What do decarbonisation targets mean for SMEs?

DBS is supporting Asia’ transition to a low-carbon economy by reducing not only its own operational greenhouse gas (GHG) emissions but also attributable GHG emissions from the most carbon-intensive segments of DBS’ institutional banking portfolio. The latter includes DBS’ downstream Scope 3 financed emissions – to reduce these emissions, we facilitate decarbonisation within the real economy by working with our customers to reduce their GHG footprint.

What do decarbonisation targets mean for SMEs?

We recently established the first set of targets for our downstream Scope 3 financed emissions as part of our net zero journey. So, what are these targets and what does it mean to SMEs?

Here is a snapshot of what you need to know when it comes to DBS’ decarbonisation targets.

DBS recently announced its very first set of targets on Scope 3 financed emissions. What does this mean?

DBS has established different sets of targets for nine sectors aimed at supporting clients in their transition towards a net zero future. These targets can be classified into the following:

Target Type #1: Emissions Intensity Reduction
Purpose: Reducing the volume of GHG emissions per unit output
Target industries: Power, Automotive, Aviation, Shipping, Steel and Real Estate

Target Type #2: Absolute Emissions Reduction
Purpose: Reducing absolute total GHG emissions
Industry: Oil & Gas

Target Type #3: Data Coverage
Purpose: Encourage quantification and disclosure of GHG emissions
Industry: Food & Agribusiness and Chemicals

Why is DBS supporting Asia’s transition to a low-carbon economy?

We have set these targets for three key reasons:

  • Decarbonisation is a societal responsibility and banks have a critical role to play in mobilising capital to help fight climate change.

  • Decarbonisation is about managing risks. For financial institutions, being unprepared for climate change may result in material transition and physical risks.

  • Decarbonisation is also a business opportunity as the road to net zero is one of the key investment themes of the future.

How does transition to a low-carbon economy affect SMEs?

As the world transitions towards a net zero economy, many large and small companies have been directing their attention and resources towards achieving their ESG (environmental, social, and corporate governance) goals including decarbonisation. These goals and decarbonisation commitments will cascade across their value chain and the wider ecosystem that will affect SMEs.  

Large corporates could choose to reconfigure their value chain with businesses which better align with their ESG goals. For example, selecting suppliers with clear ESG targets or utilise alternative material that generates lower carbon emissions as well as onboarding logistics providers using electric vehicles (EVs) or packaging companies with a responsible supply chain.

SMEs who are proactively managing their ESG performance, may find themselves more competitive and attractive to their customers as consumer lens gradually shift towards being more ESG conscious in current times.

Therefore, SMEs will need to adapt to meet the evolving expectations of the market. A better understanding of climate risks will help SMEs to make informed decisions in their procurement and marketing efforts.

How could SMEs be impacted by these targets?

There is an increasing pressure on both large and small companies to decarbonise. Be it for energy cost savings or attracting customers and investments, SMEs can benefit from this shift in focus to decarbonise.

“For SMEs that conduct activities that are out of scope, the targets are not binding, but the transition of their large corporate anchors will be relevant to what they are demanding from them,” says Helge Muenkel, Chief Sustainability Officer, DBS.

Why is it important for businesses to reduce GHG emissions?

Businesses that can showcase and prove that their business models are that of producing lower emissions will be in a better position to attract investors, financing, as well as more climate-conscious consumers.

According to a survey by Bloomberg, 83% of businesses said that ESG is a high priority for them. The study also showed that 80% of SMEs believed that ESG factors are an avenue to attract new business and funding, while 76% said it was a way to remain competitive and relevant.

How can SMEs start on their sustainability journey?

The key will be to measure their emissions and adopt technology that help to decarbonise their activities. The most straightforward way to kickstart the journey is through energy efficiency measures. There are vendors in the market who can help by providing green certification or carbon calculating services.

“Business needs to think of carbon as just another input and output to their operational process. Same as electricity and water consumption, human resources. It is critical for companies to understand where they stand in the value chain of their customers. Firstly, they need to understand their own business’ carbon emissions levels. From there, they can make informed decisions on the areas of improvement.” says Yulanda Chung, Head of Sustainability at DBS Bank.

Here are some initial steps you can take to embark on this transition journey:

  1. Identify what industry leaders are doing in terms of sustainability commitments
  2. Analyse your business and identify sustainability objectives material to your business
  3. Establish a roadmap that is feasible, quantifiable and with a clear timeframe
  4. Implement the roadmap and monitor progress

How can DBS help your business to reduce GHG emissions?

DBS will continue to focus on the digitalisation of supply chain financing, partnering with our customers to provide more efficient financing solutions, and actively participating in government ESG finance schemes to support SMEs in their sustainability and decarbonisation journeys.

Among other initiatives, DBS offers the following solutions to help SMEs go green:

  • Suite of financing products that can be leveraged to support Green and Sustainability-linked projects

  • SME Kickstarter Grant to help SMEs integrate sustainability into their business.

  • Sustainability Business Class events to create awareness among SMEs on relevant topics.

Refer to the infographics here for a summary of this article.

What’s the next step?

Kickstart your journey towards net-zero by making a Green Pledge with DBS here! Pledging allows you to take the first step in making a bigger impact beyond profit, and also identifying the support you need.

Learn more about the full suite of sustainability solutions to support SMEs in making the low-carbon transition. You can find all our programmes here.