INFOCUS | INDIA-CHINA | SME | ENVIRONMENT
Indian SMEs need green policy
Going Green now to avoid Going Red later Greening SMEs require technological innovations and learning from other countries that have successful and cost efficient technologies which can be imported by SMEs at an affordable price.
|20| India-China Chronicle November 2011
Shawahiq Siddiqui
U
nder the global climate negotiations, India assumes a significant role due to its inflating economy, soaring population and compelling development needs. Owing to its responsibility towards reducing carbon emissions significantly under global climate deals, India has formulated a series of sector specific Missions under the National Action Plan for Climate Change (2008). The NAPCC envisages building India’s capacity to reduce carbon emissions. In addition to this a number of new regulations on environment protection and amendments in existing laws are being brought to reduce environmental impact of developmental activities particularly related to industries. Ban on gutka sachets in plastic is a recent example. Further, as per the current government estimates SSIs and SMEs are known for inefficient production and management processes. Government estimates also reveal that MSMEs and SSIs contribute major amount of carbon emissions leading to adverse environmental impacts, especially at the local level. Being energy intensive, inefficiency in production and management process, leads to greenhouse gases (GHG) emissions. Given their small size and scale of operations, their GHG contribution (and energy saving potential), though considerable, is often ignored. Thus, at the unit level the emissions may be small but the collective emissions in SSI clusters are quite high. So these emissions are significant from climate change perspective. The Industrial Survey Report (2009) showed that small scale and medium enterprises though may be small on scale but are significant energy users having considerable carbon emitting potentials. At the same time they also have considerable energy saving potential. Following this there is a possibility that SSI and MEs may have to go through stricter norms of compliance. Under the new regulations, violations attract both pecuniary and penal consequences at a much increased level than ever before. Further, there are
new mechanisms that have been put in place for the green rating of industries and these are becoming increasingly popular and quintessential even for a small business to stand “green” in its practices. In this scenario it becomes extremely important for the SSIs and MEs to be aware of the legal norms and regulatory environment in place and display their green awareness and sensitivity to contribute to India’s endeavour on climate change. Environmental impact of SMEs While it is widely accepted that SMEs play a significant role in the economic development in India, they also exert considerable pressure on the environment, not individually, but collectively. SMEs are voracious consumers of resources and energy and the result is a significant generation of waste byproducts. There are a number of problems that deprive SMEs from achieving
at the unit level the emissions may be small but the collective emissions in SSI clusters are quite high. So these emissions are significant from climate change perspective.
their full potential: the use of obsolete technology; lack of finance; lack of access to export markets; lack of market information; resistant to change; and decision-making at the hands of owners of these companies. These problems contribute to environmental degradation. For example, the large number of motor repair workshops is estimated to dispose 460,000 litres of kerosene directly into the soil without concern for the likelihood of serious contamination of the water supply. Issues with performance Small and Medium-sized Enterprises (SMEs) are commonly recognized as one of the leading groups of economic activity globally, and pose enormous impacts on social issues. Most companies are currently categorized under SMEs and the goods and services that SMEs offer are diverse. Moreover, SMEs are suppliers for large enterprises. It is said that SMEs’ performance, both positive and negative, in India may be more influential than any other region in the world because of the rapid economic growth of the country. The importance of SMEs in society can be recognized by looking at the recent institutional arrangement and policy development on the environmental front. With their strong influence on economic and social matters, environmental impacts attributed to SMEs’ activities are certainly significant, not only the magnitude but also the diversity. In spite of the fact, however, measures undertaken so far have not yielded impressive results, especially when compared to those of large companies. Thus, the environmental performance of SMEs remains weak in many parts of the region and it is believed that the environmental damage caused by SMEs will grow unless innovative strategies are devised. As threats to the environment by SMEs increase, immediate measures to improve conditions are necessary. Nevertheless, SMEs are incapable and/or indifferent to conform to environmentally-friendly practices due to financial constraints, lack of proper information and a lack of motivation. Under the current situation, international organizations, along with local and national governments, must play important
November 2011 India-China Chronicle |21|