By Elisa Moscolin, Executive Vice President, Sustainability at Sage.
Green finance is expanding rapidly, but the system designed to deliver it is still not working for many of the businesses expected to drive the transition. Small and mid-sized enterprises (SMEs) sit at the heart of efforts to accelerate climate action, yet many remain on the sidelines of the sustainable finance market.
The reason is not a lack of ambition; SMEs have never been more committed to sustainability. But while SMEs are increasingly embedding sustainability into their business decisions, the data needed to evidence that progress often falls short of what lenders and investors require. Without consistent, decision-ready sustainability data, even the most environmentally conscious businesses can struggle to translate intent into access to finance.
New research from Sage and the International Chamber of Commerce highlights the scale of the disconnect. In the US, 71% of SMEs now say sustainability is central or important to their business, but only 8% formally report on their sustainability impact. Just 12% have applied for green finance, and only 4% have been successful. Globally, the pattern is similar, underscoring a widening gap between rising sustainability ambition and access to the finance needed to act on it.
Why reporting, not ambition, is the real barrier
The crux is that green finance relies on credible, comparable and decision-ready data. For most SMEs, producing that data remains complex, fragmented and costly, particularly for businesses without dedicated sustainability or compliance teams. The research shows that complexity is a major barrier to formal reporting, alongside a lack of appropriate tools, inconsistent data and high upfront costs.
In practice, sustainability information is often pulled together manually from disconnected systems, using spreadsheets and one-off questionnaires that do not align with lender requirements or regulatory frameworks. As a result, even highly motivated SMEs struggle to meet the thresholds needed to access finance, leaving significant pools of green investment untapped.
From a finance perspective, sustainability reporting is no longer a nice-to-have. It is becoming the gateway to funding. Banks and investors need structured information to assess risk, price loans and meet their own regulatory and disclosure obligations. Without it, even well-intentioned capital struggles to reach the businesses that need it most.
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This creates a vicious cycle. SMEs lack access to finance because they cannot report, and they cannot invest in better reporting because they lack access to finance. Breaking that cycle requires a shift in how sustainability data is captured, shared and reused.
How technology can close the gap
This is where technology changes the equation, and where AI fundamentally shifts what is possible for SMEs. For years, it was reasonable to assume that many SMEs simply could not afford a dedicated sustainability or climate team. Today, that assumption no longer holds. With AI-enabled tools embedded in digital accounting and financial systems, SMEs can effectively have a “digital sustainability team” supporting them.
Digital accounting platforms, automation, and AI-enabled reporting tools can dramatically reduce the burden of sustainability reporting while improving its quality and credibility. When sustainability data is connected directly to core financial systems, it can be captured once and used many times across lenders, buyers, regulators and auditors. These “report once, use many times” approaches reduce duplication, cut costs and make reporting viable for SMEs without specialist teams.
The evidence is there. In the US, SMEs using AI-powered accounting and carbon-tracking tools are twice as likely to successfully access green finance as those without them. Globally, digital adopters are significantly more likely to have formal reporting systems in place and to move from interest to action.
The role of responsible AI
AI has the potential to accelerate this shift further, but trust remains essential. When applied responsibly and embedded within core accounting and financial systems, AI-enabled tools can help SMEs benchmark performance, identify gaps, and convert routine financial data into auditable sustainability insights that lenders can rely on. Crucially, this allows sustainability reporting to build on data businesses already produce, rather than creating new manual processes.
These tools can also support SMEs by translating complex and evolving reporting requirements into practical, manageable actions that guide businesses on what data matters. For SMEs without dedicated sustainability teams, this integration can be the difference between informal intent and credible, finance-ready reporting.
As adoption grows, so does the need for clear governance. Responsible AI means ensuring transparency, accountability and appropriate oversight, particularly when new tools are used in financial decision-making. Sustainability, finance and accounting professionals will play a central role in this transition, helping SMEs adopt digital and AI-powered solutions in ways that strengthen credibility rather than introduce new risks.
Sustainability reporting enters a more practical phase
Sustainability reporting is entering a more practical and operational phase. As expectations from lenders, regulators and business partners increase, the focus is shifting towards consistency, comparability and decision-useful data rather than one-off disclosures.
For SMEs, this shift raises the bar, but it also creates clarity. Clearer expectations and more consistent information requirements make it easier for businesses to understand what is needed and how sustainability performance connects to financial outcomes. Rather than treating sustainability as a standalone exercise, reporting is increasingly being integrated into routine finance and risk management processes.
For accountants and advisers, this evolution elevates their role. As sustainability data becomes more closely linked to core financial information, they are well positioned to help SMEs embed reporting into existing systems, improve data quality and ensure information can be reused across finance, lending and compliance needs.
Turning ambition into access
For many SMEs, the barrier to green finance is no longer motivation or intent. It is whether their sustainability data is clear, credible and connected to the financial information lenders actually use.
By simplifying how sustainability data is captured, validated and shared, technology can reduce friction between SMEs and financial institutions. Done well, this shifts sustainability from a reporting burden into a powerful tool for improving decision-making and supporting long-term growth.
For SMEs and the accountants who support them, the opportunity is practical and achievable. Build reporting into everyday financial processes, improve data quality over time, and make sustainability information work harder. When the data works, access to finance follows.
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