The Green Transition of SMEs and Entrepreneurship in Portugal

1. Assessment and recommendations

Abstract

This chapter presents a summary of the main findings of the thematic chapters of the report, which covers the following thematic areas: attitudes and actions of Portuguese SMEs towards the green transition; green and sustainable finance; green skills development and green technology adoption; energy-related programmes; and green entrepreneurship (direct support and ecosystem development).

1.1. Portuguese SMEs and the green transition: Attitudes and actions

1.1.1. Portuguese SMEs account for a larger share of GHG emissions than the EU average

In 2020, Portugal’s greenhouse gas (GHG) emissions were back to the 1990 levels, after having reached their peak in 2005. Industry and transport are the two largest emitting sectors, with almost equivalent levels of emissions (about 14 800 kilotons of carbon-dioxide-equivalent), followed at a distance by construction (4 610 kilotons). Lower emissions despite stable GDP growth are the result of Portugal’s steady progress in the deployment of renewable energy sources (RES) over the last decade, notably solar and wind power. The share of RES in Portugal’s final energy use was 35% in 2022, the fifth highest value at the EU level and much higher than the EU-27 average (23%).

The green transition carries significant implications for small and medium-sized enterprises (SMEs), a crucial but often overlooked source of GHG emissions. According to new OECD estimates developed in the framework of the project “A dashboard of SME greening and green entrepreneurship indicators”, SMEs account for 37% of GHG emissions in the whole business sector (i.e., manufacturing, industry and services) and for 30% of GHG emissions in manufacturing at the EU level. Portugal shows higher values, 56% and 53% respectively, a consequence of the substantial presence of SMEs in the domestic economy, including in industrial sectors such as textiles, ceramics, and plastics, which are all undergoing major environmental transformations that are further discussed in this report.

1.1.2. A large majority of Portuguese companies does not expect a major impact of climate change on their business

Building on evidence from two surveys – the EC Eurobarometer Flash surveys (2013-2021), where only information on SMEs is retained, and the European Investment Bank’s (EIB) Investment Survey (EIS), which covers all companies regardless of employment size – the first thematic chapter of the report presents information on the attitudes and actions of Portuguese SMEs/companies towards the green transition. Survey results indicate that nearly 90% of Portuguese companies do not anticipate a significant impact of climate change on their business activity (i.e., the physical risk of climate change), despite the increasing frequency of extreme weather events in Portugal. However, this might also be partially explained by Portuguese companies adopting more preventive measures than the EU average, such as the purchase of insurance products.

1.1.3. Few Portuguese companies also expect a major impact of new climate regulations on their business

Few Portuguese companies also anticipate that new climate regulations will affect their business. Forty-three percent foresees no impact in the following five years (2021 data), a figure higher than the EU average, but lower than the southern European average (i.e., Greece, Italy and Spain combined). Furthermore, a larger share of Portuguese companies perceives climate regulations as a risk rather than an opportunity (30% vs. 26%), similar to what is observed in the EU and other southern European countries.

1.1.4. A large share of Portuguese SMEs has a climate strategy in place, but few take concrete actions towards carbon neutrality

Approximately one-quarter of Portuguese SMEs have a climate neutrality strategy in place, while another quarter plans to implement such a strategy in the upcoming two years. This is slightly better than the corresponding two EU averages. Furthermore, 42% of Portuguese companies set and monitor GHG emission targets, which is also slightly above the EU average (41%). However, fewer Portuguese SMEs with a climate strategy in place take specific actions toward climate neutrality (37%) than the EU average (53%), such as “reducing carbon emissions” or “developing/purchasing new carbon-reducing technologies”.

1.1.5. Few Portuguese SMEs undertake resource efficiency actions; this might also be due to some of these actions having been taken in recent years

Resource efficiency is one of the main channels through which SMEs can reduce emissions and minimise their impact on the environment. The proportion of SMEs undertaking resource efficiency actions – such as minimising waste, recycling, or saving energy, water and materials – is lower in Portugal than in the rest of the EU and southern Europe. For example, only 26% of Portuguese SMEs did something to minimise waste generation in 2021, compared with 64% at the EU level.

However, this figure must be assessed against recent trends that have seen a significant drop in the number of Portuguese SMEs implementing resource efficiency measures. Since 2017, the share of SMEs taking steps to save energy, materials or water declined by more than 25% across all three categories. One of the possible causes behind recent low figures is, therefore, that many Portuguese SMEs have already taken resource efficiency actions in recent years, although alternative explanations might include the presence of financial barriers and a lack of prioritisation at firm level.

1.1.6. Resource efficiency actions are costly, but also cost-effective

Survey evidence also suggests that resource efficiency actions are costly for Portuguese SMEs. A greater proportion of SMEs in Portugal (23%) than in the rest of the EU (12%) invest 6% or more of their turnover in resource efficiency actions (this indicator only applies to the group of companies undertaking such actions). Cost might, therefore, be another reason for few resource efficiency actions by local SMEs, although this figure might also imply that Portuguese SMEs undertake larger and more costly energy-efficiency actions than peers in other EU countries.

