You will need to be launching your server from the command line either manually or with a batch file. You won't be able to use the Steam server launcher or sh_server_gui.exe. All you need to do is add the following line to your server config file:

melee_mode true

Then start your server normally.

The RK-41-v MPAC will still fire bullets and grenades, but they do no damage. Grenades are non-lethal in Shattered Horizon.