Cost remains the biggest barrier preventing Singapore's SMEs from focusing more on ESG

Just 4% of the ESG initiatives recorded in 2022 were for community causes, a drastic drop from 13% in 2021.

Despite three in four (76%) Singapore SMEs considering ESG issues (environmental, social, and governance) relevant to their business, just over half (52%) actually carry out ESG activities at least once a year, a 7% drop from 2021, while 23% carry out such activities less than once every four years.

This is because cost remains the biggest barrier preventing SMEs from focusing more on environmental and social issues, said almost one-third of those surveyed, a 6% rise from 2020. The SMEs surveyed also expressed that they do not have staff with the relevant skills (28%), and that social and environmental initiatives take too much time (27%).

This is per QBE Insurance’s yearly survey that examines the key concerns and challenges faced by SMEs in Singapore, and which found that SMEs surveyed are deprioritising social and environmental initiatives by lessening their number annually. The researchers polled 416 SMEs across various industries in Singapore.

So what are the most popular ESG initiatives? Among those recorded by the respondents in 2022, 4% were for community causes, a drastic drop from 13% in 2021. Environmental preservation or awareness initiatives appeared to be the most popular among Singapore SMEs, with 54% saying they conducted these initiatives in 2022 – up from 52% a year earlier. One-third (33%) of SMEs referenced carrying out waste reduction and management initiatives, a 3% rise from 2021.

When asked about what impact climate change has had on their businesses, 38% of SMEs said it impacted consumer demand, with consumers expecting more environmentally friendly goods. More than a third (35%) of SMEs also indicated that climate change has impacted working conditions, where there are more challenging and harsher working conditions for staff, especially outdoors. A similar number of SMEs (34%) said that climate change has impacted resource availability and cost.

Ronak Shah, CEO of QBE Insurance Singapore, commented: "Ignoring the growing sentiment that sustainability initiatives are a must, as opposed to a nice-to-have, could expose SMEs to unnecessary risks across different areas of their businesses, such as labour conditions, brand and reputation, customer loyalty and resource efficiencies. We believe a focus on sustainability issues should be seen as an opportunity to build long-term business resilience, rather than a distraction – or worse, as a token initiative."

Apart from the diluted focus on ESG, what was worrying was the possible impact of deprioritising of social and environmental initiatives by SMEs potentially leading to worsening WSH (workplace health & safety) performance. In 2022, 51% of SMEs indicated that they experienced workplace incidents, an 8% increase over 2021, and a concerning 27% increase from 2020. This coincides with 2022’s record of holding the highest number of workplace fatalities over a four-year period in Singapore.

Despite the number of workplace incidents rising, 29% of the local SMEs polled were either not fully informed about WSH insurance requirements, or were totally unaware or unsure of where to get relevant information from – up from 25% in 2021. Another 8% of SMEs polled also indicated that they have not implemented any WSH initiative in the past 12 months.

Shah added: "These findings should serve as a wake-up call for SMEs. At a time when there has been a recorded uptick in workplace incidents, implementing the appropriate WSH measures are more critical than ever."

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Lead image / QBE Insurance