Many countries are seeking to promote more environmentally friendly and sustainable business practices, particularly for small and medium-sized enterprises (SMEs). Globally, SMEs represent more than 90% of all businesses and account for more than half of total business employment and value added. Their economic weight means that their collective actions can significantly accelerate progress toward sustainability targets. SMEs also hold a pivotal role in reshaping markets and supply chains, making their engagement indispensable for achieving sustainable, resilient and competitive economies.
SMEs and start-ups play multiple roles in the green transition:
As innovators, that develop disruptive green technologies and offer novel solutions to address sustainability challenges;
As enablers that produce and disseminate green products, services and technologies to help other businesses implement sustainable practices;
As adopters that incorporate existing green technologies and processes into their operations to reduce their environmental footprint.
While SMEs share many common challenges in the green transition, their specific needs differ depending upon the role they play (innovator, enabler, adopter). Common challenges include more limited access to finance, awareness, skills and expertise gaps, and disproportionate regulatory and administrative burdens compared to large firms. In terms of the type of SME, innovators often struggle to secure patient, high-risk capital to bring new technologies and solutions to market, and they need advisory and capacity building support on commercialisation, intellectual property management and regulatory compliance. SME enablers require support to expand their operational capacity, integrate into sustainable value chains and access markets that reward green solutions. SME adopters need affordable credit, advisory services and simplified compliance tools to integrate sustainability into their day-to-day operations. Recognising this mix of shared barriers and differentiated needs is essential for designing policies and financing instruments that enable SMEs to fully contribute to sustainability objectives.
The report analyses public support instruments worldwide and in-depth case studies from a range of countries to show how tailored policies and support mechanism can help SME innovators, enablers and adopters to foster the green transition. It documents how traditional instruments are being redesigned or repurposed to serve the sustainability-related financing needs of SMEs, including through green loans, leases, guarantees and other instruments. At the same time, there is increasing recognition that more tailored and flexible instruments may be needed to encourage SMEs to invest in sustainability. The report, thus, also showcases novel instruments like sustainability-linked loans, revenue-based financing or property-linked financing that have been designed to address specific supply- and demand-side constraints, such as high costs, cash flow pressures and collateral requirements. It demonstrates how different blended financing structures and other risk-sharing instruments are being deployed to mobilise private sector financing for green investments. It also provides numerous examples of how financial support can be paired with non-financial support to strengthen the uptake and impact of these instruments and programmes.
Building on more than 20 case studies, the report also sheds light on practical considerations and lessons learned for the design and implementation of publicly provided financial and non-financial support for SMEs:
