Small and medium-sized enterprises (SMEs) are a critical but often overlooked part of the global environmental transition. Representing roughly 90% of businesses worldwide and 60% of global business-related emissions, their ability to turn environmental ambition into action is essential. New analysis from CDP from almost 11,000 disclosing companies, shows encouraging signs of progress, as SMEs strengthen the foundations needed to manage their environmental impacts and drive action.
From preparation to progress: SME Disclosure Data Insights 2026finds that more than 95% of SMEs have made progress against at least one key environmental indicator, while nearly 40% meet most or all of the basic indicators assessed. However, the analysis also reveals a significant gap between putting the right structures in place and taking action. Just 20% of SMEs have an emissions reduction target, while only 32% have emissions reduction initiatives in place.
The findings point to future momentum lies ahead: almost two thirds (63%) of SMEs either have a transition plan or expect to have one within two years, although just 15% currently have one in place. Progress on governance, risk management and stakeholder engagement suggest SMEs are already strengthening the foundations for action. As transition planning becomes more widespread, this is expected to support more SMEs in setting emissions reduction targets and putting initiatives into action, helping close the gap between preparation and action.
Progress is not even across markets. European SMEs are among the strongest performers, with Spain, France and Sweden leading the way among countries assessed. By contrast, SMEs in Singapore and the United States show the least progress, with most meeting none or only a few of the indicators assessed.
Europe’s stronger performance comes amid a rapidly evolving sustainability reporting landscape, with growing emphasis on standardised voluntary disclosures for SMEs (VSME). CDP’s SME questionnaire is closely aligned with European reporting frameworks, including VSME, helping smaller businesses respond to these growing market expectations.
Simon Fischweicher, CDP Chief Customer Success Officer, said:
“SMEs are indispensable to the transition to a net-zero, earth-positive economy. Our data shows that many are already doing the hard work of putting the foundations in place by understanding environmental risks, strengthening governance and preparing for transition. But foundations alone will not cut emissions.
“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. Buyers, financial institutions and policymakers have an important role to play by making finance, incentives and practical support more accessible; helping SMEs strengthen their resilience and competitiveness while accelerating the transition.”
Previous research from CDP in partnership with HSBC found that suppliers were 52% more likely to reduce their annual emissions when buyers offered financial incentives compared with training alone, highlighting the role that larger businesses can play in accelerating action across their supply chains.
SMEs in Manufacturing, Materials, Transportation Services and Power Generation demonstrate some of the strongest progress against CDP’s basic indicators. Progress within these sectors is particularly significant given their emissions and dependencies on nature, and their importance to the global transition. By comparison, SMEs in Retail and Services show less progress against the indicators assessed. Given their role within wider value chains, accelerating environmental action in these sectors will also be important.