MSMEs and Climate Change, The Need to Cut Emissions
Why in News?
Given India’s net-zero commitment by 2070 and the central role of MSMEs in the national economy and exports, there is a growing call for these enterprises to adopt sustainable and low-carbon operations. However, the lack of incentives and regulatory mechanisms is hindering progress. 
Introduction
India’s Micro, Small and Medium Enterprises (MSMEs) form the backbone of the economy, contributing about 30% to the country’s GDP and nearly half of its total exports. With more than 60 million MSMEs employing over 111 million people, their energy consumption and carbon emissions have a significant impact on India’s climate targets.
Key Issues
1. High Energy Consumption
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India has over 63 million MSMEs.
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According to BEE, about 180 energy-intensive MSME clusters exist.
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These sectors account for around 110 million tonnes of CO₂ per year, or approximately 30% of total manufacturing sector emissions.
2. Lack of Emissions Policies
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There is no market-linked emission policy compelling MSMEs to reduce or report their emissions.
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This absence removes any incentive for sustainable practices or emissions disclosure.
3. Finance and Technology Gap
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Many MSMEs lack the financial resources or awareness to adopt green technology.
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Climate finance mechanisms like green bonds, sustainability-linked loans, or digital tracking tools are rarely accessible to smaller businesses.
Alternative Approaches
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Implement government-backed incentive-based climate financing.
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Introduce carbon pricing mechanisms tailored for MSMEs.
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Promote low-carbon technology upgrades through public-private partnerships.
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Encourage global supply chain compliance by enabling MSMEs to track emissions via digital ESG tools.
Challenges and the Way Forward
Challenges:
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Most MSMEs operate in the informal sector, lacking the technical know-how and capacity for reporting emissions.
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Adoption of digital ESG systems is low.
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Resistance due to fear of increased costs.
Way Forward:
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Leverage platforms like the Udyam Portal to integrate sustainability metrics.
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Offer training programs, green certification, and subsidies for adopting clean energy.
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Link climate finance directly to emissions reduction goals using data-driven platforms.
Conclusion
For India to meet its net-zero goals by 2070 and remain competitive in global trade, its MSMEs must transition toward sustainable operations. This requires a mix of supportive regulation, targeted financing, and capacity building. The future of both environmental sustainability and economic growth hinges on how well India integrates its MSMEs into the climate action framework.
Five Questions & Answers
1. Why are MSMEs critical in India’s emission story?
MSMEs contribute about 30% to India’s GDP and around 45-50% of total exports. Their high energy consumption makes them significant emitters in the manufacturing sector.
2. What is the biggest hurdle for MSMEs in reducing emissions?
The absence of market-linked emission policies and limited access to climate finance are major obstacles.
3. How much CO₂ do MSMEs emit annually?
About 110 million tonnes, accounting for nearly 30% of total emissions from India’s manufacturing sector.
4. What kind of support is suggested for MSMEs?
Support includes climate-linked financing, ESG training, government incentives, and adoption of digital tools to track emissions.
5. What role can the Udyam Portal play?
Udyam can serve as a key platform to collect, monitor, and integrate emissions data into MSME operations and provide access to green financing schemes.
