Combine finance and diagnostics to decarbonise SMEs

The company is a bank operating in the services sector and employs more than 20,000 people.

Small and medium-sized manufacturers make up the bulk of the country's industrial base, and industrial emissions are among the principal drivers of climate change, which puts resource efficiency, sustainable operating practice and digital transformation at the centre of industrial decarbonisation.

Three barriers held that transformation back in the SME ecosystem: a lack of awareness of what transformation involves, difficulty in accessing finance, and insufficient human resources with the skills to design and run the projects.

A bank can address the second barrier with lending, but lending alone does not create bankable projects. A company that cannot specify what to invest in, or appraise the return, does not become creditworthy because credit is available. The initiative was therefore designed around the observation that the missing element was the project pipeline rather than the capital.

An important boundary applies throughout. The emissions and efficiency results reported here belong to the participating manufacturers, not to the bank's own operations; the bank's role is to enable companies to operate at optimal efficiency without compromising sustainability, and to finance the reductions that sit inside its customers' inventories.

The two-year initiative began in 2024 and was run with a manufacturing excellence centre as implementation partner, under the bank's long-term positioning as a transformation partner to its customers.

The model brings financing, technology access and transformation advisory together under one structure, so that a company moves from diagnosis to a costed investment plan and then to financing offered on preferential terms to fund it.

Maturity is measured on two internationally used readiness frameworks rather than on a proprietary questionnaire. Digital maturity is assessed on the SIRI (Smart Industry Readiness Index) framework across 16 dimensions covering process, technology and organisation. Sustainability maturity is assessed on the COSIRI (Consumer Sustainability Industry Readiness Index) framework across 24 dimensions covering strategy and risk management, sustainable business processes, technology, organisation and governance. Using recognised frameworks keeps the results open to international benchmarking and comparable with those from other countries.

Each company receives a tailored twin transformation roadmap built from the assessment, prioritising the investments that fit its scale, sector and maturity level, so the standard method produces a company-specific answer.

Around that core the initiative supplies what SMEs typically lack: an awareness programme for decision-makers on investment appraisal, feasibility and financing; matchmaking events with suitable technology solution partners and consultants; the chance to experience the use cases in a digital demonstration factory; and workshops that make the return on twin transformation investments concrete.

Financing is where the bank contributes directly, and companies can also reach transformation finance on preferential terms from international institutions through it. Multilateral development finance is channelled through the commercial banking system directly to companies of SME scale for digital transformation, climate finance, renewable energy and energy efficiency, which is a financial architecture other banks can replicate.

Maturity is re-measured after approximately 12 months and the progress achieved is reported numerically, which converts an advisory programme into a measured one.

Emission calculations rest on the GHG Protocol standard. The bank's own decarbonisation targets draw on science-based target setting approaches and on the core principles of the associated methodology.

Figure 1: The Approach of İş Bankası 100 SMEs Twin Transformation Journey Project

The six steps of the programme as set out in the insight report (1): choosing the two readiness frameworks, forming the 100-company sample across sectors, sizes and regions, running the on-site assessments, analysing the results, re-measuring maturity after a year and continuing the financial and digital support afterwards.

Figure 2: Economic Benefits of Twin Transformation

The insight report's estimate of what twin transformation is worth to a typical participating company (1): USD 320,000 to 550,000 a year, made up of operating cost and margin gains from digitalisation, avoided carbon cost in export markets, cheaper access to sustainable finance and savings on energy.

Sustainability impact

Climate

The emissions addressed are those of the participating manufacturers. They sit in the customers' own inventories, and the bank's contribution is enabling and financing rather than reducing its own operational footprint. Within the project the emissions of the companies concerned are included in the bank's overall financed emissions calculation: 88 per cent of the 100 selected companies have used credit facilities, representing total emissions of approximately 307,000 tonnes of CO2e, of which the share attributable to the bank's financed exposure is estimated at approximately 13,000 tonnes of CO2e.

Initial analysis estimated the combined Scope 1 and Scope 2 greenhouse gas emissions of the 100 manufacturing companies in the initiative at approximately 0.33 million tCO2e.

Companies that implemented the projects in their roadmaps reported Scope 1 and Scope 2 emission reductions of 9-11% and energy efficiency gains of 14-20%. Measurement uses a 2024 base year with results measured in 2025, and emission calculations follow the GHG Protocol standard.

