summary:
This article, drawing on policy and industry trends, identifies the impacts currently facing SMEs on net-zero emissions, primarily stemming from the EU's carbon border management mechanism and supply chain decarbonization efforts. The second section then explains how SMEs can address the challenges posed by net-zero emissions through three steps. The third section, recognizing the limited human and financial resources of SMEs and the importance of easy implementation and adoption of carbon reduction strategies, offers suggestions for achieving carbon reduction through energy conservation.
1. The impact of net-zero emissions on small and medium-sized enterprises:
Regarding the net-zero emissions issue, excluding those SMEs that have voluntarily promoted carbon reduction or committed to net-zero emissions targets, the impact on SMEs comes primarily from two aspects: first, regulatory measures from relevant domestic and international regulations, and second, pressure from brands committing to supply chain carbon reduction.
I. Relevant domestic and international laws and regulations
First, regarding regulatory measures under relevant domestic and international regulations, the Ministry of Environment previously only required companies with direct carbon emissions exceeding 25,000 tons to conduct annual greenhouse gas inventories and verifications, and to log the results on the "Business Greenhouse Gas Emissions Information Platform." These regulations apply to 287 companies, including those in the power, cement, steel, oil, semiconductor, and panel manufacturing sectors.
However, starting in 2023, the Ministry of Environment (MOEN) will amend the "Regulations on the Inventory, Registration, and Verification of Greenhouse Gas Emissions" and expand the scope of regulation, requiring businesses with combined direct and indirect carbon emissions exceeding 25,000 tons of CO₂e to register their greenhouse gas emissions on the "Business Greenhouse Gas Emission Information Platform" by October 31st of each year. This expanded MOEN regulation includes nearly 230 new businesses in industries such as electronic components manufacturing, chemical materials manufacturing, textiles, basic metal industries, and non-metallic mineral products manufacturing, bringing the total number of regulated businesses to 512, covering approximately 70% of Taiwan's carbon emissions. The MOEN stated that this measure is not primarily targeted at small and medium-sized enterprises (SMEs). Preliminary assessments indicate that the affected SMEs are primarily larger manufacturers within the SME sector, with limited impact on smaller manufacturers that lack specialized manpower and resources.
The regulation currently having the greatest impact on small and medium-sized enterprises is the EU Carbon Border Management Mechanism (EU CBAM). This is primarily due to the EU's regulation based on product categories, rather than carbon emissions, requiring all companies exporting regulated products to the EU to implement appropriate measures. The EU's pilot carbon border management mechanism, which began on October 1, 2023, will regulate imports of steel (including downstream screws, nuts, and fasteners), aluminum, cement, fertilizers, hydrogen, and electricity into the EU, requiring the reporting of product carbon emissions data. Comparing this with Taiwan's export data reveals that the EU's carbon border management mechanism primarily impacts screw, nut, and fastener manufacturers and aluminum product manufacturers.
For EU border control scheme reporting, small and medium-sized enterprises (SMEs) can complete the reporting process by filling out the relevant data in the EU's declaration form and submitting it to their traders. The government is helping SMEs strengthen their reporting skills through educational training programs and workshops. The government is also promoting the fact that data submitted under the EU border control scheme currently does not require third-party verification or any certification fees (commonly known as carbon tariffs). If obtaining carbon content data is difficult, SMEs can use the EU's default values for calculations, alleviating carbon anxiety.
2. Pressure from supply chain carbon reduction
Pressure to reduce carbon emissions within the supply chain primarily stems from commitments made by brands to make a positive environmental contribution and meet external expectations. These commitments often involve reducing carbon emissions from suppliers, thus increasing the intensity of supply chain management measures and placing direct pressure on small and medium-sized enterprises (SMEs) within the supply chain. For example, Apple, a major mobile phone brand, is actively encouraging suppliers to promote carbon reduction measures in order to achieve its 2030 carbon neutrality goal for all products. Toyota, a major automotive brand, has set a 2050 carbon neutrality goal and requires suppliers to cooperate in achieving these reductions. These demands from customers create direct operational challenges for SMEs and represent the most significant and widespread measures affecting them, outside of regulations.
II. Steps for SMEs to Prepare for Net Zero Transformation:
In the face of the above challenges, small and medium-sized enterprises can respond step by step to the various challenges brought about by the net zero emissions issue to their operations through steps such as "clarifying needs", "setting goals", and "planning and implementation".
(1) Clarifying needs
The first step for SMEs to address the net-zero emissions challenge is to clarify the specific demands of external pressure. First, while both the Ministry of Environment's greenhouse gas inventory regulations and the EU's carbon border adjustment mechanism require reporting product carbon emissions, the scope is completely different. Therefore, it is crucial to clarify the specific demands before initiating relevant work to avoid wasting time and effort. Second, pressure to reduce carbon emissions from the supply chain is more diverse and requires even more careful clarification. For example, a client might simply request the completion of an organizational greenhouse gas emissions inventory, or it might require increasing the use of recycled materials, introducing renewable energy, or completing a greenhouse gas emissions inventory within a specified timeframe and developing a medium- to long-term carbon reduction strategy. SMEs must clearly understand client needs to tailor their responses appropriately.
