SMEs are particularly exposed to rising economic and environmental pressures, including climate risks, shifting trade dynamics, and the wider transition to a green economy. This cluster evaluates policies that strengthen SME resilience and competitiveness in this context. It examines five broader areas, assessing frameworks for SME greening, disaster resilience mechanisms, access to financial support, non-financial support and the role of business networks, as well as innovation ecosystems in supporting the transition.
SME Policy Index for Western Balkans and Türkiye 2026
Regional Profile
Abstract
Global megatrends are reshaping markets worldwide, including in Europe and across the Western Balkan economies and Türkiye (WBT). The transition to a greener economy, alongside shifts in geopolitics, trading systems, evolving consumer preferences and the rise of the digital economy, is redefining the conditions for small and medium-sized enterprise (SME) competitiveness and resilience (OECD, 2023[1]). While SMEs have shown agility in adapting to these global changes, strengthening their resilience and advancing their competitiveness will critically depend on effective government support to navigate increasingly complex economic and trade policies linked to decarbonisation.
The growing interlinkages between decarbonisation and trade policy are becoming particularly important. Measures such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), alongside other elements of the EU Green Deal, are likely to affect exports from the WBT to the EU Single Market. Without systematic policy responses, these developments could weigh on competitiveness and disproportionately affect SMEs through rising production costs, particularly for electricity (OECD, 2025[2]).
As WBT economies work towards stronger alignment with EU economic and trade policies, there is an increasing need to support SMEs in reducing reliance on fossil fuels, improving resource efficiency and strengthening productivity.
This section examines the strategic frameworks that WBT economies have put in place to pursue these objectives, as well as the mechanisms designed to help SMEs adapt to evolving environmental legislation and integrate into more sustainable value chains, both domestically and internationally.
2.1.1. Smoothing SME pathways to a green economy
Support for SME greening is expanding across institutions and strategies, but better co-ordination could increase impact
SME policy frameworks across all WBT have been integrating greening objectives and targeted measures, with two distinct approaches emerging (see Table 2.1). Albania is the only economy without a standalone strategic objective linked to the green transformation of SMEs, with the green transition implied across the Business Development and Investments Strategy’s specific objectives. All other WBT economies have either kept or introduced (in revised frameworks) standalone greening priorities and measures in their SME-focused strategies.
Across greening-related objectives, implementation rates of strategic activities vary across economies. Kosovo* reports an implementation rate of 29% of planned activities in 2024. In Bosnia and Herzegovina, in the SME Strategy of Republika Srpska, 34% of the funds allocated to greening activities were disbursed between 2022 and 2023. In contrast, more than half of the planned measures were implemented in Montenegro (approximately 52%) and Serbia (60%) during 2023-2024. Türkiye demonstrates the highest level of implementation, with 99% of its predominantly financial assistance measures delivered under the Small and Medium Enterprises Development Organisation (KOSGEB)’s Strategic Plan since 2022, notably through the Energy Efficiency Programme and the Green Industry Programme launched in 2024. Data for Albania and North Macedonia are not available.
Notes: 1. These objectives are: investment attraction and internationalisation; development of SMEs, entrepreneurship and innovation; and human capital development. The responsible entities for each strategy are presented in the economy-specific chapters.
Source: Information obtained from the respective strategy documents presented in the table.
All economies have adopted additional strategic frameworks, such as low-carbon development, industrial development, and energy strategies, that frequently include measures targeting SME greening. As a result, responsibility for enabling the green transformation of SMEs extends beyond institutions overseeing SME or general business development policies. Multiple actors are therefore involved, including ministries responsible for environmental protection, trade and exports, innovation agencies and funds, etc.
However, co-ordination among these institutions in the implementation of related activities is often not streamlined or well aligned. In Albania, for example, a Consultative Council for SMEs was established in 2024,1 but ministries responsible for the environment and energy are not part of the council. Nevertheless, its existence is important compared to other WBT economies that lack similar co-ordination mechanisms for SME policies. Montenegro provides a good example, on the other hand, as its Competitiveness Council enables structured public-private dialogue and brings together key line ministries, including those responsible for environment and energy, to co-ordinate reforms addressing barriers to competitiveness.
The administrative burden of environmental compliance and the impacts of green reforms are not systematically assessed or addressed
Regulatory compliance remains an important driver of business greening, with an average of 31% of surveyed WBT SMEs reporting that they act in response to domestic environmental regulations (OECD, forthcoming[3]). However, the administrative burden and impact of these regulations on SMEs are not consistently assessed or adequately addressed.
As in the previous assessment cycle, the provision of government guidance to help SMEs navigate complex environmental standards and regulatory requirements remains uneven. While regional governments and chambers of commerce all support certification under International Organization for Standardization (ISO) 14001 or ISO 50001 as tools to enable environmental compliance, such schemes are often intermittent. A notable example of institutionalised support for environmental compliance is the Turkish Exporters Assembly (TİM), which offers the TiM Academy digital platform to help exporting SMEs meet EU Green Deal requirements, including environmental reporting. Such support would be particularly relevant amid ongoing structural reforms across the Western Balkan 6 (WB6) economies, many of which are embedded in the Reform Agendas linked to the European Union’s Reform and Growth Facility. These reforms aim not only to advance Green Agenda objectives but also to unlock investment and strengthen resilience in key sectors such as energy and industry.
Ongoing greening measures across WBT economies include, among others, the introduction of carbon pricing and the liberalisation of electricity markets, which could pose challenges for SMEs. A particularly business-relevant illustration is electricity pricing: several WB6 economies, as well as Türkiye, continue to heavily regulate electricity prices for small consumers, often keeping prices artificially low for businesses. In 2024, the average electricity price for non-household consumers in WBT economies remained approximately 45% below the EU average (OECD, 2025[2]). Subsidised electricity prices remain an important pillar of competitiveness for many of the region’s SMEs. However, it also weakens incentives for energy efficiency and investment in cleaner energy sources.
Reforms in this area are, therefore, increasingly prioritised. For example, electricity market liberalisation is underway in Kosovo, affecting more than 1 000 companies (Bami, 2025[4]; Kosovo Chamber of Commerce, 2025[5]). Yet stakeholder consultations during the reform process have been limited, leaving many firms insufficiently prepared for the transition and exposed to risks such as supply uncertainty for a critical production input. At the same time, the energy crisis of 2022/2023 has heightened the vulnerability of entrepreneurs and small businesses. In Serbia, for example, this led to a policy reversal in 2025, allowing small businesses to return to a guaranteed supply regime after several years operating in the liberalised market (Elektroprivreda Srbije, 2025[6]). These developments show that SMEs are not yet effectively consulted, prepared or supported ahead of reforms that significantly affect their operational cost base, particularly in areas such as energy pricing and environmental compliance.
2.1.2. Boosting SME competitiveness in sustainable value chains
Export support programmes are increasingly adapting to sustainability demands in international trade
As WBT economies advance their decarbonisation commitments, key EU Green Deal legislation, such as the CBAM, the Corporate Sustainability Reporting Directive and the Ecodesign for Sustainable Products Regulation, will increasingly shape their trade with the EU Single Market, their main trading partner. In 2024, exports to the EU-27 accounted on average for 56% of total WBT export value, exceeding 60% in Albania, Bosnia and Herzegovina, North Macedonia and Serbia (European Commission, 2025[7]). Ensuring continued access to the EU Single Market and other key markets, particularly through support for international standards compliance, is therefore a shared priority across WBT economies and is reflected in export-related objectives included in the strategic frameworks presented in Table 2.1.
Yet, an explicit link between SME green transition and trade support is reflected only in the SME strategies of North Macedonia and Serbia. North Macedonia (Export Promotion Strategy 2024-2027) and Türkiye (Green Deal Action Plan 2021) further adopted export-focussed strategies that clearly highlight the role of the green transition in strengthening SME competitiveness in international markets. In Albania, Bosnia and Herzegovina, Kosovo and Montenegro, ministries and agencies responsible for SME development support export readiness through competitiveness programmes and incentives for higher value added green and circular products, albeit with varying degrees of strategic alignment with Green Deal objectives.
