MSMEs, Climate Change and greening businesses

The majority of the population in developing countries rely on MSMEs for their livelihoods. It is imperative that this portion of the economy becomes more resilient to future climate impacts. MSMEs in developing countries are often found in climate-dependent sectors like agriculture, fisheries and tourism. In a world of rising temperatures and sea levels, unpredictable rainfall, and extreme weather events growing in frequency and intensity, the current and future challenges faced by MSMEs are daunting. In order to effectively adapt to climate change, MSMEs will have to overcome some key barriers that stand in their way. For example, it has been estimated that MSMEs produce 70 per cent of environmental pollution. Further, environmental pollution is now becoming a dominant issue in countries such as Malaysia due to increased activities of MSMEs.278

At the same time, these businesses are well positioned to develop and sell products and services that strengthen the resilience of vulnerable communities. The ability of firms to respond to climate risks depends in no small measure on factors such as business environment that can be shaped through policy intervention. Despite the apparent impact of climate change many MSMEs do not consider climate change to be an immediate concern. Therefore, they do not have any form of low-carbon strategy at present, unless they are an energy-intensive business or wish to present a clean and green image. Yet climate change offers many opportunities for MSMEs and startup enterprises to increase their competitiveness, both in the domestic market and overseas.

While business may view compliance with new “green” regulations as an additional cost, governments may also provide financial incentives for MSMEs to reduce their carbon footprint and implement best practice models (e.g. in the form of industry grants to purchase energy-efficient process equipment and make the necessary adaptations to building facilities). Timely attention to these matters in strategic management would help MSMEs to ensure long-term competitiveness and turn them into business leaders.279


278 Auwal, A. M.; Mohamed, Z.; Shamsudin, M. N.; Sharifuddin. J.; Ali, F. (2018). External Pressure Influence on Entrepreneurship Performances of SMEs: A Case Study of Malaysian Herbal Industry. Journal of Small Business and Entrepreneurship, 1-22. DOI: 10.1080/08276331.2018.1509504.

279 ESCAP, (2015), Overview of Green Business: Enabling Policies and Private Sector Examples