In today’s climate-conscious world – where embedded carbon increasingly shapes trade decisions – the most vulnerable are the micro, small, and medium-sized enterprises (MSMEs). According to the European Commission, small enterprises represent 99% of all businesses in the EU and contribute nearly 50% of its GDP. For a region looking to be climate-neutral by 2050, small enterprises are the EU’s footsoldiers in making the European Green Deal a reality. However, limited access to climate technology for small enterprises can be a bottleneck in the EU’s green dreams.

Consider, for example, the EU’s recently introduced CBAM. This regulation is designed to restrict the import of goods with high embedded carbon emissions by imposing a 20% to 35% tax on select imports starting January 2026. For businesses to mitigate this impact or avoid penalties, precise and reliable embedded carbon reporting is crucial. However, the complexity of supply chains and the extensive data required for accurate carbon calculations necessitate robust technological integration – a resource that remains largely inaccessible and prohibitively expensive for MSMEs.

The unequal path to climate compliance 

A 2023 study by the European Investment Bank (EIB) found that only 45% of European SMEs have taken steps to reduce their carbon emissions, compared to 70% of large enterprises. This gap is largely due to limited access to funding, lack of expertise, and, most critically, the absence of affordable digital solutions.

Accurate carbon accounting and smooth reporting processes are essential for effective climate compliances like CBAM. Large-scale businesses benefit from access to cutting-edge carbon management tools and specialised sustainability teams; on the other hand, SMEs frequently use antiquated reporting systems, disjointed spreadsheets, and manual data entry – methods that are obsolete, ineffective, and prone to mistakes. In the absence of adequate climate reporting adoption, they stand to become irrelevant in the global economy, making this a necessary barrier to overcome.

Threat of exclusion for SMEs in the low-carbon economy 

Large corporations and multinational brands are increasingly prioritising low-carbon suppliers, meaning that non-compliant SMEs may soon find themselves locked out of key business opportunities, which could lead to a greater hegemony, leading to mismanagement of global supply chains and higher prices of goods.

According to estimates from the European Commission, about 30% of UK SMEs are already having trouble incorporating sustainability into their business plans. Therefore, there exists a need to support European small businesses and provide CBAM software solutions to keep them thriving in this era of a dynamic political-economy-sustainability troika landscape. A sizable section of the market would find it difficult to remain competitive without access to reasonably priced digital solutions.

Climate compliance isn’t a privilege, but an imperative 

Today, we see a top-down approach to climate technology adoption, with major players leading the way by investing in the necessary resources for compliance. However, we cannot afford to wait for these innovations to eventually reach the grassroots if we are to meet our global decarbonisation goals. A more democratised approach is required, one that guarantees small-scale businesses equal access to vital climate technology. In doing so, the playing field will truly be levelled, where affordable and accessible digital sustainability tools empower every enterprise.

To accelerate this transition, governments, trade associations, and technology providers must collaborate in building an ecosystem that equips small businesses with the resources they need for genuine climate compliance. Moving beyond mere regulatory paper trails, our collective efforts must drive real-world decarbonisation and lasting environmental impact.