Itc Smeco 2021

SME COMPETITIVENESS OUTLOOK 2021
Empowering
the Green Recovery
5 Thought
leaders 6 Business
voices
The International Trade Centre supports small business through the COVID-19 crisis.
For more information, see http://www.intracen.org/covid19/
This publication is a contribution to the annual Micro, Small and Medium-Sized

Enterprises Day campaign.
MSME Day takes place each year on 27 June.
The publication findings are presented in a global virtual debate that can be found at:
www.intracen.org
© International Trade Centre 2021
The International Trade Centre (ITC) is the joint agency of

the World Trade Organization and the United Nations.
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Empowering
the Green Recovery
© shutterstock.com
The SME Competitiveness Outlook 2021 analyses how small businesses can rebuild from the COVID-19 pandemic so
they are prepared to face the looming climate crisis. It provides a 20-point Green Recovery Plan to foster competitive,
resilient and environmentally sustainable small and medium-sized enterprises (SMEs).
The report finds that small firms are less resilient to shocks – whether the pandemic or climate change – because they do
not have key business fundamentals in place.
The report identifies key areas where small businesses with limited resources can invest to seize opportunities of the
green transition – and what business support organizations, governments, lead firms in value chains and international
organizations can do to empower small firms to be competitive, resilient and sustainable.
Publisher: International Trade Centre (ITC)

Title: SME Competitiveness Outlook 2021: Empowering the Green Recovery
Publication date and place: Geneva, June 2021
Page count: 108
Language: English
ISBN: 9789211036817
eISBN: 9789210057660
Print ISSN: 2519-1071
e-ISSN: 2519-1225
UN Sales Number: E.21.III.T.1
ITC Document Number: P87.E/DMD/RSE/21-VI
Citation: International Trade Centre (2021). SME Competitiveness Outlook 2021: Empowering the Green Recovery
For more information on ITC’s SME Competitiveness Outlook, see http://www.intracen.org/SMEOutlook/ and ITC’s
Competitiveness Suveys, see: http://www.intracen.org /SMEintelligence.
The designations employed and the presentation of material in this publication do not imply the expression of any opinion
whatsoever on the part of the International Trade Centre concerning the legal status of any country, territory, city or area or
of its authorities, or concerning the delimitation of its frontiers or boundaries.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or
by any means electronic, electrostatic, magnetic tape, mechanical, photocopying or otherwise, without prior permission
in writing from the International Trade Centre.
Digital image on the cover: © Shutterstock and ITC

© International Trade Centre (ITC), www.intracen.org
ITC is the joint agency of the World Trade Organization and the United Nations.
iv SME COMPETITIVENESS OUTLOOK 2021

Contents
Acronyms ix
Foreword xi
At a Glance xii
Executive Summary xiv
Acknowledgements xx
CHAPTER 1: Business lessons from the pandemic 2

COVID-19: Stronger impact on smaller firms 2
Competitiveness and resilience are complementary 3
Competitive firms are more resilient 6
Compete to stay robust 6
Connect to become related 7
Change to emerge responsive 9
Small, youth-led firms less resilient 11
International traders exposed, but adaptable 12
Resilient to COVID-19, resilient to climate change 13
CHAPTER 2: Climate change: What impact for small business? 16

A warmer planet poses business risks 16
Extreme weather halts business 17
Changing weather patterns lower productivity 19
Access to business inputs is at risk 20
Climate responses affect competitiveness 20
Environmental regulation can generate uncertainty 20
Sustainability standards are multiplying 22
Green finance overlooks small businesses 24
Circular economy requires openness 24
Climate change: Impact on trade competitiveness 25
Biophysical changes impact trade flows 25
Trade policies respond to climate change 25
Restructuring international value chains 26
Imports can have lower carbon footprint 27
CHAPTER 3: Going green as a business opportunity 30

Boosting capacity to compete 31
Resource efficiency lowers costs 31
Sustainable packaging reduces waste 33
Certification signals quality 33
Strengthening capacity to connect 34
Digital technologies ease access to information 34
Circularity provides data and networks 34
Enhancing capacity to change 35
Finance, insurance fuel adaptation and mitigation 35
Eco-innovation builds loyalty and skills 35
Smaller, women-led and youth-led firms lag in adaptation 36
EMPOWERING THE GREEN RECOVERY v

Appraising green opportunities 38
Trade-offs in going green 38
Climate measures can pay off 40
No support, no green transition 42
CHAPTER 4: The Green Recovery Plan 45

Green businesses advance the SDGs 45
The Green Recovery Plan 46
Business support organizations build bridges 46
Governments create incentives 47
Lead firms support small suppliers 48
International organizations prioritize small business 48
ENDNOTES 56
REFERENCES 59
ANNEX I: Glossary 69
ANNEX II: Methodology note and data sources 72
ANNEX III: ITC’s GreenToCompete strategy and toolbox 85
vi SME COMPETITIVENESS OUTLOOK 2021

Figures
1 COVID-19: Stronger impact on smaller firms 3
2 COVID-19: Smaller firms at higher risk of closure 3
3 Competitiveness builds resilience 4
4 Competitive attributes make firms robust in a crisis 6
5 Good capacity to compete means robust to crisis 7
6 Connections allow firms to relate 7
7 Connected firms have greater capacity to relate 9
8 Change factors make firms more responsive 10
9 Capacity to change helped firms to be more responsive 10
10 Smaller, youth-led firms are less resilient 11
11 Resilient companies have more stable sales, employment 11
12 Internationally trading firms more exposed to COVID-19 12
13 COVID-19: Firms that trade across borders adapt better 13
14 Environmental risks significant for two-thirds of African companies 17
15 Changing temperatures is top environmental risk for businesses in Africa 17
16 Agricultural areas are at high risk for climate hazards 19
17 More than one-quarter of firms view environmental regulations as obstacle 22
18 Smaller firms are less likely to be certified to a sustainability standard 23
19 Carbon footprint: Domestic and imported asparagus in a German supermarket 27
20 Compete, connect and change by going green 30
21 Top SME resource efficiency measures: Steam, solar power 31
22 Large firms more likely to invest in climate change adaptation 31
23 Resource efficiency measures pay off 40
24 Resource efficiency measures benefit business, environment 40
25 Africa company survey: 42% reduced footprint 41
26 New opportunities for 59% of firms making green investments 41
27 Environmental investment gains 42
28 Services firms see fewer opportunities 42
Table
1 The Green Recovery Plan to support small businesses 46
Boxes
1 Defining micro, small and medium-sized enterprises 3
2 Defining competitiveness and resilience 5
3 The path to a greener enterprise 39
EMPOWERING THE GREEN RECOVERY vii

Thought leaders
14 28
Kamina Johnson Smith William R. Moomaw
Governments must help MSMEs Climate change creates challenges
build resilience to shocks and opportunities for SMEs
43 50
Inger Andersen Pedro Beirute Prada
SMEs must embrace circularity for Making exporters more competitive
businesses and the planet to survive through environmental sustainability
52
Ayman El Tarabishy
SMEs and climate change:
Establishing patterns of resilience
Business Voices
8 18
Alisa Osei Asamoah John Robin
Rethinking the business A tragedy
of travel worse than COVID
21 32
Ahmed Khan Buzdar Hachmi Chenik
When the water Resource efficiency
runs out boosts profits
37 54
Juliet Namujju Douglas Baguma
Unite social, environmental Technology in the service
and economic sustainability of environment
viii SME COMPETITIVENESS OUTLOOK 2021

Acronyms
Unless otherwise specified, all references to dollars ($) are to United States dollars.
BSO Business support organization

CO2 Carbon dioxide
EU European Union
GDP Gross domestic product
GHG Greenhouse gas
IPCC Intergovernmental Panel on Climate Change
ISO International Organization for Standardization
ITC International Trade Centre
LDCs Least developed countries
MSME Micro, small and medium-sized enterprise
R&D Research and development
RECP Resource efficiency and circular production
SDGs Sustainable Development Goals
SIDS Small island developing States
SME Small and medium-sized enterprise
UNFCCC United Nations Framework Convention on Climate Change
VSS Voluntary Sustainability Standard
WTO World Trade Organization
EMPOWERING THE GREEN RECOVERY ix

Foreword
In January 2020, very few would have predicted that a

virus would bring the world to a standstill. A year later,
© ITC / Antoine Tardy

COVID-19 had caused the most severe economic crisis
since the global depression.
The effects of the pandemic are truly global, but

responses are not. COVID-19 has shown that resilience
matters, and laid bare the ‘resilience divide’ between
small and large firms. While developed countries have the
The International Trade Centre is fully committed to
financial means to sustain their economies and protect
supporting SMEs in the green transition. We want to
the most vulnerable, most developing and least
ensure that our partners in developing and least
developed countries are unable to do the same. In these
developed countries have the capacity and resources to
countries, many small and medium-sized enterprises
respond to the climate challenge and pivot successfully.
(SMEs) succumbed to the shock.
To this end, we adopted the GreenToCompete strategy.
But with every crisis comes opportunity. As the world
The strategy brings together our large and diverse offering
gradually recovers from the pandemic, small businesses
on environmental sustainability in a holistic and coherent
can and must rebuild in a way that prepares them for
manner. It allows ITC to support partner countries more
future shocks and strengthens their competitive position.
effectively in leveraging the green transition to increase
This is particularly crucial given the looming climate crisis. their trade competitiveness.
The economic impact of climate change is expected to be
ITC is not alone in this endeavour. Many public and private
like a COVID-19-sized pandemic happening every ten
actors across the globe are devoting considerable
years. The longer firms take to act, the higher costs
resources to rebuild greener after COVID-19. This
become. Small businesses in developing countries can
reinforces the business case for SMEs to go green,
either adapt now, when opportunities abound and
particularly if there is a win-win in building sustainability
support is available, or will be forced to do so later,
and increasing competitiveness.
at greater expense and little or no funding.
To ensure that the green transition materializes, we need
Going green is both a survival imperative and a business
coordinated action and targeted support. Even when the
opportunity.
business case is compelling, and particularly when it is
The SME Competitiveness Outlook 2021 examines the not, SMEs need help to become green. Business support
lessons the pandemic has taught us, and shows how they organizations, lead firms in international value chains,
apply to the climate emergency. Our results reveal that governments and international institutions must assist
what makes firms more competitive also makes them SMEs in adapting to and mitigating climate change.
more resilient. These attributes are not specific to health
This report is a call for climate action, for the sake of our
crises and can be incorporated into climate resilience
planet and our people. I hope you will join us in building
strategies.
a greener future.
The report also identifies key areas where small firms
with limited resources can invest to seize the opportunities
in the green transition.
Now is the time to act. The drive to ‘build back better’ must
Pamela Coke-Hamilton
incorporate environmental sustainability into business
operations, investment choices, national policies and Executive Director
international commitments, and place SMEs at its core. International Trade Centre
EMPOWERING THE GREEN RECOVERY xi

At a Glance: Empowering the Green Recovery
Put small firms Resilience matters

at the heart of COVID-19 lessons
the green recovery.
Small firms
generate more than 50% Resilient
firms were 5x less likely
to lay off workers
of jobs and greenhouse gas emissions* and more likely to have stable sales
The fundamentals of resilience

Business resilience is based on:
a company’s business processes its internal and external connections its ability to respond to changes.
Companies that did best had

these fundamentals in place.
Good inventory Diverse suppliers Innovation

CONNECT
COMPETE
CHANGE
management Connections to business Employees with

Full record-keeping support organizations, the right skills
Business bank account peers and buyers Access to funds
Climate change matters for small firms

Small firms in developing countries are more worried about climate change, but less likely to act.
Who views environmental risks

as significant for their business?
68% 54%
in sub-Saharan Africa in developed countries*
Who acts to reduce environmental risk?

Women-owned
38% 60% and youth-led companies
lag behind in adaptation.
of small firms of large firms
What they do?

Reduce waste, invest in renewable energy,
make green products and services,
gain green certification and go digital
*All ITC data except as noted by an asterix. See endnotes in report.
xii SME COMPETITIVENESS OUTLOOK 2021

Go Green: Seize business opportunities
Green your business to seize new opportunities.
Environmental investment gains
Increased product quality 19
Access to new markets 17.3
Increased production 16.6
Other opportunities 14
Lower input costs 10
New products or services 7
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Nearly
60% of surveyed African
companies
that greened their enterprises said it led to new, higher-quality
and more products, access to new markets, or lower input costs.
They were also better-positioned to tap the growing pot of green finance.
For companies that don’t see short-term gains, remember:

Greening your business builds resilience
and strengthens competitiveness. New environmental
regulations will require it and consumers will demand it.
Green finance markets seek it.
The Green Recovery Plan to support small businesses
BUSINESS SUPPORT GOVERNMENTS LEAD FIRMS INTERNATIONAL

ORGANIZATIONS IN VALUE CHAINS ORGANIZATIONS
Develop expertise Embed sustainability Adopt a holistic Mainstream

EMBRACE
internally/seek it in recovery plans approach to share sustainability in
SUSTAINABILITY
externally and manage risk development plans
Create/join Coordinate Harmonize/recognize Be a platform

COLLABORATE,
networks to share to ensure regulatory sustainability for information,
COORDINATE
knowledge coherence standards best practices
Build the local ‘Think small first’ Source from Bring SMEs
ADVOCATE
support in policymaking non-traditional to multilateral
FOR SMES
ecosystem locations forums
Be the trusted Provide incentives Facilitate access Promote tailored

FACILITATE
intermediary for green finance to supply chain financial solutions
SME FINANCE
financing
Train SMEs for Promote innovation Build skills and Increase service
STRENGTHEN
green, innovative with skills and technology base of offering for SMEs
SME CAPACITY
approaches technologies small suppliers
EMPOWERING THE GREEN RECOVERY xiii

Executive Summary
The SME Competitiveness Outlook 2021 provides a plan for fostering competitive, resilient and sustainable small and
medium-sized enterprises (SMEs). SME competitiveness is at the core of ITC’s mission, resilience is a key consideration
in post-COVID-19 plans and sustainability is essential if the world is to address the climate crisis. This report shows how
these three goals can – and should – be pursued in tandem.
COVID-19 was a harsh reminder of the economic and social damage that come with being unprepared. In addition to its
grim toll on human life, the pandemic – and measures to contain it – have battered companies worldwide, both large and
small.
For small and medium-sized enterprises, with their scarce resources, surviving the crisis has been daunting. They
suffered the most from the pandemic, with 60% of micro and 57% of small businesses strongly affected, compared with
43% of large firms. This is partly because smaller firms record lower levels of resilience, on average, than larger
companies.
The pre-COVID-19 resilience score of micro and small firms was 16% lower than that of medium and large firms,
according to a survey-based index constructed by the International Trade Centre. Similarly, companies led by youth have
lower resilience scores than firms led by people over 34 years of age. While women-led firms in the sample displayed
slightly lower scores than those owned and managed by men, the difference was not statistically significant.
Smaller, youth-led firms are less resilient

Average index of resilience
By firm size By gender By age
0.67
Medium,
0.59 0.60 0.59
Large
0.56 Men-led
Women-led Not youth-led
0.52
Micro,
Small Youth-led
Source: ITC SME Competitiveness and COVID-19 Business Impact Surveys in Benin, Cambodia and the Philippines, July 2019-August 2020, with 770 firms.
The index has values from 0 to 1, with higher values indicating greater resilience. See Annex II for detail.
Resilience is based on the strength of a company’s business processes, its internal and external connections and its
ability to pivot. It matters, as it signals how a company will fare when crisis strikes, and its chances of long-term success.
For example, during COVID-19 only 16% of resilient companies reported laying off employees, compared with 76% of
companies with a lower index of resilience. As SMEs account for about 90% of businesses and more than 50% of
employment worldwide, their demise has disastrous social and economic consequences.
Just as SMEs start to emerge from the first waves of the pandemic, a more far-reaching challenge looms – climate
change.
xiv SME COMPETITIVENESS OUTLOOK 2021

