This article explores how enterprises including technology giants, financial institutions, and consulting firms can collaboratively develop integrated sustainability solutions tailored for Indian Micro, Small, and Medium Enterprises (MSMEs) to help them reach their sustainability goals. It also delves into the strategic considerations and potential contributions from these sectors in addressing the unique sustainability needs of Indian MSMEs.
Gartner survey indicates that C-suite executives have elevated sustainability to their list of top 10 strategic business priorities for the first time ever. Projections suggest that by 2025, a quarter of organizations will elevate environmental sustainability to one of their top five strategic business priorities, with a more than 100% increase compared to the figures observed in 2021 (Gartner Forecast Analysis 2022: Consulting Services, Worldwide).
For enterprises, achieving their sustainability goals is linked to collaboration with small and medium-sized businesses (SMBs), whether SMBs function as suppliers or customers. The interdependence between enterprises and SMBs is evident, as their collective efforts are essential for driving meaningful progress towards sustainability objectives.
SMBs, with their unique economic significance, possess the capacity to influence entire industries and markets in any country. SMBs are very close to their customers hence grassroots initiatives from SMBs can create a multiplier effect. When SMBs take climate actions, they can send a strong message to local communities and influence others.
SMBs in India, also known as Micro Small & Medium Enterprises (MSMEs), are considered by many to be the backbone of the country’s economy, with a staggering 63 million MSMEs contributing approximately 30% to India’s GDP. As India sets its sights on achieving a “Net Zero” status by 2070, the MSME sector is poised to play a pivotal role in realizing this ambitious vision.
Simultaneously, Indian MSMEs are recognizing that embracing sustainable practices is not merely an ethical responsibility but also a strategic advantage. An increasing number of Indian MSMEs are seeing themselves as key contributors to both economic growth and the nation’s broader environmental objectives.
The sustainability index for Indian SMBs, known as SPeX, serves as a measure and tracker of Indian MSMEs’ perceptions regarding sustainability. This index evaluates the internal and external factors influencing businesses’ sustainability outlook across three dimensions: Willingness, Awareness, and Implementation. The SPeX currently stands at 56 and is consistently on an upward trajectory each quarter, largely due to increases in Awareness.
Here are the primary factors that draw MSMEs towards sustainability:
Challenges faced by Indian MSMEs in implementing sustainability initiatives include:
- Skills and Knowledge Gap: 88% of MSMEs have encountered delays in executing sustainability actions due to a lack of requisite skills and knowledge.
- Financial Constraints: 81% of MSMEs express a need for external funding to undertake sustainability measures, indicating financial barriers to implementation.
- Undefined Sustainability Framework: Over 60% of MSMEs currently lack clearly defined sustainability targets, policies, and procedures. This absence makes it challenging to measure Environmental, Social, and Governance (ESG) data across their value chain, impeding the quantification of returns on investment in sustainability initiatives.
Examining statistics about the Indian MSME reveals that offering technical, financial, and quantifiable key performance indicators (KPIs) can effectively assist MSMEs in tackling their sustainability challenges.
- Technical Support: The transformative impact of digital technology on various industries enables businesses of all to operate more efficiently and cost-effectively. In the context of MSMEs, there is a clear opportunity for tech giants to facilitate climate action through digital solutions. This can involve the digitization of processes to minimize waste and the development of digital tools for tracking emissions, making the implementation of changes more seamless.
While initiatives addressing climate action through technology are often directed at large enterprises, there is a substantial need to extend similar efforts for the MSME community. Technology companies possess valuable data from their MSME customers that can be augmented to help those MSMEs build compelling business cases for climate action.
Technology solutions can also be employed to assess the effectiveness of marketing campaigns for climate-related products, allowing for quick and informed decision-making. Overall, technology giants have an opportunity to leverage digital innovation to support and drive climate initiatives within the MSMEs sector.
- Financial Support: 67% of MSMEs exhibit limited or no awareness of available low-cost green financing. This presents a substantial opportunity for governments and major financial institutions to step in and offer coaching and advisory services to MSMEs about these funding options . By providing education and support, governments and financial institutions can empower MSMEs to make informed decisions about sustainable financing options, contributing to both environmental stewardship and financial viability.
- Measurable KPIs : MSMEs also looking for consultation to shape their measurable sustainability business strategy As mentioned above, the true challenge for MSMEs lies in identifying, measuring and evaluating sustainability performance indicators. Through a thorough analysis of the MSMEs’ value chain, consulting firms can identify the areas with the most significant impact on sustainability and assisting MSMEs in selecting the most relevant metrics for measurement and evaluation. Moreover, consulting firms can play a vital role in maximizing the impact of sustainability initiatives for MSMEs by extending their benefits throughout the MSME community.
MSMEs can benefit from working with technology giants, financial institutions and business consulting firms to set and achieve their sustainability goals by integrating with essential technical and financial support. Strengthening relationships with MSMEs also offers benefits to these enterprises, allowing them to expand their customer reach and enhance their overall revenue growth.