This report provides an assessment of Portugal’s policies to support the green transition of SMEs and green entrepreneurship, as well as of the progress of Portuguese SMEs towards climate neutrality in the last fifteen years.
Portugal has made major headways in the reduction of greenhouse gas (GHG) emissions over the last two decades. After reaching a peak in 2005, Portugal’s GHG emissions in 2023 were back to the levels of the early 1990s, mostly thanks to the withdrawal of coal-generated electricity and the development of renewable energy sources in the energy sector. According to OECD estimates (OECD, 2023), Portuguese SMEs accounted for 56% of all business-sector GHG emissions, almost twenty percentage points higher than the EU average (37%), in large part mirroring their larger share of economic activity. However, their carbon intensity, i.e. emissions per unit of output, was also 30% higher than the EU average, further highlighting the importance of ensuring that the challenges and opportunities faced by SMEs are recognised in climate policies to meet the country’s national net-zero objectives.
Survey evidence shows that fewer SMEs in Portugal than in the rest of the EU take specific climate-neutrality actions, such as reducing carbon emissions and developing or purchasing carbon-reduction technologies. Similarly, the proportion of SMEs committed to resource efficiency measures is lower in Portugal than in the rest of the EU. While the immediate cost is reportedly a barrier to Portuguese SMEs, the evidence suggests that these actions lead to major savings over the longer-term. Reasons for low engagement might, therefore, include restrictive financing conditions, less awareness or more volatile business conditions. On the upside, Portugal’s green economy offers expanding opportunities, with the environmental goods and services sector contributing 3% of national GDP, above the EU average of 2.5%.
Portugal’s main commercial banks are seeking to make financing conditions for green investment less restrictive, notably through the offer of “green finance” products that finance business investments in sustainable production. Similarly, the national public development bank operates credit lines and equity finance schemes that support both industry decarbonisation and the development of the circular economy and blue economy, which have all a strong focus on SMEs. These trends are similar to those observed in other EU countries, as shown by a recent survey of public and private financial institutions conducted by the OECD Platform on Financing SMEs for Sustainability. As sustainability reporting requirements become more robust and more widely adopted in the financial sector, “green finance” products should be combined with “sustainable finance” products, which offer preferential financing conditions to companies that exhibit better sustainability performance.
For this to happen, ESG or related reporting requirements should be tailored to the reporting capacities of SMEs and existing reporting tools should ideally be harmonised or made interoperable. In Portugal, there are currently at least two different main reporting tools, one used by commercial banks, and one used by the SME agency (IAPMEI). Going forward, the Portuguese government should work toward creating a better alignment of national reporting frameworks with those currently developed by the European Financial Reporting Advisory Group (EFRAG), notably the voluntary sustainability reporting standards for non-listed SMEs (VSME). Investments in tools, processes and mechanisms that can foster automatised reporting will also support SME compliance, as will further awareness-raising and capacity-building initiatives.
The national Recovery and Resilience Plan (RRP), like in other EU member states, has been the main source of public funding backing the green transition of SMEs. Portugal’s RRP has successfully included SMEs thanks to project calls of different size, the involvement of many intermediary organisations in project delivery, and the targeting of industrial sectors beyond the most energy-intensive ones (e.g., steelmaking, cement or chemicals) where the SME presence is limited. In particular, many RRP-funded initiatives have encouraged the green transition in sectors such as textile, ceramics and plastics components, where SMEs account for a very large majority of employment and output.
One of the main focuses of the RRP in Portugal has been green technology adoption, which has been promoted through a collaborative and consultative approach, as shown by initiatives such as the Sectoral Decarbonisation Roadmaps and the Mobilising Agendas. Both have seen a strong involvement of industry-based technology centres, whose established presence in Portugal has enabled the rapid and successful rollout of many different activities. On the other hand, the development of green skills, which is often complementary to the adoption of green technologies, has mostly targeted the unemployed and workers at risk of job loss due to climate policies (e.g., Green Skills and Jobs programme), while paying less attention to mid- and high-skilled workers.
The national RRP has also prioritised business adoption of renewable energies, notably through financial aid for the installation of solar panels, while production-specific energy improvements have received comparatively less attention. Moving forward, the government should keep momentum behind energy policies for SMEs. In doing so, however, it would be important that the specificities of SMEs, and their industrial sectors, be taken into account, for example by promoting and financing improvements which are within the technical and financial reach of SMEs. Programmes like energy efficiency networks, which foster a collaborative and sector-based approach to energy efficiency improvements, could be apt for this purpose.