Many scientists view climate change as even more disruptive than COVID-19 in the long term. While the range of likely
impacts varies depending on the model used, the economic damage of climate change could be as bad as having a
pandemic the size of COVID-19 every ten years.
Managers’ experiences during COVID-19 made them aware of the need to build resilience to face future crises, including
climate change. Indeed, small and medium-sized enterprises see environmental changes as a competitiveness risk. On
average, 68% of the companies interviewed for ITC’s SME Competitiveness Surveys in sub-Saharan Africa said that
environmental risks were significant for their businesses, with the share rising to 93% among firms in the primary sector.
Environmental risks significant for two-thirds of African companies
100%
7
32 38 32
Share of respondents
80%
Not facing
environmental risks
60%
Facing environmental
93
risks
40% 68
62 68
20%
0
Primary Manufacturing Services TOTAL
Note: Most respondents (94%) are SMEs with less than 100 employees, with 16% in the primary sector, 14% in manufacturing and 71% in services.
Source: ITC SME Competitiveness Surveys of 1,359 companies, in Zambia (Year 2018, 242 businesses), Botswana (Year 2019, 615 businesses) and Benin
(Year 2019, 502 businesses). See Annex II for detail.
Still, while many SMEs are concerned about the consequences of a changing climate, most have not yet invested in
measures to adapt to it. Sixty per cent of large firms reported that they had invested in at least one measure to reduce
exposure to environmental risks, according to ITC SME Competitiveness Surveys in Africa. In comparison, just 38% of
micro, small and medium-sized firms had made such an investment.
Smaller, women-led and youth-led firms less likely to invest in adaptation
100%
80% 40
62 55 59 55
Not adapting to
65 65 environmental risks
60% 73
Adapting to
40% environmental risks
60
45 41 45
38 35 35
20% 27
0%
Not youth-led
SME
Lagre
Women-led
Men-led
Youth-led
Non-exporter
Exporter
Note: Companies are ‘women-led’ if they are at least 30% owned by women and the top manager is a woman. Companies are youth-led if the top manager is
under 35.
EMPOWERING THE GREEN RECOVERY xv

If it is mainly large firms that have the foresight and capital to adapt, only they will prepare adequately for climate change.
Smaller companies that wait and try to cope after the event are likely to run down assets, with adverse effects on their
competitiveness and survival. This could exacerbate corporate concentration, which research suggests is already on the
rise as a result of COVID-19.
Not all is doom and gloom. Despite the bleak picture painted by COVID-19, some SMEs displayed a high degree of
resilience. Also, the disruption caused by the pandemic provides an unprecedented opportunity to change unsustainable
‘business as usual’.
This report analyses the key insights provided by resilient SMEs for all firms increasingly exposed to major disruptions. It
also harvests the lessons learned in supporting SMEs during the pandemic and examines how and to what extent these can
inform efforts to lessen the impact of the climate crisis.
Lesson 1: Focus on fundamentals

As was the case with the pandemic, SMEs will confront more challenges than bigger firms to prepare for, and adapt to,
the many facets of climate change. This reflects constraints that SMEs traditionally face, such as lack of knowledge about
the specific impacts on their business, and shortage of finance and expertise to implement necessary countermeasures.
It also reflects the trade-off between strengthening short-term competitiveness and building long-term resilience.
ITC research on the business impact of COVID-19 shows there is a path to foster both. Firms have capacities, and
business ecosystems have characteristics, that allow companies to thrive in good times and survive in bad times.
Businesses that fared better during the pandemic leveraged competitiveness attributes, which increased their resilience,
according to evidence from two ITC surveys.
Practices that boosted the capacity to compete also made firms robust to the shock. Characteristics that drove the
capacity to connect also determined the strength of the relationships that they drew on to access information and benefits
during the crisis. Finally, aspects that bolstered firms’ ability to change also fostered responsive coping strategies.
Competitiveness builds resilience
Competitiveness pillars Common attributes Resilience pillars
Efficient inventory management

COMPETE Complete financial record-keeping Robust
Ownership of bank account
Engagement with business

support organizations, peers,
CONNECT Related
buyers and suppliers
Diversified supplier base
Commitment to R&D
CHANGE High skills matching Responsive
Access to finance
Source: ITC.
The competitiveness attributes that lay the foundations of resilience are not specific to a health crisis. They enhance the
ability of SMEs to cope with any shock, whether a pandemic or a hurricane. They make companies ready for the impacts,
giving them relationships to draw on for help, and allowing them to respond in a timely and effective manner. Investing in
these fundamental aspects of SME competitiveness can yield dividends for current competitiveness and future resilience.
xvi SME COMPETITIVENESS OUTLOOK 2021

Lesson 2: Give timely and clear information
COVID-19 showed that people can adapt if they know what to do – wear a mask, observe physical distance, stay at
home. Businesses will adapt if they are aware of risks and know the paths to build resilience.
Small businesses need timely, accurate and clear information on the potential effects of climate change, and of the shifts
in consumption, production and trade that are emerging in response.
Climate change impacts follow an inequitable path. The most acute shifts are expected to occur in regions and countries
with low incomes and lagging performance in achieving the United Nations Sustainable Development Goals. Businesses
in strongly affected countries tend to have relatively fewer resources, alternatives and information to help them adapt.
Companies interviewed for ITC’s SME Competitiveness Surveys in sub-Saharan Africa were most concerned by
changing temperatures (34%), followed by water scarcity (22%) and floods (20%). They cited a range of other concerns,
including scarcity (18%) and quality (15%) of business inputs, storms and other risks (15% each), lower air quality (3.2%)
and rising sea levels (2.5%). This shows that small businesses are aware of, and probably already suffering, the direct
effects of climate change.
But SMEs in developing countries will not only bear the brunt of climate change’s direct impacts. They will also be at the
receiving end of measures, largely designed in developed countries, to counter the damage of a warming planet.
While necessary for mitigation and adaptation, such public and private requirements risk limiting further the ability of
SMEs to compete, particularly if measures are not clear, coordinated and affordable.
Environmental regulations appear more often in governments’ agendas, as they commit to reduce greenhouse gas
emissions and mitigate the extent of climate change. New climate policies, regulations, laws and taxes may lead to
regulatory risks for SMEs. There are financial costs associated with becoming compliant, and fees incurred for non-
compliance.
Moreover, clear rules have yet to be implemented in many states, and the patchwork of declarations, policies and
practices generates uncertainty and keeps smaller firms from planning their own green transition. More than one-quarter
of African firms interviewed for the ITC SME Competitiveness Survey said that environmental regulations were an
obstacle to their operations.
More than one-quarter of firms view environmental regulations as obstacle
100%
Environmental
80%
regulations not
63 an obstacle
60% 68 69
75 72
Environmental
40% regulations
an obstacle
20% 37
32 31 28
25
0%
Micro Small Medium Large TOTAL
Voluntary sustainability standards complement government regulations and ballooned from just 15 in 1980 to more
than 262 in 2020. These standards signal to environmentally-conscious buyers, including corporate purchasers and
consumers, that firms follow certain desired practices.
Paradoxically, the proliferation of sustainability standards is limiting their potential, particularly for SMEs. Their multiplicity,
as well as the stringency of requirements, make them technically and financially challenging for small businesses.
Only 5% of micro and 13% of small firms interviewed by ITC globally were certified to a sustainability standard.
EMPOWERING THE GREEN RECOVERY xvii

Smaller firms are less likely to be certified to a sustainability standard
100%
80% Not certified to

63 sustainability
76 standard
60%
87 86 Certified to
95
40% sustainability
standard
20% 37
24
13 14
0% 5
Source: ITC SME Competitiveness Surveys of 4,844 respondents interviewed between 2017 and 2020 in Argentina, Benin, Botswana, Burkina Faso,
Cambodia, Ghana, Hungary, Kenya, Myanmar, Nigeria, the Philippines, Togo, Ukraine and Zambia. See Annex II for detail.
Knowledge about climate risks and how to adapt to them is scarce among SMEs. They often lack the ability to identify
environmental threats and, especially, to assess adaptation options. If business support organizations facilitate SME
access to such expertise, they can help close a critical knowledge gap.
At the same time, SMEs need timely and well-defined information to plan their own green transition. Public and private
sector actors must convey their policy intentions clearly so that SME managers can avoid making investments or
embarking on ventures that run counter to future measures.
Lesson 3: Leverage opportunities

The transition to sustainable practices is a challenge – and an opportunity for SMEs to strengthen their competitiveness
and resilience. Although 58% of the firms surveyed by ITC in 2019 expected climate change measures to affect them
negatively, 39% expected some positive impact.
Adopting sustainable practices is not only about businesses being good – it is also about good business.
There are five factors driving the SME business case for going green:
Increased resilience
Cost reduction and higher productivity
Compliance with climate regulations
Access to markets
Eligibility for green financing
Measures to reduce firms’ environmental footprint that cost nothing or very little, such as changing management of water,
electricity and chemicals, pay off quickly. Although these ‘quick wins’ can mark the first step in the greening of SME
business practices, bigger investments deliver much more significant benefits to the bottom line and the planet.
For example, the costliest measures adopted by SMEs participating in ITC’s resource efficiency and circular production
interventions were installing solar panels and electricity equipment, which require significant initial investments. These
initiatives, however, are expected to deliver the largest total financial benefits after 10 years and the biggest environmental
dividend in reduced greenhouse gas emissions.
Fifty-nine per cent of African firms that had invested in greening their enterprise said it provided them with new
opportunities. Of firms that made green investment during the previous three years, 19% increased product quality,
17.3% accessed new markets, 16.6% increased production, 10% reduced their input costs and 7% made new products
or services.
xviii SME COMPETITIVENESS OUTLOOK 2021

Environmental investment gains
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Some green investment projects, however, do not seem to pay off financially in the short term. Forty-one per cent of the
firms interviewed by ITC in Africa felt their green actions had not yielded benefits. This is particularly true of firms in the
services sector.
Lesson 4: Support, support, support

Even when the green business case is compelling, and particularly when it is not, SMEs need support to transition. As
small firms seek assistance to recover from the pandemic, all stakeholders should provide them with the means to
become more competitive, resilient and sustainable.
Small firms must be at the centre of a green transition, as investing in them generates a ‘double-dividend’ of private and
social gains. The Green Recovery Plan is a set of recommendations for business support organizations, governments,
lead firms in international value chains and international organizations to help SMEs embark on a green transition.
The Green Recovery Plan to support small businesses


EMBRACE
SUSTAINABILITY

COLLABORATE,
COORDINATE
ADVOCATE
FOR SMES

FACILITATE
SME FINANCE
financing
STRENGTHEN
SME CAPACITY
COVID-19 taught the world hard lessons. Without action, climate change will teach even harder ones. By acting now and
placing SMEs at the core of a green transition, it is possible simultaneously to address the climate crisis and build the
competitiveness and resilience of the businesses on which a large percentage of the global population depend.
EMPOWERING THE GREEN RECOVERY xix

Acknowledgements
The ITC SME Competitiveness Outlook 2021 was prepared by a team led by Barbara Ramos,
Chief of Research and Strategies for Exports, under the strategic direction of ITC Senior
Management. Olga Solleder coordinated the report. The writing team in the Research and Strategies
for Exports Section included Floriana Borino, Sarah Mohan, Nathalie Raschka, Valentina Rollo and
Olga Solleder. Research assistance was provided by Sergio Martinez Cotto, Aissata Boubacar
Moumouni, Antonina Popova and Maria Camila Porras. We thank Aaron Cosbey and Chiara Ravetti
for their significant contributions during the drafting process. The report benefited from background
papers prepared by Floriana Borino, Eric Carlson, Justine Falciola, Sarah Mohan, Valentina Rollo and
Olga Solleder.
We thank all ITC colleagues who provided comments and contributions to the report, in particular
Rajesh Aggarwal, Leonardo Iebra Aizpurúa, Federica Angelucci, Milou Van Bruggen, Anne Chappaz,
Yang Chen, Simone Cipriani, Delphine Clement, David Cordobés, Frédéric Couty, Raphaël Dard,
Vanessa Erogbogbo, Alexander Kasterine, Martin Labbé, Mathieu Lamolle, Charles Lor, Elizabeth
Martinez, Olivier Marty, Hernan Manson, Chloé Mukai, Yaya Ouattara, Susanna Pak, Anton Said,
Andrea Santoni, Ian Sayers, Robert Skidmore, Topias Tamminen, Matthew Wilson, Joseph Wozniak,
Julia Zietemann and Ann-Kathrin Zotz, and especially Annegret Brauss for her continuous support.
ITC’s Trade for Sustainable Development team provided the data and insights from the resource
efficiency and circular production interventions.
We appreciate the personal contribution of distinguished Thought Leaders: Inger Andersen, Pedro
Beirute Prada, Ayman El Tarabishy, Kamina Johnson Smith and William R. Moomaw.
We acknowledge the special significance of our Business Voices: Alisa Osei Asamoah of Riali
Consult Ltd., Douglas Baguma of Innovex, Ahmed Khan Buzdar of Burg Olive Oil Products, Hachmi
Chenik of ITEX, Juliet Namujju of Kimuli Fashionability and John Robin of Benjo’s Seamoss. We also
thank all respondents to the ITC COVID-19 Business Impact Survey and SME Competitiveness
Surveys.
The report benefited from the input and comments of Opeyemi Abebe (The Commonwealth
Secretariat), Bettina Heller, Minori Lee and Dominic MacCormack (United Nations Environment
Programme), Christian Volpe Martincus (Inter-American Development Bank), Laura Kuhl
(Northeastern University), Trang Luu, Shusuke Oyobe, Pelin Sekerler Richiardi and Catherine Saget
(International Labour Organization), Jason Clay (WWF), Pooja Mall and Mahesh Sugathan
(independent experts).
Natalie Domeisen led the editorial assessment and production process, and contributed to editing.
Julie Wolf served as Lead Editor. Anne Griffin provided production and translation support, as well as
copy editing for the annexes and references. Shakira Lakdawalla and Maeve Rees-Jones provided
administrative support. Iva Stastny Brosig led art direction and layout. Serge Adeagbo provided
digital printing services.
xx SME COMPETITIVENESS OUTLOOK 2021

Empowering
the Green Recovery
© shutterstock.com
© shutterstock.com
CHAPTER 1
Business lessons from the pandemic
The COVID-19 pandemic may have been the most severe For example, efficient inventory management and
and widespread shock to the global economy in recent complete financial record-keeping increase companies’
history. In addition to its grim toll on human life, the ability to compete and make them more robust. Links to
pandemic – and measures to contain it – have battered business support organizations and a diversified supplier
companies worldwide, both large and small. base help them connect and relate. Efficient cash flow
management and commitment to research and
For small and medium-sized enterprises (SMEs), with their
development make companies more responsive and
scarce resources, surviving the crisis has been daunting.
able to change.
Just as SMEs around the world start to emerge from the
first waves of the pandemic, an even more far-reaching By identifying the pre-shock characteristics that allowed
challenge looms – climate change. firms to fare better during the COVID-19 crisis, it is
possible to start building an action plan to strengthen
Their experiences during COVID-19 made managers
SME resilience to climate change.
aware of the need to build resilience to face future crises,
including climate change. Still, ITC surveys show that,
while many SMEs are concerned about its consequences, COVID-19: Stronger impact
most have not invested yet in measures to adapt to a on smaller firms
changing climate.
A global pandemic was a low-probability, high-impact risk
As was the case with the pandemic, SMEs will face more
in autumn 2019. By the end of 2020, COVID-19 had
challenges than bigger firms to prepare for and adapt to
caused more than 1.5 million deaths and $28 trillion in
the many facets of climate change. This reflects
economic losses.1 As the virus spread, so did containment
constraints that SMEs traditionally face, especially lack of
measures to stem the health threat. Governments imposed
knowledge on how specifically they will be affected, and
restrictions on the movement of people, such as
finance and expertise to implement the necessary
confinements, curfews, shutdowns and border closures, all
countermeasures.
of which impaired business operations. Halted production
It also reflects the trade-off between strengthening short- lines eventually caused shortages within supply chains.2
term competitiveness and building long-term resilience. Lower business revenues led to temporary or permanent
ITC research on the business impact of COVID-19 shows layoffs, affecting demand and creating a vicious cycle.3
there is a path to foster both, as factors that make firms
The smaller the firm, the stronger it felt the negative impact
competitive in good times also make them resilient in bad
of COVID-19. The global ITC COVID-19 Business Impact
times.
Survey4 shows that the pandemic affected virtually all
This chapter analyses these factors using ITC’s three companies (98%), with a majority (55%) stating they were
pillars of competitiveness: the ability to compete, connect strongly affected. Still, smaller companies were more
and change. The pillars, in turn, link into three dimensions exposed than larger ones, as nearly two out of three
of resilience: the capacity of companies to be robust, reported their business operations had been strongly
related and responsive. affected, compared with less than half of large companies
(Figure 1).
2 SME COMPETITIVENESS OUTLOOK 2021

