Asia is home to some of the world’s fastest-growing economies. This rapid growth presents both opportunities and challenges for SMEs. On one hand, there is a growing consumer market and access to investment capital.
On the other hand, SMEs often have to adapt to stricter environmental regulations covering emissions standards, waste management requirements, let alone consumer demands for eco-friendly products and practices.
Labour conditions, wages, and ethical sourcing are also important considerations for SMEs in Asia, especially in industries like textiles, electronics, and agriculture. Nonetheless, sustainability practices and approaches vary widely in Asia, from one country to another.
As sustainability becomes a more significant concern for consumers, investors, and governments, incorporating green practices into your business strategy can help SMEs thrive:
- Investing in energy-efficient technologies and processes can lower utility bills, while waste reduction can decrease disposal costs;
- By offering eco-friendly products or services, SMEs can differentiate themselves in the market and attract a growing customer base that values sustainability;
- As governments and large corporations increasingly prioritize sustainability, SMEs that participate in green supply chains can fortify their credentials and pitch for new business that might not be possible otherwise;
- A strong commitment to sustainability can also enhance a company brand’s reputation among customers and key stakeholders;
- SMEs that align their operations with government sustainability goals, can also ultimately benefit from government incentives, grants, and contracts offered to businesses that engage in eco-friendly practices; &
- SMEs that prioritize sustainability may also find it easier to secure funding or attract investment from other ESG-focused sources.
The key therefore is for SMEs to conduct a sustainability assessment to identify areas where they can integrate green practices and make the most significant impact. They can then develop a clear sustainability strategy, set specific goals, and communicate their efforts transparently to customers and stakeholders.
In fact, businesses that obtain certifications such as organic, Fair Trade, or carbon-neutral labels and actively promote their sustainability efforts are often perceived as more innovative and responsible, giving them an edge in the market.
Embracing sustainability can also lead to local and overseas partnerships with other businesses or larger corporations seeking sustainable suppliers, reducing dependence on a single market. As an example, joint ventures and alliances can sometimes open new distribution channels and customer segments and help generate significant business opportunities.
SMEs play a crucial role as suppliers to global corporations, and as these corporations strive for net zero emissions, the impact of SMEs on their overall Scope 3 emissions becomes significant. According to Iris Ng, Managing Director at OCBC, “A comprehensive net zero plan for global corporations must include addressing the carbon footprint and Scope 3 emissions of SME suppliers. SMEs that aim to stay relevant in the expanding supply chain must adopt sustainable practices.”
In fact, SMEs that adopt sustainability measures will become more attractive to larger corporations seeking sustainable suppliers. Meanwhile, becoming part of a green supply chain can lead to more significant business opportunities and stability.
Granted, developing a sustainability strategy may require initial investments by an SME, but the long-term benefits including improved financial performance and resilience, make it a worthwhile investment. In fact, embracing green opportunities and promoting a more sustainable and equitable future not only aligns SMEs with the growing sustainability movement but also opens doors to a wide range of business opportunities.
SUSTAINABLE FINANCING FOR SMEs
A wide range of sustainable financing options are available for SMEs in Asia interested in obtaining environmental certifications and labels, encouraging their suppliers to adopt green practices, or investing in eco-friendly technologies, energy-efficient infrastructure, and sustainable production processes.
These financing options often come with favourable terms, making it more financially feasible for SMEs to reduce their carbon footprint and contribute to the transition to clean energy.
From investing in R&D of eco-friendly technologies, materials, or processes, driving innovation in sustainable solutions to putting in place mechanisms to monitor and report on their ESG performance, encouraging transparency and accountability in environmental matters, sustainable financing can make a significant impact on the environment by providing the financial resources and incentives needed to adopt green practices and technologies.
Banks in Asia like OCBC have robust systems in place to evaluate SMEs without green certification but with business activities that meet the green criteria. The initiative is part of OCBC’s SME framework for sustainable finance launched in 2021, for green loans under S$20 million. The aim of the framework is to widen SME access to green loans, lower the barriers of entry and help SMEs avoid high consultancy fees to become part of a tailored green-finance framework.
“The OCBC SME Sustainable Financing framework offers easy access to green loans for SMEs, eliminating complexity without the requirement for green certificates. The comprehensive framework adopts a forward-looking approach by supporting innovative green technologies*,” Ng shares. For businesses located across different locations, the framework extends its coverage to regional businesses, ensuring that a similar streamlined eligibility assessment is applied wherever the business is operating out of.
SUPPORTING INNOVATIVE GREEN TECHNOLOGIES
In the realm of Built Environment, OCBC’s green loans support services, R&D, and manufacturing related to sustainable construction. This includes projects involving advanced fabrication, material technologies, and construction, with a focus on achieving a 30% or more reduction in embodied carbon for materials like concrete, glass, and steel. Examples of supported initiatives encompass the utilization of embodied carbon software tools linked to robust databases, such as the Inventory of Carbon and Energy (ICE) and the RICS Building Carbon Database, enabling the calculation, optimization, monitoring, and reporting of construction-related carbon.
OCBC’s green loans also extend their support to Clean Transportation initiatives, particularly in R&D for green maritime transport technologies and solutions. Examples include the adoption of environmentally friendly technologies such as solar, green hydrogen, electric engines, wind, and ammonia in maritime transport. The loans also cover alternative sustainable aviation fuel (SAF) R&D, along with green maintenance, repair, and overhaul (MRO) processes, such as the recycling of used aircraft parts and eco-efficient cleaning methods like the dry-wash technique employed by Emirates. Energy storage systems within the realm of clean transportation are also eligible for funding.
OCBC’s green loans are also instrumental in advancing Climate Adaptation efforts by supporting services, facilities, and research and development projects aimed at enhancing adaptive capacity and resilience to climate change. This includes initiatives such as flood defence and alleviation infrastructure, drainage and flood prevention projects, coastal protection measures, integrated watershed management, and the development of early warning systems or agro-meteorological information systems. Specific examples range from polder development at Pulau Tekong to improvements in weather and climate information systems, collectively contributing to reducing vulnerability and fostering climate resilience.
WHY SUSTAINABILITY? WHY NOW?
Embracing environmentally sustainable practices therefore is proving to be financially advantageous for businesses, positively impacting their bottom line, according to OCBC. For instance, “the implementation of solar installations typically results in a substantial 50% reduction in electricity costs, offering a significant economic benefit”, says Ng.
Additionally, adopting water efficiency practices not only contributes to conservation efforts but also effectively reduces both water consumption and operating costs for businesses. These examples underscore how going green is not only an environmentally responsible choice but also a strategic and economically beneficial decision for businesses seeking improved financial performance.
Therefore, sustainable practices often lead to long term cost reductions. Energy-efficient technologies, waste reduction measures, and eco-friendly supply chain optimizations can also result in significant long-term savings.
Sustainability is anything but a passing trend. Instead, it is a fundamental shift in consumer behaviour and business expectations. It is a global movement. SMEs that embrace sustainability now are better positioned to adapt to future changes in consumer behaviour, regulations, and market dynamics. Meanwhile, SMEs that delay sustainability efforts risk falling behind and may struggle to remain viable in the long run.
Governments worldwide are also enacting stricter environmental regulations and standards. SMEs that do not comply with these regulations may face legal consequences, fines, and operational disruptions. Meanwhile SMEs who proactively adopt sustainable practices can ensure regulatory compliance and avoid penalties, let alone access funding, maximise market share and profits.