October 30, 2023

SMEs as Drivers of Green and Inclusive Growth

Juliet Hinga

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Small and Medium Enterprises (SMEs) serve as the backbone of many economies globally. According to data from the World Bank, SMEs contribute to over 90 percent of the total labor force in Kenya, contributing significantly to job creation, poverty alleviation, innovation, economic growth, and societal impact. SMEs are also a source of innovation and competitiveness.

In recent years, there has been a growing emphasis on the role of SMEs in not only economic growth but also in the promotion of sustainability and inclusivity. Given the critical role SMEs play in economic growth and development, it’s evident their potential to become powerful drivers of green and inclusive growth, which makes a positive impact on both the environment and society.

As the world gears up for a just transition toward addressing climate change impacts, low carbon emissions are an important pathway that also calls for inclusion leaving no one behind in the actions. SMEs are thereby an important element of the journey to a sustainable green economy since they represent about 90% of businesses and more than 50% of employment globally. The climate action responses have urgently been called for with an emphasis on collective action to ensure they are achieved.

The 11th Annual SME Conference and Expo, held at Strathmore University on 12th and 13th October 2023, sought to demystify sustainability and climate resilience for SMEs and unpack the opportunities for SMEs in the space as well as address some of the issues they face. From the conference, it was evident that many SMEs are already working in the Sustainability and climate spaces. However, they are not fully aware of the numerous opportunities available for SMEs in that space hence the need for more inclusion and support.

Based on the notion that sustainability is expensive, it’s a pointer that SMEs have not fully understood how much impact they can have on the country’s economy if they were to harness their full potential by embracing sustainability fully.

How Can SMEs act as Drivers of Inclusive and Green Growth?

SMEs are known for their agility and capacity to innovate which then allows them to swiftly adapt to the ever-changing market demands. It is a fact that SMEs are on the front line when it comes to developing and adopting sustainable business models, and innovations that contribute to a greener and more sustainable future. Speaking during the recently concluded Annual SME Conference and Expo at Strathmore University, Mary Mbugua, Regional Trade Facilitation Office of Economic Growth and Integration, commended SMEs for their resilience amidst increasing environmental challenges that shake business operations. Mary noted that apart from green innovations, SMEs can also design inclusive business models to promote inclusive growth and social cohesion by creating opportunities for entrepreneurship, especially within underrepresented groups.

Social enterprises and SMEs can embrace collaboration within them to further thrive and work together more in evading climate crises. Partnerships are essential because most of them tend to operate in both urban and rural areas, thus can help bridge the urban-rural divide. By creating jobs SMEs contribute to a more balanced and inclusive development model.

Being a part of the wider value chain in the business ecosystem, by adopting sustainable supply chains and implementing environmentally responsible measures, SMEs can encourage their suppliers and partners to follow suit. The ripple effect is important for the growth of a more sustainable and eco-conscious supply chain which ultimately reduces carbon footprint across the entire industry.

Creation of a unified network of SMEs through which SMEs can exert a considerable influence in policymaking. This way they can advocate for and have a voice in the creation of green policies and environmentally friendly regulations along with incentives at local, national, and international levels.

Attributed to their presence deeply embedded in the local communities, they can play an active role in creating awareness about environmental issues and sustainability. By actively engaging with their customers and stakeholders, they are able to foster a sense of environmental responsibility amongst counterparts and encourage sustainable customer choices.

SMEs are not just economic players; they are engines for positive change and more so now as the world grapples with the effects and challenges of climate change and social disparities. It is high time entrepreneurs, investors, policymakers, governments, and society recognize and support the potential SMEs have when it comes to building a more sustainable and equitable world.

Article by Juliet Hinga and Victor Ben Kwabe

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