(2). Setting Goals
After confirming their needs, SMEs can begin setting goals. These targets may be based on regulations, such as completing greenhouse gas inventory and verification within six months, logging the relevant data into the "Business Greenhouse Gas Emissions Information Platform," or calculating product carbon content within three months and providing the data to traders. Client-side requirements may involve achieving specific carbon reduction targets. To achieve this, SMEs may need to invest resources in carbon emission hotspot analysis and develop and implement appropriate carbon reduction strategies.
(3) Plan implementation
After clarifying needs and confirming goals, SMEs can plan and implement carbon reduction strategies based on the set targets. Considering the limited professional manpower of SMEs, they may need to collaborate with external teams, such as carbon inventory counseling units, technology research and development units, and energy technology service industries, to jointly complete carbon inventory, hotspot analysis, energy-saving strategies, and technological improvements. Leveraging the knowledge and experience of professional teams, they can efficiently plan carbon reduction strategies. Once the carbon reduction strategy is specifically implemented, the focus will be on regularly recording work results and publicly disclosing carbon reduction performance. This will, on the one hand, accumulate and optimize the data foundation for carbon reduction work, strengthen internal members' sense of identity, and build consensus on action. On the other hand, it will also communicate work results and respond to needs with supervisory units, clients, consumers, and other demanders.
III: The starting point for SMEs to implement carbon reduction
Given limited manpower and funding, small and medium-sized enterprises (SMEs) can initiate carbon reduction efforts by focusing on equipment upgrades and energy conservation. On the one hand, these upgrades often yield significant carbon reduction benefits. On the other hand, the effectiveness and payback period of energy conservation are easier to assess than strategies such as process upgrades, the circular economy, and digital green transformation.
1. Equipment Upgrade
Considering that energy use is a primary contributor to carbon emissions for small and medium-sized enterprises, energy conservation through equipment upgrades is a direct and effective approach. For example, replacing outdated boilers, air conditioning equipment, refrigeration/heating equipment, diesel vehicles, and even replacing traditional light bulbs with LED fixtures can significantly reduce carbon emissions by improving energy efficiency. For example, Crystal Doors, a UK-based manufacturer of door panels and system cabinets, has achieved significant carbon reductions through the annual replacement of outdated equipment, including replacing oil-fired boilers with biomass boilers, replacing old lighting fixtures with LEDs, replacing old vehicles with electric vehicles, and installing a waste recycling system and rooftop solar panels. The company's carbon emissions have dropped from 290 tons of CO2e in 2015 to 70 tons of CO2e in 2022, while maintaining its continued growth over the same period.
2. Energy saving optimization
Even small and medium-sized enterprises (SMEs) that have completed equipment upgrades can still explore carbon reduction potential by collaborating with energy-saving experts. These efforts, such as improving building energy consumption, optimizing existing equipment operations, and installing sensor technology, can further improve their carbon emissions. For example, Makengineering Corporation, a Japanese precision parts manufacturer, hired energy-saving experts to conduct site surveys, collect and analyze energy usage data, and propose further energy-saving plans after completing their equipment upgrades.
Energy conservation experts recommended that Makengineering Corporation improve the building's insulation by applying thermal paint to the roof, reducing the burden on the air conditioning system. Furthermore, adjustments to the air compressor nozzles within the factory could further improve air compressor energy consumption. Furthermore, energy conservation experts recommended the implementation of automatic power-off devices to automatically shut down equipment that is idle for extended periods, reducing standby energy consumption. Through these measures, even a company that has already completed equipment upgrades and replacements can achieve an additional 6.4% reduction in carbon emissions.
IV. Discovery and Suggestions
(1) At present, the main pressures on SMEs come from the EU carbon border management mechanism and client demand
Pressure on businesses to reduce carbon emissions comes from many sources. However, based on current policies, regulations, and industry trends, small and medium-sized enterprises (SMEs) face significant pressure from the EU's carbon border management mechanism, which regulates products by product, and from brand owners' supply chain carbon reduction commitments. While the Ministry of Environment has expanded its scope to include companies with combined direct and indirect carbon emissions exceeding 25,000 tons, the impact on SMEs remains relatively limited.
(2) SMEs can respond to external pressure through three steps and initiate carbon reduction efforts through equipment upgrades and energy conservation.
Faced with the EU's carbon border management mechanism and the demand for carbon reduction in the client supply chain, small and medium-sized enterprises (SMEs) interested in starting to promote carbon reduction can respond through a three-step process: "clarifying needs," "setting goals," and "planning and implementing." Furthermore, considering the human and financial needs of SMEs, it is recommended that SMEs begin carbon reduction efforts by upgrading equipment and implementing energy conservation measures. In addition to significantly reducing carbon emissions for SMEs, these strategies are also easier to assess and recover compared to other strategies, making them more feasible for SMEs with limited resources and expertise.
Sources:
The Ministry of Environment has not yet released a list of companies that have completed greenhouse gas inventory registration in 2012. According to the latest information released, there are 289 companies listed, all of which are manufacturing companies.
Organizer: Ministry of Economic Affairs, SME Administration
Executing Unit: Plastics Industry Technology Development Center
