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LIMITED budget, manpower challenges, and a lack of understanding are some of the issues that deter small and medium-sized enterprises (SMEs) from embarking on environmental, social and governance (ESG) reporting.
This was brought up at the Navigating ESG Reporting Complexity event, held on Thursday (Aug 29). The session attracted about 50 participants, most of whom were from SMEs. It was organised by ESG management platform Zuno Carbon together with Spurwing Communications.
Ong Gin Keat, director of sustainability and business development at side stream processing player Envcares, said that while there is plenty of talk on ESG reporting, not many companies understand what it fully entails.
“How does it affect me and the company?” the director, a participant at the event, said. “Those are the challenges that we face, and the main thing is that people in the company understand the intention of (adopting this practice).”
Panel member Allinnettes Adigue, head of the Asean Regional Hub of the Global Reporting Initiative (GRI), noted that sustainability reporting requirements in most jurisdictions, including Singapore, are primarily targeted at listed corporations. However, with the introduction of mandatory climate reporting, large corporations will soon be required to disclose their Scope 3 emissions.
She said: “These emissions, which can constitute up to 70 per cent of a company’s carbon footprint, largely originate from indirect sources such as supply chains, making ESG compliance increasingly critical for SMEs. As large corporations prioritise partners aligned with global sustainability standards, SMEs must adapt to remain competitive and sustain business relationships.
“Despite this, SMEs face significant challenges, including limited resources and expertise, and the complexity of data collection. To bridge these gaps, it’s crucial to provide SMEs with support through financing, capacity building, and increased awareness to facilitate their transition to a low-carbon economy.”
Engaging in sustainability reporting has tangible benefits for them too, said panellist Hari Nair, CEO of Zuno Carbon, an ESG management platform that allows companies to track and report their greenhouse gas emissions.
He explained: “When you look at larger companies that have supply chains that are based in South-east Asia, a lot of them consist of SMEs. As ESG and sustainability (issues) become hot topics for larger companies, they start to value such metrics and reports coming out of SMEs.”
Hence, SMEs which embark on ESG reporting can get a leg up on obtaining contracts from multinational corporations, Nair added.
The data they collect, and insights about their operations and supply chain can also help identify excessive use of resources and/or processes that can be optimised – which can result in lower operating costs, he said.
Ong of Envcare pointed out that to ensure employees understand the importance of ESG reporting, companies can send them for relevant courses, and also support and participate in such events with social enterprises.
But he also acknowledged the constraints, saying: “Some SMEs have (fewer) than 50 people. Where do they get the resources? (How do they choose who to) send on a course? The staff sometimes wear many hats.”
Nair said that while there are pain points to adopting the practice of ESG reporting, it is still worth it to start. He foresees that SMEs will become more open to adopting ESG practices as larger, listed companies are increasingly required to report on them.
Ong agreed, emphasising that a trusted system must be adopted for ESG metrics, and employee understanding of the benefits of ESG reporting must start with management.
“A roap map (is needed as we) cannot just drag people along,” he said.
Other panellists at the event were Justin Ma, executive director of Sustainable Finance at Standard Chartered, and Gerard Lim, director of Regional Transformation at Motul Asia Pacific.
Source: https://www.businesstimes.com.sg/esg/smes-must-adopt-esg-reporting-get-ahead-say-industry-experts