BUSINESS LESSONS FROM THE PANDEMIC
FIGURE 1 COVID-19: Stronger impact on smaller firms
100%
Strongly
80% 43
50 affected
60 57 55
60% Moderately
affected
40%
31 39 Slightly
29 30
26 affected
20%
12 12 17 16 14
2 2 2 2 2 Not affected
0%
Source: ITC COVID-19 Business Impact Survey, April-August 2020, with 3,949 businesses in 123 countries. See Annex II for detail.
FIGURE 2 COVID-19: Smaller firms at higher risk of closure
100%
15 9
26 20 20 Closure in
11
80%
15 three months
17 17
60% 20 Closure in
six months
40% 70 80
63 63 No closure
53
20% envisaged
0%
Source: ITC COVID-19 Business Impact Survey, April-August 2020, with 4,694 businesses in 136 countries. See Annex II for detail.
Despite this bleak picture, some SMEs displayed a high

BOX 1: Defining micro, small and degree of resilience. In part, this is because SMEs face an
medium-sized enterprises ‘innovate or die’ dilemma – unlike larger firms with
resources to sustain them through crises.6 These resilient
SMEs can provide key insights to firms increasingly
This report classifies companies based on the
exposed to major disruptions.7
number of full-time employees in the following way:
• Micro: 0 to 4 employees
Competitiveness and resilience
• Small: 5 to 19 employees
are complementary
• Medium: 20 to 99 employees
• Large: 100 or more employees. Competitiveness and resilience reflect factors that enable a
firm to succeed in the short, medium and long term.
Therefore, the SMEs referred to in this report are
companies with fewer than 100 employees. ITC defines enterprise competitiveness holistically:
Competitiveness is the demonstrated ability to design,

produce and commercialize an offer that fully, uniquely and
SMEs are often cash strapped, with less inventory and
continuously fulfils the needs of targeted market segments,
more limited supplier networks. Absorbing price increases
while connecting with and drawing resources from the
and input shortages, or sourcing from new suppliers,
business environment, and achieving a sustainable return
is more challenging.5 Not surprisingly, one in four (26%)
on the resources employed.8
micro firms risked shutting down permanently within three
months, compared with less than one in ten (9%) large
firms (Figure 2).
EMPOWERING THE GREEN RECOVERY 3

FIGURE 3 Competitiveness builds resilience
Competitiveness pillars Common attributes Resilience pillars
Efficient inventory management

COMPETE Complete financial record-keeping Robust
Ownership of bank account
Engagement with business

support organizations, peers,
CONNECT Related
buyers and suppliers
Diversified supplier base
Commitment to R&D
CHANGE High skills matching Responsive
Access to finance
Source: ITC.
ITC has also developed an analytical framework to Not all factors that make a firm competitive make it more
understand firm competitiveness and how it improves over resilient. In fact, some elements of competitiveness can
time. The framework is built around three pillars – compete, undermine resilience. For example, lean inventories and
connect and change (Box 2).9 streamlined input sourcing can lower costs, but leave the
firm vulnerable to supply disruptions. The higher
Resilience is the capacity to withstand disruption. Firms
productivity, efficiency and scale associated with
display the ability to absorb shocks with situation-specific
competitiveness can come at the expense of the flexibility
responses, based on how robust, related and responsive
and diversity of relationships required for resilience.11
they are. Resilient firms emerge from a crisis as strong,
or stronger, than before (Box 2).10 A strategic approach can focus on elements that work
together to build both competitiveness and resilience.
A company’s resilience is likely to be closely linked to its
Competitiveness characteristics that lay the ground to build
competitiveness, as two recent ITC surveys show. Before
resilience are:
COVID-19, ITC was collaborating with institutions in Benin,
Cambodia, and the Philippines to assess the Capacity to compete: Efficient inventory
competitiveness of small and medium-sized enterprises management, complete record-keeping and
through its SME Competitiveness Survey. In mid-2020, possession of a bank account;
ITC carried out a complementary survey in the three
Capacity to connect: Strong, varied links with
countries to assess how companies had been affected
business support organizations and other firms in
by COVID-19. Combining data from the two surveys
the sector; access to information about buyers and
allowed analysis of whether, and to what extent, pre-crisis
suppliers; and a diverse supplier base;
competitiveness factors influenced business outcomes
during the pandemic (see Annex II for methodology). Capacity to change: Investment in research and
development, skills matching and access to finance.
Practices that boosted the capacity to compete also made
firms robust to the shock. Characteristics that drove the
capacity to connect also determined the strength of the
relationships that they drew on to access information and
benefits during the crisis. Finally, aspects that bolstered
firms’ ability to change also fostered responsive coping
strategies (Figure 3).

BOX 2: Defining competitiveness and resilience
Competitiveness pillars: Compete, connect and change
Several factors at the firm, business ecosystem and national levels influence the capacity of a company to be
competitive. ITC’s competitiveness framework classifies these factors under three interrelated pillars –
compete, connect and change.
Capacity to compete refers to the static dimension of competitiveness. It focuses on factors for a firm to
deliver output of appropriate quantity, quality and cost.
Quality of inventory management and compliance with internationally recognized standards are examples of
such factors at the company level. Access to electricity, transport infrastructure and services are examples of
factors at the business ecosystem and national levels.
Capacity to connect describes a company’s ability to exploit information to underpin strategy and
operations.
At the firm level, this covers efforts to gather information flowing into and from the firm, including through
communications with suppliers and advertising to buyers. At the business ecosystem level, this includes links
to sector associations, chambers of commerce and other business support organizations. At the national
level, the capacity to connect is influenced by the availability and quality of information and communications
technology infrastructure and services.
Capacity to change refers to factors that support a firm’s capacity to make changes in response to, or in
anticipation of, dynamic market forces.
When companies mobilize financial resources, capital and skills and invest them in innovation, they draw on
the information they have to improve competitiveness. Access to finance and appropriately skilled workers
are key ingredients in this process. Nationally, education, research and development policies and
governance structures affect firms’ incentives to invest in change.
Resilience pillars: Robust, related and responsive
As with competitiveness, several factors influence a company’s resilience. ITC categorized them under three
pillars – robust, related and responsive.
Robust firms have strong management and operational procedures to withstand pressure during a crisis.
This involves effective risk management and business contingency plans, inventory management and
savings. Pre-crisis practices and resources build shock absorbers into the structure of a robust firm.
Related firms leverage internal and external connections to access resources and support during a crisis.
Firms with strong internal communication are better equipped to navigate shocks.12 Similarly, companies with
extensive and strong links to actors in the business ecosystem have a network or social capital they can draw
on for help.
Responsive firms overcome crises with inventive, well-adapted strategies to absorb shock, transform and
cope with the new reality.
Ingenuity under stress13 tends to be higher among firms that have already learned, through experience, how
to navigate a crisis. Availability and good management of human, technological and financial capital are likely
to promote an effective response that kick-starts the recovery process.
Source: (Battisti et al., 2019; ITC, 2015; Madni & Jackson, 2009; Kaplan, Leonard, and Mikes 2020; Rose & Krausmann, 2013; Suarez and Montes
2020; Sullivan-Taylor & Branicki, 2011; Torres et al., 2019; UNDRR 2020; van der Vegt et al., 2015; WEF, 2013; Weick & Sutcliffe, 2007).

Competitive firms are more resilient pandemic were more likely to be robust (52%) than those
that did not keep complete records (28%). One possible
explanation is that firms used the slack identified in their
Compete to stay robust records to get through the hard times.
What drives a firm’s ability to meet market requirements in
Similarly, good financial management influences how
the short term, or its capacity to compete, also makes it
well a company responds to changes in the economic
more robust.14 Firms with efficient inventory management,
environment. Bank account ownership, for example,
complete financial record-keeping and ownership of a
is associated with higher competitiveness and resilience,
business bank account were more likely to be robust in the
though this may reflect factors beyond a firm’s control.
face of COVID-19, according to ITC surveys (Figure 4).
Having a bank account may be a sign of good savings
Efficient inventory management helps firms stay behaviour or solid financial management. Yet, not all SMEs
competitive in normal times, and robust in the face of have access to a functioning financial system that enables
disturbances.15 Companies with better inventory practices them to open an account. Thus, bank account ownership
know which input needs are more acute and worthy of can reflect poor availability of financial services, that in turn
management attention in the short run. Only one-third of undermines competitiveness and resilience.
enterprises with low efficiency in managing their inventory
Firms that do have a bank account can amass savings to
were robust during the crisis. In contrast, about half of
tide them over in tough times.17 They can also establish a
firms with highly efficient inventory management were not
relationship with their bank that gives them access to loans
hard hit (Figure 4).
and other support in times of crisis. Some 73% of
As strained supply chains made it harder to access inputs businesses without a bank account were strongly affected
quickly during the pandemic, this quality was particularly by the pandemic according to the ITC, compared with 50%
valuable. Survey results show that 83% of enterprises with of those with a bank account.
low inventory management efficiency faced problems
To investigate the link between a firm’s capacity to
obtaining inputs during the crisis, compared with 77% of
compete and its robustness to shocks, ITC calculated a
firms with medium-high inventory management efficiency.
‘capacity to compete’ score.18 Companies with higher
Good record-keeping practices enable managers to scores were better able to withstand pressure during the
identify buffers.16 Companies that kept complete records of crisis and hence were more robust (Figure 5).
revenues, expenses and liabilities or assets during the
FIGURE 4 Competitive attributes make firms robust in a crisis
60%
Share of respondents robust to COVID-19
50% 52
48 50
40%
35
30%
28 27
20%
10%
0%
No Yes No Yes No Yes
Efficient inventory Complete financial Ownership of

management record-keeping bank account
See Annex II for detail.

FIGURE 5 Good capacity to compete means robust to crisis
50
Robustness to COVID−19
45
40
35
30
40 50 60 70 80 90
Capacity to compete
Connect to become related The share of firms that reported difficulty with accessing
information and benefits dropped from 42% to 28% when
Competitiveness and resilience also depend on a firm’s
they were engaged with business support organizations
diverse and strong connections to business support
(Figure 6a).
organizations, peers, buyers and suppliers. When a firm
connects externally, it gathers and shares information. It may be that companies with a higher tendency to reach
This allows firms to identify potential clients and market out for information and support were also more likely to
goods and services, a key competitiveness factor. It also connect to business support organizations and COVID-19
allows companies to access critical information and assistance.20 Riali Consult, a Ghanaian travel and tours
support they need during a crisis. company featured as a Business Voice in this chapter,
shows that connections to business support organizations
Firms with established relationships with business support
were key to obtain information on how to adapt.
organizations prior to the crisis appeared to have better
access to information and benefits, such as government
assistance to mitigate the effects of the pandemic.19
FIGURE 6 Connections allow firms to relate
(a) Difficulty accessing information (b) Difficulty accessing domestic inputs
45% 84%
40% 42 82%
80% 82
35%
78%
30%
76%
25% 28
74%
20% 72%
70%
15%
68% 69
10%
66%
5% 64%
0% 62%
No Yes No Yes
Engaged with business Independent of largest supplier
support organizations

BUSINESS VOICE
Rethinking the business of travel

This tourism company specialized in inbound tours and
corporate travel. It now also works in domestic tourism,
thanks to training to adapt its business strategy and
improve its digital marketing.
‘While we started 2020 on a very positive note, COVID-19 was a big

tragedy for us. Because of border closures, most of our international and
corporate clients cancelled their bookings and we lost our main source of
revenue. This meant that we had to come up with a new business
approach.
Alisa Osei Asamoah As short-run strategies, we negotiated with our employees to reduce
salaries by 30%-50% and decided to introduce domestic tourism
CEO, Riali Consult, packages.
Ghana
Initially, there was little demand for this type of travel. As time went on,
it picked up. We are now looking to employ a domestic tours officer.
Once the pandemic is over, we plan to offer both international and
domestic tours. We also found that our employees adapted well to
working remotely; they now work from home two days each week.
In addition, we benefited from our connections to multiple business

support organizations. From them, we received a lot of information on
how to expand and adapt our business.
ITC’s SheTrades Commonwealth COVID-19 Crisis Management toolkit

helped us in our transition to domestic tourism. We and 14 other tour
operators also received extensive training on digital marketing. Three of
these former trainees have now become trainers and are coaching a
further 60 individuals.
To other companies I would say: be hopeful. Tourism will bounce back and
the pandemic will pass. In the meantime, we should take this opportunity
to diversify our revenue streams. So that if you are hit by a shock, your
business can still survive.’
ITC’s SheTrades Commonwealth is funded by the United Kingdom’s Foreign,

Commonwealth and Development Office. The project enables women-owned
businesses to thrive in international markets, generate growth and jobs, and decrease
poverty. It is active in Kenya, Nigeria, Ghana and Bangladesh.

Companies that traditionally collaborate with peers also Change to emerge responsive
fared better during the crisis. Cooperation among
The ability to transform knowledge and ideas into new
companies in the same sector to solve common problems
products, processes and systems continuously is essential
can help to spread information about challenges and
to a company’s capacity to change.24 This adaptive
solutions.21 Survey results show that 29% of firms with a
capacity is also key to crisis response. It relies on
track record of cooperation with their peers had difficulty
enterprises having the skills and funds to spearhead
accessing COVID-19-related government information and
innovation.25 What supports a company’s capacity to
benefits. This compares with 46% of firms without
change in response to shifting market dynamics also
cooperative problem-solving habits.
drives its ability to respond to crises.
Given that crises often spread through supply and demand
Investments in innovation through research and
connections, enterprises with a diversified supply,
development (R&D) are essential if a firm is to adapt
production and sales network tend to be more resilient.
successfully. Firms that invested more in R&D before the
Firms that source inputs from varied suppliers, produce in
pandemic were more likely to adopt resourceful strategies
different locations, have alternative transport links and sell
to cope with the crisis. They were, for example, twice as
through different market outlets are less affected by harm
likely to create new or customized products (Figure 8a).
from any one actor in their business ecosystem.22
Skill matching was also important in dealing with
Firms with six or more suppliers were four percentage
COVID-19. Workers that possess the right set of skills and
points less likely to report difficulty accessing inputs during
know the product and production process well are more
COVID-19, compared with firms with fewer than six
likely to implement creative solutions to problems.26 For
suppliers. Similarly, enterprises that said they were
example, when confinement rules forced SMEs to shut
independent of their largest supplier were 13 percentage
their doors, many put their full offering online, which
points less likely to report problems accessing inputs
required digital skills.27
compared with firms that relied heavily on their largest
supplier (Figure 6b). Data from Benin, Cambodia and the Philippines also
illustrate the connection between skills endowment and
To assess the relationship between a firm’s capacity to
resilience. Managers who said they had a good match
connect and its ability to relate, ITC computed a ‘capacity
between employee skills and company needs were more
to connect’ score.23 Companies with a higher score were
likely to sell online during the pandemic (Figure 8b).
less likely to have difficulty accessing information and
benefits during the pandemic, and hence were more
related (Figure 7).
FIGURE 7 Connected firms have greater capacity to relate
70
Relatedness during COVID-19
65
60
55
50
45
0 20 40 60 80
Capacity to connect

FIGURE 8 Change factors make firms more responsive
(a) Created new products (b) Switched to online sales (c) Started sourcing from new suppliers
12% 12% 12%
10% 10% 11 10%

