Small and medium-sized enterprises (SMEs) are essential drivers of the global economy, accounting for roughly 90% of businesses and providing about 50% of employment worldwide. According to the OECD, SMEs contribute to economic growth by fostering innovation, creating jobs, and supporting regional economic stability (OECD, 2021). In developing countries, their impact is even more pronounced, as they help alleviate poverty and improve economic inclusion. The World Bank has emphasized the critical role of SMEs in supporting community resilience, particularly in areas where larger corporations are less active (World Bank, 2022).
In terms of employment, SMEs provide a substantial share of jobs across different regions. In the European Union, SMEs contribute approximately 60% of total employment, with microenterprises making up over 40% of the workforce (OECD, 2023). In Asia, SMEs are equally vital, contributing over 40% to GDP and generating about two-thirds of employment in certain economies, such as China and India (ADB, 2020). In these countries, SMEs are particularly significant in rural areas, where they provide accessible job opportunities for young people and women, thereby addressing regional employment gaps.
Similarly, in the Americas, SMEs play a key role in both employment and economic growth. In the United States, SMEs account for nearly 50% of the private-sector workforce and are responsible for creating two-thirds of new jobs annually (U.S. Small Business Administration, 2022). In Latin America, SMEs are crucial in countries like Brazil and Mexico, where they represent about 99% of businesses and contribute more than half of private-sector employment. The Inter- American Development Bank (IDB) highlights that Latin American SMEs face unique challenges related to productivity and informality, yet they remain essential to the economic structure and social fabric of the region (IDB, 2021).
Despite their significance, SMEs are particularly vulnerable to climate change. With limited resources, these businesses often lack the financial and technical capacities to adapt to climate-related risks. The OECD notes that SMEs generally operate on narrower profit margins, which limits their ability to invest in sustainable practices and climate resilience (OECD, 2022). This vulnerability is evident across different sectors and regions, especially in industries like agriculture, manufacturing, and tourism, where extreme weather events or resource shortages can disrupt operations. In Asia, for example, natural disasters such as floods and typhoons can devastate SMEs in agriculture, while in Latin America, droughts and rising temperatures present challenges for resource-dependent sectors.
Additionally, SMEs collectively contribute a significant share of global CO₂ emissions, largely through energy consumption, manufacturing, and transportation. The OECD reports that SMEs are responsible for approximately 60-70% of industrial pollution and CO₂ emissions, especially in sectors with high fossil fuel reliance and limited access to energy-efficient technologies (OECD, 2022). This makes SME engagement in climate action essential.Analyses conducted by international development organizations reveal that the challenges faced by SMEs in the area of green transformation are universal. These challenges can be categorized into three groups: lack of information and knowledge, low capacity and skills, and limited access to financial resources.
Recognizing the essential role of SMEs in the global economy and their invaluable contributions to employment, the initiative to the Joint Declaration on Baku Climate Coalition for SMEs' Green Transition has been put forward to address these green transformation challenges. The document is divided into a Preamble and an Operational Solutions section. The first part addresses the current role of SMEs in the global economy, their importance in preventing environmental pollution, and the necessity of mobilizing global resources in this direction. The Operational Solutions section outlines action areas to address the three key challenges faced by SMEs, as mentioned above.
The document also introduces the initiative to establish Green SME Resource Centers, aimed at ensuring global networking and providing an institutional coordination platform. The role of these Centers, which could be established in each country, would involve collecting and analyzing information on the specific challenges SMEs face at the national level, identifying concrete actions considering global practices, and providing technical, expert, and other forms of support.
References:
OECD (2021). SMEs and Entrepreneurship Outlook 2021. OECD Publishing. Retrieved from OECD Library.
OECD (2023). Employment Outlook. OECD Publishing. Retrieved from OECD Library.
Asian Development Bank (2020). Asia Small and Medium-Sized Enterprise Monitor. ADB Publishing. Retrieved from ADB Library.
U.S. Small Business Administration (2022). Small Business Profile. Retrieved from SBA Library.
Inter-American Development Bank (2021). Supporting SMEs in Latin America. IDB Publishing. Retrieved from IDB Library.
OECD (2022). Financing Climate Action: SMEs and Climate Change. OECD Publishing. Retrieved from OECD Library.