What is Net Zero Emissions? 4 Tips Towards Carbon Neutrality for SMEs
Reading time: around 3 minutes
The global focus on net zero emissions and carbon neutrality has extended from the environmental sector to the business world. In recent years, policy bureaus from the Hong Kong government, as well as financial regulatory bodies, have been eagerly exploring collaboration opportunities in carbon finance, intending to transform Hong Kong into an international voluntary carbon market1. What role can SMEs play in achieving “carbon neutrality”? How can SMEs achieve goals related to “carbon neutrality” with limited capital and human resources? Here are 4 top tips for SMEs to practise “carbon neutrality”.
What Is Net Zero Emissions?
According to information from the United Nations Climate Action, net zero emissions refers to reducing greenhouse gas emissions to near-zero levels, with only a small amount of emissions that can be reabsorbed by the atmosphere, such as the oceans and forests, aiming to restore the natural balance2.
The focus on net zero emissions is also closely related to the warning issued by the World Meteorological Organization in 2023. According to experts, if the rate of greenhouse gas emissions does not slow down, there is a 66% chance that the global temperature increase of this century will reach a tipping point over the next five years, between 2023 and 2027. It would signify a rise of 1.5 degrees Celsius above the pre-industrial level in the 19th century, potentially triggering more extreme threats such as floods, droughts, wildfires and food shortages3.
Daily activities or business and industrial actions have a direct and crucial impact on achieving net zero emissions or mitigating global warming. The United Nations aims to reach net zero emissions in 20502. To fulfil this goal, since 2015, 197 countries in the world have adopted the Paris Agreement, committing to reducing global greenhouse gas emissions to limit this century’s global temperature rise to below 2 degrees Celsius while pursuing a more aggressive target of less than 1.5 degrees Celsius4.
What is carbon neutrality?
Actions related to carbon neutrality are mostly focused on reducing, among many greenhouse gasses, carbon dioxide emissions. Carbon emissions are primarily caused by the burning of fossil fuels, such as coal and crude oil, which has empowered electricity generation and power for various production5. To reduce the climate crisis that is caused by carbon emissions, governments all around the world and enterprises are attempting to offset carbon emissions by planting trees and switching to renewable energy sources5.
Top 4 Tips for SMEs to Achieve “Carbon Neutrality”
With limited financial and human capital resources, SMEs may face various challenges while trying to achieve a low-carbon status or “carbon neutrality”. Yet, in the long run, engaging with low-carbon or “carbon neutral” policies enables businesses to help mitigate global warming, and allows businesses to gain recognition as "Green Enterprises" granted by different organisations. This "Green Enterprise" labelling SMEs receive may get more opportunities in the process of green financing , enhancing consumer impressions and receiving more promotions and brand collaboration opportunities6.
Here are 4 top tips for SMEs to become “carbon neutral”:
1. Evaluate your company's carbon footprint and participation in low-carbon activities
The first step towards “carbon neutrality” is to assess and evaluate your company's carbon emissions. This helps companies formulate the next steps for low-carbon and carbon-neutrality initiatives. Additionally, you can be a part of low-carbon activities, such as applying for the "Hong Kong Green Organisation" scheme and marking the green certificate on the website or products, or participate in various low-carbon reward platform promotional activities6.
If you are interested in gaining a preliminary understanding of your company’s carbon emissions, consider using the free Business Carbon Calculator to check your company's emission level7. If you are considering applying for a Green and Sustainable Trade Financing solution from a bank, there are also services available in the market for SMEs such as those offered by DBS SME Banking.
2. Develop a low-carbon plan
How should you start to develop a low-carbon and carbon-neutrality plan? SMEs may set short-, medium, and long-term action plans and targets considering these three dimensions:
● The company directly controls emissions from the source8;
● Emissions related to energy consumption by the company (e.g., electricity, heat and steam)8;
● Indirect emissions that are related to company activities but are produced by other parties (from supply chain to customers)8.
3. Reduce carbon emissions
Small steps can create big changes; low-carbon practices can start small. Enhancing energy efficiency, shifting to low-carbon energy sources, promoting low-carbon supply chains, etc., are all low-carbon measures. Around 40% of the world’s energy-related emissions come from buildings. Hence, the simplest way is to start with your office9. Here are some of the general suggestions from the SME Climate Hub for SMEs9:
● Reduce office waste and energy consumption: this includes opting for LED lighting, recycling, reducing paper consumption, and monitoring the energy consumption of electrical appliances, etc10. You may also consider installing solar panels to power large appliances, such as air conditioners, which can reduce carbon emissions10.
● Collaborate with supplies to reduce emissions: for instance, in terms of logistics, you may consider using lower-emission transportation means such as rail and sea freight. Air freight has the highest emissions, followed by heavy trucks11. For land transportation, explore the possibility of using e-vehicles11.
● Support and accommodate low-carbon efforts by employees: e.g., actively promote working from home to reduce transportation emissions12.
4. Offset carbon emissions to reach carbon neutrality
Some businesses choose to offset carbon emissions through increasing carbon storage and consider compensatory methods, such as tree planting, to reach their “carbon neutral” goals and fulfil their corporate social responsibilities. As major companies around the world embark on low-carbon and carbon-neutral initiatives, this has spurred the development of the global carbon trading market, involving the buying and selling of carbon financial products, and carbon credits, etc8. Some companies acquire carbon credits through means that have been recognised by international organisations, such as tree planting, and sell them to businesses that need to offset their emissions.
How should SMEs implement a net-zero strategy? As part of its commitment to being net zero in the financed emissions, DBS announced a series of net zero emissions targets in the report “Our Path to Net Zero - Supporting Asia’s Transition to a Low-carbon Economy”, and will continue to actively collaborate with clients to reduce greenhouse gas emissions with financing activities. Make a commitment to sustainable development with DBS SME Banking and embark on your journey towards net zero emissions today13.
Are you seeking financing solutions for your entrepreneurial ventures? DBS SME Banking offers extensive financial assistance and startup support you may need. Click here and learn more about SME Business Instalment Loan.
^Terms and conditions apply.
*** Account opening can be completed in as fast as 1 working day for Hong Kong-incorporated entities with all shareholder/director/sole proprietor/partner holding a Hong Kong Permanent Identity Card. For Hong Kong-incorporated entities with at least 1 shareholder/ director/ sole proprietor/ partner holding the People’s Republic of China Resident Identity Card, account opening can be completed in as fast as 5 working days. Subject to eligibility and conditions.
Subscribe to DBS BusinessClass
Stay updated with latest industry trends and insights in Asia, connect with a network of entrepreneurs, and gain access to exclusive event invitations.
Connect to thousands of entrepreneurs in Asia
Learn about market trends and insights
Network at exclusive events
Consult global business experts and seasoned advisors
That's great to hear. Anything you'd like to add?
We're sorry to hear that. How can we do better?