9
8% 8% 8%
8
6% 6% 6%
6
4% 4% 4%
2% 3 2% 2% 3
0% 0% 0%
No Yes No Yes No Yes
High resources to R&D High skill match High ability to manage cash flow
Firms may have strong ideas on how to change in Indeed, ITC surveys show that companies with strong
response to crises, but they need access to finance to cash flow management were more than twice as likely
implement them.28 Many elements, both internal and to start sourcing from new suppliers during the crisis.
external to the firm, influence the ability of a company to Extra liquidity may have equipped them to start new
access finance. Banks in developing countries are often relationships in response to problems with existing
hesitant to provide loans to SMEs due to perceived high suppliers (Figure 8c).
transaction costs and risks. There are also formidable
Firms with a higher ‘capacity to change’ score31 were more
barriers to matching investors with small firms.29
likely to adopt responsive strategies to cope with the
At the firm level, SMEs that manage their cash flow well COVID-19 crisis (Figure 9). These include selling online,
have a better chance of possessing the liquidity to finance launching new or customized products and sourcing from
short-term coping strategies, other things being equal.30 new suppliers.
FIGURE 9 Capacity to change helped firms to be more responsive
34
Responsiveness to COVID-19
32
30
28
26
20 40 60 80
Capacity to change

Small, youth-led firms less resilient Resilience preceding a crisis matters, as it signals how a
company will fare when hit by a shock. Companies with
Smaller firms record lower levels of pre-crisis resilience, higher resilience were 17 percentage points more likely
on average, than larger companies, according to an index to report stable sales and almost five times less likely
ITC constructed based on the attributes described earlier to lay off employees during the crisis, compared with
in this chapter. Specifically, the resilience score of micro companies that had a lower index. Specifically, 68% of
and small firms was 16% lower than that of medium and companies with an index of resilience above the median
large firms. Similarly, companies led by youth have lower reported stable sales during the crisis, against 51% of
resilience scores than firms led by people over 34 years companies with an index below the median. Only 16%
of age. While women-led firms in the sample displayed of resilient companies reported laying off employees
slightly lower scores than those owned and managed by compared with 76% of companies with a lower index of
men, the difference was not statistically significant resilience (Figure 11).
(Figure 10).
These findings indicate that helping SMEs build resilience
The ITC index takes into account the characteristics that not only increases their chance of withstanding a crisis,
make firms robust, related and responsive. Described in but also reduces the disastrous employment
detail in Annex II, the index has values from 0 to 1, with consequences of their decline or demise.
higher values indicating greater resilience.32
FIGURE 10 Smaller, youth-led firms are less resilient
By firm size By gender By age
0.67
Medium,
0.59 0.60 0.59
Large
0.56 Men-led
Women-led Not youth-led
0.52
Micro,
Small Youth-led
FIGURE 11 Resilient companies have more stable sales, employment
80%
76
68
60%
Low
resilience
51
40%
High
resilience
20%
16
0%
Maintained Laid off
stable sales employees
Source: ITC SME Competitiveness and COVID-19 Business Impact Surveys in Benin, Cambodia and the Philippines, July 2019-August 2020, with 770 firms. See
Annex II for detail.

International traders exposed, trading firms were three percentage points more likely
but adaptable to say it was ‘easy’ or ‘very easy’ to access information
and benefits from government COVID-19 assistance
The analysis so far has not differentiated firms that programmes, according to findings from the ITC survey
operate domestically and those that trade internationally. (Figure 13a).
The pandemic had a greater impact on firms trading
Furthermore, firms that trade internationally are better
internationally than on firms operating domestically,
placed to innovate, as they have more resources and
according to findings from the global ITC COVID-19
skilled workers to invest in innovation.34 This renders them
Business Impact Survey. Responses from companies
more adaptable in the face of disruption. ITC analysis
based in 133 countries show that internationally trading
shows that companies that exported and/or imported
firms were 10 percentage points more likely to be hard hit
were six percentage points more likely to adopt positive,
by the pandemic, so were more exposed to the shock.33
constructive responses to the pandemic than firms that
Firms that traded internationally had more difficulty operated domestically (Figure 13b).35 Internationally
accessing inputs than domestic firms (Figure 12a). This trading firms were more likely to go online, make new
was due to the particular nature of the COVID-19 crisis, products, and source from new suppliers.
which struck most countries simultaneously and cut off
A company’s resilience is defined by how robust, related
travel and transport in much of the planet. Internationally
and responsive it is. These resilience characteristics,
trading firms were more affected, as they are directly
in turn, are affected differently depending on the nature
involved in the international movement of goods
of the shock.
(Figure 12b).
In the case of COVID-19, firms that trade across borders
Although sourcing from foreign suppliers and selling to
were more exposed because they are more related, and
buyers overseas made firms more susceptible to this
the shock was global. These firms bore the burden of
exceptional global economic shock, it does not mean that
domestic restrictions in addition to those in partner
internationally trading firms were less resilient.
countries. Nonetheless, internationally trading firms
Importing and exporting help companies to build displayed greater capacity to adapt and respond
relationships that are useful during crises. Trading across effectively than domestic ones. Whether the negative
borders forces firms to liaise with government agencies effect of higher exposure or the positive effect of greater
for tariff rebates, connect to emergency suppliers and adaptability to COVID-19 dominate in the net outcome
build solid, sustainable market linkages. Internationally is ultimately an empirical matter.
FIGURE 12 Internationally trading firms more exposed to COVID-19
(a) Difficulty accessing inputs (b) Strongly affected
60% 70%
Domestic Domestic
55 firms 60% firms
50%
58
Internationally Internationally
50%
40% 43 trading firms trading firms
48
40%
30%
30%
20% 20%
10% 10%
0% 0%
Source: ITC COVID-19 Business Impact Surveys with 4,433 firms in 133 countries, April-August 2020. See Annex II for detail.

FIGURE 13 COVID-19: Firms that trade across borders adapt better
(a) Easy to access information (b) Responsiveness
25% 50%
Domestic 45% 46 Domestic
firms firms
20% 40%
20 Internationally 40 Internationally
trading firms 35% trading firms
17
15% 30%
25%
10% 20%
15%
5% 10%
5%
0% 0%
Source: ITC COVID-19 Business Impact Surveys with 4,433 firms in 133 countries, April-August 2020. See Annex II for detail.
Resilient to COVID-19, The pandemic experience has made people across the
resilient to climate change planet more aware of the need to learn about and prepare
for risks.38 Most decision makers and stakeholders now
Resilience is a general attribute of firms. It should enhance know of the slow onset of climate change and its
their ability to cope with any crisis, whether a pandemic or potentially devastating impacts on economies and
a hurricane. The factors that build resilience make societies. Having experienced the disruption of COVID-19,
companies ready for a shock, giving them relationships to businesses and those that support them are primed to
draw on for help, and tools to respond in a timely and enhance proactively their resilience to specific climate-
effective manner. induced shocks.
The ramifications of climate change will reach every corner This is a window of opportunity to boost SME resilience in
of the globe, as with COVID-19. They are likely to be even a way that also improves their competitiveness. Action to
more far-reaching. ‘The climate emergency is like the prepare for the climate crisis and reduce its severity
COVID-19 emergency, just in slow motion and much depends on information, business planning, political will
graver,’ said Nobel Prize winner Joseph Stiglitz and climate and social change. The rest of this report unpacks the
expert Nicholas Stern.36 Bill Gates added that the nature of the climate change threat, its implications for
economic impact of climate change is expected to be like SMEs and trade, and what can be done to enhance
a COVID-19-sized pandemic happening every ten years.37 SME resilience through the green recovery.
It is crucial that the lessons learned about SME success
during the COVID-19 crisis help prepare them for a
warming world.

© shutterstock.com
THOUGHT LEADER
THOUGHT LEADER
Governments must help MSMEs

build resilience to shocks
Kamina Johnson Smith
Minister of Foreign The name Jamaica conjures up the sound of reggae music,
Affairs and Foreign Trade, and beautiful images of sun, sand and lush green landscapes.
Jamaica
J amaica, however, also has an incredible story of economic recovery to tell. Prior to the
pandemic, we had been on a path of robust debt reduction and increased inclusive
economic growth, even cutting the gender gap in unemployment to less than 3%.
Supporting micro, small and medium-sized enterprises (MSMEs) and building climate
resilience were critical to our plans, and this remains the case.
Like other small island developing States (SIDS) however, Jamaica is highly vulnerable to
climate change. Our most important sectors, including tourism, agriculture and fisheries,
are at risk from increasing temperatures, extreme rainfall, drought and intense hurricanes.
Climate models project that by 2050, the dry season will increase by 6.8%, and the
frequency and strength of hurricanes will rise.1
Between 2001 and 2012, hurricanes, flooding and drought cost Jamaica approximately
J$128.54 billion. In 2017, heavy rains resulted in loss of life and damage to infrastructure
amounting to J$4.4 billion, equivalent to 0.2% of GDP.2 The World Bank anticipates that
Jamaica will need approximately US$121 million (J$16 billion) annually to cover losses
associated with natural disasters.3
Our experience underscores an urgent need for adaptive strategies to reduce vulnerability
and mainstream climate resilience into development planning processes at all levels.
In this context, the point deserves emphasis that while we believe wholeheartedly in the
free market, when we speak of ‘Government Help’ for MSMEs we allude to the reality that
such fundamental challenges require governmental action to create a supportive and
enabling environment.
Jamaica’s MSME sector comprises more than 425,000 companies and represents 90% of the
private sector.4 Climate events have caused MSMEs to suffer major production losses from
1 Winston Mccalla and Associates. (2019). Regional scoping study for private sector investment in climate
change mitigation and adaptation. Prepared for the Climate Change Division in the Ministry of Economic
Growth and Job Creation.
2 Planning Institute of Jamaica. (2017). Economic and social survey of Jamaica.
3 World Bank. (2018). Advancing disaster risk financing in Jamaica. World Bank.
4 MSME Unit, Ministry of Industry, Investment and Commerce, Jamaica.

THOUGHT LEADER
reduced operational hours and disruption to supply chain and export distribution
networks. MSMEs must, therefore, build climate resilience while responding to new market
conditions.
The Jamaican Government has set up an extensive institutional framework to support

climate change management. This includes establishing: the Climate Change Division;
the Climate Change Advisory Board to exchange scientific and technical information; and
the Climate Change Focal Point Network, a multi-sectoral approach to policies and
programmes that benefit a wide range of stakeholders, including businesses.
Composition of enterprises in Jamaica (%)
Other enterprises
MSMEs
0% 20% 40% 60% 80% 100%
Source: Ministry of Industry, Investment and Commerce (MIIC, Jamaica)
Expanding finance and investment

Jamaica has adopted new legislation to enhance financing for MSMEs. Policymakers also
are working to facilitate investment in emerging climate-resilient goods and services,
as well as mechanisms to encourage MSMEs to pursue climate adaptation strategies.
Few MSMEs are equipped to rebound quickly from the pandemic due to inadequate
liquidity, limited access to finance, retrenchment of the workforce or complete shutdown of
activity, and lockdowns of varying degrees. These challenges are in addition to traditional
constraints faced by MSMEs, such as:
High cost of energy and raw materials;

Market access restrictions;
Inadequate legislative frameworks;
Limited access to new technologies;
Inadequate capacity-building opportunities.
MSMEs, of course, also have significant opportunities. Reflecting our focus on individuals
as well as businesses, financial inclusion policies now encourage individuals, especially
women, to formalize their entrepreneurial efforts. We assist MSMEs to take advantage of
e-commerce, digital trade and increased demand for innovative goods and services.5
Furthermore, more businesses now have continuity plans, which augurs well for their
resilience to external shocks.
The pandemic has also led the Government to accelerate the transition to electronic
platforms for key services, improving the ease of doing business in Jamaica.
Expanding our foreign trade is critical to Jamaica’s economic growth. We are committed
to developing innovative programmes with local and international partners and
stakeholders to support the international reach of our MSMEs. These must be
accompanied by concerted efforts to build their capacity to adopt climate adaptation and
mitigation strategies. We must recognize such efforts as part of the work of building a
more sustainable, green and resilient economy and society.
5 The Government of Jamaica has partnered with the private sector to develop the E-commerce National
Delivery Solutions (ENDS), an app enabling business continuity during the COVID 19 curfew hours. ENDS
will allow any business or vendor to connect to and leverage the island-wide network of delivery solutions
to have their goods transported safely to clients.

CHAPTER 2
Climate change: What impact for small business?
Climate change impacts follow an inequitable path. As the world makes the transition to more sustainable
The most acute shifts are expected to occur in regions and practices, SMEs will need to adjust to three key trends.
countries with low incomes and lagging performance in First, to retain or gain access to markets, SMEs will need to
achieving the United Nations Sustainable Development anticipate and adjust to emerging regulation. Second, to
Goals. Businesses in strongly affected countries tend to maintain or create new connections to buyers and
have relatively fewer resources, alternatives and information consumers, they will need to adopt increasingly popular
with which to adapt. sustainability standards. Third, to access a growing pot of
financial resources and break into the evolving circular
SMEs in low and middle-income countries appear more
economy, SMEs will need to craft environmentally friendly
likely to perceive environmental changes as a short-term
business plans.
risk than those in high-income countries. Approximately
half of companies interviewed in developed countries say The success of small firms will depend on their ability to
climate change poses short-term risks, but the percentage adapt to climate-induced impacts and respond to
ranges between 68% and 83% for those in emerging and consumption, production and policy trends. This capacity,
developing countries.39 in turn, depends in part on the support small firms receive
from those in the business ecosystem, both nationally and
ITC’s competitiveness framework provides a useful tool to
internationally.
understand the risks climate change poses for SMEs.
A firm’s competitiveness is undermined if climate change
halts business, lowers productivity and hampers access to A warmer planet poses business risks
critical inputs. Thus, climate change reduces the firm’s
ability to deliver sufficient quantities at adequate quality and The planet is getting warmer. Independent scientists with
cost to markets. the Intergovernmental Panel on Climate Change (IPCC)
predict that mean global surface temperature could
SMEs in developing countries will not only bear the brunt of
increase by up to 4.8oC by 2100. Greenhouse gas
climate change’s direct impacts. They will also be at the
emissions such as carbon dioxide and methane are the
receiving end of measures, largely designed in developed
proximate causes of this phenomenon. They trap heat
countries, to counter the damage of a warming planet.
within the atmosphere, where it increases global average
While necessary for mitigation and adaptation, such public
temperatures.40
and private requirements risk limiting further the ability of
SMEs to compete, particularly if measures are unclear, Higher temperatures trigger additional biophysical
uncoordinated, and unaffordable. alterations, collectively known as ‘climate change’. The
main biophysical changes that affect business include:
A quarter of SMEs interviewed by ITC in sub-Saharan Africa
already perceive environmental regulation as an obstacle Extreme weather events, such as hurricanes and floods;
to their business. Moreover, only 5% of micro and 13% of Changing weather patterns, leading to droughts and
small firms interviewed by ITC globally were certified to a heat waves;
sustainability standard, even though consumers and large Altered ecosystems, including forest decline and soil
buyers increasingly require this. infertility.

CLIMATE CHANGE: WHAT IMPACT FOR SMALL BUSINESS?
FIGURE 14 Environmental risks significant for two-thirds of African companies
100%
7
32 32 Not facing
80% 38
environmental risks
60% Facing environmental

93 risks
40% 68
62 68
20%
0%
Primary Manufacturing Services TOTAL
Note: Most respondents (94%) are SMEs with less than 100 employees, with 16% in the primary sector (including 14% in agriculture and 2% in mining), 14% in
manufacturing and 71% in services.
Source: ITC SME Competitiveness Surveys of 1,359 companies, in Zambia (Year 2018, 242 businesses), Botswana (Year 2019, 615 businesses) and Benin (Year
2019, 502 businesses). See Annex II for detail.
Small and medium-sized enterprises see environmental including scarcity (18%) and quality (15%) of business
changes as a competitiveness risk. On average, 68% of inputs, storms and other risks (15% each), lower air quality
the companies interviewed for ITC’s SME Competitiveness (3.2%) and rising sea levels (2.5%) (Figure 15).
Surveys in sub-Saharan Africa said that environmental risks
were significant for their businesses (Figure 14). Extreme weather halts business
The highest proportion of companies facing significant Already, extreme weather events are more frequent and
environmental risks (93%) was in the primary sector severe, affecting businesses. The owner of Benjo’s
(Figure 14). Yet, a clear majority in manufacturing (68%) Seamoss, a company from Dominica featured as a
and services (62%) also saw significant environmental Business Voice in this chapter, remarked that hurricanes
risks. In Botswana, for example, water shortages are not only becoming more frequent, but also cause
experienced by services and manufacturing companies greater destruction.
reduced their sales, profits and competitiveness.41 Textile
Extreme weather events threaten business continuity and
factories in Morocco subject to flash floods are considering
revenues, as customers are unable to physically access
moving away from Casablanca.
the business, electricity is cut and production comes to a
Surveyed firms were most concerned by changing standstill.42 Companies can incur costs without being able
temperatures (34%), followed by water scarcity (22%) and to generate revenue.43
floods (20%). They cited a range of other concerns,
FIGURE 15 Changing temperatures is top environmental risk for businesses in Africa
Changing temperatures 34
Water scarcity 22
Floods 20
Scarcity of inputs 18
Decreased quality of inputs 15
Other environmental risk 15
Severe and frequent storms 15
Decreased air quality 3.2
Changing sea levels 2.5
0% 5% 10% 15% 20% 25% 30% 35%
Share of respondents identifying risk as significant for their business
Note: Most respondents (94%) are SMEs, with 16% in the primary sector (including 14% in agriculture and 2% in mining), 14% in manufacturing and 71% in
services.