Although the EU CBAM has been in effect since January 2026, awareness remains limited. OECD (forthcoming[3]) survey data indicate that, on average, 56% of SMEs across WBT economies have low awareness of carbon disclosure requirements and their potential impact on export competitiveness. This is not unexpected, as the CBAM affects only a limited number of sectors directly, with most firms experiencing its impact indirectly, primarily through changes in electricity pricing. However, knowledge on emissions reporting may increasingly be required by larger buyers subject to sustainability obligations2, particularly if the CBAM expands to downstream sectors in the future.
As WBT economies move towards introducing domestic carbon pricing and supporting industrial decarbonisation to maintain competitiveness in key markets such as the European Union, a significant gap remains. None has yet assessed potential SME exposure to higher emissions costs in CBAM-covered sectors and related value chains, namely in cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. The World Bank (2025[8]) CBAM Exposure Index shows that trade exposure in key sectors varies across economies. For example, Albania and Türkiye are more exposed in cement, while Serbia is in iron and steel. However, the extent to which SMEs could be affected by this exposure remains unclear. Notably, besides awareness, businesses need policy certainty. This requires accelerated alignment with EU climate and energy frameworks to strengthen systemic readiness, including market coupling, infrastructure upgrades and access to transition finance to support carbon-related trade.
Efforts to build capacity for SMEs as sustainable suppliers are still in their infancy
Beyond direct support for exporting SMEs, WBT governments are at different stages in enabling SMEs to become suppliers of green products and services in domestic markets. Public procurement can play a pivotal role in this regard. When strategically designed and aligned with fair competition rules, green public procurement (GPP) can shape market demand, foster innovation and sustainability, and create growth opportunities for SMEs by linking them to larger buyers within emerging sustainable value chains.
OECD survey data from 2025 indicate that, on average, 40% of SMEs across WBT economies report offering green products and services (OECD, forthcoming[3]), in contrast with 22.2 % observed in five WBT economies in the Flash Eurobarometer survey a year earlier (European Commission, 2024[9]).3 This suggests a growing market offering green solutions. Strategic use of GPP could propel such a trend by providing anchor demand that shifts SME supply chains to more sustainable production, and serving as a reference point for private buyers seeking environmentally sustainable products and services.
Currently, Albania, Montenegro, North Macedonia, Serbia and Türkiye have legal frameworks that explicitly address GPP and allow for the integration of green criteria at all stages of the procurement process. In Bosnia and Herzegovina, entity-level procurement policies provide legal grounds for integrating environmental criteria, but no provisions specifically address GPP. Still, overall practical implementation is low, with few measurable targets set and data rarely collected. Serbia stands out with mandatory criteria used for the procurement of certain goods, such as electronic equipment. In 2024, green criteria were effectively applied in 11% of concluded contracts in Serbia (Lemke, Kolar and Piasta, 2025[10]). Although most WBT economies also include objectives to create SME-friendly conditions in public procurement strategies to level the playing field in green tenders, concrete measures such as contract lotting or training on green criteria compliance remain largely absent.
Beyond GPP, WBT economies can attract foreign direct investment (FDI) and further integrate SMEs into the value chains of multinational corporations and larger domestic firms in priority sectors for the green transition, such as energy and manufacturing. Strengthening SME production and innovation capacities in strategic areas, particularly green manufacturing, could help attract more nearshoring activity for firms selling in the EU Single Market and embed SMEs in green value chains. Serbia and Türkiye are frontrunners in this area. The Development Agency of Serbia runs targeted programmes to help SMEs integrate into the value chains of multinational firms by supporting compliance with international green standards and sustainability reporting. In Türkiye, climate action has been identified as a strategic area for attracting FDI, with the Ministry of Trade providing incentives for supplier development. Other WBT economies are at earlier stages. While FDI incentives are generally well developed, their links to green sectors remain limited.
The way forward
Strengthen the co-ordination role of ministries responsible for SME development strategies, and build strategic public-private dialogue on the green economy. Across WBT economies, greening-related support for SMEs remains fragmented, with measures dispersed across ministries responsible for industry, trade and exports, environment, and energy. This limits policy coherence and reduces the potential for additionality and synergies among programmes. Ministries in charge of SME policy should therefore assume a more proactive co-ordination role by systematically mapping greening-related support schemes delivered by both public institutions and private stakeholders (including chambers of commerce and business associations). This could involve participating as active observers in relevant inter-ministerial working groups or formally integrating ministries responsible for certain green transition topics into existing co-ordination platforms, such as would be the case for the SME Consultative Council in Albania. The WBT economies can draw on OECD best practices for effective public policy dialogues to improve the efficiency of SME policies and propose actions that help SMEs go green effectively (OECD, 2021[11]).
Monitor the acceleration of SMEs towards net zero and develop a clearer understanding of how key EU Green Deal legislation (including the Carbon Border Adjustment Mechanism) may affect SME competitiveness. Currently, detailed assessments of how these provisions could negatively impact smaller businesses through value chain linkages with EU buyers, or of the opportunities that might arise for trade in products and services, remain limited. Establishing this knowledge base is essential for designing targeted measures to support exporting SMEs in priority sectors while simultaneously strengthening domestic production of higher-value, competitive, and sustainable products. Such an approach would position SMEs as reliable suppliers for the EU and other international markets. The WBT economies can draw from initiatives that regularly assess SMEs’ understanding and progress toward net zero, which could be complemented with stronger data collection at the statistical office level (Box 2.1). Findings from such analysis could be used to enhance both demand- and supply-side policies. On the supply side, governments could provide more structured SME guidance and transition support ahead of reforms that would significantly affect firms’ cost bases, particularly in areas such as energy pricing and environmental compliance. On the demand side, governments could work towards utilising GPP as a practical way to create predictable domestic markets for sustainable products and services. Additionally, they could develop strategies to attract green FDI, which could further boost demand by encouraging multinational firms to invest in and nearshore green production locally.
Develop and implement green public procurement (GPP) to stimulate demand for sustainable products. WBT economies should strengthen existing legislation or introduce new measures, where absent, to include sustainability criteria in public procurement. They should also develop action plans that identify priority product categories, set clear targets, and establish data collection mechanisms to monitor the uptake of green public procurement. To ensure GPP acts as anchor demand for local SMEs, early market engagement is essential so that contracting authorities understand the supplier base for green products, while SMEs receive timely information and can prepare for tenders, which requires trained procurement officials and clear guidance (OECD, 2024[12]). Contracting authorities should also adopt practices that lower barriers to SME participation, such as dividing large contracts into smaller lots and providing targeted support, while maintaining fair and transparent procedures. To support SMEs in green tenders WBT economies can draw on good practices such as Supplier Development Programme in Scotland, which supports firms, particularly those new to tendering, in accessing public contracts by organising diverse training opportunities and events throughout Scotland (Supplier Development Programme, 2026[13]).
Policy approach
Since 2021, the government-owned British Business Bank, which specialises in improving SMEs’ access to finance, has been providing up-to-date analysis through the Net Zero Business Census Report to guide its policy and financial support for SMEs’ green transition.
Policy outcomes
The 2025 edition draws on a sample of over 1 700 SMEs, assessing concentration in carbon-intensive sectors, prioritisation of net-zero goals and concrete actions taken toward these objectives. For the first time, it also includes 16 indicators tracking year-on-year progress of the United Kingdom’s small business population toward net zero. Data are collected through primary surveys conducted by the British Chambers of Commerce and PlanetMark, while secondary data on greenhouse gas emissions and business structural data are used to estimate SMEs’ share of emissions. One key finding shows that 34% of SMEs moving toward net zero reported benefits in attracting and retaining customers, likely reflecting supply chain pressures from larger corporates requiring carbon reporting.
