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Gone are the days when bottom-line alone dominated boardroom conversations and investment decisions. Gone, too, are the days where consumers engaged businesses regardless of how they operate. Increasingly, businesses, investors and consumers act with the future in mind. To preserve our environment, empower those in need, and build a transparent, inclusive, equitable future for all.

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In few places is the drive to sustainability more important than Small and Medium-Sized Enterprises. SMEs account for 90% of businesses and roughly half of employment globally, yet many lack the financing, technology and expertise required to embrace sustainability.

As we strive to realize a cleaner, greener, more inclusive future,

how can we help SMEs achieve their sustainability ambitions?

DBS partnered with Bloomberg Media Studios to find out how to help SMEs. Together, we conducted a quantitative study covering 937 decision makers from primarily small (22%) and medium-sized (67%) companies who are involved in ESG decisions. The study covered China, Hong Kong, India, Taiwan, Indonesia and Singapore, connecting with approximately 150 people in each region. They represented the Real Estate, Mobility, Power, Agriculture and F&B/Hospitality industries. These are the results.

Barriers

Complying with regulations, attracting talent, boosting revenue, pleasing stakeholders and simply doing the right thing are among the incentives leading SMEs to embrace ESG, yet a host of barriers stands in the way.

Balancing ESG with growth targets 39% 35% Cost of deployment 34% Difficulty to assess the future valuation and potential ROI Financial barriers are most common, with over a third of SMEs tipping ROI, the cost of deployment and meeting growth targets as challenges. Balancing ESG with growth targets 39% Cost of deployment 35% Difficulty to assess the future valuation and potential ROI 34% Financial barriers are most common, with over a third of SMEs tipping Return of Investment (ROI), the cost of deployment and meeting growth targets as challenges.
31% Lack of clarity from governing bodies on reporting standards 29% Lack of technical know-how on planning and implementation 24% Lack of ESG specialists A third of SMEs said the lack of ESG specialists makes this difficult, while nearly a third struggled with the lack of clarity on reporting standards. Without a single platform to harmonize standards, implementing and measuring projects is tough. A third of SMEs said the lack of ESG specialists makes this difficult, while nearly a third struggled with the lack of clarity on reporting standards. Without a single platform to harmonize standards, implementing and measuring projects is tough. Lack of clarity from governing bodies on reporting standards 31% Lack of ESG specialists 24% Lack of technical know-how on planning and implementation 29%
Lack of buy-in from external stakeholders 32% Difficult to drive employee involvement and mindset changes towards sustainability 30% A lack of buy-in from stakeholders and employees presented a third challenge. This is more pronounced in developing markets where awareness of sustainability is lower. 30% Lack of buy-in and collaboration across internal stakeholders A lack of buy-in from stakeholders and employees presented a third challenge. This is more pronounced in developing markets where awareness of sustainability is lower. Lack of buy-in from external stakeholders 32% Lack of buy-in and collaboration across internal stakeholders 30% Difficult to drive employee involvement and mindset changes towards sustainability 30%
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Strategies &

Implementation

SMEs are serious about ESG, though many are still in the early stages of their journey. Around 83% of small companies and 92% of medium-sized companies have a strategy or are creating one, yet only 37% have a clear roadmap.

Regardless of size, 72% of companies need to hire skilled talent to run ESG projects. 0% Employees Hiring skilled talent to run ESG projects Training and development 68% need to review internal policies and processes 0% Business Operations Reviewing internal policies and processes Enhancing compliance and disclosure practices 66% need to hire a sustainability lead or bring on board members with ESG expertise 0% Senior Management Hiring a sustainability lead Board member/Investors with ESG expertise 0% 68% need to review internal policies and processes Business Operations Reviewing internal policies and processes Enhancing compliance and disclosure practices 0% Hiring a sustainability lead Board members/Investors with ESG expertise Senior Management 66% need to hire a sustainability lead or bring on board members with ESG expertise 0%

Five Areas to Support SMEs on Their ESG Journey

If SMEs don’t embrace ESG soon, they could miss important opportunities. Yet, if they implement half-baked ESG strategies, they risk reputational loss, greenwashing, financial loss and more.
To pursue the opportunities and avoid the risks, SMEs need support with customized measurement standards, transparent regulations and stakeholder buy-in. Here are five areas where external parties including banks and consultancies can help.
Develop consistent and SME-customized measurement standards for easy adherence. Help SMEs provide a long-term view on the ROI linked to ESG initiatives to better inform stakeholders about the risks and returns. Manage greenwashing and corrupt practices to ensure level playing field for all SMEs vs larger corporates.
Be open to provide financial support for ESG initiatives. SMEs expect an edge when it comes to funding these projects. Ensure regulations are transparent, clear and easily accessible to SMEs
Develop consistent and SME-customized measurement standards for easy adherence Ensure regulations are transparent, clear and easily accessible to SMEs Help SMEs provide a long- term view on the ROI linked to ESG initiatives to better inform stakeholders about the risks and returns Manage greenwashing and corrupt practices to ensure level playing field for all SMEs vs larger corporates Be open to provide financial support for ESG initiatives. SMEs expect an edge when it comes to funding these projects
The Roles of

Banks

While every company must plot their path to ESG internally, none can make the journey alone. Regardless of size, 75% of companies feel that banks and financial institutions are important in helping them achieve ESG goals. Yet only half currently seek guidance from banks.

What companies expect from banks

Overall ESG consultancy
51%
ESG Financial assistance/loans
42%
Thought leadership on ESG
41%
ESG ROI projections
36%
ESG Seminars/Webinars
36%

Pain points and issues when dealing with banks and advisory partners

SMEs, face a range of pain points when working with banks.

SMEs are extremely diversified; thus, banks should not adopt a “one-size-fits- all” approach. Instead, banks should move away from standard tools and measures, developing policies that that enable SMEs to differentiate from large corporations through aspects other than capital scale.

Starting the conversation with banks

Opaqueness and complication in starting the process with banks Lack of definition of ESG initiatives and requirement Lack of alignment between banks’ overall policies and staff at the executional level Complexity in process and paperwork required Banks preferring established revenue- generating companies than start-ups/SMEs Difficulty for SME to meet the same criteria at large corporates Opaqueness and complication in starting the process with banks Lack of definition of ESG initiatives and requirement Lack of alignment between banks’ overall policies and staff at the executional level Complexity in process and paperwork required Banks preferring established revenue- generating companies than start-ups/SMEs Difficulty for SME to meet the same criteria at large corporates

With proper guidance on policies, regulations, certifications and KPIs, SMEs will be better placed to pursue ESG initiatives and play their role in building a more sustainable, transparent and equitable future for all.

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