Although resource efficiency measures are expensive, they also lead to significant savings, suggesting they are cost-effective. A larger proportion of Portuguese SMEs than in the rest of the EU (43% vs. 41%) has seen a reduction in production costs after implementing these measures. However, this proportion has dropped from the peak of 60% in 2013, suggesting that low-hanging fruits have been picked up already and that the policy focus may have to shift in the future towards more complex energy efficiency improvements, such as those affecting industry-specific production processes (see also section on energy programmes).

1.1.7. Portugal features a large proportion of SMEs that specialises in green products and services

In Portugal, the percentage of SMEs that offers green products and services is slightly lower than the EU average (27% versus 32%). However, this gap is expected to narrow, as a higher proportion of Portuguese SMEs plans to introduce these offerings in the following two years (21% compared to the EU’s 11%). Interestingly, Portugal boasts a large proportion of SMEs that specialises in green products and services (31%), i.e., companies with over half of their turnover coming from these products/services, higher than the EU average (23%). The share of these specialised “green SMEs” has doubled since 2017 (from 14% to 31%), pointing to growing opportunities in the environmental goods and service sector of Portugal, which is indeed larger than the EU average (3% vs. 2.5% of GDP).

1.1.8. Mid-sized and manufacturing firms are more likely to undertake resource efficiency actions and to offer green products and services

Within the SME business segment, mid-sized firms and manufacturing firms, two categories which often overlap (i.e. the proportion of mid-sized firms is higher in manufacturing than in services), are the most likely to undertake resource efficiency actions in Portugal. Surprisingly, however, over 10% of industrial SMEs do not engage in any resource efficiency action. Resource efficiency measures have the largest impact on production costs also for mid-sized and manufacturing firms, which is the result of economies of scale and more intense use of resources, including energy, by these companies. Mid-sized and manufacturing firms are finally more likely than other groups to offer green products and services, although the share of turnover from these offerings is comparatively smaller than for other firm profiles due to average larger turnover.

1.2. Financing the green transition of SMEs in Portugal

1.2.1. Portuguese SMEs find it difficult to obtain external finance for green investments

Access to finance is a critical enabler of the green transition. Firm-level investments in sustainable production – such as in energy efficiency, adoption of renewable energy sources or improved waste management – may require significant financial resources, making access to external finance important. This also applies to green start-ups, whose products and services have long development timelines due to average low levels of technology readiness and the high regulatory uncertainty surrounding many climate-related technologies (see also section on green entrepreneurship).

Based on Eurobarometer survey evidence, Portuguese SMEs are less likely than the EU average to use external support to undertake green-related investments (i.e., resource efficiency improvements) (14% vs. 24%) or to offer green products and services (5% vs. 24%). More specifically, Portuguese SMEs are less likely than the EU average to use both public (31% vs. 36%) and private funding (27% vs. 28%) for resource efficiency actions. Financial incentives (e.g. grants and soft loans) are the main form of support that Portuguese SMEs would like to receive: 26% and 35% of them respectively indicate that such incentives would be the main drivers of resource efficiency actions and the offer of green products and services.

1.2.2. Portuguese commercial banks are already involved in green and sustainable finance

A 2023/2024 OECD survey of public development banks and private financial institutions, which also included four of Portugal’s largest commercial banks, shows that Portuguese banks already have a sustainability strategy and/or net-zero transition plans in place. Furthermore, they already offer green and sustainable finance instruments to SMEs and seek sustainability data from SME clients to start complying with new obligations about reporting on their financed emissions.

1.2.3. The Portuguese government is transposing EU sustainable finance regulations into national legislation

Sustainable finance regulations are mostly set at the EU level, notably through two directives on corporate sustainability reporting (CSRD) and sustainable finance disclosure (SFDR) and through the EU Taxonomy on Sustainable Activities, which sets out which activities can be considered environmentally sustainable or enabling sustainability. The government of Portugal is transposing EU legislation into national laws, including through the Portuguese Climate Framework Act, which marks Portugal’s first comprehensive law addressing climate issues and includes the promotion of sustainable finance as one of seventeen climate policy objectives.

1.2.4. Sustainability reporting requirements should better reflect the nature of SMEs through a proportional and gradual approach in implementation

While these legislative developments are certainly positive, there is a compelling case for sustainability reporting requirements for SMEs to be simpler if this business segment is to seize the opportunities of sustainable finance and if financial institutions are to fully report on their financed emissions.

SME compliance costs with sustainability reporting standards on a voluntary basis are currently very high. A study commissioned by the European Commission calculated average SME compliance costs at between EUR 5 600 for small companies and EUR 24 300 for medium-sized companies. Although these costs are higher in the first year of reporting, they remain considerable over time, especially for smaller enterprises.

