SMEs are the key to a greener Asean, forum told

Industry

Published: 21 Nov. 2023, 17:52

SMEs are the key to a greener Asean, forum told

Secretary General Kim Hae-yong of ASEAN-Korea Centre, seventh from left, Ambassador of Lao PDR to Korea and Chair of ASEAN Committee in Seoul, H.E. Songkane Luangmunithone, eight from left, and speakers of the ASEAN-Korea ESG Forum pose for a photo at JW Marriott Dongdaemun Square Seoul in eastern Seoul Tuesday. [ASEAN-KOREA CENTRE]

To further spread environmental, social, and governance (ESG) mandates in Asean countries' corporate landscape, the role of small- and medium-sized enterprises (SME) is crucial, according to the experts at the Asean-Korea ESG forum held in eastern Seoul Tuesday.

Within Asean countries, there are 70 million SMEs that account for some 99 percent of the total existing ventures and constitute 85 percent of the workforce, according to the guidebook published on Tuesday by the ASEAN-Korea Centre titled “ESG Practices in ASEAN and Korea: Pathways Towards Sustainability.”

To celebrate the release of the publication, the ASEAN-Korea Centre hosted an ESG forum at JW Marriott Dongdaemun Square Seoul in eastern Seoul on Tuesday.

The guidebook was released to provide Asean countries and stakeholders relevant to the ESG landscape with a comprehensive overview of the policies which have been effective and ineffective, and introduce the different strategies and industrial sectors that each nation is focusing on.

The cover of the publication titled “ESG Practices in ASEAN and Korea: Pathways Towards Sustainability" [ASEAN-KOREA CENTRE]

Melati Nungsari, deputy dean of research at the Asia School of Business and the author of the guidebook, stresses that the member states need to effectively promote the existing policies and support given to the SMEs who follow ESG measures.

“One issue that we have found is that existing policies are fragmented in execution and hence, SMEs themselves are confused and do not comprehend what support is available to them,” Nungsari told the Korea JoongAng Daily. “Our recommendation on this would be for ministries in Asean countries to work to structure initiatives in a way that is easily understood by the public and SMEs.”

Nungsari said that the companies also need to be aware of ESG practices as more of the global companies set target goals to boost ESG management, such as achieving carbon neutrality, adopting renewable energies and smart city developments.

“Within Asean countries, there has typically been significant emphasis on the “E” in ESG but not so much the “S” and “G”, which are equally important,” she said.

“Countries looking to expand trade by exporting more of their local products abroad will need to take ESG regulations more seriously as it is going to make a difference in whether they are successful in doing so. It’s also important to note success stories — for example, in the ASEAN+6 group, which refers to China, Japan, Korea, India, Australia and New Zealand that collaborate with Asean — with disclosure requirements becoming a norm even without legal requirements. This points to embracing stakeholders' needs and movements toward more ESG-positive policies as being a viable push for ESG initiatives.”

Melati Nungsari, the deputy dean of research at the Asia School of Business, speaks at the Asean-Korea ESG forum hosted by ASEAN-Korea Centre at JW Marriott Dongdaemun Square Seoul in eastern Seoul Tuesday. [ASEAN CENTRE]

Nungsari also touched upon Korea’s main policies in the sector.

“Some of the most notable best practices in Korea include the Korea Emission Trading System (K-ETS) launched in 2015, making it the first nationwide cap and trade program operating in Asia,” she said. “And 31 large Korean companies have made commitments to the Renewable Energy 100 (RE100) initiatives and 17 financial companies have joined the Partnership for Carbon Accounting Financials, which helps financial institutions assess and disclose greenhouse gas emissions of their loans and investments.”

Other panels at the forum explored subjects such as greenwashing and green taxonomy, the latter referring to the list of economic activities considered environmentally sustainable.

“Larger corporates, in general, tend to rely on [government-led] taxonomies but it is a problem for smaller entities because it is not feasible for them to gather such data,” said Khairul Ridzwan Abdul Kuddus, general manager of International Affairs, Securities Commission Malaysia. “How will you communicate to SMEs the importance of sustainability and reference to the taxonomy as a guide, those are additional ESG initiatives we need to contemplate.”

In order to prevent greenwashing, governments need to set a firmer tone for those who abuse ESG practices, said Andrew Chan, the head of sustainability and climate change strategy at PwC's Asia Pacific region. “It’s always about drilling down into the specifics,” Chan said. “For example, you could be a solar panel company but you could have awful labor practices and terrible waste disposal practices, which does not equate to being sustainable.

“Growth regulators need to step up and make very clear regulations against greenwashing,” he continued. “One of the leading countries is the United Kingdom. They have [governmental] bodies which meticulously scan through the entire market to check which company is doing what and literally bring them to court [if they find violations]. They [the bodies] clearly highlight that this is a litigation case and state that such companies can face penalties if they’re not complying.”

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]