Only 13% MSMEs know benefits of implementing sustainability measures: SIDBI

The Sustainability Perception Index (SpeX) for Oct-Dec, 2022 stands at 46, indicating a low level of perception towards sustainability by MSMEs of India.

MSMEs and sustainability

Corporate sustainability has become a mainstream business concept and not just an ethical consideration. An increasing number of MSMEs in India are getting on board as they recognize the value of sustainability, and are starting to look beyond commercial criteria to develop priorities and strategies.

Businesses are transitioning from incremental improvements to bolder, systemic initiatives that have a net positive impact. There is no doubt among business leaders that sustainability ought to be on the agenda, and MSMEs are no exception.

Dun and Bradstreet India, in collaboration with Small Industries Development Bank of India (SIDBI), has introduced a quarterly Sustainability Perception Index (SIDBI – D&B SPeX). It is India’s first in-depth, quantitative look at the actions MSMEs are taking to implement sustainability principles and advance sustainable development goals.

The index assesses the internal and external factors that shape the sustainability perception of businesses across three dimensions – willingness, awareness, and implementation. The survey results show a high level of willingness among senior executives.

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In terms of awareness and implementation, the survey shows that there are distinct areas where Indian MSMEs are excelling and others where they lag. This first survey serves as an important benchmark for measuring MSMEs’ actions in the future.

Speaking about the importance of sustainability goals, Avinash Gupta, Managing Director and CEO – India, Dun & Bradstreet said, “SPeX at 46 indicates that the perception of MSMEs towards sustainability is in the low to middle range. MSMEs believe that raising awareness is necessary to increase adoption of sustainability measures, and that these would benefit the bottom line (23 per cent), staff retention (21 per cent), and social lives and communities (20 per cent). The greatest enabler of sustainability adoption is cost reduction, followed by internal management drive and government policies and regulations. The most difficult issues are technical expertise and established operational processes.”

Sivasubramanian Ramann, Chairman and Managing Director of SIDBI stated, “Understanding and awareness about ESG are gaining momentum amongst MSMEs and it is relevant in view of changing scenarios related to climate aspects. The survey report for Q3 2022-23 is a baseline exercise for measuring sustainability adoption among Indian MSMEs.”

“The research delves into some of the significant difficulties and opportunities that MSME face when developing sustainability strategies. Future research will follow changes in MSMEs’ perspectives and behaviour towards the adoption of sustainable business practices. This report will also enable stakeholders to align strategies for enhancing preparedness of MSMEs in pursuit of India’s carbon neutrality commitments,” he added.

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Highlights of the SPeX Report:

  • The Sustainability Perception Index (SpeX) for Oct-Dec, 2022 stands at 46, indicating a low level of perception towards sustainability by MSMEs of India.
  • Amongst the three stages of sustainability (willingness, awareness, and implementation) the sub-index for willingness is highest at 61, suggesting that MSMEs are willing to adopt sustainability measures
  • Implementation and awareness is low, with sub-index values of 41 and 40, respectively.
  • Most respondents cited the need for creating awareness as a step to improve sustainability adoption
  • Nearly 44 per cent consider sustainability measures to be a useful guideline towards responsible governance, while another 19 per cent consider it to be a requirement for working with global businesses
  • Awareness of sustainability measures is low amongst MSMEs as only 69 per cent are partially aware of the opportunities from implementing sustainability measures and relevant sustainability factors for their business, sector, and geography
  • MSMEs believe that sustainability initiatives would have a positive impact on the bottom line (23 per cent), impact on employee retention (21 per cent) and positive outcomes on social lives and communities (20 per cent)
  • 50 per cent of MSMEs chose ‘ethics and integrity’ as a sustainable priority, while only 20 per cent chose ‘diversity and inclusion’ as their sustainable priority
  • 78 per cent of MSMEs consider sustainability initiatives to be closely linked to business strategies and only 22 per cent consider them to be distinct and loosely linked
  • MSMEs prioritize economic objectives, followed by social and environmental goals while implementing sustainability measures
  • Cost reduction is the highest enabler for sustainability implementation (35 per cent), closely followed by internal management drive (34 per cent) and government policies & regulations (33 per cent)
  • Technical know-how (23 per cent) and established operating procedures (22 per cent) are the biggest challenges
  • 52 per cent of MSMEs are unaware of green finance policies. While 35 per cent are partially aware of them, only 3 per cent have availed green finance