Small and medium enterprises in India increase adoption of sustainability measures

Micro, small and medium enterprises (MSMEs) in India are increasing their adoption of sustainability measures, however awareness and willingness metrics are declining, a new report by Dun & Bradstreet has found.

Dun & Bradstreet‘s Sustainability Perception Index (SPeX) for Q4 2024, produced in association with the Small Industries Development Bank of India (SIDBI), assessed MSME perceptions of sustainability across three key metrics: willingness, awareness, and implementation.

Decline in SPeX value

Overall, the SPeX value declined by 5.3% compared to the previous quarter, due to an 11% drop in the awareness metric and a 12% decrease in the willingness metric.

At the same time, the implementation metric rose by 41%, indicating increased adoption of sustainability measures by MSMEs.

On a year-on-year basis, i.e. compared to Q4 2023, the SPeX value was 8% higher.

“Sustainability regulations are evolving rapidly, and MSMEs are recognising value in sustainability adoption in gaining market share,” commented Dr. Arun Singh, global chief economist, Dun & Bradstreet. “Global businesses are enabling sustainability adoption through supply chain mandates aligned with international sustainability goals.

“A higher share of MSMEs reporting limited sustainability familiarity in Q4 versus Q3 highlights their intent to catch up with shifting regulations. 45% of MSMEs seek alternative financial or policy support for increasing adoption, highlighting the need for policy support to drive sustainability adoption.”

Financial support

Financial and policy support remains a crucial factor for MSME’s, with 45% of businesses in this sector seeking alternative financing for sustainability initiatives.

This highlights the “need for policy support to drive sustainability adoption,” Singh added. “Notably, the perception that sustainability adoption caters only to select global clients has declined, reflecting the broader reach of sustainability mandates worldwide. Although the medium-to-long-term return on sustainability investments remains a barrier, the concerns about uncertain returns are declining with a growing recognition of the long-term benefits.”

Other findings from the report include that 85% of MSMEs plan to adopt additional sustainability measures in the next two quarters, up from 49% in Q3, while medium-sized businesses are leading sustainability adoption, with 95% expressing commitment in this area.

Elsewhere, cost reduction (63%), regulatory compliance (59%), and peer pressure (41%) were the primary drivers of sustainability adoption in 2024, according to the study. Read more here.