Advantages to MSMEs to by adopting Sustainable Practices

Context

The UN General Assembly has declared June 27 as “Micro-, Small, and Medium-Sized Enterprises Day” to increase awareness of MSMEs’ significant contributions to achieving the Sustainable Development Goals.

Over the last five decades, MSMEs have emerged as one of India’s fastest-growing sectors. They account for around 30% of India’s GDP, employ 110 million people, and contribute 49% of exports. In India, small businesses own 96% of all industrial units. The industry accounts for 38.4% of overall manufacturing production and 45.03% of total exports.

Contribution of MSMEs in Indian Economy

• MSMEs provide a variety of options in both rural and urban areas of the country, assisting individuals in finding work. Over the last six years, employment creation has increased at a rate of 110 percent every year.  
• According to the latest data from the Udyam portal, roughly 1.28 crore MSME registered industries employed 9.31 crore people in December 2022, including 2.18 crore women employees.

Current Status and Challenges for MSMEs in India

• The current situation of MSMEs in India is mixed. The sector is expanding, but it confronts numerous problems, including restricted access to funding, technology, and skills, insufficient infrastructure, onerous regulatory and compliance requirements, and poor levels of productivity and competitiveness.  
• According to recently revealed government data, more than 10,000 MSMEs closed in 2022-23, raising concerns about the sector’s health. Making matters worse, climate-related heat stress is increasingly viewed as putting enormous strain on labor.  
• Such risks affect infrastructure, operations, and resources, resulting in a financial crisis, job losses, and migration. 
• The sector contributes significantly to greenhouse gas emissions. According to a 2018 estimate, MSMEs emit around 110 million tonnes of CO2, which is equivalent to the annual energy consumption of up to 50 million metric tons of oil from 200 energy-intensive manufacturing clusters in India.

Measures to Overcome Challenges faced by MSMEs

• MSMEs should adopt sustainable and responsible business practices. Adopting the Environment, Social, and Governance Framework (ESG) framework, as well as the nine principles of the Ministry of Corporate Affairs’ National Guidelines for Responsible Business Conduct (NGRBC), might serve as a starting point for the industry.  
• The NGRBC serves as the basis for SEBI’s Business Responsibility and Sustainability Report (BRSR) for 1,000 listed businesses. There is talk of expanding a milder version of BRSR to all enterprises, including MSMEs.  
• As a result, MSMEs must gradually organize their business processes to fit with the principles and prepare for the future.  
• Adopting sustainability is vital for meeting stakeholder expectations, lowering costs and increasing efficiency, improving brand reputation, and creating business value and impact on environment and society. 
• Step by step, organize corporate procedures to match with the values, and prepare for the future. Adopting sustainability is critical for meeting stakeholder expectations, lowering costs and increasing efficiency, improving brand reputation, generating corporate value, and impacting the environment and society. 
• Decode the ESG framework and NGRBC rules. The ESG framework helps MSMEs handle energy, waste, carbon emissions, and environmental factors in their supply chain. 
• The NGRBC standards promote and support businesses in conducting themselves responsibly and sustainably, as well as their suppliers, vendors, distributors, partners, and other stakeholders. Systematic adoption of the ESG framework and aligning company activities around the NGRBC’s nine principles remain critical. 
• To implement sustainable practices in their enterprises. Governments, business groups, civil society organizations, and other stakeholders can all take an active part in raising awareness, sharing best practices, and offering training and resources.

Way Forward

• MSMEs are part of larger supply networks, and working with supply chain partners can assist promote sustainability improvements throughout the value chain. 
• Larger corporations can help MSMEs implement sustainable practices by offering training, technical assistance, and financing. The CII’s “GreenCo Rating System” promotes sustainability throughout the value chain by assessing firms based on their environmental performance. 
• MSMEs that use sustainable practices can often save money, increase efficiency, and differentiate themselves from competitors, giving them a competitive advantage: 

1. Governments and other stakeholders can promote this to boost MSMEs.
2. Ratings and recognition are one way to do this.
3. The Indian Green Building Council (IGBC) initiative “IGBC Green Factory Building Rating System” certifies factories that use sustainable building techniques.
4. This sets these factories apart from competitors and helps them attract customers and investors who value sustainability.

SOURCE: The Indian Express

Download as PDF