The rapid industrialization of Asian developing countries has pushed the need for more energy at the cost of environmental degradation. Though large industries are targeted for energy conservation and pollution prevention, small and medium scale industries (SMI) also contribute to significant pollution. This paper discusses the role of SMI in the economy, its energy consumption and impact on the environment. An overview of the energy and environment policies of China, India, Sri Lanka, the Philippines and Vietnam, and the role of energy efficient and environmentally sound technologies ((EST)-S-3) as a viable means to meet these modern challenges in SMI is discussed. The barriers faced in adopting these technologies have been identified and an analysis has been done of the various strategies and policy options available to governments to promote (EST)-S-3 in SMI. Examples and illustrations of such successful efforts have also been highlighted.