Green Bharat: How are MSMEs embracing sustainability with technology?

For decades, sustainability was a conversation that happened in the boardrooms of large corporations, government policy documents, and international climate negotiations. For smaller manufacturers and business owners, more immediate things like input costs, working capital, and the next order take precedence. However, there is a gradual change in this trend. With proactive efforts and mandatory government policies, MSMEs are making efforts to move towards sustainable practices and slowly become a part of the green ecosystem.

MSMEs account for roughly a quarter of the country's industrial energy consumption and produce an estimated 135 million tonnes of CO₂ equivalent annually, as per NITI Aayog. Thus, greener ways of doing business are both a market demand and an opportunity to build resilient, future-proof businesses.

How it all started

• A survival requirement: The evolving policy landscape is pushing this conversation into action. Global and Indian regulations such as the EU's Carbon Border Adjustment Mechanism (CBAM), India's BRSR (Business Responsibility and Sustainability Reporting), and international ESG norms have created green ways as a survival requirement.

• An aspirational goal: Added to it is the awareness shift due to education, peer networks, and digital platforms. Buyers demanding green data, or looking for green-certified or sustainable as a high-intent search filter, is driving a quiet and meaningful mindset shift, too.

Navigating the challenges

For a typical MSME that focusses on monthly cash flow, comes with limited knowledge about the green economy, and doesn’t have access to credit/schemes, the hurdles remain.

High costs: Sustainability means a complete revamp of the existing machinery. For MSMEs that operate with 5-10% of thin profit margins, a complete revamp means high costs with a payback period of 3-5 years (primarily for all green tech). The green loans are often subject to credit assessment, thus making it difficult for MSMEs to take advantage of the same.

Knowledge gap: Embedded Carbon, Scope 3 Emissions, ESG rating, energy efficiency, etc., are jargon for the MSMEs with limited knowledge and understanding. Specialised software, ESG officers or regular auditors are needed to not just calculate these, but also maintain them. This lack of expertise poses a significant challenge for MSMEs trying to make it in the market and compete with bigger brands.

Fragmented support: There are more than 18 schemes and policies for MSMEs for a green transition. But the paperwork, end benefit, and delivery of the same make the entire process complex, thus defeating the purpose of providing support altogether.

The transition has started

Amid these challenges, the MSME ecosystem is putting its best foot forward to catch up to the sustainability wave, especially with the EU's CBAM and India's BRSR norms coming into play. A tech upgrade is making it possible; however, the adoption varies.

Tech-led interventions are helping in smart energy management. This includes the use of affordable IoT sensors and smart meters, allowing managers to see energy spikes in real-time on mobile apps, sensors on boilers to alert before a machine starts consuming excess power due to wear and tear, rooftop solar integration to optimise the energy mix automatically, among others. Similarly, MSMEs in sectors with a risk of greenwashing are adopting blockchain to prove their sustainability claims.

Rise of green startups

Simultaneously, there is a rise in startups and solution providers that are offering affordable, doable green solutions and helping MSMEs operate more sustainably. This includes affordable rooftop solar financing solutions, IoT-based energy monitoring tools, green working capital loans, and much more. Additionally, the emergence of certified, traceable, and lower-carbon inputs into supply chains and easy discovery of renewable energy providers, sustainable material suppliers, and green logistics partners is making the transition accessible—all on the back of technology.

A green story from hereon

The shift is difficult but an important one. Integrated sustainability practices can not only make MSMEs future-proof but also open doors to other countries, especially with strict green norms.

Today, there is a decent amount of technology available to grow and expand the MSME ecosystem, but green-compliant tech is limited, expensive, and still a work in progress. Thus, there is a friction, and the on-ground transition is messy. Affordable, plug-and-play tech integrated into supply chains, followed by skilling programmes, can help in a faster transition.

Having said that, the journey has started. With improving tech, growing awareness, and a supportive ecosystem, the greening of Bharat is slowly but steadily underway.

(The author is COO, IndiaMART InterMESH Limited. Views are personal.)