92% of Indian SMEs focused on adopting ESG measures: Survey

NEW DELHI: SMEs (small and medium-sized enterprises) recognise the value of transitioning to more sustainable business models. In fact, SMEs in India lead regional counterparts in Asia, with more than 9 in ten rating ESG (Environmental, social, and governance) as high priority for their business, according to a survey of more then 800 SMEs across six markets - Singapore, Hong Kong, India, Indonesia, Mainland China, Taiwan - in Asia conducted by DBS and Bloomberg Media Studios in August.

The survey found that SMEs in India believe ESG practices could increase their competitive edge, boost the company’s reputation and attract investors; a new business model influenced by customer demand and an ethical choice driven by social obligation. The survey also identified critical challenges faced by Indian SMEs.

With ESG ratings coming into a sharp focus, companies must transition their business models to attract positive interest from investors and consumers. As a result, 92% of Indian SME business leaders in the survey stated ESG was a high priority for their business compared to 83% across Asia. Additionally, 92% of Indian SMEs said that the influence of the global value chain, including vendors, suppliers and customers, is a powerful driver for ESG adoption compared to 80% in Asia. About 81% consider 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 “The survey results reflect what we have seen from our conversations with SMEs in India. There is a desire and intent from SMEs to transition their business models to meet the responsibility standards demanded by the market. At DBS, we stand ready to support SMEs across Asia in their decarbonisation efforts through financing and advisory services by helping them to plug into the right ecosystems and take advantage of the opportunities around sustainability.”

While ESG frameworks help businesses shape their sustainability decisions and transparently report progress, they also represent a commitment to making a company more socially responsible. As per the survey, 56% of Indian SMEs are directing their focus towards employee well-being, and 40% focus on DE&I. 92% of SMEs believe that environmental issues concerning pollution monitoring, climate change, carbon footprint, and depletion of natural resources are top priorities directly impacting their businesses. Waste management is also a key concern raised by 77% of SMEs in India compared to 62% overall in Asia.

ESG compliance is a discipline that requires detailed knowledge of regulatory aspects, compliance with laws, and business transparency. This survey revealed that 1 in 2 SMEs in India find it challenging to get engagement from government bodies and clarity on reporting standards.

While it is very positive to see that SMEs are looking at ESG Ratings with some criticality, the survey also revealed a few challenges for adoption. These include the cost of deployment of ESG initiatives coupled with ROI assessments of ESG investments (57%), lack of knowledge about how to measure the success of their ESG projects (87%) and how to implement ESG frameworks and solutions (81%). Failing to ensure compliance and policies (75%) and lack of funding (60%) are also areas of concern.

This announcement comes while COP27, the United Nations‘ annual Climate Change Conference, is underway. The 2022 conference is witnessing the participation of 196 nations of the world that are charting their road maps and contributions to solving global climate change challenges.

In September, DBS laid the foundation of how it would strategically direct its financing towards lower-carbon activities. It was the first bank in southeast Asia to announce a landmark set of decarbonisation commitments, with interim targets set for 2030. The commitments represent one of the most comprehensive sets of decarbonisation targets in the global banking industry and reinforce DBS’ commitment to net zero financed emissions by 2050.