Decarbonization is a critical area as companies work to meet the environmental mandates associated with their environmental, social, and governance (ESG) commitments. It provides significant potentials for the sustainable manufacturing of Small and medium-sized enterprises (SMEs) to match the demands from the downstream value chain. However, SMEs find themselves not ready to take the first step due to a lack of sufficient professional resources. This paper presents a literature review and practical investigation to find out the root causes of decarbonization issues with regard to SMEs. As novel countermeasure, an agile readiness model with consideration of production and environment engineering is developed which allows collectively identifying the current status and targeted performance. Finally, the proposed approach is validated through a case study with industrial partners (in developed countries like Germany and The Netherlands, and emerging countries like China).