The UN Common Meeting has designated June 27 as “Micro-, Small and Medium-Sized Enterprises Day” to boost consciousness of the super contributions of MSMEs to the achievement of the Sustainable Growth Targets. MSMEs account for 90 per cent of companies, 60 to 70 per cent of employment and 50 per cent of GDP worldwide.
Within the Indian financial system, during the last 5 many years, MSMEs have emerged as one of many fastest-growing sectors.
They account for about 30 per cent of India’s GDP, make use of 110 million staff, and have a 49 per cent share in exports. In India, 96 per cent of business items belong to small firms. The sector accounts for 38.4 per cent of the whole manufacturing output and contributes 45.03 per cent of the nation’s complete exports.
MSMEs provide varied alternatives within the nation’s rural and concrete areas and have helped enhance employment probabilities for individuals. During the last six years, there was a 110 per cent yearly enhance within the creation of jobs. As of December 2022, roughly 1.28 crore MSME registered industries employed 9.31 crore individuals together with 2.18 crore ladies workers, primarily based on the newest information from the portal of Udyam.
The present state of MSMEs in India is combined. The sector is rising but it surely faces a number of challenges together with restricted entry to finance, know-how and abilities, insufficient infrastructure, complicated regulatory and compliance necessities, and low ranges of productiveness and competitiveness. Lately launched authorities information reveals that over 10,000 MSMEs had been closed in 2022-23, elevating issues over the sector’s well being. Making issues steadily worse, climate-triggered warmth stress is more and more seen as placing unprecedented stress on staff. Such dangers impression infrastructure, operations and assets resulting in a monetary crunch, job losses, and migration.
The sector contributes considerably to GHG emissions. MSMEs generate round 110 million tonnes of carbon dioxide, equal to the vitality utilization of as much as 50 million metric tonnes of oil per yr from 200 energy-intensive manufacturing clusters in India, in response to a 2018 report.
Within the above context, sustainable and accountable enterprise practices needs to be the pathway for MSMEs. Adopting the Surroundings, Social and Governance Framework (ESG) framework could be a begin for the sector together with the 9 rules of Nationwide Pointers for Accountable Enterprise Conduct (NGRBC) by the Ministry of Company Affairs. The Enterprise Accountability and Sustainability Report (BRSR) by SEBI for 1,000 listed firms is derived from the NGRBC. There’s an anticipation of the extension of a lighter model of BRSR to all companies together with MSMEs. It’s thus necessary for the MSMEs to organise their enterprise practices in alignment with the rules step-by-step and get future prepared. Adopting sustainability is necessary for assembly stakeholder expectations, decreasing prices and growing effectivity, enhancing model repute, increased enterprise worth and impression on surroundings and society.
An interplay with a couple of MSMEs suggests there’s a must decode the ESG framework and NGRBC pointers. The ESG framework lays down key features round which MSMEs can deal with points like vitality, waste, carbon emission and elements associated to the surroundings of their provide chain and guarantee good labour practices, minimal wages, respectable working situations for staff and the protection of girls. The NGRBC pointers urge companies to conduct responsibly and sustainably and encourage and help their suppliers, distributors, distributors, companions, and different stakeholders to comply with the identical.
MSMEs have additionally began to undertake good practices. These embody low vitality methods, adopting renewable, waste administration, security of girls, and well timed wage fee. Nonetheless, the systematic adoption of the ESG framework and organising the enterprise practices alongside the 9 rules of NGRBC stay crucial.
As well as, a couple of methods for sustainability are as follows:
One, many MSMEs will not be conscious of sustainability or have no idea learn how to incorporate sustainable practices into their companies. As such, governments, business associations, civil society organisations and different stakeholders can play an energetic position in elevating consciousness, sharing finest practices, and offering coaching and assets.
Two, offering incentives to MSMEs by means of monetary and non-financial methods could be an efficient approach to encourage them to undertake sustainability. Governments and traders can provide monetary incentives equivalent to tax advantages, subsidies, grants, and low-interest loans in order that MSMEs can undertake sustainable practices or put money into sustainable applied sciences. SIDBI has launched a programme referred to as “Greening MSME” which gives monetary help with a most restrict of INR 20 crores to MSMEs to implement energy-efficient and environmentally sustainable applied sciences. Non-financial incentives equivalent to recognition and awards may inspire MSMEs to undertake sustainable practices.
Three, MSMEs are sometimes a part of bigger provide chains, and collaboration with provide chain companions may help to drive sustainability enhancements throughout the worth chain. Bigger firms can play a task in supporting MSMEs to undertake sustainable practices, equivalent to offering coaching, technical help, and entry to financing. The CII has launched a program referred to as “GreenCo Ranking System” that encourages sustainability enhancements throughout the worth chain by score firms primarily based on their environmental efficiency.
4, MSMEs that undertake sustainable practices can typically obtain price financial savings, enhance effectivity, and differentiate themselves from opponents making sustainability a aggressive benefit. Governments and different stakeholders can promote this to encourage MSMEs. This may be finished by means of rankings and recognitions. The Indian Inexperienced Constructing Council (IGBC) has launched a program referred to as “IGBC Inexperienced Manufacturing facility Constructing Ranking System” that gives certification to factories that undertake sustainable constructing practices. This could differentiate these factories from opponents and assist them appeal to prospects and traders who prioritise sustainability.
The author is advisor, Markzin Younger Personal Restricted, which gives sustainability advisory to MSME