Sustainability for MSMEs: With the focus on sustainable models gaining momentum among businesses globally to co-exist in harmony with ecological, social, and economic environments, the small and medium enterprises (SMEs) are also recognising the value of this transition. According to a survey of more than 800 SMEs across key Asian markets viz., Singapore, Hong Kong, India, Indonesia, and Mainland China, more than nine in 10 SMEs in India rated environmental, social and governance (ESG) measures as high priority for their business, higher than their regional counterparts.
The survey conducted by Singapore-headquartered bank DBS and Bloomberg Media Studios in August this year noted that 92 per cent of Indian SMEs said ESG measures are of high priority for their business compared to 83 per cent of SMEs across Asia. Moreover, 92 per cent of Indian SMEs accorded that the influence of the global value chain, including vendors, suppliers and customers, is a powerful driver for ESG adoption compared to 80 per cent in Asia. Also, 81 per cent considered government schemes or financial institutions’ incentives as the second most crucial factor influencing ESG adoption.
Niraj Mittal, Managing Director and Head – Institutional Banking Group, DBS Bank India said there is a desire and intent from SMEs to transition their business models to meet the responsibility standards demanded by the market.
The survey and overall focus on sustainability among businesses come in the backdrop of India working towards its emission targets to tackle climate change. The country has committed to reducing the emissions intensity of its GDP by 45 per cent by 2030, from the 2005 level and achieving about 50 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.
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The role of SMEs assumes significance here as the MSME sector contributes nearly 30 per cent to India’s GDP. The survey added that 56 per cent of Indian SMEs are directing their focus towards employee well-being while 40 per cent are focusing on diversity, equity and inclusion (DE&I).
Additionally, 92 per cent of SMEs believed that environmental issues concerning pollution monitoring, climate change, carbon footprint, and depletion of natural resources are top priorities directly impacting their businesses. Waste management was also a key concern raised by 77 per cent of SMEs in India compared to 62 per cent overall in Asia.
However, ESG adoption was reported to have some challenges. For 57 per cent of SMEs, the cost of deployment of ESG initiatives coupled with assessments of return on ESG investments was an issue while for 87 per cent, the lack of knowledge about how to measure the success of their ESG projects was a problem. How to implement ESG frameworks and solutions was a problem for 81 per cent of SMEs while failing to ensure compliance and policies and lack of funding were also areas of concern for 75 per cent and 60 per cent of SMEs respectively.
The survey comes while COP 27, the United Nations’ annual Climate Change conference, is underway. The 2022 conference has 196 nations participating to chart their road maps and contributions to solving global climate change challenges.