GREENING MSMES

MSMES, WHICH CONTRIBUTE 3-4% OF INDIA'S CARBON EMISSIONS, ARE STRIVING HARD TO INTEGRATE ESG PRACTICES INTO THEIR BUSINESSES. BUT FINANCING THIS TRANSITION IS PROVING TO BE A CHALLENGE

- RICHA SHARMA

A NATIONAL CAPITAL REGION-based chemical maker with under ₹100 crore in annual turnover approached Sculpt Partners, a sustainability-centric advisory firm, seeking environmental, social, and governance (ESG) assessment. The trigger was a demand from its customer, a large domestic manufacturer supplying rubber to global tyre players like Yokohama and Michelin, which sought to know its decarbonisation road map.

There is no regulation mandating the chemical company-classified in the micro, small, and medium enterprises (MSME) category-to have such a road map in place. The need in this case arose because it is a value chain partner of a multinational company that is required to report the carbon impact of such partners.

This is not an isolated case. Indian MSMEs, primarily in the export business, are being pushed to provide ESG reports from foreign customers as part of the bidding process.

The carbon footprint of MSMEswhich contribute more than 30% to India's GDP and are responsible for nearly 45% of exports-is sizeable at 3-4% of the country's total carbon emissions, according to a report by the NITI Aayog.

"My clients in IT and data analytics are being asked for ESG metrics for bids called by multinationals. The trend I can see is a push-driven one, or if there is a progressive promoter who wants to push for ESG. Growth and overseas diversification are becoming bigger triggers for MSMEs to comply with ESG metrics," Kumar Subramanian, Founding Partner and Managing Director of Sculpt Partners, tells BT.

In this scenario, it is becoming inevitable for value chain partners of listed and export-oriented entities to make the transition. MSMEs in the automotive, leather, and textiles sectors have started generating emission data, sourcing solar energy for operations, measures for water and energy efficiency, and waste management.