Sustainable development: The rise of green MSMEs
Micro-, small- and medium-sized enterprises (MSMEs) in the country are increasingly embracing green practices, as
sustainability
is fast emerging as a crucial factor for growth, moving beyond just compliance. While still in the early stages, the shift reflects a broader understanding that environmental responsibility and economic success are interconnected.
MSMEs contribute significantly to India's carbon footprint, accounting for 10-15% of industrial sector emissions, which are 3-4% of overall carbon dioxide emissions in India, according to a SIDBI report. The report emphasised that reducing emissions from MSMEs is essential to achieving India's environmental sustainability target and net-zero goal by 2070.
Even MSMEs are acknowledging the importance of minimising their carbon footprints, say experts.
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Gaurav Kedia, Chairman, Indian Biogas Association (IBA), believes that the government support and cost savings are driving India's
MSME
sector's transition to green energy. 'By 2024, 21% of Indian MSMEs were powered by solar energy, and 31% had begun utilising energy-efficient machinery. Rooftop solar panels reached 11.87 GW, reducing power bills by 30% on average and paying for themselves in three to five years. This change could lower CO₂ by 110 million tonnes each year. Textile and chemical industries are leading this shift, while Gujarat, Maharashtra, and Kerala are making big strides,' says Kedia.
Government initiatives like PM Surya Ghar and MSME Sustainable (ZED) Certification are driving progress. If this momentum continues, MSMEs could play a significant role in achieving India's 2030 renewable energy goal, potentially contributing up to 50% to the 500 GW target, adds Kedia.
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Similarly, Maninder Singh Nayyar, Founder and CEO of the CEF Group, says that the interest from the sector is promising, especially as more MSMEs realise that sustainable transformation can enhance their credibility, open new markets, and future-proof their operations.
Unlocking new opportunities
India can emerge as a green manufacturing hub by integrating large corporations and MSMEs in a sustainable value chain and capitalising on the growing demand for eco-friendly products and manufacturing practices, believe experts and stakeholders.
'Regulators and policymakers can support this transition by establishing digital public infrastructure for ESG reporting and certification, providing tax benefits and accessible financing for MSMEs and enabling learning at scale for green skills programmes,' says Namrata Rana, National Head of ESG, KPMG in India.
According to Miniya Chatterji, CEO, Sustain Labs Paris, the Indian MSMEs are benefiting from the shift to sustainable practices, especially those in global supply chains and sectors with growing demand for eco-friendly products and services. 'This transition is creating new opportunities and value for Indian MSMEs,' says Chatterji.
'For instance, textile MSMEs in Tiruppur that adopted Zero Liquid Discharge systems have seen renewed export opportunities in Europe, where environmental compliance is now a baseline requirement. We are seeing similar shifts in food processing, ceramics, and auto components, where sustainability-readiness directly influences competitiveness,' adds Chatterji.
Is green transition expensive for MSMEs?
Experts say that MSMEs face challenges in transitioning to green solutions due to high upfront costs and tight margins. However, there are long-term benefits, such as lower utility bills, reduced material waste, tax incentives, and carbon credits. 'The key lies in enabling access: affordable green technologies, subsidies, and awareness programmes. That's where partnerships with start-ups like ours can help,' says Nayyar.
According to Kanishk Maheshwari, Co-founder and Managing Director of Primus Partners, micro and small enterprises face challenges in adopting green practices due to limited working capital, minimal access to formal credit, lower technological sophistication, and high upfront costs for energy-efficient equipment and sustainable processes.
'That said, the long-term benefits of going green, such as reduced operational costs (particularly energy expenses), enhanced product marketability, and compliance with future regulatory requirements, can outweigh the initial investment. For many MSMEs, the green transition is not just an environmental imperative but also a pathway to improved resilience and market competitiveness,' says Maheshwari.
'A solar system of 100 kW, which costs Rs 45-60 lakh, can lower electricity bills by up to 90% and recover its cost in 3-5 years. Supporting programmes such as PM Surya Ghar provide aid up to 60% for setting costs, alongside loans with 7-9% interest. Additional tax reductions with solar PV price depreciation make it even easier financially. Infrastructure sharing, leasing, and Energy-as-a-Service models help decrease operational and upgrade expenditures,' says Kedia.
The main challenge isn't just cost but rather lack of clarity on cost-effective ways to adopt green practices, say experts and stakeholders. In reality, many sustainability measures, such as energy-efficient motors and solar rooftops, can pay for themselves quickly, with some interventions breaking even in under 18 months, as seen in energy audits in industrial clusters, they add.
'There are financing schemes available—from SIDBI's green loans to
World Bank
credit lines—but most MSMEs don't know how to access or navigate them. What's missing is not intent but implementation support if we want this shift to scale,' says Chatterji.
Immediate challenges
Experts say that the MSMEs face three key challenges, including lack of awareness about affordable and scalable green alternatives, limited access to financing, with existing schemes needing better outreach and accessibility, and fragmented infrastructure, particularly in tier II and tier III cities, with underdeveloped supply chains and support systems for green technology.
To overcome this, we need more public-private partnerships, grassroots-level training, and tech-driven platforms that handhold MSMEs through their green journey,' say experts.
'Less than 10% of MSMEs are currently accessing formal green finance, primarily because of collateral and credit barriers, and 33% of MSMEs do not know about major schemes, such as ZED, etc. Also, 70% of MSMEs are reliant on diesel generators because of grid unreliability, and more than 60% report relying on machinery that is too old to upgrade. These barriers present significant challenges for the MSME transition,' adds Kedia.
While there is some very good policy-based support for a green MSME transition, according to experts, it is mostly disjointed, and there is little financing available under programmes focused specifically on MSME sustainability.
'Many of these programmes are also quite complex to comply with. Several reports indicate that 56% of MSMEs face a lack of trained technicians, and only 5% are engaged in clean-tech R&D. Some longer-term programmes for bringing MSMEs to a green transition would include expanding the operational Green Credit Guarantee Fund, scaling up collective infrastructure models, and using digital tools to streamline the process for applying to access public subsidies,' says Kedia.
MSMEs require practical support to drive their green transition, including sector-specific technical advisors, simplified ESG tools, better visibility in green procurement and access to global markets that meet sustainability standards, according to experts and stakeholders. Without these essentials, the green transition will likely remain inaccessible to most MSMEs, they add.
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