In an era marked by escalating climate challenges, small and medium-sized enterprises (SMEs) find themselves at a pivotal crossroads. As the cornerstone of numerous economies, these enterprises are uniquely positioned to spearhead the transition towards a more sustainable future. Nevertheless, to ensure that SMEs can effectively climate-proof their operations and contribute to global net zero targets, governments must offer the appropriate incentives. Recently, I had the opportunity to converse with Mr Arjun Patel, an environmental consultant with extensive experience working with SMEs across India, Britain, and Indonesia. Our discussion illuminated how different government policies are fostering the sustainability journeys of these businesses.
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Mr Patel began by highlighting the critical role of Indian SMEs, which constitute nearly a third of the nation’s GDP and half of its exports, employing over 110 million individuals. He underscored the significance of the Small Industries Development Bank of India (SIDBI) and its End to End Energy Efficiency (4E) Scheme. This initiative has been instrumental in enabling SMEs to adopt energy-efficient technologies. “SIDBI’s 4E Scheme has been a game-changer,” Mr Patel asserted. “It offers up to 75% of project costs at concessional interest rates, coupled with flexible repayment terms. This makes investments in renewable energy and eco-friendly technologies more feasible for SMEs.”
Mr Patel recounted his collaboration with Multi Decor India Private Limited (MDIPL), a construction company based in Haryana, which joined the Race to Zero via the SME Climate Hub in 2023. He detailed how MDIPL leveraged SIDBI’s financial support to install solar panels, natural gas gensets, and enhance building insulation. These initiatives not only curtailed their emissions but also significantly reduced operational costs. MDIPL’s journey exemplifies how strategic financial incentives can drive substantial climate action within SMEs. “The success stories emerging from India demonstrate that when SMEs receive the right support, they can make meaningful contributions to global net zero targets,” Mr Patel emphasised.
Turning to the United Kingdom, Mr Patel illustrated how SMEs, responsible for nearly 53% of the country’s emissions, are benefiting from the government’s myriad incentives provided through the Business Climate Hub. These incentives aim to assist businesses in transitioning to renewable energy and improving energy efficiency. Mr Patel shared the experience of VMI, a camera rental company in the TV industry. “VMI initially installed a 10KW solar PV system in London, later expanding it to 40KW. Encouraged by this success, they sought funding from the West of England Combined Authority and the European Regional Development Fund,” he recounted. “This financial support enabled them to further augment their solar capacity in Bristol and replace fluorescent lighting with LED equivalents.”
The UK government’s financial incentives have substantially reduced VMI’s energy costs and carbon footprint. “Such grants and funding opportunities are crucial for SMEs aiming to shift to renewable energy,” Mr Patel noted. “They not only help businesses save on energy costs but also contribute to the broader goal of reducing national emissions.”
In Indonesia, the Net Zero Hub (NZH) led by KADIN Indonesia is making significant strides. The Corporate Assistance Programme (CAP) under NZH equips businesses, including SMEs, with the necessary training and tools to manage their emissions. Mr Patel highlighted PT Indo Oil Perkasa Tbk, an SME that successfully submitted its net zero targets for validation by the Science Based Targets initiative (SBTi). This accomplishment was facilitated by the support and training provided by CAP. The Indonesian government complements these efforts with fiscal incentives such as tax reductions, R&D tax credits, and subsidies to encourage the adoption of green technologies. “The collaboration between KADIN, the government, and the private sector exemplifies how effective policy frameworks can accelerate the transition towards a sustainable future,” Mr Patel remarked.
As our conversation drew to a close, Mr Patel reflected on the common thread running through the experiences of SMEs in these three countries. “The right kind of financial incentives are crucial,” he concluded. “Whether it’s concessional loans in India, renewable energy grants in the UK, or corporate assistance programmes in Indonesia, these incentives provide SMEs with the support they need to climate-proof their operations.”
Governments worldwide must continue to develop and implement policies that empower SMEs to take bold climate actions. By doing so, they not only help these businesses thrive but also drive the collective effort towards a net zero future.
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