Relevance for the Western Balkan economies and Türkiye
Insights like these could be highly valuable for WBT economies, especially as they align green legislation and policies with EU market expectations. Development banks and chambers of commerce in the region could replicate a similar exercise, while closer collaboration with statistical offices would be essential to estimate SME-level carbon and energy intensity. An existing OECD pilot exercise (OECD, 2023[14]) could serve as a useful starting point for estimating these indicators.
Source: British Business Bank (2025[15]).
The World Economic Forum’s Global Risks Perception Survey 2025-2026 identifies extreme weather events as the fourth most significant risk over the next two years and the top global risk over the next decade. This highlights the growing perception among experts across sectors that environmental risks pose major threats to economies and societies. As climate change increases the frequency and intensity of extreme weather, such events are likely to generate shocks to SMEs’ operations.
Across OECD Member countries, extreme weather shocks are already associated with average annual output losses of over 0.3% of gross domestic product (GDP) (OECD, 2025[16]). Similar trends are visible in the WBT region, where severe flooding occurs more frequently (most recently in Bosnia and Herzegovina in 2024), while drought-related wildfires affected Türkiye and North Macedonia in 2025. In addition to climate-induced events, natural hazards such as earthquakes also pose major risks, as illustrated by the devastating 2023 earthquakes in Türkiye, which caused significant human loss and widespread business disruption.
Building on lessons from past environmental and economic crises, particularly the COVID-19 pandemic, this section examines policies to strengthen SME preparedness and prevention, as well as policies and tools that enable faster recovery and more efficient allocation of resources to productive uses following crises.
2.2.1. Enhancing crisis-resilient strategies to prevent SME bankruptcies
Business default prevention mechanisms are lacking despite heightened climate change risk
Support for SME business continuity, particularly in the context of economic or environmental crises, is not adequately addressed in most SME strategies in WBT economies. Although the OECD has for several years recommended greater emphasis on proactive and preventive SME support to strengthen resilience, this area has largely remained underdeveloped. As climate-related risks continue to increase across the WBT region, strengthening SME disaster risk resilience is becoming essential to safeguard economic stability, given that SMEs account for the majority of employment and value added in these economies.
While the development of preventive measures has recently been prioritised in SME strategies in both entities of Bosnia and Herzegovina, as well as in Montenegro, North Macedonia, Serbia and Türkiye, these measures have yet to be fully operationalised. At present, four economies – Albania, Montenegro, Serbia, and Türkiye – have introduced specific measures through SME strategies or integrated SME-focussed actions within their climate change adaptation frameworks. Still, across the region, green transition measures targeting SMEs still tend to focus primarily on mitigation. This often overlooks the growing need for adaptation support that would help SMEs operate under increasingly volatile climate conditions. This gap is particularly relevant for sectors heavily dependent on natural resources, including agriculture and tourism, as well as extractive industries and their related manufacturing value chains.
A key step in strengthening preventive measures is the development of early warning systems (EWS) for SME insolvency, which can provide the evidence base for timely government intervention. Currently, WBT economies lack sufficient data on SME financial distress, such as debt levels by firm size, age, or sector, due to limited monitoring systems and weak data exchange among institutions such as bankruptcy agencies, statistical offices and ministries supporting SMEs. This also constrains governments’ ability to design the contingency mechanisms needed to respond to increasingly frequent climate-related shocks that affect SME default rates. The most notable progress in this regard is evident in Serbia, which has established indicators and piloted a bankruptcy EWS. Others, like Bosnia and Herzegovina, Montenegro, and North Macedonia, also include specific activities in their SME strategies to drive progress in this area. However, most WBT economies still show limited advancement, often due to pending reforms to bankruptcy legislation and insufficient financing and technical capacity to scale digital systems.
Climate risk and disaster resilience support for SMEs remains limited
In addition to insolvency EWSs that provide governments with evidence to justify interventions supporting business continuity during crises, firms themselves depend on timely and accurate climate risk information and the capacity to incorporate it into decision making to strengthen disaster resilience. Across WBT economies, however, disaster risk resilience strategies rarely take business needs into account or include targeted measures to support them. Montenegro is a partial exception, as its strategy explicitly recognises the need for improved climate risk data for tourism SMEs.
Overall, this gap is particularly relevant because multi-hazard EWSs, such as those providing information on extreme weather events, remain underdeveloped and underused in the business context across the region. Progress in this area is largely driven by donor-supported initiatives in Montenegro, Serbia and Türkiye. For example, projects by the United Nations Development Programme support private-sector adaptation planning and help mobilise financing for climate-resilient business operations in both Montenegro and Türkiye.
Nevertheless, direct government support aimed at helping SME reduce potential losses through targeted disaster prevention is largely absent. A few targeted initiatives exist, such as risk management certification, risk-assessment workshops, and business continuity guidance offered by Republika Srpska’s Ministry of Economy and Entrepreneurship, the Chamber of Commerce and Industry of Serbia, and the Disaster and Emergency Management Authority of Türkiye. Overall, however, these efforts remain limited. This is consistent with broader evidence showing that WBT economies are generally less prepared to adapt to climate vulnerabilities than their peers in the European Union, underscoring the need for stronger investment in private-sector resilience.
Panel A in Figure 2.1 shows that, on average, WBT economies improved their readiness score over the past two decades (from 0.37 in 2004 to 0.44 in 2023), but they continue to lag the EU average (0.58 in 2023). This points to a lower ability to leverage investments for adaptation actions. Similarly, the vulnerability score shows weaker performance in the WBT average than in the European Union (see Figure 2.1, Panel B). Thus, the WBT economies have, on average, a narrower gap between their vulnerability and readiness than the EU average, indicating considerably weaker adaptation outcomes.
Notes: The Notre Dame Global Adaptation Initiative (ND-GAIN) vulnerability score measures economies’ exposure, sensitivity and capacity to adapt to the negative effects of climate change (0-1; lower scores indicate lower vulnerability). The readiness score measures economies’ ability to leverage investments and convert them to adaptation actions (0-1; higher scores indicate higher readiness). For more information, see https://gain.nd.edu/our-work/country-index/methodology/.
Source: University of Notre Dame (2025[17]).
2.2.2. Increasing SME recovery capacity and second-chance opportunities
Measures for enhancing recovery capacity after natural and climate-induced disasters are underdeveloped in most WBT economies
While all WBT economies implemented substantial relief measures following the COVID-19 pandemic to help SMEs cope with financial distress and disruptions in global value chains, dedicated recovery programmes providing direct grants and technical support to strengthen SME recovery during climate- and natural disaster-related shocks have been identified only in Albania, Bosnia and Herzegovina and Türkiye (see Table 2.2). In Bosnia and Herzegovina, these programmes typically target a broader group of beneficiaries, including municipalities and households, meaning support is shared across multiple groups rather than focussed primarily on SMEs, as is the case in Albania and Türkiye.
Sources: Information provided by the governments of Albania and Bosnia and Herzegovina during the assessment period; KOSGEB annual reports; European Commission (2024[18]); UNDP (2015[19]).
Notably, in Türkiye, strong support from the World Bank has enabled large-scale intervention through programmes implemented by KOSGEB, providing significant assistance to SMEs in the aftermath of recent major crises. In contrast, Western Balkan economies often face difficulties securing sufficient funding for recovery programmes, and constrained public resources limit the scale of much-needed domestic support.
Beyond direct recovery support, a critical component of enhancing SME resilience is insurance against disaster-related losses. Yet, insurance uptake is generally very low across WBT economies. Additionally, catastrophe insurance markets in the Western Balkans remain underdeveloped compared to Türkiye, which has an established pool for mandatory earthquake insurance. However, insurance mechanisms for other climate hazards are still largely absent across all WBT economies.
