Lengthy timeframe and uncertain returns constrain sustainability adoption: SIDBI – D&B SPeX

Mumbai, May 31, 2024: The SIDBI - D&B Sustainability Perception Index (SPeX), also known as the "green pulse indicator” decreased by around 2% to 54 during the January -March 2024 period, as MSMEs reported lower implementation of sustainability practices compared to last quarter. According to our survey, sustainability related policy implementation and training remain quite low amongst MSMEs. However, 1 in 10 MSMEs want to start taking social and governance related initiatives over the next six months.

Dun & Bradstreet, a leading global provider of business decisioning data and analytics, along with SIDBI, released SPeX for January -March 2024, which evaluates the perception of sustainability among MSMEs across three key areas: willingness, awareness, and implementation. The SPeX index value ranges from 0 to 100, with an increase in index value indicating enhanced perception of MSMEs towards sustainability. The overall SPeX value reflects changes within these dimensions, providing insights into how MSMEs understand, are willing to engage, and implement sustainability measures. An increase in SPeX suggests a positive shift in MSMEs' perception and practices towards sustainability measures. A decrease may indicate challenges or a decline in willingness or implementation.

Sustainability Perception Index (SPeX)

The index ranges from 0 to 100. Higher the index, higher is the level of perception towards sustainability.

Source: SIDBI - D&B Sustainability Perception Index Survey, January – March 2024

Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet, said,
“The hurdle to MSMEs embracing sustainability isn't just about implementation costs. Our research highlights that the lengthy timeframe and uncertain returns from sustainable initiatives also hinder adoption. Nearly half of MSMEs (42%) perceive sustainable practices as yielding results only in the medium to long term, while 35% find returns unpredictable. Moreover, quantifying ESG investments poses a significant challenge, as MSMEs often prioritize upfront costs. Hence, it's vital for stakeholders to underscore the tangible benefits that MSMEs stand to gain from adoption of sustainable practices, such as cost savings, efficiency gains, and enhanced stakeholder appeal, rather than solely relying on incentives.”

Dr. R.K Singh, CGM, SIDBI stated, “SIDBI - D&B Sustainability Perception Index Survey, January – March 2024 indicates slight stability in the SPeX score, and hence there is a need to effectively scale up & augment the capacity building, orientation and awareness efforts on demand i.e., enterprise side. While awareness and willingness remain high for MSMEs on the top of the pyramid, the level of implementation needs a fillip across all sizes of enterprises. Thus, it is important to understand the business needs of the enterprise, how an enterprise leadership understands the potential benefits towards adopting Clean, Green, Environment Friendly, Sustainable practices / solutions. SIDBI, as a development financial institution (DFI) for MSMEs, has prioritized theme “Greening the Enterprising Ecosystem” and is committed to provide all out support to MSMEs (both developmental as well financial) showing willingness to move towards adoption of clean green climate-friendly, climate-tech innovative, sustainable practices & investments. SIDBI’s Panchtatva missions viz. Energy Efficiency, E-Mobility, Renewable Energy, Circular Economy Waste2Envttaste (Circular Economy, MSW, CBG, etc.) and Adaptation Finance (Nature based Solutions) are oriented to enhance the acceptability amongst MSMEs to “Go Green” and adopting Environmental & Social (E&S) practices for holistic improvement in the enterprise thereby making more resilient, competitive, sustainable operations / practices / products / services. SPeX is poised to evolve as a tracker of MSMEs’ intent and preparedness to “Go Green”. We are also reciprocating the aspirations of MSMEs through financial products coupled with digital tools and building lenders capacity. Our efforts are also on to address the sectoral and cluster aspirations.”

Highlights of the SPeX Report:

• 78% of MSMEs claim cost reduction to be a pivotal factor for sustainability adoption closely followed by regulatory compliance (64%). Less than half believe incentives to be a major driver.
• 54% of MSMEs strongly agree that sustainability adoption will improve attractiveness to stakeholders.
• Across SPeX leadership categories, the importance of sustainability benefits varies.
• For Leaders, cost reduction along with improved brand image and competitive advantage are the top two benefits. For Integrators, improved brand image and improved attractiveness to stakeholders are the top two benefits. For Aspirers, improved brand image is the key benefit.  
• Awareness of Green Financing also varies with size and age of company as well as by leadership category: 71% of Leaders are aware of green financing compared to 27% of followers. Among different business sizes, compared to 54% of small businesses, 34% of micro sized businesses are aware of green financing. Regarding firm age, 49% of those established for 5-10 years are aware, compared to 39% among those established for 1-5 years.
• Sustainability related policy implementation and training remain quite low amongst MSMEs.
• For the majority of MSMEs, awareness of policies to support sustainability adoption is low; 57% of MSMEs are not aware of any policies and 17% who are aware have not availed of any policies.
• 1 in 10 MSMEs want to start taking social and governance related initiatives over the next six months.