In addition to the energy-related calls of the RRP, Portugal has a well-functioning energy audit system. Energy audits are common among mid-energy-intensive SMEs. However, although the national energy audit system works well, it could benefit from better accreditation of energy auditors. Energy auditors are currently certified based on their academic qualifications (i.e., an engineering degree is required) and professional experience. However, there is no entry examination, and accreditation does not expire. A new certification scheme, combined with training programmes, could be launched to help energy auditors keep up with the rapid evolution of energy-efficiency technologies and regulations. Furthermore, there could also be stronger focus on energy management practices as part of the auditing process, including through the promotion of international standards (e.g., ISO standards).
National policies also support green entrepreneurship. Thanks to a significant budget allocation of EUR 90 million from the RRP, start-up vouchers have backed nearly 3 000 projects. This is a significant number relative to similar schemes in other OECD countries. However, funding often falls short of supporting scaling or acquiring specialised equipment. To address this problem, larger follow-up vouchers could be piloted, notably for companies that meet certain development milestones (e.g., capital levels). Specialised training and advisory services also remain limited, with few green-focused programmes or incubators, despite the significant demand on those that do exist. Finally, the expansion of green markets for start-ups is also an area deserving greater attention, for example by helping entrepreneurs build international connections in the context of incubator and accelerator programmes and making public procurement more supportive of sustainable products and services.
Portugal’s entrepreneurship ecosystem works well overall, characterised by several positive attributes such as high levels of knowledge creation. The institutional arrangements for green entrepreneurship in the national entrepreneurship ecosystem are still developing and involve several ministries and agencies along with a network of business incubators and accelerators, technology centres and more. While public actors collaborate effectively, many face strains from the added demands of the green transition that come on top of their established policy missions and the system would benefit from a strong lead agency for green entrepreneurship. Recent policy efforts such as the Mobilising Agendas have helped strengthen connections between entrepreneurs, incubators, researchers, corporates and investors, but there are missed opportunities to fully leverage the knowledge and experience within the ecosystem. For example, incubators often face challenges sourcing experienced mentors and entrepreneurs would benefit from greater networking opportunities.
Based on this analysis, the following main policy recommendations are put forward to further support the green transition of SMEs and green entrepreneurship in Portugal.
Ensure continued policy support for the green transition of SMEs and green entrepreneurship after the phase-out of the national recovery and resilience plan, ending in 2026.
Streamline and harmonise sustainability reporting requirements for SMEs to reduce the burden stemming from multiple reporting demands, possibly in line with the Voluntary Reporting Framework for SMEs (VSME) being developed by the European Financial Reporting Advisory Group (EFRAG). Streamlined reporting requirements will also help unlock financing opportunities for SMEs beyond sustainability investments.
Increase the number of green-relevant education and training programmes that target high-skilled workers (e.g., engineering skills for product eco-design and managerial skills for the adoption of environmental management practices), who are currently underrepresented in national green skills policies. At the same time, further support micro-credentials with a view to rapidly developing new mid-level green skills that are in high demand in the labour market. Both approaches are especially relevant for SMEs, which tend to have fewer resources to invest in training.
Introduce place-based labour mobility schemes to facilitate the take-up of new green jobs, including by workers previously employed in brown industries, for example through toolkits on career transition pathways. This is also likely to favour labour mobility from large companies, which tend to be more present in the most capital-intensive and polluting sectors, and SMEs, which are more likely to be found in light manufacturing and services.
Further strengthen collaboration between universities and the business sector, including through financial incentives for faculty members to engage with the business sector and by further leveraging the role of the existing technology centres, many of which are already attached to or have close relationships with universities and tend to work closely with SMEs.
In the context of energy policies for SMEs, 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.), considering that the latter are the main source of energy savings for industrial SMEs. In this respect, make sure that advisory and financing programmes are suited for SMEs by supporting improvements which are within the reach of this business segment (for example, in terms of technology readiness).
Consider the development of energy efficiency networks, which are especially relevant for SMEs in light manufacturing industries, as they provide businesses with energy management support without the need to achieve a formal energy management certification.
Expand the current grants for green start-up projects to offer more targeted funding opportunities for projects at different stages of development, on condition that previous development milestones are met.
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, which currently have little access to support services.