Field analyses and maturity assessments indicate that sustainability practice improved substantially in the large majority of the companies advised. On the assumption that at least 80% of the companies achieved an average 10% emission reduction through energy efficiency and operational improvements, the total annual reduction potential is calculated at approximately 26,400 tCO2e. Taking an emission factor of approximately 0.44 tCO2e/MWh for the national electricity grid, that reduction corresponds to around 60,000 MWh per year of energy efficiency gain.

These are calculated values based on reasonable assumptions drawn from field observation and maturity analysis, not a verified inventory. Results realised at each company vary with production volume, product mix, seasonality and operating conditions, and the figures should be read as potential rather than as audited reductions.

Individual cases show what the ranges look like in practice. A company in the machinery manufacturing sector installed a 1 MW rooftop solar plant at a cost of USD 630,000, reduced its annual energy expenditure by USD 140,000 and brought its Scope 2 emissions to zero. In advanced manufacturing, machine renewal investments delivered 70% energy savings with a payback of 0.6 years. A company working on packaging innovation cut its carbon emissions by 68%.

All measurements were validated through field observation, cross-functional interviews and production process analysis rather than self-reporting alone.

Nature

The improvements reported by companies implementing their roadmaps extend beyond energy. Waste was reduced by 5-18%, water consumption by 0-12% and resource efficiency improved by 10-15%, while the share of sustainable products rose by 5-7%.

The packaging innovation case illustrates the combination: alongside its carbon reduction the company cut water consumption by 18% and raised its recyclable waste ratio by 45%.

Compliance frameworks were built into the design, including the zero-waste regulation and the European Union carbon border adjustment mechanism, so environmental improvement and regulatory readiness advance together rather than as separate projects.

Social

The initiative was structured for reach as well as depth: 100 companies across 24 provinces, 6 regions and 12 sectors, which spreads capability building across the country rather than concentrating it in the largest industrial centres.

Operational profitability at participating companies rose from 18.5% to 24%, and the gains in production efficiency strengthen employment quality and competitiveness directly.

Capability was built at several levels: an awareness programme for decision-makers, employee awareness, leadership ownership and talent development were among the four axes of improvement confirmed in the consolidated analysis, alongside strategic clarity and resource planning, integration of sustainability into the way business is done across the value chain, and transformation of the technology base with data-driven development.

The bank links the initiative to four United Nations Sustainable Development Goals covering decent work and economic growth, industry and infrastructure, climate action and partnerships.

Business impact

Benefits

For the participating companies the digital side of the transformation produced production error reductions of 8-35%, downtime reductions of 15-70% and production capacity increases of 12-50%, with an average payback on digital transformation investments of between 1.5 and 2.3 years. Sustainability investments showed an average payback of between 2.5 and 2.8 years.

Operational profitability rose from 18.5% to 24%, which is the figure that makes the case to an owner-managed business more effectively than an emissions number.

For the bank the benefit is relationship depth and customer loyalty: helping customers cut costs and decide more flexibly deepens the relationship. Companies that complete a roadmap generate a pipeline of appraisable investment projects, and firms in carbon-intensive sectors that transform reduce their exposure to the European Union carbon border adjustment mechanism, which supports their competitiveness and their access to finance at lower cost.

The structure also allows international funding lines to be deployed at SME scale through the commercial banking channel, which extends the bank's role in climate finance beyond its own balance sheet capacity.

Results are comparable internationally because recognised readiness frameworks were used, which supports benchmarking with other markets and gives policymakers usable evidence.

Costs

The cost is advisory delivery rather than capital. A two-year initiative with expert teams visiting every company, comprehensive maturity analyses, tailored roadmaps, regular matchmaking events, digital factory visits, appraisal workshops and a re-measurement round after approximately 12 months carries a substantial operating cost that sits alongside the lending.

The financing architecture combines the bank's own financing solutions with external sources: multi-year funding from a multilateral development institution, and alignment with public incentive and grant programmes so that companies can access support after the assessment.

On the customer side, the investments themselves have to be carried by the companies, with payback periods of 1.5 to 2.3 years for digital investments and 2.5 to 2.8 years for sustainability investments, which sets the threshold at which an SME will commit.