Supply-side constraints include limited data and risk assessments on sectoral losses in disasters, as well as weak links between public support schemes and insurance uptake (UNDP, 2024[20]). For example, agricultural subsidies are rarely tied to insurance coverage, although this practice has been introduced in Montenegro. Insurers also face higher volatility where businesses do not widely implement risk-reduction measures.
At the same time, climate risk management is also a demand-side challenge. Many SMEs lack awareness of adaptation measures and the benefits of insurance, while affordability remains a barrier (UNDP, 2024[20]). Türkiye leads in this respect by including measures to expand SME insurance coverage against severe climate risks in its National Climate Change Adaptation Strategy and Action Plan 2024-2030, though implementation is in the early stages.
Second-chance SME programmes remain absent, with initial measures only now emerging in some WBT economies
None of the WBT economies has operationalised a dedicated second-chance programme to help failing and failed SMEs and honest entrepreneurs with viable business models restart economic activity. Some economies have begun integrating this objective into SME strategies, including Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia. While Türkiye does not operate a formal second-chance programme, it has implemented large-scale recovery schemes for SMEs affected by COVID-19 and major earthquakes in recent years, providing a potential foundation for more structured second-chance mechanisms.
Beyond policy frameworks, the judicial system must also be able to handle higher numbers of business defaults during economic or environmental crises. Efficient insolvency processes help ensure that non-viable firms are liquidated more quickly, allowing public resources to be redirected toward more productive, sustainable, and climate-responsive business models. Notably, progress has been made in Kosovo, which established a Commercial Court in 2022, closing an important institutional gap with other WBT economies.
However, implementation across WBT economies remains constrained by limited, non-comparable data on the duration and frequency of liquidation and restructuring procedures, as well as a shortage of trained advisors to support SMEs in recovery and restructuring. These gaps could become increasingly critical as climate-related disasters raise demand for effective second-chance support mechanisms.
The way forward
Conduct comprehensive climate risk assessments and develop targeted adaptation measures for the business sector, with a focus on SMEs in the most vulnerable industries. This approach enables economies to attract funding by presenting investment-ready strategies that mobilise private capital for climate-resilient technologies and business models. Priority actions should include improving data collection on climate risk exposure across sectors and enhancing multi-hazard EWSs to ensure they can be effectively integrated into business decision making for disaster loss prevention. In developing sound assessments, the WBT economies can draw on the indicators developed under the OECD’s International Programme of Action on Climate; these provide a useful, internationally comparable benchmark for assessing risk exposure and vulnerability (OECD, 2021[21]).
Build capacities to implement targeted, climate-risk-focussed SME recovery programmes. This includes, as a base, strengthening second-chance support by reviewing the efficiency of judicial systems and aligning bankruptcy laws and the competencies of courts and agencies with EU standards. Crucially, WBT economies should increase awareness of, training on and access to financial and insurance solutions that enhance SME recovery capacity. The OECD provides insights, for example, on best practices for incentivising higher insurance coverage among vulnerable populations and lower-income businesses (Box 2.2).
Natural hazards can cause significant financial stress for households and businesses. Evidence from the United States, for example, shows that disasters can lead to increased debt distress, bankruptcies and long-term declines in credit scores (Ratcliffe et al., 2019[22]). Businesses are also heavily affected in the longer term. For example, flooding in Townsville, Australia, in 2019 caused around one-third of small firms to face business interruptions of at least six months (SGS Economics and Planning, 2021[23]).
Policy approaches
Across OECD Member countries, governments mainly support financial protection in case of natural or climate-induced hazards through two mechanisms:
1. Public-private insurance schemes, where premiums fund claims to cover risks insufficiently served by private markets. Some governments establish multi-year/permanent arrangements.
2. Public compensation and financial assistance, including grants, loans, tax relief or guarantees after disasters.
Many countries have designed public-private insurance programmes for flood risks for which SMEs are eligible, including Australia, Denmark, France, Iceland, Italy, Morocco, Norway, Spain and Switzerland. Approaches vary from state-backed insurers to private insurance pools or reinsurance schemes.
Relevance for the Western Balkan economies and Türkiye
The WBT economies could draw from these existing experiences and adopt models suited to their risk profiles, and potentially, the WB6 could explore a regional risk-pooling approach given the smaller sizes of their insurance markets.
Source: OECD (2026[24]).
Enabling the green transformation of SMEs requires improved access to financing that accounts for the environmental performance of projects and addresses the limitations of traditional lending, such as risk aversion and high collateral requirements. Green investments often involve higher upfront costs, longer payback periods and greater uncertainty around future cash flows. As a result, more tailored sustainable finance models are needed to mobilise investment while addressing SME-specific constraints, enabling them to contribute to the transition.
Data on the share of financial institutions in the WBT region that offer sustainable finance products are unavailable. Additionally, the region continues to lack fully developed strategic foundations for a harmonised approach aligned with EU and international standards. Strengthening these frameworks will be important to attract larger investments, as will the adoption of instruments and market-based approaches to reduce investment risks and thereby help scale SME-targeted financing solutions.
This section assesses the development of sustainable finance frameworks, examining both the supply of and the awareness of SMEs on the demand side of sustainable finance products. It also analyses the range of bank and alternative financing available to SMEs with different risk profiles and roles in the green transition.
2.3.1. Supporting SMEs in an evolving sustainable finance framework
Regulatory and strategic foundations for sustainable finance are emerging, albeit unevenly, across the WBT region
Sustainable finance frameworks are progressing unevenly across the WBT region, slowing the expansion of green investments in the private sector. This is particularly relevant, as two-thirds of surveyed financial institutions in the WB6 economies report that the absence of a clear regulatory framework, definitions, and standards, such as an economy-level taxonomy, hinders the expansion of sustainable finance offers to their clients, including SMEs (Figure 2.2).
Note: No data for Türkiye included in the survey. Data based on responses collected from 27 financial institutions across the WB6 economies (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia).
Source: Regional Cooperation Council (2024[25]).
All WBT economies are developing taxonomies to define sustainable economic activities eligible for green financing, and although none have fully adopted one, progress varies across them. Türkiye is the frontrunner, with mandatory reporting under the Turkish taxonomy expected to begin in 2027, when the Draft Türkiye Green Taxonomy Regulation is due to enter into force. Donor-supported projects to gradually integrate EU taxonomy principles into domestic frameworks are underway in Albania (with the European Investment Bank) and Serbia (with the French Development Agency). Kosovo also adopted a Law on Sustainable Investments, providing a basis for further defining a taxonomy. Other WB6 economies are also beginning to transpose EU taxonomy guidelines, albeit all at an early stage.
Despite these gaps, sustainable finance products for SMEs are already available in all WBT economies, as many financial institutions voluntarily apply international guidelines and good practices to classify eligible activities and projects. However, reliance on diverse and non-standardised classification systems, ranging from broad green frameworks to specific internal guidelines from international partners, can result in inconsistent and fragmented practices that limit the scaling up of sustainable finance initiatives, particularly in smaller markets, such as those of the Western Balkans, where a more aligned and collective approach would likely attract greater investment. Additionally, lacking standardisation could increase SME barriers to green finance as firms would need to navigate divergent requests for reporting by banks to access funding.
Policies addressing SME demand for sustainable finance are generally not approached in a systematic manner
While WBT economies are making progress in establishing the strategic and regulatory foundations for sustainable finance, primarily aimed at strengthening the supply of such products by financial institutions, policies addressing SME demand remain more limited (Table 2.3).
Notes: A checkmark indicates the existence of an official government strategy or policies that address core competencies related to sustainable finance. A cross indicates the lack thereof, and the designation “In progress” means that such a document or relevant policies are being prepared.
Source: Information provided by the relevant governments during the assessment period.
