KfW Research: So far, only few SMEs are able to provide sustainability data

• Creating a sustainability profile poses a challenge for small businesses in particular
• Banks and savings banks are addressing the topic of sustainability primarily in loan talks with large enterprises, but that could change
• There is great uncertainty among SMEs about the future relevance of the issue of sustainability

Many small and medium-sized enterprises in Germany are not yet well prepared to respond to the possibility of banks and savings banks increasingly asking for sustainability indicators in future loan negotiations. Under a KfW survey, fewer than half of SMEs, or 48%, responded that they could communicate at least one sustainability indicator today or in the foreseeable future. This includes data on their consumption of electricity, energy and water, as well as emission-related data such as greenhouse gas emissions and sustainability certifications.

“The findings show that even providing traditional consumption data poses a challenge for many SMEs”,

said Dr Elisabeth Grewenig, SME expert at KfW Research. At present, a mere 30% of SMEs are able to report their electricity consumption and 26% their water consumption. The smaller the enterprise, the more likely it has problems supplying such data.

These are the findings of a recent special analysis conducted by the KfW SME Panel. It was conducted between mid-February and mid-June 2024. Responses were received from 9,556 SMEs from all economic sectors.

The survey also highlighted a high degree of uncertainty among SMEs. Forty-five per cent of them stated that they were unable to assess what relevance the topic of sustainability will end up having for them in loan negotiations, while 38% expect that the issue will continue to be of little or no consequence in their talks with banks and savings banks. Smaller businesses in particular do not attach much relevance to the issue, while larger SMEs already have a different view and are also more likely to be able to provide relevant data.

Of the SMEs that were in loan negotiations in 2023, 15% mentioned that their bank or savings bank asked them to provide sustainability data. This was the case particularly for larger enterprises with more than 50 employees, 34% of which had been asked to provide such data, compared with only 13% of micro-businesses with fewer than five employees.

“In the future, banks and savings banks will pay more attention to sustainability indicators in their lending business, if only for regulatory reasons, but also out of reputational considerations. It can therefore be expedient for small and medium-sized enterprises to deal with this issue”,

said KfW economist Grewenig.

“The findings underscore how important it is to quickly gain clarity as to what disclosure requirements small and medium-sized enterprises will be facing in the future. As regulatory requirements are expanded, there is a need to strike the right balance between greater transparency and minimising the additional burden, and to be mindful of the specifics of small and medium-sized enterprises.”

The findings of the special analysis of the KfW SME Panel can be retrieved from www.kfw.de/fokus