Sharm El-Sheikh — Small and medium-sized enterprises are essential engines for growth and play a key role in creating jobs and supporting sustainable livelihoods. Yet, the financing gap for SMEs, particularly in emerging markets, is widening.
Climate change has become an increasing concern, especially for small businesses. As the effects of climate change intensify, people around the world are feeling the pressure of financial constraints, greater risk and an increase living costs. These challenges are even more complex in developing countries.
Micro, small, and medium-sized enterprises (MSMEs) are the backbone of Africa’s job creation, economic growth, and development. According to the International Finance Cooperation, MSMEs account for up to 90% of all businesses in African markets and remain one of the main sources of employment. They’re important drivers of employment and entrepreneurship for women, youth and vulnerable groups.
To highlight the contributions of these enterprises, the United Nations General Assembly designated June 27 as the Micro-, Small, and Medium-sized Enterprises Day, recognising the important role these enterprises play in sustainable development. However, the majority of businesses in Sub-Saharan Africa are micro-enterprises and they need access to capital for them to thrive and grow.
The Small and Medium-sized enterprise Competitiveness Report provided clear recommendations for stakeholders to support MSMEs in the face of climate change but what does it mean, in practice?
Pamela-Coke-Hamilton, Executive Director of the International Trade Centre explained that in 2021 at the COP26, she walked the entire spectrum of Glasgow, the Convention Center, and there was not one space that represented small businesses. “This is serious, how can we not have small business space as they represent, 90% of all businesses and 50% of job creation. Big firms are responsible for 80% of emissions simply because they are part of the value chain and supply chain. So what is our biggest challenge? Our biggest challenge is that we’re in an existential threat.”
“So where do we go from here, I would say we need to look at the wider ecosystem. So we look at the market charges, technology, access to finance, legal changes, and requirements of what small businesses really need. A competitiveness assessment tool that has been launched is a very important tool because it looks at what are the necessary mechanisms that need to be put in place for companies to meet their actual current agricultural impact. Pakistan, for example, we’re doing a U.S.$60 million programme with FAO that has actually trained over 40,000 farmers. We’ve also been looking at Ghana, where we’ve actually helped small farmers increase their yield and revenue by 22% overall”, Coke-Hamilton said.
The World Bank estimates that there are 500 million smallholder farming households globally, comprising upward of 2 billion people. Though these farms are small, typically under two hectares, their cumulative impact is large. Smallholder farmers produce at least a third of the global food supply. And though these small farms contribute little in the way of greenhouse gas emissions, they bear the brunt of climate impacts. Oxfam reports that this year the combination of the pandemic, inflation and the already stretched economic capacity in many countries is pushing 260 million people into extreme poverty, with the total number now rising to 860 million, undermining the ability to guarantee a healthy future for generations to come.
Taking action on climate change offers new opportunities for economic development, growth and job creation. Reducing emissions, can save businesses money, attract new customers, and keep their competitive edge around the globe. According to the Harvard Business Network, “decarbonizing and cutting emissions at the SME level has benefits. It creates a more resilient supply chain overall, especially as the impacts of climate change become more uncertain and severe. The Covid-19 pandemic, for example, led to significant challenges across 57% of the supply chain, showing that “when small business suppliers struggle, larger operations falter too.”
In the Sahel, droughts are becoming more and more intense. The temperatures are rising 1.5 times faster than in the rest of the world and could reach up to five degrees Celsius above pre-industrial levels. Yet, the Gambia is only responsible for just 0.05% of the world’s emissions. As temperature rises, extreme weather events such as heat waves and droughts are increasing in frequency and intensity, threatening biodiversity.
Kemo Fatty, the founder and executive director of Green-Up Gambia, an organization that addresses urgent environmental crises and raises eco-consciousness in communities, especially amongst young people in rural villages, spoke of how his organisation works with entrepreneurs in various ways to deliver sustainable farming practices.
He says that most of the food needed to feed 9 billion people is going to be grown by these local subsistence farmers.
“But the earth’s temperatures are rising 1.5 times faster and where I live there’s been a significant reduction in the rainfall patterns. So obviously, drought has been a major player. So we’ve seen that in terms of adjustments to resistance, farmers are really learning agroforestry models and these are really working, but not to their full capacity. Because most of the produce, 90% of the produce goes abroad, and people come and buy, there’s no value added to this. Small and medium-scale enterprises are actually focusing on adding value to this approach means that time is our premium.”
“We are lacking the tools that are necessary for us to leapfrog into this transition to bring up small business involvement and see how we can help enterprises to actually decarbonise our supply chains. So if we look at the carbon footprint, we need to help these small businesses become sustainable in the long run.”
According to the United Nations, eradicating poverty is the greatest global challenge and an absolute requirement for sustainable development. But to achieve this, more businesses need to join with the government and civil society to actively confront inequality, poverty, and climate change together.
This story was produced as part of the 2022 Climate Change Media Partnership, a journalism fellowship organized by Internews’ Earth Journalism Network and the Stanley Center for Peace and Security.