Micro, small and medium enterprises (MSMEs) have a huge role to play in sustainable development and will undoubtedly help the transition to an ethical and green economy.
MSMEs have the potential to create huge waves in terms of the sustainable development goals. At the surface level (not including the further impacts that MSMEs can create within their business strategies and through Corporate Social Responsibility programs), small and medium enterprises (SMEs) account for 70% of employment.
In emerging markets, 4 out of 5 positions in the formal employment sector were created by MSMEs and MSMEs are a massive source of employment for the 4 billion people that earn less than $3,000 annually. This aspect of MSME functionality clearly links to SDG1 “No Poverty” and is an important aspect of sustainable development.
Through offering training and education, MSMEs can massively and easily contribute to SDG 4 and through providing equal opportunities for employment and training for women, MSMEs can hit SDG 5. MSMEs simply being what they are, are therefore contributing to a country’s GDP, and provide economic growth which aligns with SDG 8.
MSMEs that embody sustainable development are those that often incorporate sustainability and circular economy solutions within their business model. It is these companies which are like gold dust to potential investors. Gjenge Makers, an investee of Water Unite Impact, presents a sustainable solution with multiple synergetic impacts across different sectors and SDGs.
By employing plastic pickers to remove plastic from the environment, plastic waste is collected and processed into useful construction materials which are sold locally at an affordable price. Their business model keeps plastic in circular use, whilst protecting the environment, providing employment and a stable income to local people, with the end product being affordable construction materials. Not only does Gjenge makers provide a sustainable solution, but their model is scalable.
So, surely MSMEs are the powerhouses of sustainable development?
In theory, MSMEs can revolutionise modern sustainability through business. But in practice, MSMEs face barriers that may prevent many of them from integrating sustainable practices within their own business, many of these barriers are particularly prevalent in emerging markets. Examples of this include lack of financial and technical support and resources, lack of access to financial advisors, minimal support from public institutions and poor governance in senior management in terms of prioritising environmental mitigation.
The latter of the aforementioned barriers can lead to a slow uptake of circular economy solutions and therefore slows the transition of MSMEs to the green economy we are striving to achieve. A lack of financial support at the very least seriously limits the capacity of MSMEs in emerging markets and provides less incentive to integrate sustainable practices.
So, what is being done within the realm of MSMEs in order to integrate sustainability? With certifications such as BCORP and Future Fitness Business Benchmark, MSMEs are being encouraged through these frameworks to not only become more sustainable but to achieve a positive impact within their supply chain and even outside of the scope of their business. Certifications such as these help to build credibility and relationships with other MSMEs that share ideals towards each aspect of ESG. More needs to be done for institutions to integrate these incentives in emerging markets but nonetheless, they are needed for the transition to a green and sustainable economy.
Happy MSME Day!
Author: Charlotte Macdonald
Editor: Neil Sandy
Wellers Impact is a UK-based, FCA-Regulated Impact Investment Manager which works to unlock community-focused impact through SDG-focused impact investing. Through innovative investment models that utilise fair economics, Wellers Impact originates investment opportunities across three core business activities; real estate developments in partnership with local land-owning not-for-profits in East Africa, financial support for agriculture firms and supply chains globally through sustainable development finance and direct investment into private water, sanitation and plastics recycling firms globally. Investment involves risk. Suitable for Sophisticated, Professional and High Net Worth Investors only.