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The Eco-Sustainability of Micro, Small and Medium Enterprises (MSMEs): Pains versus Potential

    by: Chloe Chan / Sept 6, 2022
    In Indonesia, the Centre of Forest Development Financing (Pusat P2H) offers soft loans to micro and small enterprises for activities related to timber and non-timber forest products. Photo courtesy of Asian Development Bank.
    In Indonesia, the Centre of Forest Development Financing (Pusat P2H) offers soft loans to micro and small enterprises for activities related to timber and non-timber forest products. (Photo courtesy of Asian Development Bank. –

    The Micro, Small, and Medium Enterprises (MSMEs) sector is uniquely challenged and charged with contradictions regarding environmental responsibility. 99% of all businesses in the Southeast Asia region are MSMEs and employ over 140 million jobs (Schaper, 2020).

    Such expansive employment generation can only exist because of the fast-growing business sector with the widespread use of technologies to improve productivity. However, with these developments come environmental consequences.

    While each firm may have little effect in isolation, their sheer number makes them significant players in the business industry and environmental sustainability. Growing pressures to adopt environmentally sustainable practices encourage business owners to implement them with increasing urgency. 

    However, many of these MSME managers claim that financial implications exist in these decisions that they cannot afford. MSMEs do not enjoy the same financial stability as major corporations. Changing how things are done may be a disaster for the company if they are not careful, as it would cost valuable time and money.

    Going green is an expensive gamble for many MSMEs because it is often not a one-off expense, but an ongoing cost that builds up over time. Each firm must search for the balance of maintaining their business while determining the best for them to support eco-friendly initiatives; this is a resource-intensive task.

    The lack of resources— whether money, support, knowledge, training, or time— is a significant barrier for MSMEs to pursue environmentally friendly practices in their activities.

    Consequently, this leads to many business owners thinking it is cheaper to pollute and pay taxes rather than improve environmental performance (Wahga, 2019). A 2021 report from The Organisation for Economic Co-operation and Development (OECD) says that environmental enforcement efforts are targeted chiefly toward large enterprises.

    This shows that ASEAN policymakers and the community must proactively support MSMEs in the transition to eco-sustainability. Whether it be financial support or policies encouraging greener business practices, cooperation across sectors and ASEAN regions is key to determining what eco-sustainability initiatives work and what needs more refinement.

    Indeed, green growth is becoming increasingly popular as the public and private sectors recognize that steady economic growth is tied to properly managing environmental resources. For example, these sectors have begun partnerships to bridge some of the setbacks MSMEs experience in this matter.

    In Singapore, some local banks support businesses in their sustainability journey by offering suitable financial plans to assist MSMEs in transitioning to greener business models.

    ASEAN countries such as Vietnam also offer environmental standard certificates (ESC) to MSMEs who pass the requirements of ecologically sustainable practices. These take account of the firm’s technology, ecological literacy, and equipment.

    Recent years have also seen the rise of sustainability training among employees— rightly so, as it is a vital part of enacting change within the business structure. Wave-making changes in the industry have always incorporated training for employees.

    Similarly, consumers have generally preferred adopting eco-friendly practices. A study found that more than 50 percent of ASEAN consumers tailor their consumption and buying habits to favor more sustainable products and practices (Kantar Asia Sustainability Foundational Study, 2021).

    This shows how green initiatives are becoming more relevant in giving businesses a competitive edge. As a significant demographic of consumers, the ASEAN youth then holds sway in influencing business trends by active mindfulness of our buying habits. Supporting green businesses and purchasing eco-friendly products are some of the significant ways we can start making a change.

    Buying from local businesses also supports the local economy, in addition to saving on fuel and resources that it would take to get a product from the production line to us as consumers. Supporting local businesses with eco-sustainability initiatives shows the industry that these issues matter and that going green is a viable business model.

    With environmental issues as an ever-growing concern, ASEAN youths have the power to be proactive in starting the wave of eco-awareness and sustainability, even in the business industry. MSMEs certainly have the potential to drive innovative green practices through their business-led initiatives, the collaboration between private and public sectors, and inclusive environmental policies from local governments.

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