Improving energy efficiency can help small businesses better withstand volatile energy prices while lowering costs and strengthening long-term competitiveness, the International Energy Agency said in a Friday note.
Successive spikes in gas, oil and electricity prices have left small and medium-sized enterprises particularly exposed because they often lack the resources to absorb sudden increases in energy costs, the IEA said.
The agency said efficiency upgrades can lower energy bills, improve profitability, reduce emissions and make SMEs more resilient to future price shocks. However, limited government support and structural barriers continue to slow investment in energy-saving technologies.
SMEs account for more than 90% of businesses worldwide, contribute about 50% to 60% of value added in advanced and emerging economies, and provide over 60% of global employment. Their share of employment rises above 80% in lower-income countries, the IEA said.
Because SMEs generally pay more for energy than larger companies, utility costs consume a greater share of their revenue. In 2025, European Union SMEs spent about 4.5% of sales on gas and electricity, compared with 3.1% for larger businesses, the agency said.
Limited financing, bargaining power and technical expertise leave SMEs more exposed to energy price swings and economic shocks. The IEA said 35% cite complex procedures and 28% identify high upfront costs as barriers to efficiency investments.
Recent disruptions to oil and gas flows through the Strait of Hormuz have renewed cost pressures.
Nearly half of US business leaders said higher energy costs are affecting operations, while more than 80% of Malaysian SMEs reported double-digit cost increases and over 20% of Thai SMEs faced possible closure within three months, the IEA said.
Despite their exposure to volatile energy prices, only 15% of smaller companies surveyed by the IEA in 2025 had completed an energy audit, compared with 40% of larger firms. Only a quarter of SMEs had invested in digital technologies, versus more than 50% of large companies.
The IEA said analysis of more than 4,500 US industrial facilities found the least energy-efficient SMEs can face energy costs up to six times higher per unit sold than the most efficient businesses in the same industry, highlighting significant untapped savings potential.
The IEA said SMEs benefit more from energy efficiency upgrades than larger companies. Improvements to cooling, heating and demand management delivered significantly bigger energy cost savings for SMEs than for larger facilities.
The savings increase as businesses adopt more measures. An SME implementing four efficiency upgrades can save nearly five times more on annual energy costs than one adopting a single measure, while average savings reach about 12% of yearly energy costs compared with 8% for larger facilities.
Matching today's most efficient SMEs could cut the sector's global energy use by about 60%, while a more conservative improvement scenario would still reduce consumption by around 30%.
Policies aimed specifically at SMEs remain limited despite their greater exposure to economic uncertainty. The IEA said only 9 of the 85 countries and jurisdictions introducing energy efficiency measures in 2025 and 2026 included SME-focused policies.
The IEA said governments can strengthen SME resilience by providing stable long-term policies and expanding targeted efficiency support.