BUSINESS VOICE
A tragedy worse than COVID-19

This beverage producer specializes in seaweed-based
drinks. It has survived two major hurricanes through pre-
crisis preparedness and post-crisis responsiveness.
‘Living on an island in the Caribbean, we witness climate change first-
hand. The frequency with which we are hit by hurricanes has increased,
as well as their destructive force. The worst one to ever make landfall in
Dominica was Hurricane Maria in 2017. The consequences were worse
than the pandemic. Maria caused damages equivalent to 224% of
Dominica’s GDP.
Over 90% of houses were damaged or destroyed. Roads, bridges and

John Robin ports were mostly inaccessible. After the storm, we had no access to food
or clean water. Businesses were looted. It took about four months to repair
Owner, Benjo’s Seamoss, the local infrastructure, a time during which we had no electricity. Even
Dominica four years later, a large percentage of houses are not yet rebuilt.
My production facility escaped this tragedy with minimal structural

damage, as, based on my decades of experience, I located it far away
from the coast and rivers. But still, it was a difficult time. Having no
electricity, we had to shut down production. Because of the damages to
ports, it was nearly impossible to ship out our remaining stock. We lost
almost four months of income. But we came up with creative workarounds
such as using yachts for transport.
Insurance is important when rebuilding, but not something to be relied on

blindly. Insurance policies are expensive and complex. After the hurricane,
a lot of people realized that not all damages were covered. Getting
compensated can be a slow process and many are still waiting for their
repayments.
Today, four years after the hurricane, the key challenge in Dominica is
access to finance. Financial support should not only be given to start-ups
but also extended to more mature, medium-sized businesses ready to
scale up. These are the companies that, by having the financial means to
expand their operations, can provide the most value to Dominica’s
economy.
I also believe that it is our responsibility to protect the island’s

environment. An essential part of this is good waste management. This is
why I started an island-wide glass recycling programme that is ready to
expand to other types of waste. I would welcome partnerships that can
help this initiative by providing machinery or financing its purchase.
Despite the hardships we have faced, I believe that Dominica’s future is

bright. Our manufacturing sector has enormous employment and export
potential and, whether we are in the aftermath of a hurricane or pandemic,
should be at the heart of our economic recovery.’

FIGURE 16 Agricultural areas are at high risk for climate hazards
High climate
variability
Growing season
reductions
High temperatures
during growing
season
Combination of two
or more climate hazards
Source: Global Commission on Adaptation, 2019.
Where worker protection is weaker and short notice Rising temperatures melt polar sea ice and expand the
periods are common, companies may simply let oceans. Sea level will rise by 26–82 cm by 2100, according
employees go, and the temporary shock may lead to a to the IPCC.48 The change will hit island and coastal states
long-term human resource loss, as experienced during hardest, notably in the Caribbean and the Pacific, as well
the COVID-19 crisis.44 as in South-East Asia.49 Coastal cities such as Jakarta,
Lagos, Houston and Bangkok could be submerged as
These disruptions are costly. For example, the private
early as 2050.50 Low-lying island countries such as the
sector bore roughly 90% of the $45.7 billion in damages
Maldives risk going completely underwater.51
caused by the 2011 floods in Thailand.45 Catastrophe
insurance payouts between 2017 and 2018 represented Ocean-dependent sectors, particularly tourism and fishing,
the highest environmental insurance bill in history.46 will be unable to operate, either temporarily or permanently.
SMEs tend to be disproportionately represented in these
Clearly, small firms need access to financial instruments
sectors.
such as climate and catastrophe insurance. Unfortunately,
as the experience of Benjo’s Seamoss in Dominica shows, With more heat, SMEs may experience increased
insurance premiums are expensive and the application absenteeism and lower labour productivity.52 Average
process is complex, putting them out of reach for many annual rainfall is likely to increase in high-latitude regions
SMEs. Moreover, they often do not fully cover the cost of and decrease in dry regions closer to the equator.53 Heat
damages and the wait time for payment can be very long, and strong rains may undermine the machines vital to
preventing companies from rebounding faster, or at all.47 small and medium-sized manufacturing companies.
In some regions, precipitation and runoff changes will
Changing weather patterns lower productivity affect hydroelectric generators, causing more outages that
are so debilitating to small businesses.54
Climate change shifts weather patterns in a way that
compromises small business productivity. Hotter These phenomena are already reducing farm productivity
temperatures, rising sea levels and changed precipitation in many regions.55 Estimates suggest that global
affect production in fundamental ways. agricultural yields may decline by up to 30% by 2050, with
the most negative impact occurring at mid-latitudes
(Figure 16).56 Climate change also adversely affects
agricultural output quality.57

SMEs often lack knowledge on how to adapt, and Climate responses affect
resources to do so. Technical assistance can help farmers competitiveness
change the crops they plant, while knowledge on how to
climate-proof a shop or factory can be essential to survival. Climate change will also alter consumption, production
Once they know what to do, SMEs need to access the and policy trends. This indirectly affects SME
funds and technologies required to adapt. competitiveness.
SMEs must take into account:

Access to business inputs is at risk
Environmental regulation
The scale and speed of climate change will alter
Sustainability standards
ecosystems, affecting access to goods and services on
Green investment
which small businesses depend.58 In the absence of
Circular economy
affordable, good-quality inputs and services, SMEs are
unable to meet market requirements for the quantity, Through environmental regulation, governments define
quality and timeliness of their output. climate-friendly behaviour. Individual businesses and
coalitions are adopting sustainability standards, which
Collapse of forest ecosystems can reduce access to
signal alignment with consumer preferences. Investors, for
firewood for small-scale agrifood processing firms, for
their part, reflect the interest of asset owners in supporting
example. Ecosystems also provide services, such as water
sustainable practices through dedicated green investment
purification and insect pollination, which businesses take
funds. Burgeoning interest in circular modes of production
for granted, but would be hard-pressed to do without.
and exchange are reshaping business connections.
Deteriorating biodiversity and ecosystems already hurt
small firms.59 Small-scale fisherfolk go further out to sea to Environmental regulation can generate
catch the same quantity of fish,60 female farmers spend uncertainty
more time seeking wood to fuel the furnaces that process
Government regulations to reduce greenhouse gas
their crops61 and more fuel is needed for ever-deeper bore
emissions mitigate the extent of climate change. However,
wells that draw water from ever-lower aquifers.62
clear rules have yet to be implemented in many states, so
The owner of Burg Olive Oil Products, an olive farm in there is a patchwork of declarations, policies and practices.
Balochistan province in Pakistan, featured as a Business The uncertainty keeps smaller firms from planning their own
Voice in this chapter, describes how water scarcity is green transition.
threatening the livelihoods of his livestock-rearing
Governments use carbon taxes and cap-and-trade
community.
systems to deter greenhouse gas emissions. Carbon taxes
In some locations, fragile environments will be especially impose a fee on energy and production processes that
prone to natural disasters such as landslides. The effect on emit carbon dioxide and other greenhouse gasses.
transport infrastructure will hurt SMEs, which need these Such taxes, including levies on greenhouse gas-emitting
lifelines for their businesses.63 fuels, have been, or are scheduled to be, implemented in
30 national and subnational jurisdictions.68
Furthermore, ecosystems that have been compromised by
climate change, land use changes and other causes have In a cap-and-trade system, a regulatory body decides the
lower biodiversity, which scientists say is a root cause of maximum amount of permissible emissions by industry and
outbreaks of animal and insect-borne zoonotic diseases issues a corresponding number of emission allowances that
such as COVID-19 and Ebola.64 More severe global companies can buy and trade with one another. Limits on
warming will accelerate biodiversity loss,65 which in turn is the industrial emissions of greenhouse gasses have been
predicted to increase the likelihood of more COVID-type set through 31 cap-and-trade schemes, including the
pandemics in the future.66 As we are now keenly aware, European Union’s Emissions Trading System.69
this type of shock tends to hit SMEs the hardest.67
International policy frameworks also influence national
SMEs need national regulatory approaches to climate that climate policies. The Paris Agreement entered into force in
are well integrated with other environmental objectives and 2016 and requires its 196 signatories to submit nationally
programmes, including through nature-based solutions to determined contributions to reduce national greenhouse
climate change that support the ecosystems and gasses. In early 2021, United States President Joseph
biodiversity they depend on for inputs. Biden signed an executive order to re-join the Paris
Agreement, furthering global momentum.

BUSINESS VOICE
When the water runs out

This olive farm specializes in producing olive oil. It moved
from livestock rearing to growing olives to adapt to climate
change.
‘Before I was an olive farmer, I reared livestock. I abandoned this in 2010

because I lost about 1,400 animals due to drought and fodder deficiency.
Droughts are becoming more frequent in my region as temperatures rise.
For many people in my community this poses a threat to their livelihoods,
as they rely on livestock for income.
Water table levels also are going down. In a 60km radius around our
Ahmed Khan Buzdar village, we were unable to find any water. Because of this scarcity, farming
is not an option for most people. On my private land I was lucky enough to
Owner, Burg Olive find some water and set up a tube well. I also have built a small dam to
Oil Products, save rainwater during the monsoon season.
Pakistan
Planting olive trees was a way for me to adapt to the changing climate.
They are drought-resistant plants that require little water, are evergreen
and can survive temperatures up to 50 degrees Celsius.
My olive oil is used in homeopathic treatments to address health

conditions such as diabetes and arthritis. Olive shoots and leaves are
by-products of the oil production that I use to feed my remaining livestock.
They are very nutritious fodder that improves meat quality. I have also
started to produce olive tea, made from the leaves.
I am participating in ITC’s GRASP project to learn more about best farming

practices. Recently, I joined an exposure visit where we discussed the
latest innovations in olive value chains and were taught about orchard
management, grading, packaging and marketing.’
The Growth for Rural Advancement and Sustainable Progress (GRASP) project, funded
by the European Union, focuses on rural SMEs in two Pakistani provinces, in the
horticulture and livestock sectors, with an emphasis on climate-smart agriculture.

FIGURE 17 More than one-quarter of firms view environmental regulations as obstacle
100%
Environmental
80%
regulations not
63 an obstacle
60% 68 69
75 72
Environmental
40% regulations
an obstacle
20% 37
32 31 28
25
0%
National Adaptation Plans fostered by the UN Framework normal year-on-year variation.74 Many support programmes
Convention on Climate Change (UNFCCC), the parent during the pandemic nurtured business as usual, including
agreement to the Paris Agreement, have been taken up by support for carbon-intensive industries and fossil fuel use.75
developed and developing country alike, sometimes with
To ‘build back better’ after COVID-19, some governments
private sector involvement.70
are providing incentives in their recovery efforts for
Countries accounting for half of global GDP have investments to reduce greenhouse gasses. These include
committed to achieving ‘net zero’ emissions by 2050.71 financing green infrastructure, providing energy-efficient
These commitments, and accompanying regulation on retrofit subsidies and investing in sustainable agriculture.76
how to achieve them, are more prevalent among
Access to concessional loans or recovery programmes is
developed countries.72
sometimes conditional on commitments to cut greenhouse
Globally, roughly $400 billion is spent on subsidies for gasses. Some governments also subsidize SME access to
fossil fuel production and use. Removing these subsidies cleaner renewable energies.77 Yet many SMEs continue to
could make greenhouse gas emissions in 2050 6%–8% rely on fossil fuels to power their operations, and need
lower than they would be otherwise. In 2009 the G20 more support to switch to cleaner energy.
pledged to ‘rationalize and phase out’ fossil fuel subsidies,
SMEs need clear, predictable regulatory approaches to
describing them as ‘inefficient’ and ‘wasteful’.
mitigate climate change in order to plan their own green
New climate policies, regulations, laws and taxes, while transition. Governments that communicate their plans
necessary, may lead to regulatory risks for SMEs. There are to achieve carbon neutrality – and specify the related
financial costs associated with becoming compliant, and technical and financial aid to assist small businesses –
fees incurred for non-compliance.73 Among African firms make it more likely that businesses get up to scratch by
interviewed for the ITC SME Competitiveness Survey, 28% the time the regulations are imposed.
said that environmental regulations were an obstacle to their
operations (Figure 17). Interestingly, fewer micro-sized firms Sustainability standards are multiplying
found these regulations to be an obstacle than larger firms.
Sustainability standards are increasingly necessary to
Environmental regulations may be more stringent in access markets. They complement government
agriculture and manufacturing. Agricultural and regulations, and are developed by business, civil society
manufacturing firms were significantly more likely to organizations and multi-stakeholder initiatives.78
see environmental regulations as an obstacle than those
Sustainability standards signal to environmentally-
in the services sector, according to the survey.
conscious buyers, including corporate purchasers and
Voices pushing for a green recovery became louder during consumers, that firms follow certain desired environmental,
the pandemic, and with good reason. While economy- social and ethical practices. However, SMEs come up
stopping measures temporarily reduced greenhouse gas against formidable knowledge and financial barriers to
emissions, the estimated reduction of 4%-8% was within adopt sustainability standards.

For some firms, going green is necessary to maintain Sustainability standards have also made their way into
market share. Consumer and buyer sustainability demands public regulations.86 In 2018 the Republic of Korea began
compel many businesses to take climate action. A smaller requiring timber operators to show proof of certification to
carbon footprint can lead to a better corporate reputation at least one scheme in its list of voluntary sustainability
and competitive edge, especially in sectors with relatively standards. Government regulations requiring specific
homogeneous products.79 voluntary sustainability standards as proof of corporate
due diligence on sustainability have been adopted in the
Companies without green credentials may face
EU, France and California.87 Public procurement of certified
reputational risks that could make them lose business,
green products is also growing.88
particularly with developed country buyers. Most buyers
in developing countries do not place heavy emphasis on Private benchmarking initiatives have arisen to assess
sustainability criteria, though attitudes are shifting.80 which standards are considered sufficient to supply into
In China, for example, green marketing and consumption a given market.89 For example, soya bean sustainability
increased dramatically over the last decade.81 schemes can apply to be benchmarked against the
European Feed Manufacturers’ Federation’s Soy Sourcing
Attuned to these changes, more than 90% of chief
Guidelines if they wish to export to the European market.
executive officers surveyed by the UN Global Compact
believe that sustainability will be important to the success Voluntary sustainability standards ballooned from just 15
of their business.82 In part because of public and in 1980 to more than 262 in 2020.90 In commodity markets,
shareholder pressure, many publicly-traded companies Rainforest Alliance, organic, GLOBALGAP and other
in developed countries are embarking on their own green schemes are growing rapidly, with the acreage dedicated
transitions. to them increasing by 52% between 2014 and 2018,
according to the State of Sustainability Markets.91
Regardless of whether large companies’ green marketing
campaigns reflect a real belief in sustainable firm Paradoxically, the proliferation of sustainability standards is
practices,83 many large companies are adopting limiting their potential, particularly for SMEs. The multiplicity
sustainability schemes and pressuring their supplier SMEs of standards, as well as the stringency of requirements,
to go green as well.84 Several industry platforms have make them technically and financially challenging for small
emerged to craft and monitor voluntary sustainability businesses.92 The fixed costs of initial certification are
standards in key international value chains.85 proportionately more onerous for SMEs.93 Evidence from
The Roundtable for Sustainable Palm Oil, for example, almost 5,000 companies interviewed for ITC’s SME
is a non-profit, multi-stakeholder platform to develop and Competitiveness Surveys shows that smaller firms tend to
implement international standards. adopt sustainability standards less often than larger firms
(Figure 18).
FIGURE 18 Smaller firms are less likely to be certified to a sustainability standard
100%
Not certified to
80%
sustainability
63 standard
60% 76
87 86 Certified to
95
40% sustainability
standard
20% 37
24
13 14
0% 5
Source: ITC SME Competitiveness Surveys of 4,844 respondents interviewed between 2017 and 2020 in Argentina, Benin, Botswana, Burkina Faso, Cambodia,
Ghana, Hungary, Kenya, Myanmar, Nigeria, the Philippines, Togo, Ukraine and Zambia. See Annex II for detail.

