Onus is on SMEs to reach net-zero emissions before 2050

Small and medium enterprises (SMEs) are the backbone of an Asian economy that now needs to rapidly decarbonize if the planet's climate goals are going to be met and net zero achieved by 2050. They comprise 98 percent of private sector companies in Asia, while in Southeast Asia this rises to 99 percent, where more than 70 million SMEs generate over 140 million jobs. That means engaging SMEs to function more sustainably is essential to achieving the region's climate goals given their economic scale and contribution.

Accelerating technology adoption - specifically digitization and electrification - is central to achieving this task. Governments across the region are doing what they can to accelerate the digital transformation of businesses generally, while many SMEs are beginning to experience how digital technologies can improve productivity and efficiency through remote working or supply chain enhancement. An area of real potential is energy efficiency, where it is now possible to gather and analyze data to use energy more sustainably while at the same time explore the transition to renewable energy sources. Until recently, this technology was typically deployed in large-scale building management projects and too expensive and complex for smaller-scale buildings, but that is changing quickly as access to digital innovation accelerates.

However, there is some way to go. We know that SMEs still struggle to embrace sustainability for a number of reasons. According to a report by Epson, SMEs across Southeast Asia struggle to adopt a sustainability mindset, with Singapore's SMEs ranking the lowest in the region when it comes to adopting sustainable operating practices. This is due to technical or financial limitations, organizational capacity to assess suppliers, or difficulty in pivoting various products and services towards more sustainable production or delivery models.

Further, a study by Marketech APAC that surveyed more than 1,400 SMEs across Asia Pacific found that SMEs are slowly adopting digital technologies, with only 16% of SMEs willing to undertake digital transformation strategies, compared to an 11% in 2020. While this indicates progress, it still lags behind larger enterprise where the pandemic has accelerated the adoption of technology across a range of business functions including ecommerce and remote working.

For SMEs, we believe that digitisation has the greatest potential to markedly improve the sustainability of SMEs across Asia. As the world turns to cleaner electricity, powered by renewables, digital technologies work to unlock the potential efficiency gains of clean energy. This means that as more renewable capacity, storage infrastructure and electrical loads come onto the grid, more data analytics, smart technologies and management software will be needed to control them.

For instance, we know that decarbonisation requires greater levels of electrification which is the most efficient form of energy and can be a pathway to a lower-carbon future. It is safe, reliable, and clean, and can also absorb the rising global energy demands resulting from digitalisation, urbanisation, and industrialisation.

What's more, the cost of clean energy infrastructure for generating electricity has seen a significant reduction over the past decade, making it more accessible for SMEs. Electricity also reduces poverty, improves health (especially for women and children), increases productivity, enhances educational opportunities, improves the standard of living, and promotes environmental sustainability.

Technology and the data it generates also play a significant role, as more accurate reporting and analyses can highlight efficiencies that could reduce carbon emissions. For instance, tracking energy use with IoT-capable smart sensors can reveal hidden costs or opportunities, allowing organisations to make informed decisions to drive the highest impact.

Less costly, more efficient and tailored digital services, including cloud-based services are now more accessible to SMEs, while technologies such as artificial intelligence, 5G, and blockchain can help to streamline business processes. We know that SMEs will also need greater control and optimisation of their energy spend, as well as tools sensors to monitor for energy intensity and tackle environmental waste as consumer expectation and potentially regulation evolves.

As the economy transforms to a lower carbon model, the core aim of any SME digital energy solution should remain straight forward and adoptable. We envision a click and tap energy management solution for factories or offices that has a low-cost barrier to enable SMEs to contribute to a lower carbon economy while also saving money through greater efficiency.

The author is Vice President of Business Development and Sustainability Lead, East Asia & Japan of Schneider Electric which was recently ranked number one on the Corporate Knights' list of "the Global 100 most sustainable corporations in the world".