SMEs Deprioritise ESG Initiatives Due to Rising Costs
In 2022, a noticeable decline was observed in the number of small and medium enterprises (SMEs) in Singapore engaging in social and environmental initiatives as they grappled with various challenges that compelled them to prioritise other concerns.
According to a survey by QBE Insurance, only 52% of SMEs conducted such initiatives at least once a year, marking a 7% decrease compared to the previous year.
The study encompassed 416 SMEs across Singapore, revealing a noteworthy disparity between the 76% who acknowledged the relevance of environmental, social, and governance (ESG) issues to their businesses and the actual implementation of initiatives. The primary obstacle cited by 32% of respondents was the prohibitive costs associated with addressing these concerns.
SMEs further identified two significant factors hindering their engagement in social and environmental initiatives. They highlighted the lack of staff possessing relevant skills (28%) and expressed concerns that such initiatives require excessive time commitments (27%).
QBE Insurance has cautioned that deprioritisation of social and environmental efforts by SMEs could potentially contribute to deteriorating workplace safety and health (WSH) performance.
The Workplace Safety and Health Report 2022, published by the National Statistics of the Ministry of Manpower, has revealed that 2022 witnessed the highest number of workplace fatalities in Singapore over a four-year period.
Alarmingly, more than half (51%) of the surveyed SMEs by QBE Insurance reported experiencing workplace incidents, representing an 8% increase from 2021 and a significant 27% surge from 2020.
"These findings should serve as a wake-up call for SMEs. At a time when workplace incidents are on the rise, it is more crucial than ever for SMEs to implement appropriate workplace safety and health measures," emphasised Ronak Shah, CEO of QBE Insurance Singapore.
Environmental preservation and awareness campaigns remained the most popular initiatives among SMEs in 2022, with 54% indicating their engagement, a slight increase from the 52% recorded in 2021.
Waste reduction and management initiatives also garnered significant attention, with 33% of the surveyed SMEs choosing to prioritise them. However, there was a noticeable decline in community initiatives, as only 4% of SMEs focused on such projects in 2022, compared to 13% in 2021.
The impact of climate change on business operations was acknowledged by 38% of SMEs, driven by consumer demand for more environmentally-friendly goods.
Furthermore, 35% of SMEs highlighted the challenges of harsher working conditions, particularly for outdoor staff, and the impact of climate change on resource availability and cost.
QBE Insurance's survey suggests that SMEs tend to prioritise immediate climate change impacts rather than taking proactive measures against long-term risks. CEO Ronak Shah emphasised the need for SMEs to consider environmental risks in their business plans, as neglecting sustainability initiatives could expose them to various risks, including labour conditions, brand reputation, customer loyalty, and resource efficiencies.
Shah further stressed that focusing on sustainability issues should be viewed as an opportunity to build long-term business resilience rather than being perceived as a mere token initiative or distraction. Ignoring the growing sentiment that sustainability is no longer optional but necessary could pose unnecessary risks across different aspects of SMEs' operations.
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Source: Singapore Business Review
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