As Figure 2.2 suggests, high implementation costs, combined with weak market demand for green products, can discourage financial institutions from expanding their sustainable finance offerings. Demand, however, depends heavily on SMEs’ awareness and knowledge of available financial products, their relevance to business transformation, and their ability to develop investable projects. Yet, SME-focussed support and incentives remains scarce, and as a result, banks might experience difficulties with building project pipelines, especially when SMEs perceive the reporting burden as too high.
Albania is the only economy that integrates sustainable finance into its National Strategy for Financial Education and Inclusion, including dedicated modules and awareness-raising activities for SMEs. Serbia plans to further expand green finance content in the upcoming 2025-2030 update of its Financial Education Strategy. In Türkiye, a 2024 co-operation protocol between KOSGEB and the Capital Markets Board of Türkiye aimed to strengthen financial literacy programmes for staff, with sustainable finance training expected to translate into improved advisory services for SMEs. In most other WBT economies, financial literacy activities related to sustainable finance are limited to ad hoc seminars, often organised by chambers of commerce, rather than embedded in a broader strategic approach.
Finally, the attractiveness of sustainable finance products also shapes SME demand. As banks often perceive high costs, targeted government incentives offering concessional terms could help boost demand and uptake. The next section presents examples of such instruments as implemented by governments and donor initiatives.
2.3.2. Increasing SME access to sustainable (bank and alternative) financing
Targeted bank financing for SME green investments is available, but still relies heavily on donor support to de-risk private lending
The OECD (2025[26]) distinguishes three broader groups of SMEs by role in the green transition: early-stage green start-ups (“innovators”) developing new technologies or business models; more mature green firms (“enablers”) scaling up innovative solutions; and established SMEs seeking to adopt greener processes, products or technologies (“adopters”). These groups require tailored financing.
In the WBT region, support instruments, both direct and indirect financing options, are targeted toward enablers and adopters via green grants and loans, with many instruments relying on donor financing. Direct green grant programmes exist in Bosnia and Herzegovina, Kosovo, Montenegro, Serbia and Türkiye (Table 2.4). Green credit lines providing indirect financing to SMEs are available across all WBT economies, driven mainly by donors such as the European Bank for Reconstruction and Development (EBRD) (notably its SME Go Green programme in the WB6). Loans offered by banks participating in the SME Go Green programme, for example, are eligible for grants of up to 15% of the loan value after project completion. Some development banks (where they exist) also provide such instruments, e.g. the Federation of Bosnia and Herzegovina’s Development Bank credit line for energy efficiency and renewables, and North Macedonia’s Development Bank and Ministry of Finance co-financing green credit lines. Both offer concessional terms, such as below-market interest rates (2.9%), longer maturities of up to 12 years, and grace periods of up to 24 months. Green credit guarantee schemes, which offer financial backstops to reduce lenders’ risk on SME defaults, are, however, only active in Republika Srpska (Bosnia and Herzegovina), Kosovo and Türkiye. Positively, though, Albania has a scheme that includes sustainable agricultural finance, and Montenegro plans to de-risk via the operationalisation of the Credit Guarantee Fund in late 2026.
Note: Most available credit line programmes are donor policy tools, such as the EBRD’s SME Go Green programme, which is active in Bosnia and Herzegovina, Kosovo, Montenegro and Serbia.
Source: Based on information provided by WBT governments during the assessment period.
Alternative green finance remains underdeveloped, leaving many SMEs underserved
Across the WBT region, alternative green finance and access to risk capital remains weak, leaving all three SME profiles only partially served. Beyond bank lending, SME adopters could benefit from other debt instruments such as leasing, which can help finance equipment and technology upgrades where upfront investment costs are high. While dedicated green leasing markets are largely absent, initiatives by the International Finance Corporation are beginning to provide climate-related leasing options for SMEs in Kosovo and Türkiye.
Equity, quasi-equity, and capital market financing remain even more limited, reflecting underdeveloped markets and weak linkages to environmental, social and governance (ESG)-aligned instruments, but also a lack of investable ventures. As a result, dedicated green private equity and venture capital (VC) funds for SME innovators are largely absent. Türkiye is a notable exception: launched in 2024, its Green Fund supports scalable green ventures and had reached TRY 2.2 billion (Turkish liras) (approximately EUR 43.7 million) by March 2026 (MaxisGS, 2026[27]).
For SME enablers, capital market instruments are also scarce. Nonetheless, some early developments signal potential. Green corporate bond issuances have taken place in Türkiye, and in Serbia, a subsidiary of Intesa Sanpaolo (2025[28]) recently introduced minibond options for small firms. However, these instruments remain at an early stage, and further market development will be needed to attract greater private capital and enable SME green ventures to scale commercially with less reliance on public support.
The way forward
Accelerate the development and adoption of sustainable taxonomies. Türkiye has made the most progress in this area and should ensure timely adoption in line with its planned timeline. The WB6 economies could benefit from exchanging with Türkiye on its experience in developing a taxonomy aligned with EU criteria while adapting it to domestic economic structures and market conditions. To support this process, the Western Balkan economies could establish a regional co‑ordination platform to facilitate alignment with international standards, harmonise data collection and methodologies, and strengthen the capacity of financial institutions to implement taxonomy-based sustainable finance frameworks. A co-ordinated approach would also enable structured dialogue with Türkiye and other partners, helping accelerate the development and uptake of sustainable finance across the region.
Expand and diversify de-risking instruments to strengthen sustainable finance for SMEs. Currently, most de-risking mechanisms in WBT economies rely on EBRD-supported credit lines, while government-led initiatives, such as credit guarantee schemes or dedicated green credit lines through development banks, remain limited. Expanding public de-risking approaches could help mobilise greater private investment in SME green projects. At the same time, financing instruments should be diversified to address the different roles SMEs play in the green transition. For example, more equity-based risk-sharing models could support innovative firms operating in higher-risk segments. The OECD (2025[26]) provides an overview of commonly used policy instruments tailored to different SME profiles, such as innovators, enablers and adopters, which WBT economies can draw on when designing support mechanisms. In particular, targeted programmes focussing on green technologies could help crowd in more private investment to scale innovative business models (Box 2.3).
Public equity (e.g. VC) and quasi-equity instruments (e.g. subordinated or convertible debt, mezzanine financing and profit participation) help finance high-risk green ventures that private investors often avoid due to long development cycles, uncertain demand and the need to deliver both environmental impact and financial returns.
Policy approach
The Business Development Bank of Canada (BDC) manages the federal Climate Tech Fund II, a VC initiative supporting the scale-up of Canadian climate technology firms. The CAD 500 million (Canadian dollars) (approximately EUR 336 million) programme was launched in 2022. The fund targets capital-intensive innovations that significantly reduce greenhouse gas emissions across sectors, including energy, mobility, the built environment, industry and carbon management. The risk of investment is usually shared equally between BDC and private investors, but exceptions are possible for early-stage and high-risk ventures. Also, BDC typically takes a board or observer seat in funded companies, ensuring alignment with long-term strategic goals.
Policy outcomes
The predecessor Fund I showed strong leverage, with each public dollar mobilising about CAD 12 in private investment. Under Fund II, the average investment is around CAD 10 million (~EUR 6.3 million), reflecting its focus on scaling advanced climate technologies.
Relevance for the Western Balkan economies and Türkiye
Adapting similar models through development banks, innovation funds or newly established green funds, such as in Türkiye, could enable the WBT region to finance more capital-intensive climate technologies, while strengthening local VC ecosystems and reducing reliance on public subsidies over time.
Sources: OECD (2025[26]; 2025[29]).
Beyond financing, non-financial support systems play a critical role in helping SMEs advance their green transition. SMEs often require targeted capacity building, technical assistance and advisory services to develop the necessary skills and knowledge, as well as access to ecosystems that facilitate these resources. In addition to seeking support for navigating environmental compliance requirements, SMEs may also seek to expand market opportunities by connecting more closely with other firms through industrial networks.
