Sustainability and MSMEs
Research shows that investing and enabling micro, small and medium-sized enterprises (MSMEs) to fulfill their development potential can have significant contributions to 60% of the SDG targets, including those related to goals SDG 8 (Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all) and SDG 9 (Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation), among others.
Thus, investing in and supporting the sustainability of MSMEs in the region as an integral part of the sustainability efforts of clients, can yield significant progress towards an economy that works for all.
For most large firms in Latin America and the Caribbean, MSMEs represent an important client segment or a large share of stakeholders in their value chain —be it as suppliers, distributors, retailers, etc.
In the region, MSMEs represent the lion’s share of businesses and employment, as they represent 99% of businesses and 67% of employment. Therefore, they are among the strongest drivers of economic development. However, despite their potential, MSMEs in the region tend to stay small and are significantly less productive than large firms.
One of the biggest challenges for MSMEs is the lack of accessible, adequate, and affordable financing that prevent them from growing, increasing productivity and competitiveness, and from investing in innovation —including their capacity to embrace digital solutions—. Another challenge relates to SMEs' capacity to adopt sustainable practices increasingly requested by large firms as they seek greater transparency and accountability in their own sustainability efforts. SMEs don’t always have the relevant knowledge, human resources, or financial capacity to invest in these issues, risking their competitiveness and integration into larger regional or global value chains.
We believe that by adopting sustainable practices, models and mindsets, these companies will be better placed to drive innovation, deepen markets, enhance competitiveness, strengthen supply chain resilience, and diversify their sources of investment. Now more than ever, the need for companies to have solid sustainable business models has become evident as it determines the resilience and likelihood of survival to economic shocks, especially in its value chain, while addressing inter-linked and material challenges around climate change, social inclusion, and prosperity as a whole.
At IDB Invest we offer inclusive and sustainable financial solutions by supporting financial services clients to maximize their unique role in promoting sustainable and inclusive economic growth. We do this by integrating a sustainability lens in their investments, products, and services to their clients, and also by expanding our clients’ financial inclusion of MSMEs and underserved populations.
We focus on integrating sustainability with the aim of working closely with our clients in further understanding and addressing their most material sustainability issues; embedding sustainability in their strategy and operations. In this framework, we help deepen MSME integration through local and sustainable procurement strategies, while our experts help improve traceability along the value chain.
Finally, we support business transformation. We focus on understanding and adopting innovative solutions, such as the transformation towards a circular economy business model.
Our commitment is to ensure clients integrate and offer solutions to MSMEs allowing them to thrive while driving long-term value for them and their stakeholders through a sustainability lens. IDB Invest is the ideal link to foster coherence and ambition in addressing the interlinkages and integrated nature of the SDGs working towards prosperity, social inclusion, and a healthy planet.
Through our advisory services on sustainability and MSMEs, we aim to support clients in enhancing their inclusive and sustainable business practices, models, and mindsets; we drive and scale up the business’ impact and meaningful contributions to the Sustainable Development Goals (SDGs). IDB Invest focuses on material sustainability aspects for our clients to maximize impact and transition to business models that generate value for society.