs believe that sustainability may be a passing fad that, in the short term, requires a cost effort greater than the potential medium-term benefits. Third, many have chosen to wait until there is a stable and consolidated regulatory framework and rely on an incentive system with tax advantages. Finally, in Spain, unlike what happens in other EU countries, SMEs believe that the degree of sensitivity to the adverse consequences of climate change will not change their financial conditions in the coming years.
There are many reasons that explain this timid approach by SMEs towards the decarbonisation of the economy. Among others, it is important to put the importance of sustainability into perspective in an economic environment as complex and uncertain as the one currently defining the Spanish economy. Therefore, for sustainability to be integrated into SMEs’ decision-making map in an environment like the current one, a change in mindset is absolutely necessary so that emphasis is placed on the opportunity offered by capturing new market niches and improving production and financial costs, rather than focusing on the risks arising from climate change.
Likewise, it is essential to consolidate the regulatory framework, with clear and manageable sectoral alignment pathways in the medium and long term and with an appropriate system of incentives aligned with the net-zero objective, so that SMEs can adapt with conviction and transparency, and not merely for compliance. While the regulatory scaffolding remains incomplete, there will be a tendency to delay any decision, resulting in a loss of time or timewashing, which will add to the long list of climate risks. Finally, it is crucial to decouple sustainability from empty, meaningless and unfounded words, often used for political purposes.
However, while work is being done to pave the way to mitigate the adverse effects of climate change and manage the social aspects arising from this transition, SMEs must ask themselves whether it is worth making an effort to anticipate and be prepared. Not only out of prudence, but out of a genuine interest in generating a positive impact on their surrounding environment.
Large companies have already declared their firm intention to help mitigate climate change and, sooner rather than later, they will begin to require an adaptation certificate from their suppliers. For its part, the banking system demonstrated at COP26 that it is ready to finance this transformation, so SMEs should explore what this opportunity means for them, because there is no doubt that the Spanish banking sector wants to advise, support and finance any company’s interest in moving forward on the path to sustainability.
Juan Carlos Delrieu, Director of Strategy and Sustainability