At present, awareness of government greening support programmes among SMEs in the WBT region remains limited, with only around 13% of surveyed SMEs reporting knowledge of such initiatives (OECD, forthcoming[3]). This further increases the importance of network-based support structures. Stronger linkages with buyers, suppliers and research partners can help SMEs access knowledge, technologies and markets needed to participate in greener supply chains.
This section examines how existing business support services for the green transition are tailored to SME needs in the region, and how policies foster SME support ecosystems that enable resource sharing, collaboration and spillover effects across sectors.
2.4.1. Scaling up public non-financial support for SMEs in a green and resilient economy
Non-financial SME greening support is growing, but often fails to target SME needs effectively
All WBT economies include non-financial public support measures for SME green transition in their strategic frameworks, although implementation varies. In Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia, chambers of commerce play an important role in delivering targeted support, such as training, technical assistance, and standardisation and certification services. In Bosnia and Herzegovina (Republika Srpska) and Serbia, responsible business hubs established with the respective chambers of commerce further strengthen this support by providing tailored advisory services, training, and sector-specific tools on carbon management and broader ESG requirements, particularly for exporting firms. Development and entrepreneurship support agencies also provide assistance in Bosnia and Herzegovina, North Macedonia, Serbia and Türkiye. However, in Albania and Kosovo, non-financial support remains largely donor-driven, and institutional structures for sector-specific training within SME agencies remain limited.
Across the region, support measures are generally not well-tailored to the diverse needs of SMEs in the green transition. Although training on carbon footprint calculation and ESG standards has been introduced to varying degrees (except in Albania and Kosovo) most initiatives across WBT economies focus narrowly on general support for energy efficiency and renewable energy adoption. As a result, support services rarely reflect the different roles and challenges SMEs face. For example, firms in highly regulated sectors, such as energy, may require legal assistance to navigate domestic regulatory frameworks, while exporting SMEs need support in complying with foreign legislation, particularly requirements linked to the EU Green Deal. This suggests the need to broaden and strengthen existing offers of greening-related support.
Another key challenge is limited SME awareness of available programmes, even when support is available. As Figure 2.3 shows, in 2025, only 13.3% of surveyed SMEs in WBT economies knew about existing government programmes for greening, ranging from 2.2% in Kosovo to 24% in Montenegro, which, notably, has been undertaking many promotional activities, particularly through its Chamber of Commerce.
Notes: Sample sizes differ by economy, with relatively small samples in Montenegro and North Macedonia. The question asked was: Do you know any government programmes for business greening?
Source: OECD (forthcoming[3]).
Improving communication and dissemination is therefore essential. Emerging solutions, such as online portals of the responsible business hubs in Serbia and Bosnia and Herzegovina (Republika Srpska), help centralise access to expertise and advisory services, reducing the need for businesses to navigate multiple institutional websites to find relevant support. They also facilitate dialogue with the private sector, helping identify practical bottlenecks to greening, including barriers not addressed by existing support, such as infrastructure constraints.
Other solutions include promoting government programmes through key partners or consultants specialising in decarbonisation or energy. For example, the donor-initiated Energy Transition Network in Industry project (2022-2024) in Bosnia and Herzegovina shows how linking consultants and firms can enable practical, hands-on exchange between SMEs and experts. Using consultants as intermediaries also helps firms better understand use cases and benefits of support programmes.
Green transformation services for SMEs are slow to scale, particularly as structured feedback mechanisms are not employed
Beyond budget constraints, a major barrier to effectively scaling SME green transition support in Western Balkan economies, and even in Türkiye, despite the launch of its well-funded Green Industry Project in 2024, is the limited availability of data to understand the specific needs of SMEs across sectors and their different roles in the green transition.4
In terms of programme reporting, several economies perform relatively well. For example, Türkiye’s KOSGEB and North Macedonia’s Agency for Innovation, Scientific and Technological Development and Entrepreneurship5 regularly report on activities undertaken, budgets mobilised, and the number of SMEs supported. In 2025, Serbia also conducted research among more than 350 SMEs as part of its Green Economy Roadmap to identify areas where further government support services may be needed.
However, across all WBT economies, structured feedback mechanisms remain limited. Implementing ministries and agencies rarely collect systematic information on how delivered services helped SMEs achieve greening objectives, how beneficiaries evaluated the quality of support delivered, or which services remain missing from the current policy offer when compared to market needs.
2.4.2. Exploiting the power of networks for the sustainable growth of SMEs
Business network approaches are not yet systematically leveraged to integrate SMEs in green value chains and support more sustainable production
Experience from OECD Member countries shows that targeted policies can successfully integrate SMEs into business networks,6 enabling them to benefit from knowledge transfer, innovation, internationalisation and productivity gains (OECD, 2023[30]; 2019[31]; 2008[32]).
Strategic approaches to fostering SME participation in formal partnerships, such as economic clusters, can help connect firms with knowledge institutions, suppliers and customers within production chains. Often organised around sector specialisation or geographic proximity, such networks can accelerate the green transformation of small firms by enabling technology spillovers, improving access to knowledge resources and strengthening market access.
For example, OECD survey data on SME obstacles to engaging in carbon disclosure show that 24% of SMEs report the need for more harmonised approaches within their value chains (OECD, forthcoming[3]). This highlights the importance of stronger collaboration and partnerships with suppliers and customers.
However, SME network-building initiatives in the region often do not prioritise green transition objectives. One notable exception is the Cluster Support Programme run by the Ministry of Industry and Technology of Türkiye, which has launched targeted calls aimed at strengthening green economic practices within strategic industrial clusters. Through their SME strategies, both Montenegro and North Macedonia place strong emphasis on increasing SME participation in networks that promote sustainability and the green transition, in line with their smart specialisation objectives. However, progress in implementation has been slow so far.
SME demand for collaboration in the green transition is growing, but the supply of targeted government services is only just catching up
Eurobarometer survey data indicate growing demand from SMEs for stronger value chain collaboration. Around 18% of SMEs in the WBT region (Figure 2.4) are already switching suppliers to obtain greener inputs, while 16% sell waste or residues to other firms, highlighting emerging circular-economy practices and the need for stronger business ecosystems. Although these shares remain below the EU average, where about 33% and 22% of SMEs, respectively, engage in such practices, participation is relatively strong in Montenegro, Serbia and Türkiye, where even up to 42% of SMEs report switching suppliers to access greener inputs.
All WBT economies recognise the need to strengthen linkages among SMEs, larger firms, and key partners, such as research institutions (discussed further in Section 2.5), to enhance resilience and expand opportunities for sustainable production. As a result, support infrastructures, such as technology and industrial parks, incubators and accelerators, and other platforms supporting innovative spin-offs, are increasingly central to policy approaches addressing SME needs.
Note: No data available for Bosnia and Herzegovina and Kosovo.
Source: European Commission (2024[9]).
To support ecosystem development, green industrial zones have emerged as one of the most widely adopted policy approaches in the region. Such zones are operational only in Türkiye but are being developed in Kosovo, North Macedonia and Serbia, with plans for the medium term in Albania. Other approaches are also emerging. Bosnia and Herzegovina is developing network-based initiatives focussed on energy efficiency, while the Enterprise Europe Network is used across the region, particularly successfully in Montenegro, to help SMEs strengthen links with European markets and green production networks. Still, services provided through these approaches are often not yet scaled to support broader SME segments.
