90% MSMEs say cost reduction biggest motivation to implement sustainability: Study
The SIDBI-D&B Sustainability Perception Index for January-March 2023 stands at 54, eight points higher than the October-December 2022 level of 46. This suggests an improved perception of the Indian MSMEs towards sustainability.
About 90% of micro, small, and medium enterprises (MSMEs) view cost reduction as the most crucial factor that motivates them to implement sustainability initiatives.
Regulations rank the second-most important factor, at 80%, and 69% of MSMEs view willingness to support sustainability as the most important factor, according to a statement by SIDBI.
As per the SIDBI-D&B Sustainability Perception Index, between October-December 2022 and January-March 2023, awareness increased the most—from 40 value points to 62 on the index—while willingness saw a minor increase from 61 to 63. On the other hand, the index value for implementation remained consistent during the period.
“With SPeX, an index indicator for MSMEs on sustainability, we are moving in the right direction to mainstream the MSME sector in the green transition pathway,” said RK Singh, CGM, SIDBI.
With this quantitative measure of the perception of MSMEs towards sustainability practices, policymakers can gauge the industry insights and level of adoption of sustainability initiatives in the sector, he added.
This survey and index are set to help MSMEs address any transitional challenges, as per SIDBI's statement.
The index uses three metrics—willingness, awareness, and implementation—to assess the internal and external factors that shape sustainability. Through this, it measures and tracks the perception of Indian MSMEs toward sustainability.
“Notably, it has been the increase in the awareness level which has driven the change in the Index as the level of implementation remained stagnant and willingness amongst SMEs saw a minor increase compared to last quarter,” says Arun Singh, Global Chief Economist, Dun & Bradstreet.
The report also mentioned that, for each of the seven sustainability initiatives that were tracked, majority of MSMEs do not have any plan or initiatives currently in place. Among several economic, social, and environmental objectives, 85% of MSMEs prioritise employee welfare, training, and retention the most.
Among the group surveyed, 75% view environment-related initiatives such as reducing, reusing, and recycling emissions, waste, water and energy as second, and 71% of MSMEs consider compliance to be the third most important priority.
Additionally, 41% of MSMEs claim to be fully aware of its impact on profitability with 56% believing that specific policies and regulations are required to encourage MSMEs to adopt sustainability measures. Direct incentives or awards of recognition did not emerge as necessary incentives to encourage.
Other highlights:
- 50% of MSMEs claim to be fully aware of the improvement in brand image, cost reduction, and attractiveness to various stakeholders due to the adoption of sustainability measures.
- Awareness about the availability of low-cost funding (green financing) is low among MSMEs. About 67% of MSMEs surveyed have limited or no awareness of low-cost green finance options.
- 75% of leaders in the SPeX category have in-house knowledge and expertise to apply sustainable practices. 63% of aspirers have some experience or knowledge, 49% of integrators claim to have in-house experience, and 53% of followers intend to develop competence.
- 50% of respondents claimed to have reduced their usage of water, raw materials, and energy. Yet, 40% recycle/recover less than 10% of their consumption.
- Availability of technical know-how (88%), capital (81%), and internal willingness to change (51%) are the top three challenges faced by MSMEs.
Edited by Akanksha Sarma
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