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MSMEs show strong sustainability gains but lag in governance: SPeX
The SPeX rose by 14.7 per cent quarter-on-quarter to reach 69 in Q1 2025, marking its highest level in the past 10 quarters. All three dimensionsAwareness (+20 per cent), Willingness (+17 per cent), and Implementation (+2 per cent) increased from Q4 2024, each reaching their highest levels in the last 10 quarters.
Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet, said, "MSMEs have made remarkable strides in their sustainability journey, with awareness, willingness and implementation reaching record highs in Q1 2025 since we started tracking in Q4 2022. From reducing emissions and energy use, to adopting sustainable packaging, these achievements underscore a growing commitment to environmental responsibility. However, our survey shows that compliance with social and governance standards has consistently remained a low priority for MSMEs through 2024 and into Q1 2025, with limited adoption of formal governance frameworks. As MSMEs express the intent to expand their governance efforts, this presents a timely opportunity to strengthen these initiatives. Measures such as simplified certification processes and improved access to technical expertise will be essential to support this shift. Strengthening these enablers is critical to unlocking the next phase of sustainable growthresilient, future-ready, and aligned with global standards." Dr. Ravindra Kumar Singh, Chief General Manager, Green Climate Finance Vertical, SIDBI, stated, "Over past 10 quarters, SPeX has endeavored to capture the pulse of MSMEs' orientation and preparedness to go for sustainable investments. This helps in looking within and aligning green processes, products, and design to meet the expectations of the value chain. SIDBI - D&B Sustainability Perception Index Survey (which we term as 'Green Pulse') for the Quarter January March 2025, has indicated significant enhancement in the SPeX score (from 60 in the QE December 2024 to 69 for the QE March 2025). This rise from 46 (1st edition) to the score of 69 now indicates that enterprises are becoming responsive and are aiming to adopt clean, green, environmentally friendly technologies while also becoming conscious of Environment & Social (E&S) factors. Continuous capacity building and embedded instruments are key to enabling MSMEs' transition to green practices. SIDBI has mainstreamed Climate Financing and is actively providing long-term financial solutions that enable MSMEs to adopt greener technologies. Each green loan passes through the filters of E&S, Green transitional framework, and green tech stack such that energy saving and/or GHG emissions reductions are tracked."
Highlights of the SPeX Report: In Q1 2025, the awareness dimension saw the most significant improvement across all areasrising 24 per cent from the previous quarter to reach 68, the highest level in the past ten quarters. This reflects the growing understanding of sustainability amongst MSMEs and its relevance to business, as evidenced by several encouraging trends: MSMEs are increasingly recognizing the tangible benefits of sustainability, particularly in terms of profitability and cost reduction. Awareness that profitability can be achieved through sustainability initiatives surged from 43 per cent in 2023 to 80 per cent in 2024, and further to 89 per cent in Q1 2025. Similarly, the share of MSMEs associating sustainability with cost savings rose from 44 per cent in 2023 to 85 per cent in Q1 2025demonstrating a sharp shift in mindset from compliance to business advantage.
In Q1 2025 awareness of green financing remained relatively high at 53 per cent well above the 37 per cent recorded in mid-2024. Encouragingly, the share of MSMEs accessing green finance rose to 26 per cent in Q1 2025up from just 7 per cent in Q4 2024.
At the same time, more MSMEs are tapping into government and institutional support, with adoption rising to 59 per cent in Q1 2025, up from 36 per cent in Q4 and 39 per cent in Q3 of 2024.
MSMEs entered 2025 with renewed determination to embrace sustainability, as reflected in the 'willingness' dimension rising to a 10-quarter high of 69 in Q1 2025up sharply from 59 in Q4 2024. This reflects growing momentum in embedding sustainable practices across operations.
At the heart of this commitment lies a steadfast focus on Reducing, Reusing, and Recycling initiatives, especially across waste, emissions, water, and energy. This area has topped MSMEs' agenda since 2023, with 82 per cent identifying it as a priority in Q1 2025up from 76 per cent in 2024 and 51 per cent in 2023.
Driving this transition is a simple business case: cost reduction continues to be the most influential factor in adopting sustainability measures. After topping the list in 2023 (81 per cent) and dipping slightly in 2024 (63 per cent), it surged again in Q1 2025, with 78 per cent of MSMEs citing it as a primary motivator.
Yet, alongside this economic imperative, external forces such as regulations and incentives have gained significant traction. Regulatory influence has grown rapidly, with 80 per cent of MSMEs citing it as a key factor in Q1 2025up from 53 per cent in 2023 and 59 per cent in 2024. In parallel, the importance of incentives rose notably, becoming the third most influential factor at 63 per cent, compared to just 40 per cent in 2023.