Lead firms in value chains can facilitate small business Often SMEs are unaware of the range of investment tools
sustainability by aligning and streamlining certification available nationally and internationally for climate finance.
requirements, and providing funding and technical Green investments that could lead to predictable savings,
expertise to help small companies switch to green such as through energy efficiency, are not understood as
production processes. Including SMEs in the design and a quasi-revenue stream and monetized as such in lending
governance of standards, as well as providing technical decisions.
assistance and sharing costs, can foster SME participation
When standard banks offer green financial products,
in international trade governed by sustainability
they are often available only in combination with technical
standards.94
assistance programmes. These programmes build
capacity of recipients, but use bank human resources
Green finance overlooks small businesses intensively. As a result, participation is restricted to few
New funds to finance green investments offer opportunities beneficiaries.
for eligible small businesses. At the same time, some
These schemes often have cumbersome application
financial institutions are introducing environmental criteria
procedures, and require proven business models and
for loan eligibility, which risk excluding SMEs.
reliable measurement of energy consumption.104 If SMEs
The green finance market is booming, with significant fail to disclose climate risks and performance, this
funding available for climate-relevant investments.95 Both perceived lack of transparency undermines the screening
private and institutional investors have increasing appetite efforts of would-be investors in climate mitigation and
for projects that reduce carbon emissions or implement adaptation initiatives.105
innovative adaptation solutions. Many asset holders have
Impact investors expect clear reporting on sustainability
committed to reducing the negative environmental impact
issues as well as a high financial return. The average SME
of their investments, or have taken a proactive approach by
falls short on both fronts. As a result, the supply of ‘climate
investing for positive environmental change.96
liquidity’ frequently exceeds demand.106 Financing climate
In 2019, 3,300 companies with $81.7 trillion in assets under projects faces a double challenge of high transaction costs
management had committed to the UN-backed Principles for lending to small companies and little lender expertise
for Responsible Investment.97 The OECD has drafted on climate projects.
guidelines for export credits that give special treatment to
Given these difficulties, there is policy space for govern-
green projects.98 Multilateral development banks have
ments, international and business support organizations to
pioneered green bonds and are increasing investments in
facilitate access to climate finance by SMEs.
climate funds in developing countries. Impact investors
offer green bonds where the proceeds from the offering
are applied exclusively towards funding green projects. Circular economy requires openness
Lead firms, government procurement offices and
Defining green investments remains a work in progress,
consumers are starting to show preferences for products
however. The green finance market still lacks a
made in a ‘circular’ manner. SMEs that fail to learn to cycle
harmonized, reliable benchmark and transparent
their production processes risk being excluded from
evaluation methods.99 The IRIS+ impact investing
markets. Those that go circular can reduce their input
assessment scheme is one of the most popular means by
costs, generate new revenue streams and tap into new
which investors assess the environmental impact of their
markets.
investments.100 The EU in 2020 adopted criteria defining
sustainable investments, designed to facilitate the raising The circular economy is changing how goods and services
of private and public finance for these ventures.101 Some are produced and consumed. It represents a shift away
developing country banks have also issued guidance on from the ‘take-make-waste’ approach of the linear
green finance.102 economy, in which goods are produced from non-
renewable sources, used by the consumer for a limited
Some green finance aspects have excluded SMEs. What
amount of time and thrown away, often destined for
undermines SME access to finance in general also applies
incineration or landfills.
to green finance. For example, high transaction costs often
make it difficult to match SMEs to investors interested in In the circular economy, products cycle through phases of
larger financial instruments.103 reuse, repair, refurbishment, remanufacture and recycling
that keep them generating value over several generations

of use. By decoupling economic activity from inputs that Melting polar ice caps make a Northern Arctic Sea route
emit greenhouse gasses, the circular economy approach commercially viable, undermining traffic through the Suez
reduces economic activity pressures on the environment. Canal and affecting associated trade flows.114 Frequent
storms in tropical seas and higher fossil fuel costs may
Firms that are part of value chains associated with the
reduce maritime shipping connections to small island
supply of virgin materials may suffer due to decreasing
developing States, and hurt their exports.115
demand. Yet, opportunities arise from the ‘servicification’
of circular linkages. Demand for support services for the What’s more, today’s interdependent value chains mean
circular economy abound – for example in waste that climate events that affect one firm spread to others in
management to increase the availability of recycled the chain, even if they operate in unaffected regions.
materials107 and repair services to extend the life of Tropical storms, for example, impair factories, roads,
products already in the market.108 ports and other infrastructure.116 They threaten access to
inputs,117 with risks spreading quickly across value chains.
Knowledge is a key barrier to SMEs incorporating the
circular economy into their business processes. They need For SME exporters to cope, technical assistance can
greater access to technical advice on circular ways to help them to assess how climate change will affect their
reduce costs, improve sales and strengthen linkages in competitiveness on world markets. Environmental
international value chains. management services, either locally or imported, can
enable them to access the knowledge they need to plan
Cross-border movements of materials intrinsic to the
tomorrow’s climate-resilient business model.
circular economy – waste and scrap, secondary raw
materials, second-hand goods and goods intended for
refurbishment and remanufacturing – can help SMEs Trade policies respond to climate change
exploit the opportunities associated with circularity.109 Policies to prevent energy-intensive industries from
relocating to countries with less strict climate regulations,
a phenomenon known as carbon leakage, will affect the
Climate change: Impact on trade exports of SMEs.118 Border carbon adjustments address
competitiveness carbon leakage by imposing taxes on products imported
from countries with less strict environmental regulation
The planet’s biophysical changes will alter trade patterns in
than the importing country.
the years ahead. Trade policy responses and international
value chain practices will affect the extent to which This aims to ensure that the final product price reflects
humanity is able to mitigate its emissions of greenhouse the higher compliance cost in importing countries.
gasses – and adapt to climate impacts.110 Governments may also rebate environmental compliance
costs to producers exporting to countries with lower
Biophysical changes impact trade flows environmental standards.119
The physical impacts of climate change are affecting Feasibility, modalities and implications of border carbon
export competitiveness. Global export shares will shift in adjustments have been discussed for more than a
response to the new relative competitiveness of countries. decade.120 The European Commission, for example,
is developing a border carbon adjustment mechanism to
Firms may see a drop in productivity or higher production
accompany its European Green Deal, and is expected to
costs, losing market share to firms elsewhere, due to
publish its proposal in mid-2021.121
changing climate conditions. This will adversely affect
SMEs in climate-affected countries, and particularly in Border carbon adjustment proposals currently focus on
LDCs and small island developing States, where export commodities that are emission-intensive and exposed to
baskets tend to be more concentrated.111 trade, such as steel, aluminium, chemicals, pulp and
paper and fertilizers.122 Developing country agricultural
Agriculture, fisheries and tourism in tropical regions may
exports are unlikely to be affected since most border
see productivity drop due to higher temperature. Firms
carbon adjustments explicitly exclude agricultural trade,
from these sectors in temperate countries may find their
and developing country production processes are relatively
competitiveness improves, as their weather becomes more
less carbon intensive.123 Services and most manufacturing
favourable.112 Some of the world’s breadbaskets may even
sectors are excluded from border carbon adjustments
become infertile, while new regions will be cultivated for the
discussed to date.
first time.113

Climate policies have not only been made at the domestic Restructuring international value chains
level in environmental forums. Regional and international
Lead firms are reorganizing their value chains to make
trade policies are also playing a proactive role.124 Regional
them more resilient to climate-induced shocks and to
trade agreements, such as the recent accord between the
reduce their carbon footprint. This trend risks excluding
EU and Vietnam, promote sustainable forestry trade, in the
SMEs that cannot demonstrate their sustainability. It also
hopes of stemming deforestation (which accounts for at
opens doors to new SME suppliers, as lead firms diversify
least 8% of annual global greenhouse gas emissions).125
their upstream value chain.
The WTO is crafting new international rules to reform
fisheries subsidies to protect ocean ecosystems as well as At their peak, international value chains coordinated the
small-scale fisherfolk livelihoods.126 movement of 80% of world trade.133 Lead firms have
directed these value chains towards higher efficiency –
Climate-related trade measures may pose market access
marked in the extreme by just-in-time production methods
risks for exporting SMEs. Exporters will need to be in line
that shuttle small inventories around the world through
with domestic regulations as well as rules in destination
rapid, lean flows.134 The pandemic made clear that these
countries. Small companies may have to cope with
highly efficient international value chains could also be
uncertainty due to market access fluctuations as rules
vulnerable.
change.
Lockdowns in one country reverberated throughout the
There are business opportunities in identifying and
system, leading to shortages elsewhere.135 In the wake of
reducing carbon footprints now to gain secure, preferential
this value chain contagion came COVID-induced calls to
trade access later.127 As companies strive to become
relocate production to home countries (onshoring) or to
compliant with new government regulations, access to
neighbouring countries (nearshoring). However, bringing
green technologies will be critical.128 Environmental goods
production closer to home could be bad for GDP and
are used by SMEs to prevent or minimize pollution and
resilience.136
greenhouse gas emissions. Many states are reducing their
tariff and non-tariff barriers to such technology imports, Lead firms are in fact restructuring their chains to be more
with a view to facilitating SME access to the tools they resilient, instead of shortening them.137 Investing in
need to respond to climate change.129 resilience can foster more stable sales within value chains.
It also reduces exposure to localized climate shocks, by
To take advantage of environmental goods, SMEs also
diversifying sourcing from multiple producers in multiple
need access to complementary climate-friendly services.
countries.138
Construction workers build energy-efficient buildings,
waste management workers help reduce pollution, and Supply chains that were once based on single-country
other environmental service providers are also key to the sourcing and selling may thus become more international.
green economy. They often use imported environmental This generates opportunities for SMEs in previously
goods to perform their tasks.130 overlooked locations.139
While services are in many cases locally sourced, Value chain buyers also are making efforts to reduce their
facilitating trade could also open opportunities for environmental footprint. They seek suppliers with proven
providers from overseas to deliver environmental services, climate credentials, and are building stronger relationships
particularly where local know-how about new technologies with them.140 The relationship-building includes investing in
is limited. Engineers, training service providers, business suppliers to improve their capacity to manage for sustaina-
management consultants and green machine maintenance bility and performance. This market-based mechanism
mechanics have potential for cross-border services trade ‘pulls’ SME suppliers into the climate transition, in contrast
to support the SME green transition.131 to regulations, which ‘push’ them into it.
Greater environmental awareness may provide a golden SMEs need technical assistance to get certified to the
opportunity to accelerate progress towards the 2030 sustainability standards needed to thrive in international
Agenda for Sustainable Development through trade, value chains. In so doing, they access value chain
as long as governments avoid protectionist tendencies. upgrading opportunities, higher value export markets, and
World Trade Organization rules as well as trade more stable and larger market share. Uncertified SMEs risk
agreements could have relevance in addressing climate being excluded from the selected group of suppliers.
policies, with implications for trade flows.132 Instead, they could be left behind in shrinking low value
markets.

FIGURE 19 Carbon footprint: Domestic and imported asparagus in a German supermarket
Imported air freighted

6.534 CO2
Peruvian asparagus
Domestic off-season heated

1.57 CO2
greenhouse trucked German asparagus
Imported boat container shipped

1.183 CO2
Peruvian asparagus
Domestic in-season field grown trucked

0.815 CO2
German asparagus
Note: C02 refers to carbon dioxide equivalent greenhouse gas emissions.

Source: Schäfer, 2013.
Imports can have lower carbon footprint relevant.145 Moreover, the carbon intensity of shipping
decreased by 28% between 2008 and 2018, according to
Trade trends are likely to shift in response to mitigation and
the International Maritime Organization, and it plans to lead
adaptation policies, with implications for SMEs. In 2014,
efforts to cut maritime emissions in half by 2050.146
the transport sector accounted for approximately 23% of
global greenhouse gas emissions.141 This significant share A product’s carbon footprint depends on the distance
of emissions led many to equate green production with over which it travels, and also on how it is made. Some
local sourcing. production systems and locations are more energy-
intensive than others. Tomatoes grown in greenhouses, for
This could lead to trade measures that use language
example, are 10 times more energy-intensive than those
related to climate change, but are designed to protect
grown in open fields.147 How long food is stored before
local producers. Such an approach would hurt SME
retail also contributes to emissions.
exporters in developing countries. Instead, sustainability-
induced trade measures should be based on carbon In other words, imported products made in low-carbon
emission facts, and support export and development ways that are shipped via maritime transport may be more
aspirations of developing countries. climate-friendly than domestically made products
(Figure 19). Air freight, however, is energy-intensive and
Consuming products that are made domestically, or within
can outweigh the lower emissions associated with
the region, is often assumed to be better for the planet’s
production in more energy-efficient environments.
climate than consuming products imported from far away.
This may not always be the case. As humanity emerges from the disruptions of COVID-19, it
is faced with an even larger challenge – climate change.
Most transport emissions come from road vehicles,
The lessons from the pandemic are informing new patterns
not maritime shipping.142 Maritime freight shipping emits
of consumption, production and trade, characterized by
about two grams of C02 equivalent per tonne over a
greater efforts to mitigate and adapt to a changing climate.
kilometre, while for road trucking it averages around
150 grams, according to the IPCC.143 This implies that Yet the transition should leave no one behind. For this,
maritime shipping releases almost 100 times less small businesses will need support to adjust to new
greenhouse gas emissions per kilometre than regulations, sort through the ballooning number of
3.5-ton-trucks on roads.144 sustainability standards, tap green financing opportunities
and embed circular economy practices in their businesses.
Products imported by sea still need to be distributed
Climate change responses should be designed to make
locally via trucks. Yet the sea-based part of the journey
the green transition feasible – and profitable – for SMEs,
plays a relatively small role in their carbon footprint. Road
particularly those in hard-hit developing countries.
distance and trucking network efficiency are much more

© shutterstock.com
THOUGHT LEADER
THOUGHT LEADER
Climate change creates challenges

and opportunities for SMEs
William R. Moomaw
Professor Emeritus,
As the macro economy shifts to respond to climate change,
The Fletcher School, and is buffeted by pandemics, small and medium-sized
Tufts University enterprises (SMEs) are forced to adapt and become more
Distinguished Visiting sustainable or face failure. Those in developing countries
Scientist, Woodwell Climate are especially vulnerable.
Research Center, USA
I t is becoming all too clear that a warming world is not simply a gradual process with
a few additional milder days in winter, and longer summer seasons. The differential
heating of the planet – much greater at the poles – has led to changes to the jet stream
and to ocean currents with resulting increases in intense precipitation and storms
punctuated by longer and more intense droughts and fires.
These erratic weather patterns are posing major challenges to SMEs, especially those in
agriculture. They must change their operating model to become more resilient and reduce
climate altering emissions.
Governments are finally mobilizing to address climate issues. Their sometimes mixed and
changing messages – or the absence of policies – can create regulatory risk for
companies. Governments must convey their policy intentions clearly so that SME
managers can avoid making investments or embarking on ventures that run counter to
future government measures.
Incentives work best

As a lead author of five major Intergovernmental Panel on Climate Change Reports, I have
evaluated technologies and strategies to promote resiliency and address growing climate
challenges. Incentives have proven more effective than penalties to encourage the
needed transformations. Policies to discourage use of fossil fuels, such as price hikes,
should be accompanied by compensation to assist SMEs and others to switch rapidly to
new, cleaner forms of energy and prevent the often violent opposition to such measures.

