Connecting SMEs for a green economy

Greening SMEs? Everyone's talking about it...

Green SMEs? Everyone's talking about it
Emily Benson's picture

This week the Green Economy Coalition brought together leaders from business, finance, civil society, UN, research and policy to discuss different dimensions of the green economy transition. It turned out that everyone was interested in small businesses...

On 1 -2 September the Green Economy Coalition convened a global meeting in London focused on the transition to greener economies. Participants came from near and far and were from diverse backgrounds including NGOs, business, finance, policy and research.  Yet a theme that came up across the two days was the role that smaller businesses can play in the transition to greener economies.

SMEs are the key for unlocking a fair transition
SMEs are central to the transition to more equitable greener economies. They respond to local needs, they provide local jobs and they are rooted in local communities. Now that the global green economy agenda is shifting to focus on questions of equity and inclusivity, it is the ‘little guys’ who hold the key.  

Partners from the CANARI in the Caribbean, who have set up a practical and research lab for supporting SMEs to go green in the region, commented that SMEs in developing countries are better placed to take the green challenge because their business operations are so often directly reliant on natural resources. But they also stressed that online knowledge hubs have a limited potential in poorer countries, rather physical networks and workshops such as the model they have developed have proved much more useful. Development Alternatives in India described how SME networks in the country are beginning to take advantage of new commerce opportunities for going green.

Connecting the global dots
Through the GEC network alone, we learned of just some of the activities going on around the world to support SMEs in making this transition.

  • The EC’s Small Business Act for Europe has a network of SME Envoys who represent the needs of SMEs at nation state level.
  • HIVOS, the Dutch development agency, runs a ‘Green Entrepreneurship’ programme which is supporting socially responsible and economically viable entrepreneurship in rural areas for SMEs.  It focuses on carbon finance, building microfinance institutions, financing, renewable energy.
  • The Global Environment Facility (GEF) and the UN Industrial Development Organisation (UNIDO) run the ‘Global Cleantech Programme for SMEs’ to support emerging and developing countries help their smaller enterprises. I just checked out their recent publication ‘Fostering Clean Technology Innovation’, which captures some great progress from India, Malaysia, South Africa and Armenia with some useful case studies. Well worth a read.
  • UNIDO supports a network of National Cleaner Production Centres (NCPCs) in 47 developing and transition countries. These centres help raise awareness the environmental, financial and social benefits of cleaner production systems, they help to obtain financing for investments and provide policy advice to national and local governments.
  • UNIDO’s Green Industry Platform, though more aimed at larger business and industry, is also keen to understand the linkages to SMEs and global supply chains.
  • The SEED Initiative continues its excellent work with entrepreneurs and SMMEs from around the world. 

Reaching SMEs
Reaching out to SMEs is difficult wherever you are in the world. Smaller enterprises are fragmented, diverse and lack the resources or the incentive to engage with policy or research processes. So, how have GEC partners managed to reach SMEs?

  • Connect with SMEs via trade associations and trade press
  • Focus on urban centres where SMEs tend to be better networked and connected
  • Track the financial flows to SMEs and work with those suppliers
  • Connect to regional services and consultants for SMEs
  • Consider ‘e-commerce’ services to build more of an incentive for SMEs to collaborate
  • Target young entrepreneurs
  • Connect with emerging technology and innovation ‘hubs’

Mind the funding gap
SMEs in developing countries face a funding gap. They are too small to be able to apply for international aid from donor countries, and they lack the credit history to be able to apply for loans from central or local banks. In developed countries, large asset owners have little access even to listed SMEs.

  • The French Development Agency is currently developing a new fund for ‘social finance’ for SMEs.
  • Last year the OECD produced a useful ‘Scoreboard’ on Financing SMEs and Entrepreneurs in their member states.

Some questions
A number of questions did crop up in the discussions and I wondered if anyone might be able to help answer them.

  • Does anyone know of any studies that have tried to aggregate SME funding -- either at the national level or a the international level? Would love to know about them if so!
  • And what about a literature review across different countries - North and South - of what has worked and what has not in helping SMEs green their products, operations and business models? 

Do get in touch if you can help! 



Erwin Hofman's picture
Submitted by Erwin Hofman on Mon, 2014-09-08 08:41

An additional possibility for overcoming part of the 'funding gap' could be crowd funding. The ASU Energy Policy Innovation Council (in the United States) has published a policy brief on this topic: Crowdfunding and Renewable Energy. GreenEconet also already provides one nice example of this, with the solar panels on the roof of the FC Groningen football stadium (Netherlands) being financed through crowd funding.

Emily Benson's picture
Submitted by Emily Benson on Mon, 2014-09-08 15:22

Good point, thanks Erwin. Though not aimed explicitly at SMEs there is an interesting model here in the UK - Trillion Fund - by which communities hoping to leverage funding for local greening projects can use the site to attract private investment. Feels like this kind of model could work for SMEs with green ideas and products to get to the market -- and this is also an idea that the GreenEcoNet consortium are considering for the next phase of this platform. Does anyone know of any other current crowd-sourcing and matching websites aimed at green SMEs? Let us know! 

valentinogovigli's picture
Submitted by valentinogovigli on Wed, 2014-10-08 17:41

Erwin and Emily those are very interesting points. Alternative funding mechanisms to initiate green transition within cities and SMEs are a potential solution to fill up this funding gap. Within the Green Economic Research Group (GECO) we are actually working on this topic, investigating in how alternative financial mechanisms could help to finance green investiements by using a series of simulation
related to the water sector. Once our research will be finished and presented, I will be glad to share with you our results if you are interested !

Erwin Hofman's picture
Submitted by Erwin Hofman on Thu, 2014-10-09 13:08

Dear Valentino, I would be certainly interested in the results of your research!

Emily Benson's picture
Submitted by Emily Benson on Fri, 2014-10-10 11:59

Interesting. Yes, please do share your research with us!