Making MSMEs green

Greening smaller enterprises poses challenges. Most MSMEs focus their efforts on survival – i.e., short-term profitability, ensuring their day-to-day operations, maintaining revenue and paying salaries. This is especially true of small and micro enterprises, which tend to operate on relatively short time horizons. Improving environmental performance may seem like an additional cost of doing business for MSMEs. They rarely have (or can afford) dedicated staff to work on environmental performance, including understanding sometimes complex environmental requirements. However, experience from around the world demonstrates that adopting greener practices can have real benefits for MSMEs, including increasing profitability and lowering the operating costs, increasing competitiveness and resilience, and opening access to new markets and sources of finance.

Beyond the economic and environmental benefits of greener practices for conventional MSMEs, the green economy presents entirely new opportunities for MSMEs to become leaders in fields such as renewable energy installation, green service provision, and green consulting. Although MSMEs have fewer resources to adopt green measures, they often have greater flexibility than larger firms and can sometimes adopt new technologies more quickly. What motivates MSMEs and their owners is likely to be very different from what motivates large corporations. Despite their heterogeneity, MSMEs have many common characteristics that influence their approach to environmental issues and the implementation of green practices. Understanding these characteristics can help shape policy approaches to MSME greening:²⁸⁵

• MSMEs often lack information about the costs and benefits of relevant green practices and may have limited capacity to understand environmental requirements, as well as a low awareness of the need to address their environmental impacts. 
• MSMEs may have limited capacity to implement the changes required to improve environmental performance and uncertainty about both the most appropriate technologies and the ways they can incorporate green practices into core business planning.
• MSMEs often operate on shorter time-scales. Generally, environmental technologies encompass higher costs in the short term with the benefits realised in the longer term.

The environmental performance of MSMEs will thus be critical to putting Asia-Pacific economies onto a more sustainable development path. Supporting measures to increase resource efficiency and reduce the environmental impact of MSMEs can improve MSME competitiveness by lowering their operating costs and giving them access to new markets, while also increasing resilience. With many countries aiming to enhance economic growth while ensuring the sustainability of their power systems and ecosystem services, now is the time to adopt measures to support MSME greening. This is timely as the impact of the COVID-19 virus requires strong government support for industry. For example ASEAN has developed the ASEAN Comprehensive Recovery Framework (ACRF) which serves as the consolidated exit strategy from the COVID-19 crisis. The approaches in this toolkit can support measures to promote transition towards a green and circular economy, an initiative of the ACRF implementation plan under the broad strategy on advancing towards a more sustainable and resilient future.