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Going green is no longer just a buzzword. Today, there is a clear business case to go green in the evolving landscape where success is no longer only measured by a firm’s top and bottom lines.

Increasingly, stakeholders – including customers, staff, investors and governments – care more about just the products and/or solutions that a business offers. They want to know (and even be a part of) the long-term value that businesses are creating for their communities, and the environment they operate in.

Stakeholders value a greener business

More customers today are putting their money where their mouth is. They prefer to purchase products and services that gel with their aspirations for a cleaner and better tomorrow.

Similarly, business partners are looking at their own supply chains. As MNCs around the world are embarking on sustainability initiatives of their own, there will be a trickle-down effect – requiring the smaller SMEs they work with to hold the same values as they do.

As an SME, you have more say in going green than you think. The bulk of the businesses in most economies, including Singapore, are SMEs. This underscores the power of many – without our many SMEs participating, we cannot go green; without the many small actions from SMEs, we cannot snowball their collective impact.

Both retail and institutional investors are also backing greener firms that leave a positive footprint on the environment – rather than pollute it. To this end, ESG investing and net zero have become common terms in the investment world. In fact, one of the largest institutional investors, Singapore’s Temasek, bills itself as a “Generational Investor” working towards halving its carbon emissions by 2030 and achieving net zero by 2050.

They’re not alone, as the world’s largest sovereign wealth fund, Norway’s US$1.4 trillion pension fund, also supports achieving a net-zero portfolio by 2050.

The problems (and solutions) to green finance in Singapore

Banks and financial institutions form another stakeholder that businesses need to interact with. In Singapore, green finance is rapidly gaining popularity, and banks want to support SMEs that are forging ahead in this area by granting them green and sustainability-linked loans.

However, these loans can be harder to manage than other types of loans. With traditional loans, the financial institution mainly focuses on a company’s creditworthiness. In green finance, there’s an additional requirement to continually monitor a business’ progress on ESG metrics. Furthermore, being sustainable isn’t simply a one-time audit at the loan disbursement stage. It requires an ongoing data feed.

This is where “blockchain technology can help to make sustainability be more accessible to SMEs and companies of any size”, explains Benjamin Soh, Managing Director of STACS, a Singaporean fintech firm.

Benjamin elaborates that “it is very difficult to track if a company is continuing with its sustainability drive after 6 months or 9 months later”. For banks, “it could be even worse if the company is not as green as it says, (as) it creates pressure on the banks – that the loans granted are just being greenwashed”.

That’s why, STACS has developed and launched ESGpedia, one of four pilot digital platforms under the MAS Project Greenprint, to support and enable better data in green finance. This is intended to level the playing field for SMEs embarking on sustainability – which is traditionally seen as reserved for only larger companies.

The STACS digital ESGpedia platform aims to become a transparent blockchain-based ESG registry, recording and maintaining ESG certification accorded by relevant bodies in different sectors, as well as collecting third-party audited data and metrics. Ultimately, these data sets will provide stakeholders, including financial institutions, with a single point of access to certified trusted data, and help facilitate transparent data flows.

Layering blockchain technology on top of it to enforce actions whenever the data sets go above or below certain thresholds will help financial institutions manage their green products better. This information is transparent for both SMEs and financial institutions, as well as other relevant stakeholders.

How can SMEs embark on sustainability?

STACS does not just want to create a seamless platform for banks to monitor whether a business they’ve lent money to is being sustainable or not. Its goal is to make it simpler for SMEs to embark on sustainability.

One example is STACS’ partnership with associate IoT firm, CO2X, to collect corporate fleet management data sets. By installing IoT devices within vehicles to track their carbon footprint, they can devise data-driven strategies to reduce emissions. In turn, this reduces fuel and energy costs for the business.

The intention is to create win-win outcomes for the environment (through lower carbon emissions) and bottom lines (by reducing fuel costs and energy costs). Benjamin also shares that a third win could come in the form of improved safety outcomes in training and educating drivers from the data collected on “harsh braking and harsh accelerating, or keeping the engine on idle”.

The data that it collects will then be quantified and stored on a blockchain platform. This enables transparent information flows, enabling SMEs to pursue green certification against international standards. Other use cases include opening third-party verified data sources for stakeholders, such as their clients and investors, who may require sustainability reports, and financial institutions like OCBC, which will require sustainability information before disbursing green loans.

From November 2021, CO2X has begun beta testing with industry players such as Bok Seng, Chuan Lim Construction, CWT, EVFY, FoodXervices, Tiong Seng and others.

Embracing an ESG registry across all business sectors

Smaller SMEs may not have the resources to hire sustainability consultants. Mitigating this, Benjamin envisions the same processes for collecting fleet management data to be portable to different sectors. The key elements are simply to collect relevant and trusted data sets, quantify them within certain metrics, store them on a transparent ESG registry, and enable stakeholders timely access to the information.

STACS is not just starting with fleet management. They are already looking at other industries, including the building management sector – where the Green Mark certification acts as a stamp of approval on sustainable buildings. Like the fleet management industry, a similar IoT device can be installed to collect relevant data sets to store on the ESG registry. A similar layer of blockchain technology can also be enabled for notification or enforcement reasons.

By having a similar process across industries, corporates of any size or industry will know how to start their journey towards achieving sustainability, and also access sustainability financing.

They will understand the process of collecting information via IoT devices, and the firms they need to work with for installation and data analytics, as well as transmitting the data to an ESG registry for their stakeholders to access.

“It’s very transparent for all”, exclaims Benjamin. Whenever there are shortcomings in the data sets, both the business and its stakeholders will receive a notification from the ESG registry. This can be applied to sustainability-linked loans, for investment funds to assess companies or entire portfolios, as well as for businesses to review the sustainability of their supply chain partners.

As technology infiltrates more aspects of our lives and businesses – more data sets can be tracked and analysed. These all form new data points for assessment in the future.

Every small action can lead to a big difference

Embarking on your sustainability journey may seem confusing and expensive if you’re just starting out. This is exactly what STACS is trying to solve – giving SMEs the tools to embark on their green journey, and enabling transparent and accredited information flows.

At the same time, SMEs should not think that their green practices are simply to appease larger stakeholders. Far from it. Collectively, Singapore’s small and medium enterprises make up 99% of our enterprises, hire 70% of our employees, and contribute 43% of our GDP. Without SMEs participating in the green transition, it simply cannot happen.

The old saying that every small action can lead to a big difference cannot ring more true for SMEs trying to make a positive change. Do well, do good, SMEs. Going green cannot happen without you.