A recent study discovered a decline in the number of small and medium enterprises (SMEs) in Singapore engaging in social and environmental initiatives, despite 76% recognising the relevance of ESG to their businesses.

According to the QBE survey, only slightly over half (52%) of SMEs prioritise ESG initiatives by conducting relevant programmes at least once a year, indicating a 7% decrease from 2021. The primary challenge identified by respondents is the cost, with nearly one-third (32%) considering it the top barrier. This marks a 6% increase from 2020.

SMEs surveyed also cited a lack of staff with appropriate skills (28%), and the time-consuming nature of social and environmental initiatives (27%), as additional obstacles to implementing an ESG framework.

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The survey results demonstrate a correlation between the decreasing emphasis on social and environmental initiatives by SMEs and a deterioration in workplace safety and health (WSH) performance. In 2022, 51% of SMEs reported experiencing workplace incidents, representing an 8% rise from 2021. This aligns with 2022 being the year with the highest number of workplace fatalities in Singapore over a four-year period.

Despite the increase in workplace incidents, SMEs are taking fewer measures to mitigate the impact. The survey found that 29% of respondents either lacked full awareness of WSH insurance requirements or were unaware or uncertain of where to obtain relevant information. Additionally, 14% of Singapore SMEs do not offer their employees WSH insurance coverage beyond the minimum mandate.

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Out of the ESG initiatives carried out by SMEs in 2022, only 4% were dedicated to community causes, marking a significant decline from 13% in 2021. Environmental preservation remains the most popular initiative, with 54% of respondents reporting their involvement in such programmes. Waste reduction and management also gained traction, with 33% indicating their implementation within their businesses last year.

In terms of climate change impact, 38% of respondents noted a change in consumer demand as more customers now expect environmentally friendly products. Working conditions have also been affected, with 35% of SMEs stating that it has become more challenging and demanding for staff, particularly those working outdoors.

Ronak Shah, CEO of QBE Singapore, emphasised that these findings should serve as a wake-up call for SMEs, given the associated risks that result in more workplace safety incidents. He stressed that neglecting sustainability initiatives, which are increasingly viewed as essential rather than optional, could expose SMEs to unnecessary risks across various aspects of their operations, including labour conditions, brand reputation, customer loyalty, and resource efficiency. Shah believes that focusing on sustainability issues should be regarded as an opportunity to foster long-term business resilience rather than a distraction or merely a token initiative.

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Source: Insurance Business