The way forward
Improve the promotion and accessibility of government support services for SME greening. Awareness of existing greening support programmes remains very low across most WBT economies, even though some promising approaches have emerged, such as the responsible business hub platforms in Serbia and Bosnia and Herzegovina (Republika Srpska), which centralise information on green transition support and related opportunities. To maximise impact, governments are encouraged to prioritise additionality. Rather than creating entirely new structures, existing SME support platforms could incorporate “green opportunity filters” to better guide firms toward relevant programmes, guidance and international resources. Chambers of commerce already play an important role in this area across the region, and closer collaboration with ministries and business support institutions, such as innovation and entrepreneurship agencies, will be essential to ensure SMEs are informed about available programmes and can navigate application procedures with clear eligibility criteria and accessible entry points. WBT economies could improve the accessibility and visibility of SME support for the green transition by centralising information and services in a single platform. An example is the UK Business Climate Hub (2025[33]), a joint initiative between government, businesses, and business associations, which provides SMEs with guidance on climate action, as well as access to funding, advisory and mentoring services, research partnerships, and up-to-date market insights.
Adopt strategic, network-based approaches to support the green transition of SMEs. While WBT economies increasingly recognise the benefits of ecosystem and network-based approaches, particularly in the context of smart specialisation and the development of green sectors, these approaches are not yet consistently integrated into SME development policies. Progress in cluster development, for example, remains uneven, despite the potential for clusters to act as intermediaries that facilitate the wider adoption of green practices among businesses. To design more targeted interventions, WBT economies could draw on guidance from the European Cluster Collaboration Platform (2026[34]) Policy Toolkit, which presents good practices on how cluster development mechanisms can accelerate sustainable transformation at national, regional and local levels (Box 2.4).
Policy approach
The Tokyo Zero-Emission Innovation Bay was established in accordance with Japan’s Environment Innovation Strategy, adopted by the Integrated Innovation Strategy Promotion Council in 2020. The initiative aims to create an innovation area dedicated to developing and deploying zero-emission technologies.
Policy outcomes
Located in the Tokyo Bay industrial region, the hub brings together research laboratories, factories, universities, research institutes and corporate offices from sectors such as power, gas, petroleum, chemicals, electronics and automotive manufacturing. As of March 2026, the cluster includes 144 members. Participants collaborate on research, demonstration projects, and the commercialisation of technologies, including hydrogen, carbon capture, utilisation, and storage, and advanced energy management systems. The objective is to build one of the world’s largest research and development (R&D) centres for zero-emission technologies and accelerate their deployment in the wider economy.
Relevance for the Western Balkan economies and Türkiye
Such cluster-based innovation ecosystems can offer valuable lessons for WBT economies. By strengthening collaboration among industry, research institutions and government within targeted industrial zones or innovation hubs, economies could accelerate the development and diffusion of green technologies while supporting SME participation in emerging sustainable value chains.
Sources: European Cluster Collaboration Platform (2021[35]); National Institute of Advanced Industrial Science and Technology (2020[36]).
Innovation underpins SMEs’ ability to improve productivity, upgrade technologies and respond to evolving environmental and market pressures. In this context, investment in R&D and in technology adoption is not only a driver of competitiveness but also a key enabler of business resilience and the transition towards more sustainable, climate-compatible economic activities.
According to the European Innovation Scoreboard, on average, WBT economies outperform the European Union in SME product and process innovation, reaching 111% of the EU level in 2025 (European Commission, 2026[37]). However, economies such as Albania, North Macedonia and Türkiye still lag behind. Linkages between innovative firms remain, on average, weaker, at 85% of the EU level, with only Montenegro exceeding this benchmark (European Commission, 2026[37]). While data on innovations specifically contributing to the green economy are lacking, these findings highlight the need for stronger innovation support and infrastructure, including mechanisms that foster collaboration between businesses and research institutions. Such measures can enhance SME performance and accelerate the green transition, as increased R&D investment can help drive down the costs of green technologies (Cervantes et al., 2023[38]).
This section examines how innovation policy frameworks in WBT economies are incorporating greening objectives and the measures operationalised to strengthen green research and technology at the SME level. It assesses initiatives and programmes aimed at improving innovation infrastructure and creating knowledge networks to enhance SME value creation in green economic sectors.
2.5.1. Advancing strategic innovation for a green and resilient economy
Science, technology and innovation frameworks increasingly recognise the role of knowledge-based transformation for business greening and resilience
Greening objectives are increasingly integrated into quadruple helix innovation approaches,7 particularly through Smart Specialisation Strategies (S3), which are implemented in Montenegro (currently under revision), North Macedonia and Serbia. More broadly, innovation and research strategies across the region prominently include green innovation objectives to support businesses in expanding green R&D and adopting advanced technologies (see Table 2.5).
Notes:
1. Kosovo is in the process of drafting its Innovation Strategy 2030+, and stakeholder consultations are currently taking place, led by the Ministry of Industry, Entrepreneurship and Trade.
2. The new S3 strategy of Montenegro is expected to be adopted in 2026, and consultations took place in the first quarter of the year.
In terms of implementation, innovation funds in Montenegro and Serbia, as well as agencies responsible for scientific research and technological development in Albania, North Macedonia and Türkiye, play a key role in supporting SME innovation. Comparable structures are less developed in Bosnia and Herzegovina, where support is mainly delivered through entity-level ministries for science and technology,8 though legal grounds are in place to establish an innovation fund in the entity of Republika Srpska. In Kosovo, the establishment of an innovation fund has been delayed due to pending amendments to the law on innovation. Despite these institutional structures, direct financial and technical support for green innovation beyond donor-funded initiatives remains limited. Only the Innovation Fund of Montenegro and the Scientific and Technological Research Council of Türkiye (TÜBİTAK) in Türkiye currently provide targeted schemes specifically supporting green innovation among SMEs.
The impact of innovation on SME productivity and greening outcomes remains poorly understood
In the European Union, research and innovation (R&I) have proven to be key drivers of labour productivity growth, accounting for two-thirds of productivity gains between 2010 and 2016 (European Commission, 2020[39]). Evidence also shows that large firms, on average, are able to achieve higher labour productivity by investing more and building a stock of knowledge-based capital (digitalisation, information, etc.) (Schiersch and Le Mouel, 2020[40]).
It is therefore important for economies to develop robust mechanisms to measure productivity gains resulting from implemented policies. Given that support measures for SME green innovation are dispersed across several strategic frameworks in the WBT economies (see Table 2.5), developing comprehensive evaluation systems would be essential to assess whether policy incentives effectively stimulate SME innovation, productivity gains and progress toward green transition objectives. However, such practices remain largely underdeveloped across the WBT region. None of the economies currently conducts systematic evaluations of whether SME innovation support contributes to improvements in productivity, resource efficiency, or other green transition outcomes, such as emissions reductions or energy savings.
2.5.2. Capitalising on knowledge networks for driving SME innovation
Innovation infrastructure has picked up, but greening-focussed services lag
Most WBT economies provide technology-extension services to support SME innovation and development, primarily through technology transfer offices and science and technology parks. These structures receive government support in all economies, except Kosovo, where privately funded initiatives, such as the Innovation and Training Park in Prizren, play a key role in facilitating technology transfer for SMEs. However, the effective transfer of research outputs and green technologies from academia to the private sector remains fragmented across the region. Data on SME engagement with technology transfer structures are also largely unavailable, making it difficult to assess their impact.
As Figure 2.5 shows, gross domestic expenditure on R&D remains significantly lower in WBT economies than in the EU-27 across all sectors. The gap is particularly pronounced in business R&D spending, where expenditure in the WBT region is more than five times lower than the EU-27 average. This highlights the need to strengthen private-sector investment in R&I, to accelerate technology development, improve SME absorptive capacity, and enable the wider diffusion of green technologies.