THOUGHT LEADER
For example, Norway is fostering use of electric vehicles by eliminating its high vehicle
purchase tax, establishing rapid charging stations, reducing tolls and providing dedicated
parking. Norwegians are far ahead in replacing petroleum powered vehicles, even though
much of the country’s wealth comes from oil and gas production. Less affluent countries
such as Nepal have accelerated the shift to electric ‘motorized rickshaws’ by making them
easier to purchase and operate.
While smaller firms may be more vulnerable to changing weather patterns and regulatory
risks, many have been at the forefront of innovation. In Europe and North America, organic
agriculture began at small scale and is now the fastest growing sector of food production.
In Niger, an innovative agroforestry farming method that responded to increasing
temperatures and erratic rainfall was developed locally and transmitted from village
to village. It now serves several million people.
While not every small start-up in the back room of someone’s home will become
a technological giant, most large firms began as a small enterprise.
The key challenges for SMEs to become resilient to climate change are threefold:
Building capacity, which includes the ability to modify dysfunctional business models
or accept new technologies;
Finding and accessing financial resources;
Responding to changing external market conditions.
SMEs as innovators
Building capacity in developing countries to replace expensive diesel generators and
their fuel with less expensive solar panels and batteries avoids the need to build large,
expensive electric grids to bring power to homes and businesses. It also creates
self-reliant communities, improves overall well-being and provides new opportunities
for SMEs.
When lack of electricity in Africa’s rural areas made mobile phone charging difficult, for
example, enterprising village women borrowed money to buy a solar panel and phone
charger. In Tilonia, Rajasthan, the Barefoot College has trained thousands of poor village
women to be ‘solar engineers’ who have brought solar panels, lanterns and ovens to rural
India and several African countries. They also service and maintain these systems.
Creating these innovators entails overcoming the financial limits that traditionally hamper
adaptation by SMEs. The microfinancing pioneered at scale by the Grameen Bank in
Bangladesh and its imitators has underwritten a revolution in climate adapted small
enterprises. Women now produce marketable goods, and have gained a higher status in
their communities.
Once SME-based economies are secure and resilient, they move beyond basic needs
and begin to make marketable goods for local markets and eventually for export. This is
already happening, with fair trade organizations purchasing food items and handicrafts
from SMEs and marketing them internationally.

CHAPTER 3
Going green as a business opportunity
The transition to sustainable practices is a challenge – clearly communicated, give incentives for SMEs to
and also an opportunity for SMEs to strengthen their proactively reduce their carbon footprint.
competitiveness and resilience. Although 58% of the firms
Access to markets: Environmental products, services
surveyed by ITC in 2019 expect climate change measures
and processes can propel small businesses towards
to affect them negatively, 39% expected some positive
greater revenue. Given growing demand for sustainability,
impact.148
many SMEs are greening their operations to maintain or
Adopting sustainable practices is not only about access markets. For small businesses selling to climate-
businesses being good – it is also about good business. conscious buyers domestically or internationally, going
green is a survival imperative. For others, certification to
The following five factors drive the SME business case for
sustainability standards can open lucrative new
‘going green’.
opportunities, as lead firms look for suppliers to diversify
Increased resilience: Targeted investments that boost access to inputs and increase resilience to shocks.
business ability to cope with the impact of global warming
Eligibility for green financing: Financial institutions
can improve competitiveness. Through strategic
increasingly include sustainability criteria into their
improvements in business operations, management
decision-making. SMEs that prepare shovel-ready climate
practices and business models, small businesses can
mitigation or adaptation projects can be first in line to
build their resilience, foster agile operations, and support
access funds from eager investors. As financial institutions
their economies and societies in adapting to climate
of all stripes undertake a green transition in their own
change.
operations, firms that develop a track record of financially
Cost reductions and higher productivity: Lower costs viable climate action now will have access to liquidity in the
and higher productivity are some of the most convincing years ahead.
reasons for green SME investments in developing
Taking action on these factors can lead to improvements in
countries.149 Production processes that use fewer
all three pillars of ITC’s competitiveness framework
resources lower input costs and improve profit margins.
(Figure 20).
Eco-efficiency technologies allow small businesses to
produce more from the inputs they have while reducing – Through resource efficiency, sustainable packaging
or even earning value from – waste. Environmental and certification to sustainability standards, a company
investments also increase long-run productivity,150 can enhance its ability to compete.
counterbalancing some of the loss in productivity from
Digitally-enabled supply chain linkages and adopting
climate change.
circular economy principles can deepen the firm’s
Compliance with climate regulations: As more connections with buyers and suppliers.
governments adopt policies to address the climate
Adapting to climate change, accessing green finance
challenge, many SMEs are adjusting their practices for
and environmental innovation can enhance the firm’s
compliance or to stay ahead of the curve.151 Existing or
capacity to change in response to global warming.152
expected regulations or trade rules, when coherent and

GOING GREEN AS A BUSINESS OPPORTUNITY
FIGURE 20 Compete, connect and change by going green
Green opportunity Pillars of competitiveness
Resource efficiency
Sustainable packaging COMPETE
Certification to standards
Digital technologies
CONNECT
Circular economy
Green finance
Eco-innovation CHANGE
Adaptation
Source: ITC.
Boosting capacity to compete
Small and medium-sized enterprises that reduce their Fifty-six SMEs took part in resource efficiency interventions
greenhouse gas emissions often enhance their capacity to in 2019–2020 in Ethiopia, Jordan, Kenya, Peru and
compete in the short term. Initiatives to improve resource Vietnam, carried out by ITC. Working with environmental
efficiency, package sustainably and obtain certification experts, the firms developed 202 resource efficiency
advance environmental objectives, and enable SMEs to measures relevant to their agricultural, apparel and tea
meet market requirements. enterprises. These ranged from installing LED bulbs to
replacing industrial hot air machinery with energy-efficient
Resource efficiency lowers costs ones. Others replaced fossil fuel with renewable energy
sources, such as solar panels.
Natural resource inputs are costly both for the bottom line
and the planet. Indeed, many SMEs are already interested in These resource-efficiency projects yielded environmental
green practices for their potential to reduce production and financial dividends – reductions of 15 tons of C02
costs. Reorganized production processes can cut input equivalent emissions and savings of $14,700 per year,
costs and waste, and improve productivity.153 More efficient on average. Steam equipment, solar energy, and changes
use of lighting, heating, water, gas and transportation in electricity equipment were the most common measures,
reduces associated costs, while lowering emissions. though these varied by industry (Figure 21).
FIGURE 21 Top SME resource efficiency measures: Steam, solar power
Steam equipment 20 22
Solar energy 11 2 11 1
Electricity equipment 4 1 16 2
Lighting 15 1
Air conditioners 9
Energy management or audit 2 1 6
Replacement of motors 8
Rainwater harvesting 7
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Textile and clothing Agriculture and agrifood (excluding tea) Tea Other
Note: Values represent the number of measures in most popular categories, selected by 56 firms in Ethiopia, Jordan, Kenya, Peru and Vietnam.
Source: ITC Resource efficiency and circular production interventions, 2019-2020. See Annex II for detail.

BUSINESS VOICE
Resource efficiency boosts profits

This textiles and clothing producer does all stages of
manufacturing in-house. To reduce costs, it analysed its
resource use and is implementing resource-saving
strategies.
‘In Morocco, water shortages are the most pressing issue related to
climate change. These have not impacted our production yet. They do,
however, have the potential to make our resource inputs more expensive
in the future. We are therefore pre-emptively engaging in adaptation.
Because it is difficult to identify shortcomings in the manufacturing

Hachmi Chenik processes ourselves, we opted to join ITC’s GTEX MENATEX project.
Its experts looked at our water, fuel and electricity use at different
Technical director, ITEX, production stages and, after a cost-benefit analysis, suggested measures
Morocco through which we could decrease these inputs.
We implement measures that do not need external funding and have a

pay-back period of three years or less. Some measures do not require any
additional investment – it is all about knowing what to do. We have
finalized two energy-reducing solutions: installing a photovoltaic system
and thermal insulation of hot surfaces. We are putting in place further
measures that reduce our energy, fuel, water and chemical use and
generate less waste.
Making our production more resource efficient is increasing our resilience

and also helps us lower input costs. As a result, we can decrease the
price of our products, become more competitive and attract new buyers.
Sustainable production allows us to retain customers that are becoming
more concerned about the environmental footprint of the goods they buy.
I encourage other companies to investigate their use of resources. Not

only does it have a positive effect on the environment but it also lowers
costs and increases profits.’
GTEX MENATEX, funded by the State Secretariat for Economic Affairs of the Swiss
Confederation and the Swedish International Development Cooperation Agency,
encourages textiles and clothing exports to promote employment and income
generation.

Installing renewable energy sources, such as solar arrays, Sustainable packaging reduces waste
is a popular measure. These can link with mini-grid
Appropriate packaging ensures products arrive safely, yet
systems that feed excess energy back into the grid,
is not wasteful. It must be optimized to product shelf life,
generating additional revenue or credits.
and length and means of transport. Such packaging
Quick wins are possible by greening buildings.154 makes better use of space, minimizes package
Optimized lighting systems use LED bulbs and smart dimensions and reduces the quantity of material, lowering
sensors to reduce electricity use and thus greenhouse resource and transportation costs.
gas emissions. Improved insulation, in conjunction with
The packaging material of choice for businesses around the
effective windows and efficient heating and fans, reduces
world is plastic. This secures billions of dollars’ in goods
small business energy bills. Water harvesting systems,
– many of which are, themselves, made of plastic. As more
such as rooftop or rainwater gathering pits, reduce
than 98% of plastic production relies on fossil fuel feedstock,
irrigation and water pumping costs.
sustainable packaging is essential to reduce emissions.158
Many governments favour SME investments in greening Much of global plastic use is dedicated to single-use
their premises, providing subsidies and/or reducing packaging, and plastics are projected to account for 15%
property taxes. Moving to a building constructed expressly of the global annual carbon budget by 2050.159
with a smaller environmental footprint also generates
More recycled content and multiple-use packaging can
financial savings through lower energy use and can benefit
reduce waste, lower input costs and respond to market
from government incentives.
demand.160 Some businesses now eschew the use of
Greening production processes also reduces firm-level plastic entirely, in favour of more sustainable packaging
energy use. Retrofitting or upgrading machinery for options. Biodegradable, compostable, and renewable-
efficient electricity use reduces energy bills and fossil fuel source packaging materials such as bamboo can be used,
burning. High energy prices strengthen the financial case so long as companies meet the needs of transportation,
for cutting energy use. protection and preservation. A life cycle approach to
plastics and their alternatives can help enterprises choose
SMEs that improve their waste management practices,
the best option for the environment, the firm and its
notably through the appropriate handling of hazardous
customers.161
chemicals, increase their efficiency, reduce their
environmental footprint and enhance the occupational In most regions, virgin packaging (e.g. plastic bought
health and safety of their workers.155 directly from the fossil fuels refinery) is less expensive than
recycled materials. Hence, for many SMEs, there is a weak
Resource efficiency is relevant to exporting and non-
financial incentive to switch to sustainable packaging.
exporting firms, as benefits derive from lower operational
Regulations that make fossil fuel-based inputs relatively
costs. These benefits may nonetheless be most readily
expensive and subsidies that make renewable packaging
available to firms in the manufacturing sector, in which use
cheaper can tip the scale.162 These measures are enabling
of material inputs and energy are higher.156
conditions for sustainable packaging strategies to be
In agriculture, replacing fossil-fuel intensive pesticides commercially viable.
and fertilizers with organic substitutes reduces costs and
the carbon footprint. Appropriate techniques maintain Certification signals quality
productivity,157 and the shift reduces exposure to input
In a context of increasing buyer sustainability demands,
supply shocks. Moreover, it improves soil health, fostering
firms can improve sales by demonstrating green
the resilience of farming systems.
credentials. Adopting voluntary sustainability standards
The case of ITEX, a Moroccan textiles and clothing encourages sustainable production as mandated by
producer featured in this chapter’s Business Voices, SDG 12, while supporting quality and productivity
illustrates how resource efficiency measures increase improvements.163
enterprise resilience and lower input costs. The case
Most small and medium-sized enterprises are aware of the
shows that SMEs often need expert technical advice to
standards required to meet the sustainability requirements
assess business practices and find the most appropriate
of their current buyers. There are dozens of carbon
technologies to improve resource efficiency.
footprint measurement and reporting schemes that can
help SMEs benchmark and communicate about their green
transition.164

Adopting a standard can reduce firms’ emissions, so they online for potential suppliers and information on production
can play their part in mitigating climate change. At the conditions. To prepare for and respond to climate risks,
same time, certification can help them keep current buyers some businesses access data on local and destination
and access new ones, expanding access to markets. weather conditions online.
Certified companies have a better chance of securing Digital technologies improve the footprint of transport and
longer-term contracts that set quantities and prices in logistics in supply chains.171 A company’s supply chain
advance. As such contracts often reduce uncertainty,165 produces, on average, 5.5 times as much greenhouse
SMEs that sign them have a greater incentive to invest in gasses as its own operations.172 Blockchain and other
quality, adaptation to climate change and productivity- tracking technologies can help trace sustainable practices
enhancing innovation, which may also be financially along the value chain.173 Digital supply chain technologies
supported by buyers. can help improve the coordination of truck routes, which
shortens delivery times, boosts capacity utilization, lowers
Certification also can be helpful in accessing new markets
costs and reduces greenhouse gas emissions.174
and diversifying the portfolio of sales of SMEs.166 One
United Kingdom buyer, who sourced horticultural products Lack of internet access hinders SMEs in developing coun-
from developing countries, pointed out that being certified tries, creating unequal competitive conditions compared
to GLOBALGAP or other sustainability schemes can open with their developed country counterparts. Governments
up the entire United Kingdom market. and business ecosystem actors that expand access to,
and skills for, internet access and communication technol-
When certification draws additional buyers, it improves
ogies, particularly in remote areas, provide crucial support
resilience.167 Even if one client stops buying because of
to SMEs in the digital and green transitions.175
a climate-induced impact, SMEs can sell to another one.
When SMEs focus all their sales on a single certified buyer,
they risk reducing their resilience to shocks – as seems to Circularity provides data and networks
have been the case during the COVID-19 pandemic.168 The circular economy allows companies to access new
partnerships, expand business networks, generate
additional revenue and find ways to cut costs.
Strengthening capacity to connect
SMEs can begin to reap the benefits of circular economy
Going green enhances the ability of small and medium- practices by moving away from non-renewable inputs. This
sized enterprises to connect. Initiatives to deploy digital will make them more resilient, given that commodity supply
technologies and adopt circular economy approaches are chain fluctuations affect recycled inputs less. It also allows
used by small businesses to mitigate and adapt to climate firms to anticipate future environmental regulations linked
change. to climate change.176
In the process, they strengthen relationships with buyers, Waste generated in regular production processes can
suppliers, consumers, business support institutions and either be reintegrated into production or sold, eliminating
value chain partners. Given their strong links in local or reducing the need to pay for disposal. This also
communities, small and medium-sized enterprises can be provides business opportunities for other enterprises.177
a source of social and environmental change.169
Businesses engaged in manufacturing can strengthen their
relationships with clients and consumers by offering to fix
Digital technologies ease access to information broken products or by encouraging buyers to return items
Businesses use digital technologies to access information that have reached the end of their first stage of life.178 This
from consumers, buyers and suppliers in a more allows the firm to obtain information about the wear and
environmentally friendly way. Due to COVID-19, managers tear of their products to inform future product design and
found it difficult, if not impossible, to travel to trade fairs marketing.179
and training sessions. Video conferencing and market
The company can then refurbish the returned products and
information portals partially closed the gap, and should
sell them on second-hand markets at a lower price or it
have enduring value.
can use parts to produce a new item. This generates new
Some SMEs reach new buyers and receive feedback revenue streams from something that would have been
through web-based sales portals.170 Others are searching viewed as waste in a linear economy.180