The findings identify what slows transformation at company level: economic uncertainty and difficulty in accessing finance and human resources. These constrain conversion of roadmaps into completed projects regardless of the quality of the diagnosis.

Costs are contained by using standard readiness frameworks instead of bespoke assessment, by clear division of responsibilities between the two partners, and by aligning outputs with existing public support programmes so that companies draw on grants rather than on the bank alone.

Impact beyond sustainability and business

Co-benefits

A supply chain effect emerged during delivery. Large manufacturers began asking their own suppliers for digitalisation work, sustainability activity and roadmaps, which feeds transformation from both the supply and the demand side and multiplies the reach of the initiative beyond the companies directly enrolled.

The outputs give policymakers evidence on what actually blocks SME transformation, which supports policy integration and wider deployment in the medium term.

Many participating companies drew on public grant and support programmes during or after the process, and the bank supported access to those incentives after the initiative ended, so the public and private support structures reinforce each other.

Potential side-effects

The headline reduction potential is modelled rather than measured. It rests on an assumption about how many companies achieved what level of reduction, and a bank presenting enabled impact should keep that distinction visible; conflating it with reported inventory data would overstate the result.

Delivery is expert-intensive. On-site assessment, cross-functional interviews and process analysis for every company cannot be automated easily, so scaling the model requires assessment capacity to grow with it.

The bank does not control implementation. Roadmaps convert into projects only when the company can finance and staff them, which is why economic uncertainty and access to talent appear as the binding constraints in the findings.

Concentrating support on companies able to invest can also leave the least mature firms behind, which is the selection trade-off implicit in any criteria-based programme.

Typical business profile

The model suits banks and other financial institutions with an SME portfolio concentrated in manufacturing, where customers face regulatory and value chain pressure to decarbonise but lack the internal capacity to specify and appraise the investments.

It requires a partner able to carry out plant-level maturity assessment, access to a multi-year funding line with a development finance institution, and an SME banking function willing to work on project development rather than only on credit appraisal.

It is equally applicable to industrial groups seeking to transform their own supplier base, since the assessment and roadmap structure is the same whether the sponsor is a lender or a customer.

Delivery engages SME banking, sustainability, credit and customer relationship functions on the financial side, and assessment, engineering and ecosystem coordination capability on the partner side.

Approach

1. Define the target group and the selection criteria: Decide which companies enter the programme and set the criteria explicitly - in this case 100 manufacturing SMEs spread across 24 provinces, 6 regions and 12 sectors - so that results are comparable and the sample represents the portfolio rather than its best performers.

2. Bring decision-makers in before the diagnostics: Run an awareness programme for owners and senior managers on investment appraisal, feasibility and financing, because the barrier at this scale is usually the business case rather than the technology.

3. Assess maturity on internationally comparable frameworks: Measure digital maturity on the 16 dimensions of the SIRI (Smart Industry Readiness Index) framework, covering process, technology and organisation, and sustainability maturity on the 24 dimensions of the COSIRI (Consumer Sustainability Industry Readiness Index) framework, covering strategy and risk management, sustainable business processes, technology, organisation and governance.

4. Validate the assessment inside the plant: Visit each company with experts in digital transformation and sustainability and confirm the findings through field observation, cross-functional interviews and production process analysis, rather than relying on questionnaires or self-reported data.

5. Produce a company-specific twin transformation roadmap: Convert each assessment into a prioritised, investment-oriented roadmap that fits the company's scale, sector and maturity, and align the projects with the public green transformation and digital transformation support programmes the company can draw on technically and financially. Companies can also meet different technology partners through the programme and compare solutions.

6. Connect companies to technology partners and advisers: Hold regular events matching each company with suitable technology solution partners and consultants, and let decision-makers experience the use cases from their own roadmaps in a digital demonstration factory, so the investment is understood before it is financed.

7. Make the return explicit before asking for the investment: Run workshops that quantify the payback of twin transformation investments, using observed ranges of 2.5 to 2.8 years for sustainability investments and 1.5 to 2.3 years for digital investments.

8. Channel the finance to the project: Blend the multi-year funding line from the development finance partner with the bank's own SME lending so that international climate and digital transformation finance reaches companies of this scale, and support access to public incentives after the programme.

