Small hotels and restaurants are boosting Britain's green business credentials, with more recycling their waste than in any other sector.

An impressive 87 per ent are now actively recycling, up from 80 per cent just two years ago and well ahead of the UK average.

The biennial SME-nvironment survey by environmental guidance website NetRegs.gov.uk also revealed an impressive doubling in the number of small and medium-sized hotels and restaurants (SMEs) improving their energy and water efficiencies (32 per cent, up from 14 per cent in 2007).

Across the sector, 58 per cent have introduced practical measures aimed at reducing environmental harm - again putting the sector ahead of the UK average of 55 per cent and proving that hotels and restaurants are really making strides in reducing their impact.

However, the recession seems to be taking its toll on businesses' green business practices, with just one in four small hotels and restaurants planning to invest in improving their environmental performance over the next year.

Despite government efforts to improve the UK's green business credentials through formal environmental management systems (EMS), NetRegs' study of 7,000 SMEs found an 85 per cent drop in the number of hotel and restaurant businesses with such a system in place. Seventy-three per cent argue that an EMS or environmental policy is 'of no use' to their business, despite evidence from some in the sector that this has reduced operating costs and improved customer relationships.

The number of SMEs able to name a single piece of environmental legislation relevant to their business has also fallen. Just 23 per cent of those in the hotel and restaurant sector were aware of the Packaging Waste Regulations, despite these applying to many licensed premises and businesses which import or handle packaged goods. Only 36 per cent were aware of the Duty of Care Regulations which put requirements on any business that produces, treats or disposes of controlled waste - relevant to many hotels and restaurants.

And to highlight the gulf between perception and reality of environmental harm, just 4 per cent of hotels and restaurants questioned by NetRegs thought their business undertook activities which harm the environment; the actual figure was far higher, with 40 per cent emitting smoke or fumes to air.

Debbie Chatting, marketing strategy manager at NetRegs.gov.uk, comments: "It's good to see improvement in the hotel and restaurant sector's green business activities, but efforts are clearly starting to fall back in many areas. Our survey has unearthed a level of denial among some businesses who still don't acknowledge the harm that they can do to the environment nor recognise the business opportunity it presents to them. SMEs make up 99 per cent of British business so their cumulative impact is huge; they simply cannot be apathetic or maintain indifference."

Falling awareness levels are a likely by-product of recession-driven cuts. Fewer hotels and restaurants are following an environmental improvement programme compared with two years ago, suggesting that the environment has slipped down the priority list of the UK's 4.7million SMEs.

NetRegs is now campaigning for all businesses to nominate a 'Green Ambassador' responsible for reducing the firm's effect on the environment.

Debbie Chatting explains: "Many consumers and businesses now choose to opt for hotels and restaurants with good eco-credentials, so by building measures into your business plan, training your staff and taking an environmentally responsible stance throughout your business, you will reap the rewards of winning more customers. And you'll comply with the law."

She continues: "NetRegs has developed a simple online self-assessment checklist which is free and can help identify green measures that will save most businesses real cash. In fact businesses that receive NetRegs' free regular updates save around £2,600 a year*. Environment, profit and staff motivation go hand in hand."

SMEs ignore green legislation at their commercial peril. The Environment Agency's most recent Spotlight report revealed that half of all serious industrial pollution incidents are caused by SMEs, with the average environmental fine now exceeding £10,000.