The reporting burden is further exacerbated by a proliferation of tools and trackers to measure emissions, making it difficult for SMEs to understand which ones are really useful. In Portugal, for example, commercial banks tend to use a reporting system that they have developed together with a national payment service provider, while the national SME agency (IAPMEI) has developed its own questionnaire to assess the environmental performance of programme applicants. Furthermore, there is no single portal where SMEs can access all the relevant information on their reporting needs and supporting tools.

Many international networks and institutions, including the OECD Platform on Financing SMEs for Sustainability, have advocated for the simplification and harmonisation of SME sustainability reporting standards, suggesting that requirements should be “proportionate” to the human and financial capacity of SMEs and should be phased in gradually to ease compliance. The Voluntary Reporting Framework for Unlisted SMEs (VSME), which is currently being developed by the European Financial Reporting Advisory Group (EFRAG), goes in this direction and could provide a model for EU countries, including Portugal.

Going forward, the government of Portugal should therefore work towards simplifying and aligning national reporting frameworks with those developed at the EU level. In addition, it could seek to make at least some data reporting automatic, for example through the transfer of relevant information from energy authorities to commercial banks, subject to agreement from the interested parties. Finally, it could offer further awareness-raising and capacity-building programmes to help local SMEs better understand the nature of the sustainability reporting requirements and the benefits associated with compliance.

1.2.5. The government already operates some green finance programmes for SMEs

The government of Portugal has launched some green finance programmes to support SME investments in environmental sustainability. The main institutional player in this area is the national public development bank, Banco Português de Fomento (BPF), which operates two key credit programmes. The “Line of Credit for Decarbonisation and Circular Economy” enables IAPMEI-certified SMEs to secure loans for energy efficiency and circular economy projects, offering guarantees that cover up to 80% of the loan amount, with a maximum limit of EUR 2 million per company. The “Tourism + Sustainability Credit Line”, with a budget of EUR 50 million, promotes sustainable projects in the tourism sector, providing up to EUR 750 000 per company, also with a coverage ratio of 80% and reduced interest rates in case of compliance with sustainability reporting requirements.

The public development bank is also experimenting with sustainability-oriented equity finance programmes. Growth Blue I is the first private equity fund focused on the blue economy in southern Europe and is established in partnership with the European Investment Fund (EIF) under the flagship “InvestEU” initiative. BPF also operates together with the national innovation agency (ANI) the programme “INNOV-ID”, which aims to enhance access to venture capital for early-stage projects that contribute to decarbonisation, sustainability, energy efficiency, or the circular economy (see also green entrepreneurship section).

These initiatives are important and should be maintained even after the end of the national Recovery and Resilience Plan (RRP), which is the current primary source of funding. Furthermore, as reporting requirements become more robust and widely adopted, “green finance” programmes, which supports green investments, should be matched with “sustainable finance” programmes, which reward companies with superior sustainability performance through better financing conditions.

1.3. Green skills development and green technology adoption in Portuguese SMEs

1.3.1. The green transition has important implications for the labour market

The green transition is expected to have a major impact on the labour market, as regions with a high concentration of brown jobs (i.e., jobs in polluting industries) are expected to lose employment, while regions rich in natural assets, such as abundant sunshine, are set to reap the benefits of the renewable-energy transition.

The lack of a universally accepted definition of green jobs and green skills represents a challenge for comparative analysis in this field. The OECD adopts a task-based definition of green jobs – i.e., jobs that include tasks aligning with environmental goals or requiring green skills – as opposed to a sector-based approach, where all jobs within some environmentally-relevant sectors are regarded as green.

1.3.2. The number of green jobs is growing worldwide, with Portugal mirroring this trend

Evidence based on online job postings points to a rise in the number of green jobs across many countries. In a sample of 48 countries, the growth rate of green jobs has exceeded the average job growth rate every year since 2019. However, there is also evidence that the demand for green skills is outpacing its supply, increasing the risk of green skills shortages.

Portugal mirrors this trend, with a significant rise in green jobs over the past decade, including outside the capital region of Lisbon, where the services sector typically drives the growth of green jobs. Nationwide, brown jobs (i.e., jobs in polluting industries) have also declined, thanks to government measures such as the closure of the last two coal-fired power plants of the country ahead of schedule in 2021. Nonetheless, regions like the North, Centre, and Alentejo still have relatively high shares of non-green jobs (i.e., jobs which have no green skills or tasks involved).

From a firm-size perspective, micro-enterprises have a higher share of green jobs compared to non-green jobs, while mid-sized enterprises have a higher share of non-green jobs, which reflects the larger presence of micro-enterprises in the services sector and mid-sized enterprises in manufacturing.