9. Re-measure after approximately 12 months and report: Repeat the maturity assessment about a year later, report the progress numerically, consolidate the results into comparative benchmarking reports, and feed company feedback systematically back into the methodology and the company-specific action plans.

Stakeholders involved

• Project leads: Responsibilities were divided explicitly between the bank and its implementation partner, MEXT, which is what makes accountability traceable in a two-organisation structure. The bank carries the financing architecture, the strategic framework and customer relationship management, and it set the company selection criteria. Corporate ownership rests with the beyond banking teams inside the SME banking department, with a budget structure aligned to strategic priorities, so the initiative is funded as a strategic commitment rather than from a campaign budget.

• Company functions: The beyond banking teams inside the SME banking department run the initiative and work closely with the relevant departments and with the relationship management teams that hold the customer contact. The project partner, MEXT, supplies the methodology and the impact framing, while the SME banking function supplies the customer access and the credit route that turns a roadmap into a financed project.

• Main providers: MEXT, a manufacturing excellence centre, acted as implementation partner and is responsible for applying the two readiness methodologies, for the company-level maturity analyses, for the site visits and for preparing the customised roadmaps. The same partner acts as ecosystem coordinator, bringing SMEs together with technology providers and consultants, and carries the data analysis, comparative benchmarking reports and the measurement and reporting functions of the 12-month progress review. An international management consultancy carried out case analyses of participating companies, which produced the consolidated payback and improvement ranges reported here. Technology solution partners and independent consultants deliver the company-specific projects in the roadmaps.

• Other: The 100 SMEs are the primary stakeholder and participated directly rather than being surveyed: they took part in the assessment through site visits and cross-functional interviews and in setting their own roadmaps, and their feedback during the 12-month progress review was reflected systematically in methodology updates and in company-specific action plans. A multilateral development bank acted as financing partner, providing multi-year funding that strengthened the international dimension and the credibility of the structure and allowed global climate finance standards to be transferred into the local SME ecosystem. Public institutions shaped the design: the initiative was aligned with the industry and technology ministry's green transformation and digital transformation support programmes, with the SME development agency and with the national research council, and many participating companies benefited from those support schemes.

Key parameters to consider

The initiative ran for two years from 2024, with a 2024 base year and measurement in 2025, and a re-measurement of maturity after approximately 12 months.

Scale and spread are part of the design: 100 companies, 24 provinces, 6 regions and 12 sectors, which is what allows the results to be read as a portfolio rather than as case studies.

Emission calculations follow the GHG Protocol standard, while the bank's own decarbonisation targets draw on science-based target setting approaches and the core principles of the associated methodology; the two should not be confused, because the first covers customers and the second covers the bank.

The reduction potential figure carries explicit assumptions - at least 80% of companies achieving an average 10% reduction, and a grid emission factor of approximately 0.44 tCO2e/MWh - which should be restated whenever the figure is quoted.

The model has no geographical or sectoral restriction and is designed to be adapted to different economic contexts; the company-specific roadmap structure provides a standard application template for different scales, sectors and maturity levels.

Implementation and operations tips

Keep enabled impact separate from the institution's own footprint. Reductions achieved by customers belong in their inventories, and a financial institution that presents them as its own operational performance will lose the credibility the numbers were meant to build.

State the assumptions with the headline figure. A reduction potential derived from an assumed participation rate and an average reduction rate is useful, but only if the assumptions travel with it.

Solve the pipeline problem, not only the funding problem. Companies at this scale usually lack an appraisable project rather than access to credit, so assessment and roadmap work is what makes the lending possible.

Use recognised readiness frameworks. Standard methodologies make results comparable across companies, sectors and countries, and remove the argument about whether the assessment was fair.

Validate on the shop floor. Site visits, cross-functional interviews and production process analysis catch the gap between what a questionnaire reports and what the plant actually does.

Quantify payback before asking for commitment. Ranges of 2.5 to 2.8 years for sustainability investments and 1.5 to 2.3 years for digital ones are what convert interest into a decision.

Work with the supply chain effect. Once large manufacturers start requiring roadmaps from their suppliers, demand for the programme grows without additional promotion.

Sources

(1) KOBİ'nin İkiz Dönüşüm Yolculuğu — insight report