How India's MSMEs are Driving Towards a Sustainable Future The Green Climate Fund (GCF) recently approved $215.6 million to bolster climate action within India's MSME sector.
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Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India's economy, contributing significantly to employment, production, and exports. As India strives towards becoming Viksit Bharat by 2047, it is clear that sustainable growth will play a pivotal role. Recognizing this, the Indian government has introduced various initiatives that empower MSMEs to adopt eco-friendly practices and align with sustainable development goals (SDGs). These initiatives, coupled with rising awareness among MSMEs, set the stage for a transformative journey toward a greener future.
One such initiative is the MSE-GIFT (Green and Inclusive Finance for Transformation) Scheme, designed to help MSMEs adopt cleaner technologies. This scheme provides concessional financing for sectors ranging from renewable energy to green building practices, aiming to embed sustainability in MSME operations. From 2023 to 2026, a total of INR 478 crore has been allocated under MSE-GIFT to fund projects related to renewable energy, clean transportation, energy efficiency, and waste management, as per CII climate action charter.
Another impactful initiative is the MSE-SPICE (Sustainable, Productive, Inclusive, Competitive Enterprises) Scheme, which offers a 25 per cent capital subsidy to MSMEs that invest in resource-efficient and low-impact technologies. With an allocation of INR 472.5 crore for the period from 2023 to 2027, MSE-SPICE empowers MSMEs to reduce waste, lower emissions, and optimize resource usage. By addressing the financial barriers that often deter MSMEs from adopting sustainable technologies, the government is fostering an environment where even small businesses can play a role in India's sustainable development goals.
"Yet, amidst these substantial supports, the challenge of infrastructure development remains a key hurdle for MSMEs. This is where Pre-engineered Buildings (PEB) can play a transformative role. PEB technologies streamline construction processes, significantly reducing project timelines and costs, which are crucial pain points for MSMEs. These structures are not only durable and customizable but also align with sustainability goals, making them ideal for businesses aiming to minimize their environmental impact," said Nikhel Bothra, executive director at EPACK Polymers.
Supporting these efforts on an international scale, the Green Climate Fund (GCF) recently approved $215.6 million to bolster climate action within India's MSME sector. This program provides $200 million in concessional financing and leverages an additional $800 million from private institutions, creating a $1 billion facility dedicated to low-emission and climate-resilient technologies. This funding is expected to yield profound impacts, with projections suggesting it could reduce CO₂ emissions by 35.3 million tonnes and enhance water resilience for over 10.8 million people. As Gurjodhpal Singh, CEO of Tide India, notes, "With SIDBI leading this transformative programme, MSMEs can access the resources they need to adopt sustainable practices, marking a monumental shift toward a greener MSME sector."
"The major reason that is pushing MSMEs to take a stand and choose sustainability is the increasing customer awareness about climate change. Now that consumers are exploring more environmentally friendly products, authorities have responded by imposing strict laws that compel small enterprises to execute eco-friendly methods of operation. These regulations are part of a broader global shift, where sustainability is taking centre stage in supply chains," stated a report by Outlook Planet.
Many MSME owners lack awareness of sustainable practices and their benefits, which hinders widespread adoption. Regulatory requirements also present obstacles, as compliance with environmental standards can be complex and time-consuming, especially for smaller businesses without dedicated administrative resources. Additionally, MSMEs often struggle to access markets that prioritize sustainability. Larger corporations tend to dominate supply chains, and they often have the resources to meet stringent sustainability standards, which can leave smaller companies at a disadvantage.
"Over the past year, MSMEs have become more aware of sustainability, particularly of environmental measures, and are increasingly recognizing the profitability and cost-saving benefits of sustainable practices. However, high costs, availability of capital, and difficulty in quantifying benefits make them hesitant to deepen their expertise. To overcome these barriers, it's crucial to reduce the cost of adopting sustainable practices and increase funding, especially for cleaner production and recycling technologies. The government's initiative to create Climate Finance Taxonomy as announced in the Union Budget in July 2024 will be key in directing capital toward climate-resilient infrastructure, aiding MSMEs in achieving energy efficiency and emission reduction targets," said Dr. Arun Singh, global chief economist, Dun & Bradstreet, in a SPeX report.
Many MSMEs have already started making headway on the sustainability front. Sustainability awareness among Indian MSMEs has grown by 59 per cent, and nearly half of MSMEs are implementing eco-friendly practices. As Gurjodhpal puts it, common initiatives include waste management, where companies focus on reducing waste through recycling and reusing materials. "Many MSMEs are focusing on waste reduction through recycling and reusing materials or usage of recycled products. For instance, some enterprises are converting waste into valuable products, such as transforming plastic waste into construction materials and using recycled products such as rPVC cards to transact in day-to-day business," he said.
Energy efficiency has also emerged as a focal area for MSMEs, particularly as they seek cost-saving measures and regulatory compliance. Gurjodhpal revealed that programs like "Zero Defect Zero Effect" encourage MSMEs to adopt energy-efficient technologies that minimize their environmental footprint while improving operational efficiency. Additionally, digital tools, including Internet of Things (IoT) solutions, are becoming increasingly popular for tracking and optimizing energy usage. By enabling real-time monitoring, these tools help businesses identify areas for energy savings, thereby reducing costs and emissions.
