A collaborative initiative to facilitate environmental, social and governance (ESG) reporting among small businesses worldwide appears to have received scant attention when it was first announced in June, but actually holds huge potential in advancing the sustainability agenda.

Called Project Savannah, the initiative by the Monetary Authority of Singapore (MAS), the United Nations Development Programme (UNDP), and the Global Legal Entity Identified Foundation (GLEIF) seeks to simplify the ESG reporting process for micro, small and medium-sized  enterprises (MSMEs) by leveraging on digital initiatives such as MAS’ Project Greenprint to generate ESG data credentials that can be housed in MSMEs’ Legal Entity Identifier (LEI) records.

Project Greenprint is a blockchain-based network of registries to record and maintain provenance of ESG certifications and verified data. LEI is a 20-character, alpha-numeric code based on the ISO 17442 which connects to key reference information that enables identification of legal entities participating in financial transactions.

By using Project Savannah, MSMEs worldwide can transmit verified information and key ESG data to their business partners, thus strengthening their ability to gain access to global financing and supply chain opportunities.

This would address the problem of the lack of a common framework as well as a unified reporting system for MSMEs that will allow them to send their ESG data or information to investors, partners, regulators, and other entities who may be interested. 

ESG reporting challenges

Project Savannah, when fully implemented, would also address the practical challenges faced by MSMEs in complying with ESG disclosure and reporting requirements including costs, the lack of resources and expertise on sustainability reporting, and the complexities around multiple standards and reporting frameworks in use globally.

In particular, “Project Savannah seeks to alleviate a significant pain point associated with the lack of reliable and comparable sustainability data, especially from MSMEs. Improvements in MSMEs’ sustainability reporting will enhance MSMEs’ ability to obtain financing and access business opportunities,” says Wei Na Sim, counsel in the litigation and dispute resolution practice at Mayer Brown.

Sim, who advises and acts for companies in litigation, investigation and regulatory matters, with a focus on the financial services industry, explains that closing the MSME data gap benefits larger corporations as well because small businesses are part of their supply chains; they will welcome the availability of such data for their own sustainability reporting and for supply chain due diligence purposes.

Supporting the sustainability transition of the MSME sector is quite important. Singapore, for example, has about 130,000 MSMEs which contribute 48% to GDP and 71% to employment.  Unless these small businesses are integrated and successfully transition to sustainability, it would be difficult for the country to achieve its overall sustainability agenda.

Singapore initiatives

The good news is that Singapore is probably the most proactive in supporting its SME sector in transitioning to sustainability. In 2022, the MAS launched two ESG initiatives, the ESG Impact Hub (Hub) on October 5 2022 and ESGenome last September 12.

The Hub, which is basically a plush meeting room that is aptly named for its location in the central business district, is intended to encourage co-location and collaboration between ESG fintech start-ups and other stakeholders including solution providers and financial institutions. During its launch, 15 ESG fintechs and other organizations joined the Hub, including Climate Impact X, Terrascope, MUFG Bank and KPMG.

Earlier, MAS and Singapore Exchange (SGX) jointly launched ESGenome, a digital ESG disclosure platform as part of Project Greenprint.

ESGenome is a disclosure platform designed to support companies in their ESG reporting by enabling companies to report metrics aligned with global standards and frameworks, ensuring regulatory compliance that meets investor needs for consistent and comparable ESG data. The disclosure platform is operated by World Wide Generation, a UK-based sustainability fintech firm, as a Software-as-a-Service (SaaS) solution. ESGenome provides access to SGX’s 27 core ESG metrics that are aligned with global standards and frameworks.

“Singapore has made significant progress in bringing together ESG stakeholders and technology platforms to support its vision to be a leading green and sustainable finance centre in Asia and internationally,” says Sim.

But despite these initiatives, challenges still remain in supporting small businesses as they transition to sustainability.

A recent survey by DBS of 800 SMEs across six Asian markets indicate that about 63% of respondents identified balancing business growth with sustainability as their top challenge in transitioning to sustainable business models.

About 60% of SMEs cite the lack of technical knowledge and access to ESG specialists as the main challenges in developing and implementing their respective ESG frameworks, the DBS study finds.