How SMEs of all sizes can embed sustainability into their business
Regardless of size or stage of growth, every SME can play a part in making carbon neutrality and net-zero emissions a reality. Here are some practical strategies for business leaders to consider.
Accounting for up to 99% of Southeast Asia’s economy, SMEs play a huge role in their local economies. Given this massive volume, individual commitments to sustainability will make a significant difference to whether countries will be able to meet carbon-neutrality goals and net-zero targets.
But one of the biggest sustainability challenges most SMEs face is not knowing where to start. Despite their desire to implement green practices and pursue green certifications, many lack the resources and knowledge needed to identify opportunities and strategies, especially in a cost-efficient manner.
To help business owners kick-start their ESG efforts, here are some practical strategies that SMEs at all stages of growth can adopt to embed sustainability into their operations.
Start-up stage: Green and sustainability-linked loans
A key obstacle preventing SMEs from going green tends to be lack of capital. Going green can be expensive—the company may need to secure new tools, technologies, and talent, analyse and enhance processes and systems, gather and examine data to guide planning and strategy, and more. All of these require resources that can cost a pretty penny.
In the past, the majority of green financing used to be limited to larger corporations that had ready access to historical ESG data and close relationships with financial institutions. Providing green loans with smaller quantums was once considered a high-cost, low-return activity for most banks.
Today, however, with greater awareness of the responsibility and influence of financial institutions in pushing the sustainability needle forward, SMEs have more avenues than ever to access sustainability-linked loans and transition financing. These loans often have interest rates pegged to environmental targets, giving SMEs the crucial capital they need to fund greener practices while also implementing accountability, incentivising business owners to make sustainability a core part of their business model.
Growth stage: Trade digitalisation
Incorporating ESG in trade is quickly becoming a key differentiator in Asia’s emerging economies. With nations gradually recovering from the economic fallout of COVID-19 and with intra-ASEAN trade having gained more attention in recent years, an uptick of cross-border trade in the region is likely. Combined with increased emphasis on ESG and sustainability, this spells opportunity for businesses, including SMEs.
As SMEs expand beyond borders, trade digitalisation can be a powerful tool to steer supply chains towards greater sustainability. Because of the visibility and transparency that trade digitalisation offers, companies can better ensure third-party accountability and sustainability across their supply chains—ultimately winning stakeholder and consumer trust.
Beyond the sustainability benefits of using digital clearing and settlement platforms such blockchain-powered Partior, trade digitalisation also offers added business benefits in the form of lower transaction fees, faster transfers and programmable smart contracts for automated payments.
Maturity stage: Carbon financing
Businesses looking to get more out of their sustainability efforts can generate carbon credits to be traded on a trusted carbon exchange such as Climate Impact X, also known as CIX. This allows SMEs to earn extra revenue from their emissions reduction efforts—an incentive in and of itself. Even better, this revenue can then be funnelled back into further expanding the firm’s sustainability practices, creating a virtuous cycle. Conversely, SMEs that are unable to reduce emissions from their operations can purchase carbon credits to achieve carbon neutrality and work towards their ESG goals.
Every business, no matter what size, can play their part in achieving a more sustainable future for the world. Adopting sustainable practices isn’t just an ethical imperative, but a financial one—being ESG-conscious and green certified improves a company’s reputation, and makes it easier for them to work with international corporations and investors that care about third-party sustainability.
Visit our Sustainability page to find out more about how DBS is supporting a more sustainable future. Keen to know more about sustainability-linked loans, green financing, or carbon credits? Get in touch with our team here.
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