Green MSMEs - Enabling Transition
to a Green Economy

How MSMEs can help towards transition to a Green Economy?

MSMEs play a key role in increasing competitiveness and promoting rural and global value chain development, thereby achieving inclusive growth and poverty reduction. According to the World Bank, Micro, Small, and Medium enterprises (MSMEs) contribute significantly to GDP and play a crucial role in creating employment. Formal MSMEs contribute up to 45% of total employment and up to 33% of GDP in emerging economies. Individually, MSMEs have relatively small environmental and social impacts. However, as a group the impacts are much larger and as they play a huge role in the global economy, particularly in equitable income generation, employment creation, innovation and growth.

With the magnitude in which MSMEs exist, they contribute to economic growth as well as climate change adaptation and mitigation policies through implementation of resource efficient measures and inclusive business practices to respond effectively to the increasing pressures on ecosystems. For instance, Paaduks is a small enterprise which engages with cobblers in producing eco-friendly footwear with soles made from scrap tyres which are simple, stylish, durable reducing the impact of waste on the environment. With the ever-strengthening movement on sustainable development, it is high time to attempt converting traditional operational processes of MSMEs to green practices and ensure the one’s setting up to start green.

What are Green MSMEs?

Green MSMEs adopt green processes and/or those producing green goods using green production inputs. A judicious exploitation of techno-commercial opportunities and redevelopment of business models, often neglected by established companies, have been the major hallmarks of green MSMEs.

MSMEs operating in eco-design, green architecture, renewable energy, energy efficiency and sustainability are spearheading the transition to green economy across a wide range of industries in the manufacturing and services sector. In the primary sector, organic farming is most commonly ventured into by MSMEs. The path to green economy is achieved by making use of production, technology and management practices of green MSMEs.

There are many cases from across India which corroborates the role of MSMEs in providing poverty and environment solutions while building a resilient economy. In Maharashtra, Nuru Energy has co-created a unique off-grid recharging platform using human power to recharge both their portable LED lights as well as other low-power devices, such as radios and mobile phones. Eco-Wise is a provider of comprehensive Waste Management and Recycling Services in Delhi-NCR which collect, sort and treat both residential and commercial waste. Avani Foundation in Kumao, Uttarakhand is a power plant generating electricity from flammable pine needles. In Bihar, multiple MSMEs like RAS, UPS etc have adopted manufacturing of bricks made of polluting fly ash.

What are the key movers for green entrepreneurs?

The key motivations for a green entrepreneur are to exploit the market opportunity and to promote environmental sustainability. A green business can help in the implementation of innovative solutions, compete with established markets and create new market niches. Green entrepreneurs are a role model as they combine environmental performance with market targets and profit outcomes, thus contributing to the expansion of green markets.

Some of the popular areas in which small green businesses have been historically successful are renewable energy production (solar, wind and biomass), smart metering and waste recycling.

What can be done?

Green MSMEs face significant barriers to entry despite their key role in developing locally appropriate technologies and eco-friendly business models. The most pressing challenges are lack of information and awareness, perceived resource intensity (people and finance) and disorientation of research and development from industry priorities and trends.

Policy interventions for supporting green MSMEs, especially in developing nations, are urgently required to overcome major barriers, including knowledge-sharing, raising environmental awareness, enhancing financial support, supporting skill development and skill formation, improving market access and implementing green taxation.

Thus, complemented with adequate support, green MSMEs are drivers of integrated development – enabling job creation, poverty reduction, environment sustainability and resilience building. ■

Stella George
sgeorge@devalt.org