Bridging the Sustainability Gap for Small Businesses

This post is by Ragna, a Mastercard Strive EU Innovation Fund winner. Ragna is an affordable virtual AI advisor designed specifically for small businesses that delivers tailored, actionable sustainability steps to boost market relevance, increase revenue, and contribute to a lower-waste, lower-carbon future.

Small businesses often underestimate their ability to make a meaningful environmental impact. But what if they’re actually one of our greatest untapped forces for sustainable change? The truth is, small businesses make up the majority of companies in the EU, and they hold immense potential to drive sustainable business practices forward. Despite this, they’re frequently overlooked: most digital sustainability solutions are designed for large corporations, leaving the specific challenges and needs of small businesses largely unmet.

We believe that empowering small businesses with the right digital sustainability solutions not only drives their performance but positively transforms regions, supply chains, and communities from the ground up. Small businesses are agile, innovative, and eager to lead. They just need the right scaffolding.

Ragna is here to fill the gap between ambition and implementation. We know we’re part of a broader movement and hope to inspire others to build with us: to share knowledge, unlock funding, and co-create the tools and networks that make sustainable action for small businesses possible at scale.

What are small businesses’ sustainability habits today?

To better understand how small businesses in the EU approach environmental sustainability, we conducted over 30 interviews with micro- and small enterprises in the tourism sector across both urban and rural areas in Sweden and France. The findings were consistent: while there is strong motivation to act on sustainability, small businesses face systemic barriers that limit their ability to do so effectively. These include a lack of dedicated staff, limited financial resources, and uncertainty about where to begin.

• Awareness and access to funding remain low. Despite the availability of green subsidies and loans, small businesses rarely know these resources exist. For example, one French bank reported personally contacting hundreds of small businesses to ensure they were aware of the green financing options. Many small businesses only discovered financial support through personal networks or by chance, revealing a major gap in how funding opportunities are communicated and tapped into.
• Action is already happening, but it’s often piecemeal. Many small businesses are already engaging in basic sustainability practices such as recycling, local sourcing, and reducing energy use. However, they tended to be reactive and short-term rather than part of a strategic or integrated sustainability plan. Sustainability, in most cases, is not embedded in their business models.
• Small businesses are open to AI but lack tailored support: Interestingly, nearly all small businesses were familiar with AI tools like ChatGPT and were already using them for tasks such as admin or reporting. This indicates growing digital confidence and a willingness to adopt AI when it saves time or reduces workload. However, when it came to sustainability, small businesses felt that existing digital and AI-enabled tools lacked the specific, actionable guidance they needed, especially tools that account for their size, sector, and regional context.

What motivates small businesses to adopt more sustainable practices?

Our interviews and research point to four main drivers that motivate small businesses to make changes for the environment:

• Proving value: Demonstrating a clear return on investment is essential, particularly for businesses under pressure to justify every investment.
• Customer expectations: In consumer-facing sectors, customer interest in sustainable practices can be a powerful motivator.
• Regulatory incentives and compliance: While currently less urgent than for large businesses, regulatory changes still play a role for small businesses, especially when changes are clarified and contextualized within a small business’s industry or sector.
• Moral and community-driven values: Many small businesses want to do right by their local environment and community, but they need support to translate that motivation into action.

The business case

Sustainably managed businesses often experience above-average sales growth and higher profit margins, outperforming their peers financially. For example, an MSCI study found that strong performers on environmental and social impact tend to enjoy better share price performance, return on equity, and reduced capital costs. Taking steps towards more sustainable practices could save small businesses significant operational costs and lead to more business opportunities. Sustainable practices have also been shown to attract top talent and reduce workforce turnover, with companies reporting up to 93% employee retention when environmental and social impact is embedded in company values. Although these benefits are well documented among larger companies, we expect small businesses to achieve similar advantages as they increasingly adopt sustainable practices.

Yet despite the clear business case on sustainability, including cost savings, new funding opportunities, and market advantages, many small businesses still struggle to act. Why? Because even if small businesses have the motivation, they lack the finances, time, and knowledge to navigate this complicated landscape alone.

An ecosystem of capacity-builders can amplify change

Sustainability isn’t overwhelming when small businesses are supported by a strong ecosystem of partners, networks, and regional actors. When capacity-builders align on shared goals and provide coordinated access to knowledge, funding, and tools, the ripple effect can be transformative. The small business community in the EU demonstrates a strong willingness to be supported in its efforts to become more sustainable.

The 2024 European Union’s Flash Eurobarometer highlights this gap: small businesses most often need financial incentives such as grants or subsidies. Beyond funding, they also benefit from support in identifying market opportunities in the transition to a more sustainable economy, boosting resource efficiency, and building collaborative strategies.

AI plays a key role in this vision. It can reduce costs, streamline reporting, spark innovation, and make sustainability more accessible. In fact, small businesses are often more adaptable than large enterprises when it comes to tech adoption due to their agile nature. Their flexibility and responsiveness make them ideal candidates for tools like Ragna.

What’s next for Ragna?

In the coming months, we’ll be launching early testing with small business users and expanding region and industry-specific datasets. This is a key step because the better we understand different business types and local contexts, the more precisely Ragna can tailor its advice. More tailored guidance means actions that are easier to take, more relevant to each business, and ultimately, more impactful.

From our interviews, it was clear that small businesses are motivated to act on sustainability, but many lack dedicated resources, clear guidance, and the time to navigate complex frameworks. They told us directly: they need practical, time-saving tools that fit seamlessly into their daily operations.

That’s exactly what we’ve built Ragna to do. The platform simplifies sustainability by offering focused guidance, step-by-step actions, and easy-to-use checklists — all adapted to a business’s specific type and context. It also points users to relevant funding opportunities, supports regulatory preparation, and enables businesses to align daily operations with long-term climate goals. Our goal is to translate moral motivation and growing digital confidence into meaningful, measurable progress.

We’re working to secure our first partner communities and continue refining Ragna’s features to support local ecosystems, including regions, clusters, and networks that want to coordinate sustainability efforts across multiple small businesses.

What if sustainability is also your biggest opportunity? Reach out to…

• Partner with Ragna to scale sustainability across your network or region?
• Talk more, ask questions, or share insights from your experience working with small businesses?
• Collaborate to exchange knowledge and co-create meaningful solutions for sustainability?

We’re always eager to learn, listen, and work with others driving sustainable impact for small businesses. Let’s connect → www.ragna.ai or reach out directly at carina@ragna.ai.