UPSC EDITORIAL ANALYSIS : How MSMEs can benefit by adopting sustainable practices
Kartavya Desk Staff
Source: Indian Express
• Prelims: MSME, GDP, GHG’s, Environment, Social and Governance Framework (ESG) framework, National Guidelines for Responsible Business Conduct (NGRBC), Indian Green Building Council (IGBC)etc
• Mains GS Paper III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment etc
ARTICLE HIGHLIGHTS
• The UN General Assembly has designated June 27 as “Micro-, Small and Medium-Sized Enterprises Day” to raise awareness of the tremendous contributions of MSMEs to the achievement of the Sustainable Development Goals.
INSIGHTS ON THE ISSUE
Context
Micro, Small and Medium-Sized Enterprises(MSME’s):
• MSME stands for Micro, Small and Medium Enterprises.
• MSMEs are businesses that produce, process, and preserve goods and commodities.
• These are broadly classified based on their investment in plant and machinery for manufacturing or equipment for service enterprises, as well as their annual turnover.
• MSME Regulation in India: In 2007, the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries Merged to form the Ministry of Micro, Small, and Medium Enterprises.
Contribution of MSME:
• MSMEs account for 90 percent of businesses, 60 to 70 percent of employment and 50 percent of GDP
• India: MSMEs have emerged as one of the fastest-growing sectors. It accounts for about 30 percent of India’s GDP employs 110 million workers Have a 49 percent share in exports.
• It accounts for about 30 percent of India’s GDP
• employs 110 million workers
• Have a 49 percent share in exports.
• In India, 96 percent of industrial units belong to small companies.
• The sector accounts for 38.4 percent of the total manufacturing output
• It contributes 03 percent of the country’s total exports.
Employment generation:
• Over the last six years, there has been a 110 percent yearly increase in the creation of jobs.
• Udyam Portal(December 2022): Approximately28 crore MSME registered industries employed 9.31 crore people including 2.18 crore women employees.
Challenges:
• Limited access to finance, technology and skills inadequate infrastructure complex regulatory and compliance requirements low levels of productivity and competitiveness.
• inadequate infrastructure
• complex regulatory and compliance requirements
• low levels of productivity and competitiveness.
• Government data: It shows that over 10,000 MSMEs were closed in 2022-23, raising concerns over the sector’s health.
• Climate-triggered heat stress is increasingly seen as putting unprecedented pressure on workers. Such risks impact infrastructure, operations and resources leading to a financial crunch, job losses, and migration.
• Such risks impact infrastructure, operations and resources leading to a financial crunch, job losses, and migration.
• Itcontributes significantly to GHG emissions: MSMEs generate around 110 million tonnes of carbon dioxide equivalent to the energy usage of up to 50 million metric tonnes of oil per year from 200 energy-intensive manufacturing clusters in India.
• equivalent to the energy usage of up to 50 million metric tonnes of oil per year from 200 energy-intensive manufacturing clusters in India.
What steps need to be taken to overcome challenges?
• Sustainable and responsible business practices should be the pathway for MSMEs.
• Adopting the Environment, Social and Governance Framework (ESG) framework can be a start for the sector along with the nine principles of National Guidelines for Responsible Business Conduct (NGRBC) by the Ministry of Corporate Affairs. The Business Responsibility and Sustainability Report (BRSR) by SEBI for 1,000 listed companies is derived from the NGRBC.
• The Business Responsibility and Sustainability Report (BRSR) by SEBI for 1,000 listed companies is derived from the NGRBC.
• Organize business practices in alignment with the principles step by step and get the future ready.
• Adopting sustainability is important for meeting stakeholder expectations, reducing costs and increasing efficiency, enhancing brand reputation, higher business value and impact on environment and society.
• Decode the ESG framework and NGRBC guidelines: The ESG framework lays down key aspects around which MSMEs can address issues like energy, waste, carbon emission and factors related to the environment in their supply chain
• energy, waste, carbon emission and factors related to the environment in their supply chain
• Ensure good labor practices, minimum wages, decent working conditions for workers and the safety of women.
• The NGRBC guidelines urge businesses to conduct responsibly and sustainably and encourage and support their suppliers, vendors, distributors, partners, and other stakeholders to follow the same.
• Systematic adoption of the ESG framework and organizing the business practices along the nine principles of NGRBC remain imperative.
• To incorporate sustainable practices into their businesses: Governments, industry associations, civil society organizations and other stakeholders can play an active role in raising awareness, sharing best practices, and providing training and resources.
• Providing incentives to MSMEs through financial and non-financial ways can be an effective way to encourage them to adopt sustainability.
• Governments and investors can offer financial incentives such as tax benefits, subsidies, grants, and low-interest loans so that MSMEs can adopt sustainable practices or invest in sustainable technologies. SIDBI’s programme “Greening MSME” provides financial assistance with a maximum limit of INR 20 crores to MSMEs to implement energy-efficient and environmentally sustainable technologies. Non-financial incentives such as recognition and awards can also motivate MSMEs to adopt sustainable practices.
• SIDBI’s programme “Greening MSME” provides financial assistance with a maximum limit of INR 20 crores to MSMEs to implement energy-efficient and environmentally sustainable technologies.
• Non-financial incentives such as recognition and awards can also motivate MSMEs to adopt sustainable practices.
Way Forward
• MSMEs are part of larger supply chains, and collaboration with supply chain partners can help to drive sustainability improvements across the value chain.
• Larger companies can play a role in supporting MSMEs to adopt sustainable practices, such as providing training, technical assistance, and access to financing. The CII’s program “GreenCo Rating System” encourages sustainability improvements across the value chain by rating companies based on their environmental performance.
• The CII’s program “GreenCo Rating System” encourages sustainability improvements across the value chain by rating companies based on their environmental performance.
• MSMEs that adopt sustainable practices can often achieve cost savings, improve efficiency, and differentiate themselves from competitors making sustainability a competitive advantage. Governments and other stakeholders can promote this to encourage MSMEs. This can be done through ratings and recognitions. The Indian Green Building Council (IGBC) program “IGBC Green Factory Building Rating System” provides certification to factories that adopt sustainable building practices. This can differentiate these factories from competitors and help them attract customers and investors who prioritize sustainability.
• Governments and other stakeholders can promote this to encourage MSMEs.
• This can be done through ratings and recognitions.
• The Indian Green Building Council (IGBC) program “IGBC Green Factory Building Rating System” provides certification to factories that adopt sustainable building practices.
• This can differentiate these factories from competitors and help them attract customers and investors who prioritize sustainability.
QUESTION FOR PRACTICE
• Economic growth in the recent past has been led by an increase in labor activity.” Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labor productivity. (UPSC 2022)
(200 WORDS, 10 MARKS)
Editorial Analysis – 28 June 2024 [PDF]