The landscape of global trade is shifting rapidly, and Indian Micro, Small, and Medium Enterprises (MSMEs) are at a pivotal point. With the world increasingly focusing on sustainability, these small businesses are finding themselves in need of adapting to not just survive, but to thrive in the global marketplace.
The Influence of Big Buyers
Large corporations and multinational companies (MNCs) are significantly influencing MSME sustainability. These big buyers, committed to net zero targets, are now favoring suppliers who align with their sustainability goals. This shift is impacting Indian MSMEs, which often lack the resources and expertise to adapt quickly. Initiatives by global corporations, such as IKEA’s SME Climate Commitment and PwC’s promotion of science-based targets, are guiding small businesses towards sustainability. However, MSMEs outside these networks often feel overwhelmed due to a lack of clear incentives and resources.
Evolving Consumer Preferences
Consumer preferences are rapidly changing worldwide, favoring environmentally friendly products and services. The Indian Government’s Mission LiFE, aimed at promoting sustainable lifestyles, echoes this trend. Corporations like Flipkart are also adapting by introducing sustainable packaging and reducing plastic use. These changes present a significant opportunity for MSMEs to expand their market presence with eco-friendly products.
International Trade Policies, Taxes, and Certifications
Trade-related rules and taxation on carbon emissions are becoming increasingly stringent. Mechanisms like the Carbon Border Adjustment Mechanism (CBAM) and EU Supply Chain Due Diligence Directive are affecting MSMEs, especially those exporting to regions like the EU. These developments require MSMEs to stay informed and adapt to ensure continued profitability. Certifications related to sustainability are becoming essential for market credibility, though there is a need for making these certifications more accessible and affordable for MSMEs.
Building Climate Resilience
At COP27 in Sharm el-Sheikh, Egypt, India laid out its long-term low-emission development strategy, focusing on sector-wise approaches to achieve low-carbon pathways. However, there are challenges such as a lack of awareness about climate-related risks, training gaps, and limited access to green finance. Solutions like targeted provisioning of region-specific climate information, new-age technologies like AI and GIS, and developing robust databases for local resources are being explored.
The Way Forward
To support the transition to greener methods, MSMEs need support in building capacities and awareness about climate impacts. Developing innovative financial instruments for green technology investments, technical know-how on green financing, and micro-insurance risk mitigation mechanisms are essential. Vocational education and training systems should evolve to support innovation and resilience in the MSME sector. Policy coherence and institutional convergence led by state governments can incentivize greener activities.
Conclusion
The role of MSMEs in India’s journey towards climate resilience is crucial. With India’s G20 presidency in 2023, there’s a unique opportunity to foster global cooperation on climate change and resilience for vulnerable enterprises. The synergy between top-down and bottom-up approaches, mainstreaming climate change resilience into policies and business strategies, is key to achieving a just and sustainable energy transition.