SINGAPORE, October 3, 2024 - Bain & Company and the Singapore Business Federation (SBF) announced today the launch of the SME Sectoral Net Zero Transition Program to help Singapore small- and medium-sized enterprises (SMEs) accelerate decarbonization and realize material benefits.

The program is designed to tackle the unique challenges faced by SMEs by providing a cost-effective, scalable, and action-oriented decarbonization solution powered by GenAI and Bain & Company’s deep decarbonization expertise. The SME Sectoral Net Zero Transition Program provides SMEs with end-to-end support via four cornerstone components, offering distinct advantages:

• Sector-specific focus. Participating SMEs learn from experts about decarbonization levers most relevant to their industries, through structured and guided workshops which consider circumstances inherent to their sector and decarbonization maturity.
• Unique AI-powered DecarboniSME tool. This provides SMEs with sector-specific materiality assessments (i.e. identify relevant emission sources), enables SMEs to understand their emissions baseline, and create “chief sustainability officer-quality” sector-specific decarbonization strategies, pathways and targets with minimal expertise and effort (approximately 75% faster than the traditional processes). DecarboniSME also includes a chatbot which provides general decarbonization support on a wide range of common inquiries.
• Access to ecosystem partners. Matchmaking with network of sustainability-focused funding and green solution providers.
• Ongoing advisory support. SMEs will receive continued guidance, such as on supplier evaluations, cost estimations, etc. from decarbonization advisors. Check-ins with SMEs are scheduled two, four and six months after the final workshop.

The program’s pilot run was supported by Enterprise Singapore and the Singapore Food Manufacturers’ Association. Involving 21 food manufacturers which produce beverages to noodles, it was held from July to August 2024 and received strong positive feedback from participants. Some key highlights include:

• 80% of the participating SMEs established their emissions baseline for the first time.
• SMEs identified company-specific levers to decarbonize, which could potentially reduce Scope 1 and 2 emissions by between 50% and 70%, increase EBIDTA margins by 4%-5%, and lower energy cost per unit by 40% to 50%.
• The program empowered the SMEs to set ambitious decarbonization targets of 50% reduction to their Scope 1 and 2 emissions by 2030. This is timely given that SMEs in the pilot program have an average carbon emission intensity that is twice the global average level.

“SMEs are the backbone of Singapore’s economy, but they are also significant contributors to greenhouse gas emissions. The decarbonization pathway for SMEs is fraught with challenges, from financial constraints and limited capability to the complexity of integrating sustainable practices into existing business models that perhaps have different set of priorities. Yet, it is within these challenges that we find immense opportunities,” said Gerry Mattios, co-director of the Global Sustainability Innovation Center at Bain & Company.

“Some of the pilot work we have done with SMEs show that sustainability and profitability are not mutually exclusive. By reducing their carbon footprint, they have unlocked new avenues for cost savings, enhanced their competitive edge, and garnered greater customer loyalty.”

“SBF is delighted to partner Bain & Company in both the survey and the SME Sectoral Net Zero Transition Program. SMEs contribute more than 40% of Singapore’s greenhouse gas emissions and are vital to Singapore’s net zero commitments. Yet, only one-third of SMEs have made significant decarbonization progress, as compared with 80% of larger enterprises. The program will provide companies with a comprehensive suite of resources, including expert-led workshops, sector-specific training, and a robust support network that includes both financial and non-financial partners. SMEs will also benefit from ongoing advisory support from decarbonization experts, ensuring that they are well-equipped to navigate regulatory changes and future-proof their operations. We believe such an end-to-end support system to help our SMEs decarbonize is unique in the market and will increase the chances of success in meeting their decarbonization ambitions,” said Kok Ping Soon, Chief Executive Officer of the Singapore Business Federation.

Following the successful pilot, Bain & Company and SBF aim to work with relevant Trade Associations and Chambers (TACs) and Enterprise Singapore to expand the program to more food manufacturing SMEs and other sectors.

The program is underpinned by a joint study by Bain & Company and SBF, ‘Overcoming Barriers to Singapore SME Decarbonization’, Singapore’s first large-scale survey on SMEs’ decarbonization efforts. The study surveyed nearly 500 SMEs across more than 20 sectors in Singapore between May and August 2024.

The joint study found the following key insights:

• Around half of SMEs that have already embarked on decarbonization initiatives have experienced tangible benefits, such as enhanced customer advocacy, cost savings, and avoidance of additional costs. For example, People Bee Hoon Factory was able to reduce electricity cost by 30% through solar panel installation. They also optimized their washing process and used thinner packaging material, resulting in 50% reduction in water consumption and thereby future proofing their business to comply with EU and US regulations as they expand globally.
• However, many SMEs continue to face barriers to decarbonization. Smaller SMEs (annual revenues less than S$10 million) are finding it more difficult to decarbonize compared to their larger (over S$50 million) counterparts. Additionally, consumer-facing SMEs are progressing at half the rate of B2B SMEs, primarily due to lower perceived customer demand for sustainable practices. A significant lack of awareness, in-house capability and financial support were the top three barriers to SMEs’ decarbonization journeys:
  • 46% of SMEs do not have awareness on the range of solutions
  • About 60% of SMEs lacked in-house decarbonization capability
  • 67% of respondents highlighted the need for better financing options for green initiatives.

There remain major gaps between the challenges faced by SMEs and the support available in the market. For instance, SMEs struggle to hire sustainability roles, despite a 14% year-on-year increase in green skills in Singapore. 

“This is a great initiative for SMEs who may not have the time/resources/know-how on how to embark on this journey. The tailored approach provided us with a deep understanding of emission reduction and the development of long-term decarbonization plans,” said Jamie Koh, founder of Brass Lion Distillery.  

Commenting on the launch of the program and DecarboniSME platform, HSBC Singapore’s Head of Commercial Banking, Priya Kini said, “We recognize that access to knowledge and financing support will make a meaningful difference to SMEs in their transition to a more sustainable future. HSBC is pleased to work with Bain and SBF in the ‘scale up’ phase of this program by offering our global expertise and range of sustainable financing solutions and tools to support SMEs on their net zero journey. We look forward to deepening our support of this initiative as it rolls out across new SMEs sectors.”

Editor's Note: For more information or interview requests please contact Tay Yan Xin at yan-xin.tay@bain.com.