According to a recent World Economic Forum (WEF) report, small and medium-sized enterprises (SMEs) are the ‘key to a more sustainable and inclusive world’. In the Asia Pacific (APAC) region, SMEs are the backbone of most economies, contributing 40 to 60 percent of GDP. As such, they form an indispensable part of supply chains in the region and around the world.
However, many SMEs aren’t yet engaged with environmental, social, and governance (ESG) issues, often because they lack the budget, time, or resources to invest in a specialist team or appoint a Chief Sustainability Officer (CSO). Although APAC might not be up to pace with regulatory efforts in the EU, there is an opportunity for SMEs to pave the way for greener business practices in the region and even turn sustainability into a competitive advantage.
Sustainability is a topic that is at the top of the business ecosystem’s awareness but still generates questions, if not conservatism from the business landscape, particularly SMEs.
While there is a perception that sustainability is complex and hard to tackle, we believe there are plenty of recipes that can be leveraged, even standardised, for businesses to start from without impacting their top and bottom line, competitive positioning, or branding – and even improve them!
DIAGNOSING THE ESG CHALLENGE
From grassroots initiatives to technology to employee engagement, there are many alternatives to driving ESG. But the first step on an SME’s environmental journey is to define what ESG is. Research on key Asian markets found that 85 percent of medium-sized companies and 75 percent of small companies say ESG is a high priority, but only 37 percent have a clear roadmap to achieve their goals, demonstrating a clear gap between understanding and action. One of the top challenges reported by SMEs when implementing sustainability projects is balancing ESG with growth targets.
Herein lies the fundamental issue; many businesses currently still see sustainability and performance as two separate agendas. To ensure the needs of key stakeholders align with sustainability, ESG must be framed as a supporting mechanism that can help address problems like cost cutting, resource efficiencies, utility bills, and more.
THE BLUEPRINT TO TURNING SUSTAINABILITY INTO A COMPETITIVE ADVANTAGE
- Build an ESG roadmap
Once you understand what ESG is, your next step is to create a roadmap that defines what success looks like to you. It should encompass a plan that aligns business targets with business performance so that you move from focusing on performance alone to performance with impact.
Science Based Targets (SBT) help organisations to decarbonise based on climate science and data. Incorporating the unique challenges SMEs may face, the SBT initiative sets out a specific route for SMEs to start establishing targets. To align internal cultures and attitudes, it’s essential to engage your employees in every aspect of this journey. - Unlock the value of data through the adoption of digital tools
This is where most companies get jaded from their ESG ambition. Tracking emissions is critical to managing and reducing negative environmental impact, but these emissions are often nearly impossible to visualise in analogue.
Fortunately, digital tools are now mature enough to help you get actionable and directionally sound data, which can help you understand your carbon baseline and relate it to your expenses and carbon footprint. Zeigo Activate is one of our solutions which supports SMEs with decarbonisation by digitising the entire process, from planning and acting to taking action and tracking progress, both carbon and ROI wise.
SMEs can gain greater insight into their operational functions, the impact of potential improvements on the environment and their bottom line, and the areas of the business they can realistically change to reduce emissions.
For larger companies, tools like this can be especially useful for tackling Scope 3 emissions, which are the hardest to track and account for around 75 percent of a company’s average emissions. Such tools provide an affordable way to kick-start a whole supply chain decarbonisation programme with traceability, accountability, and a real-time view of the progress and the issues to tackle. - Seek education and training programmes
Launching a successful sustainability strategy is risky without the right guidance for a truly data-driven approach. This is the case for two reasons:
• Not having a data-driven approach may cause you to tackle the wrong issues.
• Not linking it to your business may prove non-sustainable in the long term and fall from priority at the first challenges your business may face.
This is why it’s important to access training that can turn even the most environmentally inexperienced business leaders into ESG pioneers.
In Singapore, Schneider Electric has set up the SME Kickstarter Decarbonisation Programme, a mentorship scheme in which SMEs can access support to develop their decarbonisation roadmaps and leverage energy-saving digital solutions. Once they enrol in these programmes, SMEs can build the foundational knowledge they need to create tangible, measurable, and replicable actions. - Choose partners that will help you reach your goals
When talking about sustainability, we have to exit from the traditional approach and acknowledge that no company alone has all the answers. This is why partnerships and collaborations are key.
An openness to collaboration with similar businesses and/or ESG experts will help you access the right guidance, support, and solutions for your ESG journey and navigate the complexities on the road ahead. Plus, they’re likely to open up new revenue streams, too.
For instance, Boer (Wuxi) Power Systems Co Ltd (Boer), one of Schneider Electric’s partners and 2023 Sustainability Impact Award winners, was able to build more resilient operations through electrification and digitisation. Specifically, the company adopted a smart forklift scheduling management system to improve production efficiency.
As a company that designs, manufactures, and sells high-end integrated power distribution systems and solutions, Boer used these learnings to start engaging with its customer base to share this approach and expand its market coverage and reach in a differentiated way.
KICKSTARTING YOUR SUSTAINABILITY JOURNEY
Sustainability is shifting from a trend to a must-have. As such, business leaders need to demystify it and look into ways to embrace and include sustainability as an integral part of their business strategy, using it to prepare their business for the net zero world and drive a competitive advantage.
The role that SMEs play in the economy, society, and the environment cannot be understated. They need to feel empowered with the knowledge and tools to fully pursue sustainability.
APAC accounts for 39 percent of the world’s greenhouse gas emissions, but the region is also uniquely positioned to act against this. If every business uses the right strategies and technology to minimise its environmental impact, we can collectively decrease emissions by 30 to 40 percent, which is all we need to keep up to the required 1.5°C net zero trajectory until 2027. By focusing on incremental targets, leveraging existing talent and resources, and fostering a culture of sustainability, SMEs can achieve what some of their larger counterparts fail to do. It’s all about doing good through doing business.
