South-east Asia’s SMEs risk being excluded from growing green economy
Regulators and financiers can play a part in getting them on board, but companies themselves must act too
SOUTH-EAST Asia’s small and medium-sized enterprises (SMEs) contribute almost half of the region’s gross domestic product and employ 85 per cent of its workforce, yet their participation in the green economy remains limited.
Not only does this engine of regional growth risk being left out as new business opportunities are created, such SMEs may even lose some existing footholds.
In a recent survey, eight in 10 SMEs said they have lost business opportunities due to stringent emissions compliance policies implemented by customers and suppliers.
If the SME community is not brought into climate conversations, South-east Asia’s economic engine could falter.
SMEs themselves, meanwhile, need to take control of their trajectories by tapping existing training and funding initiatives.
The United Nations Global Compact (UNGC) is one initiative encouraging corporate sustainability. In her annual letter this year, assistant secretary-general and CEO Sanda Ojiambo stressed corporate climate action must accelerate in speed, scale and scope to achieve meaningful, sustainable outcomes.
Yet this acceleration must not marginalise any key contributors to South-east Asia’s economy. The journey towards sustainability is far more complex for SMEs, which have limited resources, capacity and expertise.
Singapore, as a regional hub for innovation and sustainability, is well-placed to set an example in supporting SMEs, thus accelerating the development of a greener South-east Asia.
Building knowledge and capabilities
The UN Global Compact Network Singapore, the local chapter of UNGC, found in its ninth CEO Roundtable survey that training and financing are top priorities for SMEs that face new sustainability demands.
Several training initiatives are already underway, such as Enterprise Singapore’s (EnterpriseSG) Enterprise Sustainability Programme. The programme supports Singapore companies – especially SMEs – in their sustainability journey, with a range of courses curated by EnterpriseSG and developed in partnership with industry players.
UN Global Compact Network Singapore has partnered EnterpriseSG to produce the Carbon Accounting & GHG Management course for the programme. Other courses under the programme cover sustainable finance, decarbonisation and how to put sustainability into practice.
Various funding and assistance schemes are also offered by government-led entities such as SkillsFuture Singapore and Workforce Singapore to support the development of employee capabilities.
SMEs need to take advantage of this wealth of resources to learn more about the changing regulatory and business demands related to the green economy, and then take action to protect their market positions.
Building financial and regulatory foundations
While there are now more training options, access to financing remains significantly limited for SMEs looking to invest in sustainability initiatives.
Many SMEs still face difficulties securing the necessary capital to implement green solutions, which means the path towards sustainability remains relatively inaccessible.
Financial institutions need to step up by offering better terms for trade supply financing and other forms of funding to SMEs that want to implement sustainable practices. While they may lose several basis points of interest in the short term, financiers willing to do so will create positive long-term relationships.
Governments, meanwhile, play a critical role in making it economically viable for larger companies to involve SMEs in climate action. Policies, financing schemes and capability-building initiatives should be designed with both large enterprises and SMEs in mind.
A good example of a government-led financing scheme and capability-building initiative is the LowCarbonSG programme.
Supported by Singapore’s National Environment Agency and EnterpriseSG, it provides SMEs with access to carbon management tools, workshops and government grants. These resources enable local businesses to monitor and reduce their carbon footprints while staying competitive.
Global sustainability standards must also be adapted to fit local contexts and limitations. While SMEs that serve multinational customers must be prepared to adapt to international standards, many SMEs are focused on domestic or regional markets.
Singapore has already shown its ability to lead the region in sustainable finance, having developed an Asian taxonomy supporting the region’s energy transition.
A possible next step is to set similar standards for supply chains, waste management and packaging, while consulting SMEs to ensure such new standards do not disadvantage them.
Building channels of communication
As we strive for a greener future in South-east Asia, all sectors of the economy must work together to ensure that sustainable growth isn’t a zero-sum game in which larger companies benefit at the expense of smaller ones.
SMEs, despite their size, are powerful drivers of innovation and economic stability. Their success is integral to the region’s sustainable growth.
Regulators and financiers should ensure that these SMEs are given a voice on critical issues such as decarbonisation. At the same time, SMEs need to be more proactive in communicating and participating in the sustainability dialogue.
By levelling the playing field and ensuring that both multinational corporations and SMEs benefit from sustainable development, we can create an economy that thrives today and sustains tomorrow.
The writer is executive director of UN Global Compact Network Singapore
