15 SEP 2023
Small enterprises with big impact – how the road to net zero is paved with SMEs
Small and medium-sized enterprises are green powerhouses –investing in them is investing in everyone’s future.
Globally, small to medium sized enterprises (SMEs) make up 90% of businesses and account for around 50% of employment.
This means that while Amazon, Coca cola, Apple and other brand behemoths make bold net-zero projections, it’s important to support the millions of firms with 250 or fewer employees that are also driving the sustainability agenda – arguably even further and faster. This is especially true for SMEs in the renewable energy sector who will play a leading role in bringing down global emissions.
Challenges of transitioning
SMEs across all sectors understand the importance of acting on sustainability. In one survey, an overwhelming 89% of SMEs in the UK recognized sustainability as a business issue. It's this acute awareness which has prompted fellow SMEs to build and offer renewable energy solutions.
But working with fewer employees and resources, SMEs must balance the need to innovate with the need to grow. Particularly in the developing world, SMEs are confronted with daily challenges; wrangling bureaucracy, limited access to stable finance and skills shortages. Smaller firms are also more vulnerable to climate change impact. Lacking the financial buffers of global brands, they must thrive to survive.
The result is too many SMEs with minimal margin for innovation and little protection against disaster - including those whose very business model is built upon enabling climate change action.
What SMEs want
A recent Twitter poll by ADSW asked SMEs in the renewable energy sector what support they needed to succeed economically and environmentally:
37% required funding.
32.8% asked for incentives.
30.3% highlighted incubator programs.
Across all sectors, SME respondents echo the same findings. In a survey from the SME Climate Hub, 40% of small business owners globally reported delaying climate action because of time limitations, two-thirds admitted feeling unequipped to tackle the climate crisis – and 70% needed faster access to external funds to reduce their emissions.
The case for investing in SMEs
The World Bank predicts 600 million jobs are already needed in 2023 to absorb the growing global workforce. This should put SMEs, as a major employer, at the top of the priority list for governments around the world - and argue the International Trade Center’s case for $1 trillion global investment in annual SME investment.
It would be money well spent.
Smaller enterprises can react with greater agility than the world’s giants. A surprising study by ScienceDirect found that climate change has had a significant positive impact on innovation among SMEs, leading to an average increase of 6.6% in R&D development investment.
Indeed, many SMEs thrive on the challenge – such as Charm Industrial, a US-based SME which converts plant waste into bio-oil and then stores it underground, locking carbon away for 1 million years. The company made headlines in 2022 for signing a $53 million deal to remove over 100,000 tons of carbon dioxide from the atmosphere.
But for those with minimal support or funding, a surge in innovation is hard to achieve.
SMEs in pursuit of SDGs
Despite the unlevel playing field, SMEs all around the world are leading the way.
In India, solar-powered clean irrigation has positively impacted more than 38,000 small farms. Award-winning SME Claro has installed 60MW of power and 16,850 solar pumps. Its work has so far benefited 7,650 women farmers and avoided an estimated 30,000 metric tons of CO2 emissions.
The award-winning SME Genevos is advancing the mission for zero emissions at sea. Based in France, the firm is a front-runner in championing green hydrogen and on a mission to drive the marine sector towards a net zero future.
In South Africa, G7 Renewable Energies has been in the business of grid-connected wind farms and solar parks since 2008. With 37 interns over the past decade, the company is investing in the future by enrolling undergraduates, graduates and post-graduates in its youth development program. Thinking younger still, its Head of Environment has helped create When I Grow Up, a children’s book of inspiring stories from people working in green energy.
And SMEs don’t need to be in the renewables sector to have big impact. In Tanzania, honey producer SuBeHuDe has partnered with the Global Evergreen Alliance on a project of landscape restoration, supporting livelihoods in the area. The nonprofit focuses on training in sustainable beekeeping practices alongside promoting access to inclusive education, healthcare and clean water. The name is a shortening of Sustainable Beekeeping and Human Development and SuBeHuDe has built a social, economic and environmental framework which has positively impacted thousands.
Small businesses, big impact
SMEs may not be big, but they are powerful. Collectively they can accelerate the green transition and benefit everyone on the planet, but only if they can access funding and have a supportive environment, with policy frameworks and incentives to boost their green development.
Small businesses may be our biggest hope.