Encouragingly, intent to build in-house expertise is also on the rise. By Q1 2025, 59 per cent of MSMEs aimed to enhance their capabilities in implementing sustainable environmental practices, up from just 29 per cent at the end of 2023. Similarly, 56 per cent expressed intent to strengthen their supply chain sustainability expertisean increase of 17 per cent over Q4 2024-reflecting rising concerns about global trade disruptions.
In Q1 2025, the sustainability journey of MSMEs marked a significant milestone, with the implementation dimension reaching a ten-quarter high of 59signalling strong momentum in translating sustainability commitments into action.
This progress is backed by a trend over the past two years, during which MSMEs have steadily reported reductions in the consumption or generation of water, waste, emissions, heat/energy, and raw materials. Many have also adopted more sustainable packaging solutions.
This positive trajectory continued into Q1 2025, where 68 per cent of MSMEs reported lower emissions, 62 per cent achieved reductions in heat and energy usethe highest level since Q1 2023and 44 per cent adopted sustainable packaging practices, a record since Q3 2024. These figures highlight growing adoption and deepening integration of environmental practices.
However, this progress has not come without challenges. Throughout 2023 and 2024, the cost of implementation and limited access to capital have remained persistent obstacles, and they continue to constrain MSMEs' ability to scale sustainability efforts in 2025.
More recently, new barriers have begun to surface. Technical know-how has become an increasingly pressing issue, with the proportion of MSMEs citing it as a challenge rising sharply from 46 per cent in 2023 to 70 per cent in Q1 2025. At the same time, concerns around environmental labelling and certification have doubledfrom 31 per cent to 60 per centlikely reflecting the mounting pressure on exporters to comply with rapidly evolving international standards.
Methodology The SPeX value ranges from 0 to 100, an increase in the index value indicates MSME's enhanced perception towards sustainability. The overall SPeX value reflects changes across these three dimensions, providing insights into MSMEs understanding, willingness to adopt, and implementation of sustainability measures. An increase in SPeX indicates improvement in MSME's perception towards sustainability adoption. A decrease could indicate challenges or a decline in perception.
About Dun & Bradstreet: Dun & Bradstreet, a leading global provider of business decisioning data and analytics, enables companies around the world to improve their business performance. Dun & Bradstreet's Data Cloud fuels solutions and delivers insights that empower customers to accelerate revenue, lower cost, mitigate risk and transform their businesses. Since 1841, companies of every size have relied on Dun & Bradstreet to help them manage risk and reveal opportunity. For more information on Dun & Bradstreet, please visit www.dnb.com.
Dun & Bradstreet Information Services India Private Limited is headquartered in Mumbai and provides clients with data-driven products and technology-driven platforms to help them take faster and more accurate decisions in domains of finance, risk, compliance, information technology and marketing. Working towards Government of India's vision of creating an Atmanirbhar Bharat (Self-Reliant India) by supporting the Make in India initiative, Dun & Bradstreet India has a special focus on helping entrepreneurs enhance their visibility, increase their credibility, expand access to global markets, and identify potential customers & suppliers, while managing risk and opportunity.
India is also the home to Dun & Bradstreet Technology & Corporate Services LLP, which is the Global Capabilities Center (GCC) of Dun & Bradstreet supporting global technology delivery using cutting-edge technology. Located at Hyderabad, the GCC has a highly skilled workforce of over 500 employees, and focuses on enhanced productivity, economies of scale, consistent delivery processes and lower operating expenses.
Visit www.dnb.co.in for more information.
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About SIDBI: Small Industries Development Bank of India (SIDBI) in its role as the Principal Development Finance Institution for MSME sector has played a significant role in developing the financial services for MSME sector through various interventions including Refinance to Banks, Credit Guarantee programs, Development of the MFI sector, Contribution to Venture capital/AIF funds, MSME ratings, promoting digital lending ecosystem, etc. The Bank has proactively been working toward Energy Efficiency (EE) in MSMEs since 2005-06 as part of Direct Finance business using support of multilaterals like World Bank, ADB, GiZ, FCDO, JICA, AFD, KfW etc. for energy efficient projects. SIDBI has taken steps to promote Energy Efficiency and Cleaner production in the MSME sector and propose to accelerate its efforts for MSME sector for their survival, growth, and competitiveness in long run during prevailing climate related challenges.
Looking to importance of ESG aspects and the need for a simplified, Customised ESG risk rating framework, SIDBI has already started integration of ESG framework into its operations. Subsequent to setting up of Green Climate Finance Vertical for prioritised focus, a Board level Committee has been constituted for guidance, oversight, and monitoring on ESG, Green Strategy of the bank, including relevant SDGs etc. To lead with the example, SIDBI has set a target to become Carbon Neutral by 2024 and Net Neutral organization in subsequent years.
Through Green Financing products and other developmental activities, SIDBI enables the manufacturers and service providers in MSME sector to adopt green energy efficient technologies helping in lesser waste leading to positive impact on environment and sustainability.
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