SMEs require more support in the journey to become more sustainable as they are facing challenges such as insufficient knowledge to identify and to execute relevant initiatives for the organisation (40 percent), inadequate non-financial support such as sustainability training (33 percent) as well as potential increase in cost (31 percent), according to the UOB SME Outlook Study 2022.
The study also revealed that when implementing sustainable practices, small businesses with turnovers of less than S$10 million, also experience inadequate financial support from the government and banks for sustainability initiatives (31 percent).
Meanwhile, SMEs with turnovers of between S$10 million and S$100 million, cited inadequate non-financial support (47%), insufficient knowledge (46%) and the possible impact to short-term revenue (44%) as key barriers to adopting sustainable practices.
Three in five (60%) SMEs in Singapore believe in the importance of incorporating sustainable practices in their businesses. Improving reputation (54%) was cited as one of the top three reasons SMEs want to adopt sustainability as a core to their business, followed by ease of working with MNCs who care about their sustainability goals (45%) and being able to help build an environmentally and socially responsible Singapore (44%).
SMEs are also integrating environmental, social and governance (ESG) considerations into various aspects of their business. The common ESG-related practices that SMEs plan to implement are clear operational policies and processes such as risk management and financial control (45%), more efficient use of resources to minimise waste (43%) and using energy-efficient equipment and technologies (35%).
At the same time, SMEs are on the lookout for collaboration opportunities with industry bodies, government-linked companies or large businesses (43%). They also seek out connections with industry peers and ecosystem partners (39%), as well as training or solution providers (38%) to deepen their capabilities.
Aligning with Singapore’s green initiatives
SMEs are aligning their initiatives to the Singapore Green Plan 2030. Almost all of the wholesale trade companies (98%) said they plan to do so, by stepping up recycling efforts (60%), training employees in climate risk or environmental protection (60%) and switching to energy-efficient sources to reduce carbon footprint (56%).
Furthermore, construction and infrastructure companies (98%) are focused on increasing their recycling efforts (41 per cent) and applying for green certification schemes (39%). Meanwhile, real estate and hospitality companies (98%) are primarily looking at reducing packaging waste (42%) such as single-use plastic.
Eric Lian, managing director, group commercial banking, UOB, said that pressing global issues such as climate change and the Covid-19 pandemic have brought environmental and social considerations to the fore. “With tougher net zero targets now front and centre in the minds of government and industry leaders, large corporates may start to move faster on working with SMEs that are compliant with sustainability standards within their supply chains,” he added.
The Singapore Green Plan 2030, or the Green Plan, is a whole-of-nation movement to advance Singapore’s national agenda on sustainable development. It charts targets over the next 10 years, strengthening Singapore’s commitments under the United Nation’s 2030 Sustainable Development Agenda and Paris Agreement, and positioning the country to achieve its long-term net zero emissions aspiration as soon as viable.
According to its official website, some of the targets set out for Singapore’s Green Plan 2030 include planting one million more trees, quadruple solar energy deployment by 2025, reduce waste sent to landfills by 30% by 2030, have at least 20% of schools be carbon neutral by 2030, as well as get all vehicles to run on cleaner energy by 2040.
At the recent Singapore Budget 2022, the government announced that it will issue S$35 billion of green bonds by 2030 to fund green infrastructure projects and publish a Green Bond framework later this year. According to UOB, the injection of fresh capital to anchor Singapore as a green finance hub is also aimed at attracting issuers, capital and investors.
The increased liquidity and focus will drive new opportunities for SMEs, from collaborations with government agencies or large corporates to develop or implement green technologies, to knowledge transfer within a larger ecosystem of industry players. As part of its focus on building a low-carbon economy, Singapore also plans to raise carbon tax in phases to reach net zero targets around 2050.
This study was conducted by UOB from late December 2021 to early January 2022 among 800 local SMEs with revenue less than S$100 million and aimed to understand the business outlook and key expectations among SMEs in Singapore.