1.3.3. Addressing environmental challenges in industrial SMEs requires both technology upgrades and workforce training

Three key industrial sectors for the green transition of SMEs in Portugal are textiles, plastics, and ceramics, each of which is facing specific regulatory-driven environmental challenges. The textile sector needs to further streamline water use and water treatment, boost recycling and re-use of materials, incorporate bio-materials in production, and increase product transparency in line with the new EU legislation on the digital product passport. The plastics sector is under pressure to improve waste management and recycling rates, as well as to comply with regulations on single-use plastics, although insufficient recycling infrastructure may undermine the recycling efforts of the industry at national level. The ceramics sector, which has multiple industrial applications and is a large consumer of natural gas, must focus on reducing production-related carbon emissions. These environmental challenges require the uptake of existing green technologies at firm level, increased workforce and management training, and larger investments in R&D.

1.3.4. Portugal is taking important steps to enhance green skills, with a focus on low and mid-skilled workers

The government of Portugal has taken important steps to strengthen the green skills of its labour force. The main government programme in this area is the “Green Skills and Jobs” programme, which primarily targets the unemployed, employees in energy-related activities, and employees at a risk of job loss due to the green transition. The programme is well-conceived, involving the business sector and the regional offices of the National Institute for Employment and Professional Training (IEFP) in the design and implementation and providing financial compensation for participants (both companies and workers). On the downside, some of the programme’s eligibility requirements, such as the use of “innovative” training methodologies or “adequate” training infrastructure, may be difficult for SMEs to prove. The government of Portugal is also updating its catalogue of national qualifications to enhance the offer of green skills, especially mid-level technical skills in energy-related areas. Finally, new training centres dedicated to green skills have been established, notably in regions like Alentejo where the last two coal-fired power plants of the country were located (e.g., the Training Centre for Energy Transition).

Overall, Portugal’s green skills programmes mostly target the unemployed and low/mid-skilled workers through technical training, whereas the offer of green-relevant skills for high-skilled workers is less developed. However, these skills are also instrumental for a successful green transition. Examples include engineering skills for product eco-design and managerial/entrepreneurial skills for the adoption of environmental management practices at firm level.

1.3.5. Portugal is supporting green technology adoption by SMEs

Together with green skills programmes, the government of Portugal has launched many initiatives to foster green technology adoption in SMEs, taking advantage of the funding opportunities of the national RRP. Two flagship programmes in this area are the Sectoral Decarbonisation Roadmaps and the Mobilising Agendas, both of which adopt a collaborative approach in policy implementation. The roadmaps, which involve government agencies, business associations and research organisations, aim to identify the main decarbonisation actions in a given sector for the near future. Examples of envisaged actions include the measurement of carbon emissions, the preparation of toolkits to help companies design a tailored approach to decarbonisation, and capacity-building sessions on new and existing green technologies. Compared to the roadmaps, the Mobilising Agendas place a stronger accent on industry-university research collaboration, with at least thirteen of them related to green topics (for example, one of the agendas focuses on sustainable plastics). Technology and research centres, such as CITEVE for textile/clothing or PIEP (Centre for Innovation in Polymer Engineering) for the plastics industry, play an important role in the delivery of both initiatives. These centres have long supported the technology upgrading of Portuguese SMEs and have made possible the rapid rollout of both programmes.

While these programmes are well-designed and represent an important opportunity for industry decarbonisation in Portugal, some issues raised by stakeholders include the limited capacity of local SMEs to calculate their emissions and take action on the suggested decarbonisation measures, many of which require significant upfront investments; a lack of collaborative culture between universities and the business sector, especially in the context of the Mobilising Agendas; and slowness in the disbursement of public funding.

1.3.6. Portugal has launched some pilot initiatives to promote the circular economy

The Portuguese government, especially through the national environmental agency (APA), is also active in the promotion of the circular economy. In 2024, APA was developing the "National Plan for Biodiversity and the Circular Economy: 2025-2030," which focuses on the textile, footwear, and natural resin sectors and promotes the replacement of fossil fibres with bio fibres, the reduction of waste in production, and higher recycling rates. The Plan also has specific actions for SMEs, such as: a) the CIRCO Hub training programme, which is jointly implemented by APA and IAPMEI; b) “eCircular”, a voluntary-based certificate of the circularity performance of organisations developed by the Portuguese Energy Agency (ADENE); c) “Vale Economia Circular”, a voucher scheme of IAPMEI supporting circular-economy principles in SMEs.

With respect to waste management, one concern has been to the lack of involvement of SME stakeholders in the consultations that have led to the draft of the non-municipal waste strategy, also covering industrial waste, as this could hinder its effectiveness by failing to reflect the specific compliance needs of SMEs. Furthermore, while some waste management regulations are designed to protect customers, they may also slow down the achievement of higher recycling rates, which is one of the objectives of the National Plan for Biodiversity and the Circular Economy.

