Expert Insights

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.

Climate change and demography share deep ties but their relationship is more complex than it might seem. Population growth is just one side of a story that, when we dig a little deeper, reveals some cause for optimism in the face of adversity.

There are three times more people on Earth today than there were in the 1950s. With a population of eight billion that looks set to continue growing into the middle of this century, we often think about the negative environmental impact of population growth when we consider the relationship between demography and climate change. Whilst the impact of this rapid expansion has been undeniable, it’s not the only side to the story.

The connection between population patterns and climate change is a complex matrix that includes not only population growth, but also food systems, urbanization and displacement. Negativity dominates the headlines, but there are more than a few causes for hope in this story. Ahead of COP28 and the vital decisions that need to be taken to slow the impacts of climate change, exploring the intricate connections between population dynamics and climate change uncovers reasons for optimism and pathways towards a more sustainable future.

The urban paradox

Rapid urbanization is a defining characteristic of our time. Over half of the world’s population lives in cities, 80% of GDP is generated in urban areas, and cities account for over 70% of global CO₂ emissions. This concentration of people, wealth and resource consumption paints a picture of cities as major emitters and, while this is true, the reality is more complex. Urbanization increases household carbon footprints in developing countries, but studies suggest that the inverse can be true in developed economies thanks to more efficient energy and transport infrastructure. Turku and Dijon, for example, are lowering household and municipal emissions through the installation of quadruple glazed windows and solar panels.

Designing more sustainable urban areas with efficient public transportation and green infrastructure could significantly reduce global emissions and improve quality of life, but only if access to these innovations is equitable for all countries. Furthermore, the sheer number of people and resources in cities means they can serve as hubs of innovation, fostering the development and implementation of sustainable technologies and policies. Cities are some of our largest polluters, but they have the potential to be the source of our greatest sustainability successes.

Reclaiming the climate refugee narrative

Extreme weather events, rising sea levels and ecological disruption are creating climate refugees. According to UNHCR, 21.5 million people have been displaced by weather-related sudden onset disasters – like floods and wildfires – every year since 2008.

But there could be a glimmer of hope. This adversity is compelling governments and individuals to find solutions, develop sustainable practices, and create stronger, more inclusive societies. Marshallese community members and artists, for example, are strengthening ties to their traditional culture and fostering national pride by resisting the narrative that they are helpless in the face of climate change. And climate refugees in Bangladesh are building new lives in climate-resilient areas like Mongla that provide them with jobs, housing and a renewed sense of purpose. Displacement due to climate change will challenge our societies in new ways, but the movement of people has always been a fact of human existence. We can work to create positive outcomes for those affected by it.

Feeding the future

Addressing the nexus between population patterns, climate change and food security is at the top of the sustainability agenda. As many as 811 million people faced hunger in 2020 and that number is continuing to rise. Extreme weather events – like flooding in Pakistan and drought in the Horn of Africa – are threatening more people with starvation through the destruction of crops and livestock, while the environmental impact of food production continues to grow: agriculture accounts for a quarter to a third of global emissions.

Solving world hunger and reducing emissions from food production seem to be totally at odds but there’s significant potential for sustainability success. Eco-friendly farming practices – such as agroforestry, organic farming, and precision agriculture – can help mitigate emissions while enhancing productivity and resilience. Increasing attention is also being given to the sustainable agricultural practices of indigenous peoples, paving the way for greater social cohesion and inclusion of historically marginalized communities. The USDA, for example, is engaged in a national project to revive the indigenous American practice of planting several different crops alongside each other, and new research suggests that indigenous farming knowledge is key to the creation of sustainable food systems. Embracing sustainable agriculture has the potential to increase food security and reduce pressure on natural resources in the same stroke, allowing us to feed future generations.

Optimism amidst challenges

The complex interconnectedness of demography and climate change presents formidable challenges and demands our immediate attention, but the opportunities for positive change are also great. Governments, businesses, and individuals are recognizing the urgency of addressing these issues and are taking action. COP28 will provide an historic opportunity to enable a unified approach to global sustainability efforts and a chance to accelerate positive change.

Optimism is not only possible but necessary if we are to effectively tackle the challenges of climate change and shifting populations together. In many cases, a solution to one is a solution to another – the pursuit of sustainability is inevitably the pursuit of a healthier, happier and more prosperous society