Going Green Means Going Strong: How Sustainability Builds Resilience for SMEs

Recent macroeconomic turbulence has tested SMEs’ resilience. According to our UOB Business Outlook Study 2024 (Regional), approximately 9 out of 10 enterprises in Southeast Asia have been hit by inflation, with 62% citing an increase in operational expenses, 50% citing an increase in raw material costs, and 32% citing a decrease in profit levels.

These macroeconomic trends are inextricably linked with sustainability. For example, greater raw material costs might be ascribed to resource scarcity, which is a vulnerability for smaller Southeast Asian economies such as Singapore. Furthermore, climate change hazards such as rising sea levels and extreme weather can cause increased coastal erosion, posing challenges to infrastructure.

While these shifts may challenge SMEs, there is still an opportunity to turn the tide and increase resilience. The aim is to integrate sustainability into one’s business. Sustainability strategies, such as resource optimisation or greening operations and services, can improve operational efficiency, cost savings, market innovation, and investor confidence.

Driving cost savings and resource efficiency

As an example, sustainable practices usually involve waste reduction and resource optimisation, which leads to lower material, energy, and water prices. These resource efficiency measures can also lead to increased resiliency because practices such as water and power conservation can eventually reduce SMEs’ reliance on imported resources, making them more resilient to global fluctuations in resource costs.

Additionally, effective sustainability practices, such as accurate carbon reporting, can help SMEs avoid future compliance costs associated with stricter environmental regulations. This is especially pertinent today, as nearly eight out of ten small businesses in Singapore have lost business due to emissions reporting laws. When SMEs can demonstrate an actual reduction in carbon footprint, they can collectively have a true impact on the earth since their lower emissions can mitigate the effects of climate change’s harsh consequences.

Furthermore, consumers are increasingly eco-conscious, and SMEs with strong sustainability practices can build a positive brand image and attract a wider customer base. By providing sustainable products and services, SMEs can distinguish themselves from competition and cater to this rising market sector. Furthermore, investors are increasingly preferring companies with excellent ESG (environmental, social, and governance) policies, which SMEs may capitalise on by incorporating sustainability into their services.

While implementing sustainable practices may incur initial expenses, the long-term benefits for Singapore’s SMEs are significant. Despite these positives, sustainability has taken somewhat of a backseat with SMEs in Southeast Asia. According to the UOB Business Outlook Study 2024, 87% of ASEAN enterprises value sustainability, yet only 44% have adopted green practices.

Hence, this is where external public and private support is important. Private sector initiatives, such as our Sustainability Innovation Programme (SIP), can help alleviate the financial and operational burdens of adopting sustainable practices – particularly through innovation. By becoming more sustainable, SMEs can not only contribute to a greener future, but also gain a competitive advantage in a changing marketplace.

Sustainable innovation forming new success routes

Beyond cost savings and resource optimisation, SMEs can leverage sustainability to boost revenue and capital inflows.

SIP combines the best of coaching, support, and resources to help SMEs get started and flourish in their sustainability journeys. This year’s SIP, which will begin on August 15, aims to assist SMEs in transforming into sustainable and green businesses.

The programme’s experts, drawn from UOB’s extensive network of industry professionals, will provide SMEs with in-depth insights into a wide range of sustainability topics, including energy efficiency, circular economy and waste management, ESG reporting and disclosure, solutions for decarbonisation, sustainability grants and support, and sustainable finance.

SIP has a proven track record of effectively incorporating sustainability and its benefits into SMEs. Following last year’s programme, the majority of participants (82%) said they walked away with better knowledge and understanding of sustainability and 75% have taken major steps to embark on a sustainability journey after attending the programme. Moreover, 65% of participants stated that SIP sparked the start of their ESG programmes, with some being keen to implement UOB’s Carbon Management Solution and Sustainability Compass in the near future.

Overall, SMEs can stand to gain invaluable knowledge on how to incorporate sustainability to balance impact while maximising profit and productivity. Through SIP, as well as our other sustainability-focused programmes, we at the FinLab hope to empower SMEs to scale their business efficiently while maintaining their competitive advantage and mitigating against climate change risks.

This year’s Sustainability Innovation Programme will run from 15 August 2024 – 26 September 2024. For more information, click here.