1.4. Energy programmes for industrial SMEs in Portugal

1.4.1. There is scope for enhancing the energy efficiency of Portuguese SMEs

Portuguese SMEs account for a large share of business-driven energy consumption, which reflects the significant weight of SMEs in the national economy. According to recent OECD estimates produced in the framework of the project “A dashboard of SME greening and green entrepreneurship indicators”, Portuguese SMEs account for 65% of total energy consumption in the whole business sector, which includes manufacturing, construction, and services, while in manufacturing alone the percentage is 63%. Both figures are much higher than the respective EU averages: 43% and 36%.

While these differences largely reflect the industry structure of Portugal, “SME energy intensity” (i.e., the amount of energy consumed by SMEs to produce one unit of output), an indicator which is also affected by energy efficiency at firm level, is 30% higher in Portugal than the EU average for the business sector and 17% higher for manufacturing, suggesting that there is scope for strengthening energy efficiency among Portuguese SMEs.

This is especially important because energy costs have a major impact on business activity in Portugal. In 2018, Portugal featured the highest value of “SME energy price burden” (i.e., the cost of electricity and natural relative to business turnover) across all EU member states, both in the whole business sector (5.3%) and manufacturing (3.8%). In 2022, at the peak of the energy crisis caused by Russia’s war in Ukraine, the price burden increased further (7.8% in the business sector and 5.6% in manufacturing), but proportionally less than in the rest of the EU. Survey evidence corroborates this finding. Based on data from the EIB Investment Survey, Portuguese companies are more likely than peers in the rest of the EU or southern Europe to report “energy costs” as a major barrier to investments.

1.4.2. The recovery and resilience plan, which is the main source of funding for energy-related investments, has reached many SMEs

Currently, Portugal’s main source of funding for energy-related investment support programmes is the national Recovery and Resilience Plan (RRP), notably Component 11 (C11) focusing on industry decarbonisation. With a total budget of EUR 837 million over the period 2021-2026, C11 of the RRP intends to support industry decarbonisation through the adoption of low-carbon processes and technologies, energy efficiency measures, the integration of renewable energy sources and energy storage, and the development of decarbonisation roadmaps and capacity-building initiatives.

The RRP has been implemented through different project calls to which companies and other organisations, such as technology centres or business incubators, have applied. Overall, Component 11 of the RRP has been inclusive of SMEs thanks to project calls of different size, the involvement of many intermediary organisations in project delivery making it possible to reach a large number of companies, and the targeting of all industrial sectors, not only the most energy-intensive ones such as steelmaking or cement where few SMEs are found.

A potential issue in the implementation of Component 11 is that most public support for SMEs has taken the form of incentives for the micro-generation of clean electricity through the installation of solar panels, while energy efficiency improvements, particularly those linked to industry-specific production processes rather than sector-neutral support processes, have received less attention. One possible reason is the shorter time it takes to install solar panels compared to undertaking and completing energy efficiency improvements, which may have played a role in the design and implementation of the RRP calls given the tight deadlines attached to EU funding.

1.4.3. Going forward, it will be important to continue to promote SME energy efficiency through national funding

The national RRP is exceptional in the amount of funding that has been dedicated to energy-efficiency measures and other decarbonisation technologies. Prior to the RRP, national business energy policies (e.g., the Energy Consumption Efficiency Promotion Plans, PPEC) were relatively small-scale and focused on improving “support processes” (e.g., ventilation, lighting, and heating/cooling systems). Going forward, it will be important that the government maintain the momentum behind these policies and partly shift their focus towards production-related improvements, as these have the largest energy-saving potential for industrial SMEs.

1.4.4. The energy audit system works well and is inclusive of SMEs

Energy audits are a mainstay of energy policies across many OECD economies. In Portugal, they are compulsory, every four years, for companies with annual energy consumption levels exceeding 500 tonnes of oil-equivalent (toe), i.e., about 2.3 GWh per year. Audits result in eight-year energy rationalisation plans, which audited companies are obliged to implement with mandatory reporting to the national energy agency (ADENE) every other year.

Portugal’s energy audit system is inclusive of SMEs. ADENE statistics shows that a large number of energy audits also cover industrial companies with energy consumption below 500 toe/year. Similarly, the two sectors most covered by energy audits are food and textile, both of which have a very large presence of SMEs.

Information from the energy audits feeds into a national database called Management System of Intensive Energy Consumption (SGCIE), which is managed by ADENE and offers valuable information on energy consumption by industry and type of activity, thus providing policy makers with important insights to design better-informed business energy policies.

Overall, Portugal’s energy audit system is effective. Nonetheless, some possible reforms could be considered, such as the phase-out of excise duty exemptions on oil products for companies going through energy audits, the integration of international energy audit standards into the national audit system, an enhanced accreditation for professional energy auditors, and a more explicit focus on energy management practices within the scope of the energy auditing process.

