Promoting small and medium enterprises for sustainable development

Global wealth has almost doubled since 1990, but nearly half the world's population subsists on less than US$ 2 per day. Poverty remains a major challenge to sustainable development, environmental security, global stability and a truly global market. The key to poverty alleviation is economic growth that is inclusive and reaches the majority of people. Improving the performance and sustainability of local entrepreneurs and small and medium enterprises (SMEs), which represent the backbone of global economic activity, can help achieve this type of growth.

This Issue Brief, titled Promoting Small and Medium Enterprises for Sustainable Development and published by the World Business Council for Sustainable Development (WBCSD) in collaboration with SNV Netherlands Development Organization, explains how governments can help alleviate poverty by focusing on SMEs and how larger corporations can help themselves by including SMEs in their value chains. It describes some of the comparative advantages of SMEs and the challenges they face in developing countries.

The Issue Brief includes a set of key messages to both business and governments on promoting the growth of SMEs.

Key messages to business in view of promoting SMEs:

• Localizing value creation through engagement with SMEs is a key contribution that large corporations can make to economic development. This underpins their license to operate by creating a positive local impact, can reduce supplier costs and can be an important source of innovation to develop new products and reach new consumers.
• Building SME capacity through the localization of supply chains requires leadership from the top, both at the strategic and at the operational level.
• However, leadership cannot be overprescriptive; each initiative needs to adapt to local conditions and find its own way to maturation and success.
• Facilitating access to finance is critical: this requires business to look to what it can do on its own, as well as put pressure both on its peers in the business community (particularly the banking sector) and governments to engage.
• Consider partnering across segments and with other development actors to facilitate SME development and access to finance.
• Business planning skills, including training in financial management, are essential for successful SMEs.
• Large corporations can also build capacity and encourage environmental stewardship in the SME sector.

Key messages to government in view of promoting SMEs:

• A thriving SME sector is critical to inclusive economic growth and job creation.
• An enabling regulatory environment is critical. SME registration and monitoring needs to be cheaper, simpler, speedier, and more transparent.
• Governments can help address the dire need for start-up funds for SMEs by providing incentives for SME financing.
• Governments play an essential role in providing capacity building for SMEs by means of vocational training. Business believes that governments could help further by:
  • setting up municipal-level agencies for start-up development and management, in the form of, for example, an “Enterprise Advice Bureau”, and
  • helping to promote the importance of and need for more entrepreneurs.
• Governments can provide advice and an enabling environment to encourage environmental stewardship from the SME sector.

Download:

• Promoting Small and Medium Enterprises for Sustainable Development (pdf, 388 kb)
• SME Issue Brief in Spanish: Promoción de Pequeñas y Medianas Empresas para el Desarrollo Sostenible