Fear of the unknown preventing firms from embarking on sustainability journey: SMF

[SINGAPORE] Fear of the unknown is one factor stopping some companies from moving forward in their sustainability journey, according to Clara Kwan, chief sustainability officer of Singapore Manufacturing Federation (SMF).

Another roadblock is that some company leaders are unclear about what to do and how to take things forward, and even then, they are often unsure how their progress can be measured.

Added to that, the business landscape is more complex now, she said. 

“There is greater know-how, smart manufacturing and software. AI (artificial intelligence) is also coming into play. It is a different landscape, with (evolving) political trends,” she added.

The chief sustainability officer said that “businesses are practical. The effectiveness of adopting sustainability practices, such as lowering costs, has to be there”. 

How to get started?

But once those points are established, there is always the question of “where or how do I start?”

To help such firms get started, SMF has come up with the Chief Sustainability Officer as a Service initiative. 

The initiative started in January 2024 and was designed to empower small and mid-sized enterprises (SMEs) with the tools, expertise and guidance necessary to integrate sustainable practices into their operations.

“Since we’ve started, our outreach events have reached over 3,300 companies. Together with partners, we’ve conducted and developed about 80 sustainability training, reports, strategies and road maps alongside (around) 60 carbon reports,” said Kwan.

There are many sustainability programmes out there, such as the Certified B Corporation, but not all may be suited for smaller firms.

“For SMEs – including the manufacturing area – their priority is not to get certified in certain areas,” said Kwan.

Hence, the goal in the programme would be more aligned with what smaller companies need. For example, “what would qualify (them) for green financing such as sustainability-linked loans and whether they can fulfil tender requirements – those are the problems faced by smaller companies.”

A macro view of sustainability is taken with the programme.

The sustainability director said there are conversations with senior management to create that baseline for them. “We will then go through with them and explain to them what it means, and how it benefits them financially in the long term… The end goal is for them to not be reliant on us permanently, but to equip them with the know-how so that they are able to do it on their own.”

The programme also forms an ecosystem where like-minded people gather together and opportunities to collaborate are created. 

There are platforms such as Singapore Innovation and Manufacturing Excellence Award to spur smaller firms to start being sustainable. 

“This is also a form of encouragement, and from there they aspire to do better,” Kwan added.

She said there are many metrics nowadays to measure sustainability impact, but the A*Star Green Compass methodology and United Nations’ Sustainable Development Goals are important standards that have been adopted. 

Once sustainability practices are embedded, manufacturing companies will be well-positioned to influence their partners and overseas operations.

“Sustainability is inherently regional, not confined to national boundaries,” Kwan said. 

A 2023 report by McKinsey showed that if a company can grow profitably as a sustainability leader, the market will reward it for this growth. 

Strong commitment

The report showed that the outperformers in environment, social and governance (ESG), profit and growth delivered two percentage points of annual total shareholder returns above companies that only outperformed on financial metrics.

This suggests that a strong ESG commitment adds additional shareholder value for companies that also exceed their peers in growth and profitability.

Kwan said that even the social aspect – to engage employees and participate in certain giving-back activities – is important as there is an increase in employee engagement and satisfaction after adopting such practices.

“It is not ‘sexy’ to be labelled as working in the manufacturing industry. So these are ways we can make the industry more attractive and make the staff happy and not leave,” she added. 

“Retention is important in manufacturing – especially smart manufacturing – as the skill sets are not easy to replace.”

Building up resources

On Aug 25, the Accounting and Corporate Regulatory Authority and Singapore Exchange Regulation extended implementation timelines for climate reporting requirements for SMEs, to allow them to build up their resources.

With regard to the extension, Kwan said: “(Some companies) are ready (but) can they collect (what is needed) from the supply chain?”

She added that while smaller companies are willing to do it, they are still figuring out what to do, especially with the current uncertain economic climate. 

On the future of the manufacturing sector and sustainability, Kwan said: “We are seeing more young leaders step into the sector, and with them comes a stronger openness to change so less convincing is needed. Sustainability is a journey and when the seed is planted, the impact unfolds over time, not a matter of weeks.”