1.4.5. New energy management programmes could be launched to enhance energy efficiency at firm level

Portugal could also consider launching two new programmes with a view to encouraging the adoption of energy management systems and practices at firm level. Very few Portuguese companies have international standards in energy management systems (EnMS), such as ISO 50001, even after controlling for the size of the country. For large energy-intensive companies, the government could support the acquisition of these international standards, possibly as part of a Voluntary Agreement Programme (VAP) comprising other elements such as workforce training and financial incentives. Success factors for VAPs or, more generally, for the adoption of international EnMS standards include top management support, the presence of company staff dedicated to energy issues, and in-house understanding of energy use and potential improvements.

For the larger population of SMEs, especially in light manufacturing, the government could rather consider the development of energy efficiency networks, which offer energy management support without the need for participants to achieve a formal energy management certification. Countries operating similar programmes include Germany, Sweden, and Switzerland. In particular, evidence from Sweden shows that companies that are part of such networks reduce twice as much energy consumption as companies which have only gone through an energy audit. Success factors for this policy include a sector-based approach in the build-up of networks and the involvement of business/trade associations and research/technology centres in programme delivery.

1.5. Direct public support for green entrepreneurs in Portugal

1.5.1. Portugal has a relatively high rate of green start-ups

Entrepreneurs play a significant role in the green transition because of their ability to drive innovation and change. While a commonly agreed definition of green entrepreneurship has not yet emerged, this report takes it as the development and deployment by new start-ups of products, services, and processes, that either: i) reduce or prevent any type of environmental damage; or ii) emit less pollution and waste, and/or are more resource-efficient than equivalent products, services, and processes.

To measure green entrepreneurship, however, many researchers rely on private sector data due to the limitations faced by national statistical offices to capture information on “green” activities. In this case, private databases define green firms and start-ups based on sectors and subsectors and show that about 4% of start-ups receiving equity investments in Portugal were operating in “green” sectors and subsectors over the period 2011-2021. This ranks Portugal in the top ten of OECD countries when this sector definition of green start-ups is used.

1.5.2. There is a high level of awareness about the potential of green entrepreneurship

Surveys also show that there is a high level of awareness of environmental issues in the Portuguese population. About 95% of respondents to a 2020 Eurobarometer survey reported that climate change affected their daily life. This may partly be due to increased government investments in improving the availability of information on climate-change risks and, more recently, substantial media coverage of the national RRP, which promotes and supports green innovation and entrepreneurship.

Against this backdrop, green entrepreneurship has been showcased within the national entrepreneurship ecosystem and, to a lesser extent, to the broader public. Examples include the “Born from Knowledge” (BfK) award programme, which recognises outstanding collaborative R&D projects and companies, including in green-related areas, or the Web Summit, which showcases green entrepreneurs to a larger audience. These events, which leverage role-model effects to stimulate the emergence of new green start-ups, could be further expanded.

1.5.3. A growing number of green entrepreneurs benefit from public funding measures

A range of financial measures are implemented to support green entrepreneurs in Portugal, many of which appear to be reaching their intended objectives. One main example is the “Vouchers for Startup – New Green and Digital Products” measure, which provides a non-repayable grant of EUR 30 000. This measure provides funding to a large number of green entrepreneurs (i.e. the budget allocation of EUR 90 million could support 3 000 projects), but stakeholders reported that the amount of funding provided is not always sufficient to invest in specialised equipment, nor to scale up operations when products are ready to go to market. Other OECD countries, such as Sweden, have put in place grant systems with larger grants available for more advanced projects, an approach that the government of Portugal could also consider.

In the equity finance space, the Call INNOV-ID programme intends to enhance access to venture capital for early-stage projects that contribute to decarbonisation, sustainability, energy efficiency, or the circular economy. Overall, the initiative appears to be successful, as nearly one-quarter of funded start-ups had secured additional private funding as of March 2023. However, many stakeholders did not identify this programme as a potential funding source, suggesting a low level of visibility.

Overall, financing remains a pressing challenge for many green start-ups. Compared to other OECD countries, Portugal’s financial measures offer smaller amounts of funding. Furthermore, financial support could be better linked with business development and technical support services.

1.5.4. Dedicated training programmes for green entrepreneurs are still rare

Green entrepreneurship training programmes can have many objectives, including awareness-raising and the provision of skills to help green entrepreneurs succeed in getting public funding, leveraging tax benefits, adhering to regulatory requirements, and managing policy and regulatory risk. Given the use of integrated support schemes (e.g. incubators) that provide technical support and access to labs, green entrepreneurship training programmes can be particularly relevant for non-tech green entrepreneurs. While there is some experience with green entrepreneurship training schemes, such as the Youth Programme for Green Entrepreneurship and Employability, there are currently few of these offers in Portugal. Strengthening training programmes could be instrumental to supporting green entrepreneurship, especially the non-technology-based one.

1.5.5. Integrated support packages would better support green entrepreneurs

Many governments in OECD countries offer integrated support packages to green entrepreneurs, often delivered through business incubators. The services offered typically include workshops, specialised business consultancy, networking, access to finance, and access to labs and testing facilities. These packages of interconnected services can improve the performance of new start-ups and early-stage firms by addressing experience gaps and a lack of technical knowledge.