Despite these gaps, promising developments are emerging in Montenegro and Bosnia and Herzegovina (Republika Srpska), which are becoming frontrunners in strengthening these linkages. In Montenegro, alongside the Innovation and Entrepreneurship Center Tehnopolis, which supports innovation in areas such as sustainable agriculture and the bio and blue economy, the Science and Technology Park was inaugurated in 2024 as a government-backed technology transfer hub aimed at strengthening business innovation capacities, including in green technologies, in line with Montenegro’s smart specialisation priorities. In Bosnia and Herzegovina’s entity of Republika Srpska, the Digital Innovation Hub, established in 2022, launched the Digitally Enabled Sustainable Energy Transition of Manufacturing SMEs project in 2025. The initiative focuses on strengthening knowledge-based advisory services for SMEs at the digital-green nexus, particularly through the use of digital tools for improved energy management.
Notes: No data available for Kosovo. Data for Bosnia and Herzegovina are from 2021; data for Albania are from 2022.
Source: Eurostat (2026[41]).
In contrast to infrastructure support, financial support remains scarce. Green innovation vouchers, designed to help SMEs invest in green solutions, services or equipment supporting the transition (European Commission, 2019[42]), are largely absent across the region. More broadly, innovation vouchers, which are widely adopted across EU and OECD Member countries, remain underused. However, North Macedonia piloted a voucher scheme to cover sustainable innovation, and some schemes linked to smart specialisation priority sectors already exist in Montenegro and Serbia, which could provide a useful entry point for developing incentives to support SME adoption of greener technologies, services and skills.
Research-business collaboration schemes for green innovation are slowly emerging across economies
As discussed in Section 2.4.2, networks are key building blocks for strengthening SME resilience and improving access to resources needed for the green transition. Knowledge and innovation networks are particularly important, as knowledge-intensive processes enable the adoption of green technologies and accelerate sustainable production and consumption. Evidence from the OECD (2025[43]) shows that green patent filings rely more strongly on scientific knowledge, citing nearly six times as many peer-reviewed articles as filings for high-carbon technologies.
Across WBT economies, collaborative platforms and grant schemes linking universities, research institutes and businesses are gradually emerging to strengthen private-sector capacity and the commercialisation of green innovations. Examples include the Green Programme of Cooperation between Science and Industry in Serbia and the Proof-of-Concept Programme in Montenegro. In North Macedonia, the government-supported Maker Space initiative provides incubation and laboratory support for projects in areas such as the circular economy, while in Türkiye, the SAYEM Industrial Innovation Network Mechanism supports specialised R&D platforms in fields such as smart energy and environmental management.
However, progress remains uneven. In Albania, Bosnia and Herzegovina, and Kosovo, initiatives remain largely donor-driven, and even in those WBT economies where promising programmes exist, stronger institutionalisation and evaluation are needed to ensure improved commercialisation as well as continuity and impact of support.
The way forward
Strengthen infrastructure for green technology transfer and mainstream greening objectives within government-backed technology transfer structures. Across WBT economies, technology transfer offices often lack sufficient resources to assess SME needs for green innovation and support their transition to higher value added, knowledge-based production. In addition, SMEs frequently lack in-house capacities to test or prototype new products. Expanding access to demonstration facilities and laboratories would help firms validate technologies and accelerate the commercialisation of green innovations. To achieve this, governments are encouraged to move beyond project-based funding and provide more systematic support to scale existing technology transfer structures, including incubators and accelerators that help SMEs develop and bring green innovations to market. A useful example of a policy approach to design adequate structures is Portugal’s “Mobilising Agendas,” which promotes green technology adoption of SMEs across various sectors. The Agendas involve industry-based technology centres that support manufacturing’s green transition, especially for SMEs lacking resources for R&D projects (OECD, 2025[44]). WBT economies could also consider partnering with experienced programme providers, such as EIT Climate-KIC (2026[45]), which delivers the ClimAccelerator across different local contexts. This can support the development of climate-focused accelerator programmes for green startups in their respective economies, while building on lessons from past initiatives implemented by private providers in the region.
Develop green innovation vouchers and other targeted incentives to boost SME greening. While expanding technology transfer infrastructure and commercialisation systems is a medium- to long-term objective, WBT economies could introduce lower-cost measures in the short term to stimulate green innovation. Green innovation vouchers or collaborative grant schemes can incentivise SMEs to undertake greening projects and strengthen co-operation with research institutions. These instruments could be aligned with S3s, an approach already emerging in Montenegro and Serbia, and could also support WBT economies that are still developing such strategies. A relevant example is presented in Box 2.5.
Policy approach
The Lombardy region in Italy has operated an innovation voucher scheme since 2010 to support collaboration between SMEs and knowledge providers. Through participation in the Interreg S34GROWTH Project (2016-2020), the scheme was subsequently adapted to better align with the region’s S3 priorities.
Under its Operational Programme for Investment for Growth and Employment 2014-2020, the region had introduced a dedicated action to strengthen SME R&D capacities and facilitate access to high-performance research infrastructure through vouchers.
Policy outcomes
One notable strategic opportunity identified was support for SME access to privately owned pilot plants for sustainable bioeconomy projects, as open infrastructure was not available or economically feasible. Building on this approach, the region launched the S3INNODRIVER project in 2019 (with a budget of EUR 7 million) to help SMEs purchase and develop advanced technological innovation services.
Relevance for the Western Balkan economies and Türkiye
Experience from Interreg Europe initiatives such as this provides valuable insights for WBT economies on how to strengthen the implementation and impact of S3 greening objectives.
Sources: Interreg Europe (2020[46]; 2020[47]).
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← 1. According to the Law on the Development of Micro, Small and Medium-sized Enterprises of 2022 (Law 43/2022), the council is composed of the following members: one representative from the ministry responsible for finance and economy, one from the ministry responsible for entrepreneurship protection, and one from the Albanian Investment Development Agency. The Union of Chambers of Commerce and Industry is also represented, alongside three representatives of entrepreneurship and business selected from the most prominent business organisations and chambers. Additionally, the council includes one representative from the Association of Banks and two representatives from higher education institutions, one from a public institution and one from a non-public institution, proposed by the minister responsible for education following a public selection process. Finally, one representative from local self-government units, nominated by the Association of Municipalities of Albania, completes the council.
← 2. Companies above a certain size are required under the Corporate Sustainability Reporting Directive (CSRD) to disclose information on the risks and opportunities arising from social and environmental issues, as well as the impacts of their activities on people and the environment. Although non-EU SMEs are not directly subject to this regulation, they may still be required to report on certain sustainability aspects when supplying to EU-based buyers.
← 3. Differences can be mostly attributed to smaller sample sizes in the OECD survey (higher likelihood of self-selected sample) and the use of a third response option in the Eurobarometer, “No, but you are planning to do so in the next two years”. Including this option raises the average in the five WBT economies (Albania, Montenegro, North Macedonia, Serbia and Türkiye) to 32.6%, which is more comparable.
← 4. The OECD (2025[26]) distinguishes three boarder groups: early-stage green start-ups (“innovators”) developing new technologies or business models; more mature green firms (“enablers”) scaling up innovative solutions; and established SMEs seeking to adopt greener processes, products or technologies (“adopters”).
← 5. Formerly the Agency for the Promotion of Entrepreneurship, until it was merged with the Fund for Innovation and Technology Development in 2025.
← 6. Networks are systems of connected actors that enable the exchange of information, products, services, assets and/or resources. They may be supported by physical infrastructure, formal agreements, or remain informal relationships (OECD, 2023[1]). In the context of the green economy, expanding and strengthening such networks is essential for SMEs to access key resources, such as data, skills and technology, and to improve their adaptability and resilience.
← 7. The approach is based on the idea that innovation emerges from an interactive process among multiple spheres of actors, each contributing according to its role in the innovation system. The quadruple helix model comprises four groups of actors: industry, academia, government, and civil society (European Committee of the Regions, 2016[49]; OECD, 2020[48]).
← 8. In Republika Srpska, the Ministry for Scientific and Technological Development and Higher Education is also a key partner in the Innovation Center Banja Luka, acting as the key institution for innovation support to SMEs in the entity.