Within Singapore, SMEs make up 99 per cent of businesses, 70 per cent of its workforce and nearly half of its GDP1. So whilst being environmentally aware has traditionally fallen to larger companies, SMEs need to face up to the demands of a nation determined to make a meaningful change to the environmental issue.
However, transitioning to more environmentally-focused business models isn’t something SMEs should feel compelled to do out of obligation but rather they should do it because it makes good business sense.
In saying that, it can be very overwhelming and hard to grasp for any business to embark upon. Here are some tips on how to approach it.
Let’s first be clear on what being ‘green’ actually means?
So what constitutes being environmentally-focused? In truth, it covers a variety of elements, but some ways you can consider looking from the top down at your business model include:
- Adopting smart technologies that can automate resources such as electricity and water usage.
- Technology can reduce the use of paper and also be used to streamline processes such as payroll to improve cost efficiencies. This in turn reduces costs and frees up employees’ time for work that adds more value to the business
- Reducing waste or considering better waste management practices
- Upgrading to lower-emission or energy efficient equipment
Why supporting the environment can also benefit your business?
- The bottom line - every SME wants to reduce costs to improve cash flow, and adopting sustainable practices can help achieve that. As one example, cutting down on your use of energy, can pare down a firm’s expenses. CapitaLand recently announced that it has saved S$170 million on utilities bills since 2009, thanks to more efficient use of resources.2
- Greater competitiveness – Having a sustainability model will open up new customer opportunities. For example, the Singapore Government procures only printing paper with Singapore Green Label, meaning only paper suppliers adhering to these practices can win contracts.3
- Risk management - Putting sustainable practices in place and improving your ability to measure and report on your environmental footprint can help heighten your understanding and ability to manage environmental risks. For example, understanding how change in weather patterns – such as increasing floods - may impact your business operations.
- Committing for your stakeholders – customers and investors are also demanding that the businesses they buy from and invest in be sustainable, compelling many SMEs to measure and report their environmental impact.
- People matter – Increasing people want to work for businesses that have a positive impact on the environment. This is especially the case for family-run SMEs looking to engage the next generation of successors.
Financing – the enabler of green conversion
Whilst SMEs may have wanted to change, often the cost, time and complexities in accessing green finance has made it inaccessible – until now.
The Singapore government, regulatory, industry bodies and financial sector have been coordinated and single minded in ensuring SMEs can have access to green financing tools.
And we’re starting to see the results with a myriad of green financing instruments being specifically designed with them in mind. For example, HSBC has done away with the complexities associated with the traditional green loan process. It is the first bank in Singapore to offer green loans designed specifically for SMEs, by accepting applications based on market-leading ‘green’ certifications awarded to the business by Singapore industry authorities such as the Singapore Environment Council, the Building & Construction Authority and the Singapore Green Building Council.
SMEs can also now access green deposits too, designed to help businesses align their surplus capital with their green aspirations.
Sustainability at the heart of SMEs
There will be some upfront time and investment needed by SMEs to ensure the right practices are in place to transition their businesses towards greener practices, whilst positively contributing to their financial performance and the broader environment and society.
Singapore has developed a range of means to do this, it’s now time for business owners to grab hold of them to win a competitive advantage in the short and long term.
This article was first published in Entrepreneurs' Digest issue 91, May-June 2020.
1Singapore Department of Statistics, Singapore Economy
2CapitaLand, Global Sustainability Report 2018.