There are 138 incubators and accelerators in Portugal which are currently linked through the National Incubator and Accelerator Network. While support offered through these incubators and accelerators is often of high quality, only a small number offer specialised support for start-ups that are based on environmental technologies. These are complemented by similar programmes delivered by NGOs and the private sector. Some private incubators, such as Casa do Impacto, are well-known across the entrepreneurship ecosystem, but the scale of integrated support for green entrepreneurs is overall limited. Many individual incubators also reported that they cannot meet the demand for their programmes.

Finally, an ongoing trend across many OECD countries consists in helping entrepreneurs build international connections to facilitate the entry into foreign markets. This would be particularly relevant for Portugal given its direct access to the EU single market.

1.5.6. The expansion of green markets is an area deserving further attention

Governments can also play an important role in expanding markets for green entrepreneurs. The Portuguese government has launched relevant strategies in two areas: i) expanding the scope of the circular economy, which could open up new markets for green entrepreneurs; ii) making public contract markets more supportive of sustainable products. However, progress has been relatively slow on both issues. For example, despite launching the new “Portuguese Strategy for Green Public Procurement 2020 - Towards Green Growth”, Portugal’s green public procurement as a percentage of total public procurement is among the lowest in the EU: i.e., less than 2% of public contracts are issued using sustainability criteria.

1.6. Green entrepreneurship ecosystems in Portugal

1.6.1. Green entrepreneurs need strong entrepreneurship ecosystems

Entrepreneurship ecosystems are comprised of a range of actors (e.g. entrepreneurs, investors, government, higher education institutions, incubators, among others) and play a critical role in entrepreneurship development. They collectively facilitate access to resources for entrepreneurs and set the “rules of the game” that affect start-up development in a given country or region. One of the dominant models of entrepreneurial ecosystem, which is adopted in this report, consists of two core components that facilitate the creation of productive entrepreneurship: “institutional arrangements” and “resource endowments”.

Entrepreneurship ecosystems are particularly important for start-ups based on environmental technologies because these technologies often have longer development timelines than other types of technologies due to regulatory and market uncertainties. In addition, green entrepreneurs have a greater need for infrastructure development in the ecosystem, in the form of laboratories, testing facilities, and specialised consultancy.

1.6.2. Start-up Portugal plays a major role in the national entrepreneurship ecosystem

Portugal’s green entrepreneurship policies are implemented by a large number of public actors, notably Startup Portugal, IAPMEI, the National Innovation Agency (ANI) and the Institute of Employment and Professional Training (IEFP). The main actor is Startup Portugal, which is a non-profit organisation created in 2016 and holding the Statute of Public Utility since 2019. Its mission is the development of activities of public interest for the promotion of entrepreneurship, in close connection with public and private entities operating in the national entrepreneurship ecosystem. Start-up Portugal manages a wide range of programmes, such as the Road to Websummit and the “Vouchers for Startups – New Green and Digital Products” measure (see above). It also has an important role in developing the green entrepreneurship ecosystem of which it is part, notably through the Vouchers for Incubators and Accelerators, which is an instrument that provides financial support to domestic business incubators and accelerators. This scheme is innovative and not common in many other OECD countries. However, it has also been reported that the funding provided is not sufficient to fully develop and launch new programmes.

1.6.3. Collaboration between different stakeholders in the ecosystem is common and facilitated by government programmes

The public entities involved in green entrepreneurship policies work collaboratively to deliver different programmes in Portugal. In most instances, these arrangements work well, and there is a clear benefit to leveraging the complementary strengths of different entities. However, some public entities also reported difficulties managing organisational pressures related to the new mandate of facilitating the green transition, which comes on top of their traditional policy mandate.

Non-government actors are also active members of Portugal’s entrepreneurship ecosystem. They include some of the 138 business incubators and accelerators, universities, corporate champions, and specialised NGOs, some of which operate specific green entrepreneurship programmes. Overall, the private sector is active and nimble in responding to the needs of entrepreneurs. It has also benefited from recent policies that attract international talent and has a high level of interest in supporting the green transition because there are clear market opportunities in this area (see below).

Universities also play an important role. In particular, there are several leading universities that make a concerted effort to bring research results to the business sector through joint projects. Although many universities lack experience in working with businesses, this gap should narrow over time as the two parties get to know better each other’s expectations by working together in common projects. In this regard, the government-sponsored Mobilising Agendas play an important role by fostering industry-university collaboration in many technology areas, including sustainability-related ones. This programme is also important because, through a consortia approach, facilitates co-operation between businesses that are often competitors.

1.6.4. Green entrepreneurs would benefit from more opportunities to build international connections

Entrepreneurship networks are groups of interconnected entrepreneurs, business service providers and other relevant actors who can be accessed by entrepreneurs for information, ideas, and resources. There are a variety of formal and informal entrepreneurship networks in Portugal. Many of them not only work to directly support entrepreneurs but also contribute to the strengthening of the entrepreneurship ecosystem through collaborations, including with public actors. Examples include the 351 Portuguese Startup Association, which has grown to more than 1 600 members in its four years of existence. However, very few of these networks have regular dedicated activities for green sectors and technologies. Furthermore, there is room for enhancing the linkages between Portuguese networks and networks in other countries, following the example of other EU member states.

1.6.5. Portugal’s green markets are large by EU standards, creating demand that green entrepreneurs can meet

Access to market opportunities is critical for the success of entrepreneurship ecosystems. One way to approximate the size of the domestic market for green entrepreneurs is to estimate the volume of business activities offering environmental goods and services. Recent estimates from Eurostat show that Portugal’s environmental goods and service sectors accounted for nearly 3% of GDP in 2021, which is above the EU average (2.5%). This share has grown by about 16% in Portugal since 2014, which is consistent with the EU average over this period.

1.6.6. A clear national leader for the green entrepreneurship agenda has yet to emerge

There is wide recognition – both inside and outside of Portugal – that Startup Portugal has played an important role in the recent development of the national entrepreneurship ecosystem. However, many public entities are contributing to the development of green entrepreneurship, and none has emerged yet as a clear leader or champion on this agenda. Two main reasons explain this. First, each of the public entities engaged in delivering support to green entrepreneurs is doing so alongside their primary mandate. Second, these entities have launched their green entrepreneurship activities with great speed and face organisational challenges as a result. The emergence of a clear leader in this area, possibly Start-up Portugal with close support from IAPMEI, would be key to guaranteeing continued support for green entrepreneurship in the future.

Box 1.1. Main policy recommendations

Based on this analysis, the following main policy recommendations are proposed to the government of Portugal to further accelerate the green transition of SMEs and promote green entrepreneurship.

Financing the green transition

• Streamline and harmonise sustainability reporting requirements for SMEs to reduce the reporting burden that originates from the multiplication of different demands, possibly in line with the Voluntary Reporting Framework for SMEs (VSME), which is being developed by the European Financial Reporting Advisory Group (EFRAG) at the EU level. In this respect, ensure that SMEs better understand the implications of sustainability reporting requirements, but also the associated benefits, through awareness-raising and capacity building activities.

• Set up the necessary data and legal infrastructure to enable the sharing of sustainability-related data between different institutions (e.g. energy authorities and financial institutions), with a view to making sustainability-reporting more automatic.

• Once reporting requirements are enhanced and more commonly used, encourage the use of sustainability-linked financing instruments (grants, concessional loans, and credit guarantees), which partly link financing conditions to the sustainability performance of the company.

Green skills development and green technology adoption

• Increase the number of green-relevant education and training programmes that target high-skilled workers, who are currently less covered in national green skills policies. Examples of high-level green skills include engineering skills for product eco-design and management skills for the adoption of environmental management practices at firm level.

• Introduce labour mobility schemes to facilitate the take-up of new green jobs, including by workers previously employed in brown industries, for example through the preparation of toolkits giving information on career transition pathways.

• Set up an Observatory of Green Jobs to follow the evolution of green jobs and anticipate the demand for green skills across different industries and regions, with a view to supporting the development of new national qualifications and education/training curricula.

Energy programmes

• In the context of energy efficiency policies, give adequate attention not only to improvements in support processes (e.g., lighting, ventilation, building insulation, etc.) but also in production processes (e.g. heat recovery, engine optimisation, etc.), as the latter are the main source of energy consumption for industrial establishments.

• Strengthen the accreditation system of energy auditors through the introduction of an entry exam, regular re-examinations, and capacity-building activities, including on industry-specific modules.

• Introduce energy efficiency networks, which are especially relevant for SMEs in light industries, as they provide companies with energy management support without the need to achieve a formal energy management certification.

Direct public support for green entrepreneurs

• Expand the current grants for green start-up projects to offer more targeted funding opportunities for projects at different stages of development.

• Strengthen training programmes for green entrepreneurs and start-ups to reach the wider population of start-ups and potential entrepreneurs, including non-tech green start-ups, who currently have little access to support services.

• Scale-up the availability of specialised incubation programmes for green start-ups, notably in the energy sector, without excluding non-tech green start-ups.

Green entrepreneurship ecosystem

• Develop a green entrepreneurship strategy to connect green entrepreneurship policy objectives, identify priority actions and co-ordinate support systems. The strategy would also need to clearly define green entrepreneurship and related concepts.

• Improve data collection on green entrepreneurship activities to enable more informed policy making, starting with those start-ups and early-stage firms receiving public support.

• Appoint a public sector champion who can provide leadership for green entrepreneurship policy. This could be a unit or office inside of Startup Portugal to leverage the strong brand recognition that this organisation already has.