Enhancing capacity to change assistance to develop bankable green business plans,

and facilitating connections with financial institutions,
Environmental retrofitting of small businesses reinforces foundations and impact investors. Additionally, there is
their capacity to change. It draws on their ability to learn, a need for mechanisms to promote broader and more
innovate and access finance to fuel plans. Access to green affordable environmental insurance coverage to help
financing, eco-innovation initiatives and adaptation SMEs’ bottom line, and the macroeconomic health of
measures boost the ability of SMEs to change in response countries with economies dependent on SME viability.
to market trends.
Eco-innovation builds loyalty and skills
Finance, insurance fuel adaptation and New markets are emerging with the greening of
mitigation consumption and production. New products and services
Businesses need finance for their green investments. are being created to fit an explicit environmental purpose
Some green financing schemes are specifically targeted at such as low-carbon transportation and production. SMEs
SMEs in developing countries, and sometimes go hand-in- will need to innovate, dropping relatively ‘dirty’ parts of their
hand with advice and assistance in environmental project product and service offering and replacing them with
design and implementation.181 environmentally-friendly options, if they are to break into
these new markets.
For example, the Green Climate Fund’s pilot programme to
support micro, small and medium-sized enterprises is Creating new products, processes and services to reduce
providing $25.6 million in loans to women-led SMEs and the environmental impact of human activity is known as
farmers’ associations in Ghana to support low-emissions ‘eco-innovation’.190 Many firms are shifting focus or being
and climate-resilient agricultural practices.182 In India, solar created on this basis, and the scope of entrepreneurship in
investment trusts and impact investors fund small-scale environmental goods and services is growing sufficiently
SME rooftop solar energy projects.183 Green venture quickly for it to garner a new name: ‘ecopreneurship’.191
capitalists meet annually at their Ecosummit to choose Young entrepreneurs are at the forefront of this
green start-ups in which to invest.184 revolution.192
Private insurance against climate losses is another useful Eco-innovation reinforces a company’s competitiveness.
instrument, as it can protect small businesses from the The know-how, agility and skills developed in the process
devastating effects of storms, drought and higher sea of environmental innovation are transferable to other
levels. In Kenya and the Philippines, weather-indexed operations. Offering an environmentally friendly product
insurance schemes make payments to farmers based on alongside a conventional one can encourage product
the occurrence of a pre-defined phenomenon linked to discrimination and brand loyalty among customers. Finally,
production losses.185 the pursuit of eco-innovation can reinforce the enterprise’s
employee commitment and community support.
Countries with widespread insurance coverage recover
faster from the financial impacts of extreme events.186 Eco-innovation is closely related to research and
In Mexico, the landfall of Hurricane Delta in late 2020 development (R&D). According to the ITC SME
triggered payouts of a coral reef insurance policy in the Competitiveness Surveys, African companies with a history
Quintana Roo region. The funds were used to repair the of R&D investments were 29% more likely to see business
reef, which is essential to SMEs in local tourism.187 opportunities from their environmental actions than
companies that went green, but had no prior R&D
However, insurance currently covers few types of
experience.
environmental damage.188 Even when environmental
insurance is available, some small businesses fail to Financing and technological support help ecopreneurs
acquire it, assuming the government will help in the event move beyond climate-friendly product or service
of such shocks. In some firms that have experienced a prototypes, and scale up to become independently viable.
devastating environmental incident, there is a feeling that Venture capitalists, supply chain buyers, angel investors
a similar event is unlikely to strike again.189 and governments are important allies. They create an
enabling environment for ecopreneurship, and foster the
Business support organizations can help SMEs meet the
abilities and ideas of innovators.
environmental, social and governance requirements of
financial institutions. This may entail providing technical

FIGURE 22 Large firms more likely to invest in climate change adaptation
100%
80% 40
62 55 59 55
Not adapting to
65 65 environmental risks
60% 73
Adapting to
40% environmental risks
60
45 41 45
38 35 35
20% 27
0%
Not youth-led
SME
Lagre
Women-led
Men-led
Youth-led
Non-exporter
Exporter
Note: Companies are women-led if they are at least 30% owned by women and the top manager is a woman. Companies are youth-led if the top manager is
under 35.
Smaller, women-led and youth-led firms lag If it is mainly large firms that have the foresight and capital
in adaptation to adapt, only they will prepare adequately for climate
For businesses, adaptation means minimizing the risk of change. Smaller companies that wait and try to cope after
harm from climate change and/or exploiting opportunities the event are likely to run down assets, with adverse effects
arising from it.193 on their competitiveness and survival. This could exacer-
bate corporate concentration, which research suggests is
SMEs may design adaptation measures to prepare
already on the rise as a result of the COVID-19 pandemic.196
themselves for specific climate threats, such as building
physical barriers to reduce flood damage. Business Other characteristics affect companies’ tendency to adapt.
adaptation can also strengthen overall resilience.
A higher proportion of men-led firms invest in adaptation,
For example, sound inventory management makes firms
according to ITC SME Competitiveness Surveys
more robust when there are shortages due to storms.
(Figure 22). This is worrisome, as there is evidence that
Solid peer relationships raise awareness on new
women-led farming households are more vulnerable to
agricultural conditions. R&D allows for innovative
climate change, and livelihood diversification strategies are
responses to shifting market conditions.
less likely to shield them.197
Because smaller firms often lack the information, skills,
Age matters, too. Youth-led firms are less likely to have
financing and time to dedicate to long-term planning,
taken adaptive measures.
they tend to respond passively to shocks.194 Larger
companies are for their part increasingly seeing climate Finally, exporters are more likely than non-exporters to invest
change as a significant long-term threat to their business in measures to reduce exposure to environmental risks.
models and investing to adapt to these changes.195
Those less likely to invest in adapting to climate change –
Sixty per cent of large firms reported that they small, women-led, youth-led and non-exporting firms –
had invested in at least one measure to reduce tend to have one thing in common. They have less capital
exposure to environmental risks, according to ITC at their disposal and hence less capacity to invest, even
SME Competitiveness Surveys in Africa. In comparison, when there is a clear business case for doing so.
just 38% of micro, small and medium-sized firms had This underscores the need for equitable access to
made such an investment (Figure 22). information and technical and financial support.

BUSINESS VOICE
Unite social, environmental and

economic sustainability
This social enterprise makes clothing and accessories from
recycled plastics. The workers are persons with physical
disabilities. To respond to changing market demand due
to the pandemic, it produces innovative face masks.
‘The idea for the business came from my early life experiences.
When I was very young, my father lost one of his legs in a cycling
accident. Because of his disability, he lost his job and felt very isolated
from the community.
Juliet Namujju At the age of six, I became an orphan and went to live with my
Founder, grandmother who was a tailor. I would sew up her fabric scraps with
Kimuli Fashionability, plastic waste and create dolls and flowers. This inspired me to start a
Uganda fashion enterprise that can help tackle the plastic waste crisis in Africa
while providing employment to marginalized groups.
Our approach contributes to environmental conservation and is a cost-

effective way to run a business. We are saving on expenses for material
inputs, as we do not have to pay for the plastic itself. This enables us to
pay fair wages to our workers. Using recycled materials makes our
products unique and the company more competitive. Our customers
value that they help protect the environment and support persons with
disabilities by purchasing from us.
In 2020 we planned to open a workspace for our disabled employees.

But because of the pandemic, our sales decreased and we lacked the
capital to move ahead. To adjust to the new business environment, we
started producing masks. We developed a model that has a transparent
window made from plastic in the mouth area. This is useful for people who
are hard of hearing, as it allows them to lip-read.
Our membership in ITC’s Ye! Community enables us to connect with

coaches and exposes us to new opportunities. Since we joined, we have
participated in several competitions and received various awards.
This gave us international exposure and helped the business grow.’
The Ye! Community is a global network supporting youth entrepreneurship and self-
employment. The platform provides a space for young entrepreneurs and business
support organizations to connect with tools, resources and opportunities to support their
enterprises.

Appraising green opportunities Climate change mitigation and adaption measures cost
money, and liquidity is tight for SMEs worldwide following
COVID-19. Many SMEs would rather not access external
Trade-offs in going green financing for an investment with an uncertain return. Most
Even if the business case is strong, the green transition is financial institutions have yet to incorporate long-term
not straightforward or easy for small and medium-sized environmental calculations into their loan approval
enterprises. Investments in reducing emissions, and calculus, further constraining the capacity of SMEs to act.
improving resilience to climate shocks, have to be carefully
Trade-offs between climate and other environmental
planned and justified. The information, time, skills and
objectives can be overcome.200 SMEs that adopt nature-
financing required to green the business partially explain
based solutions to global warming preserve wild spaces
why so few SMEs have pursued it.
and biodiversity while adapting to and mitigating climate
SMEs face the challenge of balancing short-term and change.201 For example, farmers can use local seed
long-term considerations. Current actions, such as whether varieties that are resistant to storms and weather
to flood-proof the factory this year, must account for their fluctuation to preserve biodiversity and facilitate adaptation
future value, such as how much they reduce the likelihood to climate change. This has the added benefit of being
or potential cost of flooding damage. affordable, as inputs from community seed banks tend to
be relatively cheaper.
Calculating the future benefits and costs of climate action
or inaction requires extensive information that is not always Sustainability is multifaceted, with trade-offs between
easy to obtain. Some green actions have short payoff environmental, social and economic objectives. Company
periods and generate new revenue streams, which capital invested in reducing its carbon footprint is not spent
increase their viability and attractiveness. SMEs often on raising worker wages or providing health care. Yet these
prefer these actions to more costly and long-term objectives need not be mutually exclusive. This is
measures, even if the latter are more necessary and illustrated by Kimuli Fashionability, a Ugandan social
potentially more profitable. enterprise featured in this chapter’s Business Voices.
Uncertainty makes this balancing act more difficult. First, There are potential pitfalls in going green and mistakes can
the types, locations and intensity of climate shocks are not be costly. In one case, an industrial cluster in a developing
entirely clear. Second, although there are potential country invested massively in the installation of solar
business benefits from greening the enterprise, many panels on the rooftops of member SMEs. Because of dry
SMEs are uncertain about whether and when these will conditions, the panels were often covered in dust, requiring
materialize.198 Third, there is policy uncertainty, as many large amounts of water for cleaning and generating less
governments have yet to clarify their regulatory approach electricity than expected.
to carbon reductions. All of these factors tend to delay
A wiser green strategy based on appropriate technical
green transitions, as managers opt instead for investments
expertise would have considered the local environmental
with more certain short-term returns.
and business context, and found that the small factories
For these reasons, SMEs are more likely to invest if they used lots of wood to fuel their machines. Investments in
have first-hand experience with climate disruptions. liquid natural gas stoves would have reduced emissions
Farmers, tourism companies and retail shops that have from wood burning, improved productivity and reduced
already seen the impact of climate shocks may be driven deforestation.
to take climate action. Manufacturing industries may not
Challenges that firms face are unique to their
feel compelled to adapt pre-emptively. Family-owned
circumstances. In going green, SMEs need assistance to
businesses tend to be particularly interested in going
select locally appropriate environmental investments.
green, as they pass on the enterprise to their children and
Careful choice of green strategies can ensure financially
hence place a higher value on the future.199
viable, effective reduction of environmental footprints and
improve the enterprise’s competitiveness.

BOX 3: The path to a greener enterprise
Management leads the effort to acquire

information on climate risks
1 - Acquire and opportunities to cut greenhouse
information gas emissions. This can come from
business support organizations,
business journals or expert advice.
A climate assessment identifies

the business exposure
to climate change risks.
This helps determine 2 - Assess
how company operations climate risk
could be affected by
climate change. A gap analysis reveals the main
greenhouse gas emission sources
and compares the company’s use of
3 - Assess resources and emissions with
climate benchmark values specific
footprint to the sector and country.
It identifies areas for improvement
and suggests investments to
increase resource efficiency.
SME and supporting actors craft the

firm’s strategy to go green, through 4 - Plan
adaptation and/or mitigation planning.
SME selects a few green measures

to kick off implementation.
5 - Implement In some cases, this requires access
to technology, resources
and/or expertise.
SME regularly evaluates

implementation to ensure it is
progressing as planned and yielding 6 - Evaluate
expected positive results.
Adaptation planning Mitigation planning
Focus on probable risks that would cause most damage, Focus on significantly reducing the firm’s
and on which the firm can act. The strategy can reduce environmental footprint, including through
exposure through risk-specific blocking measures, readily available cuts in resource use.
such as storing inventory in a remote site, or through The best investments accomplish this
general moves to enhance resilience, such as ensuring goal quickly and affordably, and are
cash is on hand for sudden climate-related costs. easy to measure and report on to
climate-conscious buyers.
Focus on win-win options that pay off now and/or have
added social, environmental and economic benefits,
as well as measures that are financially viable immediately,
regardless of whether a climate risk materializes.
Source: Lessons learned from ITC’s Resource Efficiency, Climate Resilience and Climadapt for Trade approaches (see toolkits in Annex III),
(James, 2015) and (Brauss & Zotz, 2020).

Climate measures can pay off chemical management practices, for example, cost on
average less than $1,000 per company, and savings
Some measures analysed in ITC’s resource efficiency and
through reduced waste meant that the initiatives paid off
circular production interventions could be adopted at no
within two years, on average.
cost, such as improving waste management processes
and removing certain chemicals. However, most entailed Although these ‘quick wins’ can mark the first step in the
an up-front cost; the average estimated initial investment greening of SME business practices, bigger investments in
was $26,200. The average payback period, after which the resource efficiency measures deliver much more significant
measure generated a cumulative net benefit, was three benefits to both the bottom line and the planet (Figure 24).
years (Figure 23).202 The more a company is able to invest, the more benefits it
receives in the long term. Moreover, measures that are
Measures to reduce firms’ environmental footprint that cost
most costly to start are more effective in reducing
nothing or very little, such as changing management of
greenhouse gas emissions.
water, electricity and chemicals, paid off quickly. Changing
FIGURE 23 Resource efficiency measures pay off
120 $107
100 $94
Cumulative net benefits ($1000)
$81
80 $67
60 $54
$41
40
$27
20 $14
$1
0
0 1 2 3 4 5 6 7 8 9 10
-20 $-13
Years
$-26
-40
Savings Costs
Note: Figures are averages based on 202 resource efficiency measures implemented by 56 firms in Ethiopia, Jordan, Kenya, Peru and Vietnam. The costs in
year 0 are the initial investment.
Source: ITC Resource efficiency and circular production interventions, 2019-2020. See Annex II for detail.
FIGURE 24 Resource efficiency measures benefit business, environment
400
Solar energy
350
Cost saving after 10 years ($1000)
300 Electricity equipment
250 Biomass
or biogas
200
150 Steam equipment
100 Replacement of motors

Replacement of boiler
50
Upgrading of machinery
0
0 20 40 60 80 100 120 140 160 180 200
Initial investment ($1000)
Note: The size of the bubble is proportionate to the CO2 equivalent emissions reduction. Figures are averages based on 202 resource efficiency measures
selected for implementation by 56 firms in Ethiopia, Jordan, Kenya, Peru and Vietnam. Dark blue colour refers to measures related to renewable energy,
light blue to thermal energy, medium blue to other measures. Selected categories shown.
Source: ITC Resource efficiency and circular production interventions. See Annex II for detail.

FIGURE 25 Africa company survey: 42% reduced footprint
(a) Proportion reducing footprint (b) Most popular footprint reduction measures
Waste management systems 31
42% Other measures 17
58% Reduced chemical use 12
More energy-efficient technologies 10
Renewable energy sources 10

No environmental
Sustainable/recyclable packaging 9
investment
More water-efficient technologies 8
Firms undertaking
environmental investment Air pollution controls 3
0% 5% 10% 15% 20% 25% 30% 35%
For example, the costliest measures adopted by SMEs opportunities (Figure 26). This figure is higher than the
were installing solar panels and electricity equipment, global average calculated in a recent survey, in which 22%
which require significant initial investments. These of respondents said they had realized modest or
initiatives, however, are expected to deliver the largest total significant value from sustainability in the past five years.203
financial benefits after 10 years and the biggest This preliminary evidence indicates that the rate of return
environmental dividend in reduced greenhouse gas from green investments in Africa may be higher than
emissions (Figure 24). elsewhere.
Forty-two per cent of the companies surveyed through the Of firms that made green investment during the previous
ITC SME Competitiveness Surveys in Africa had invested in three years, 19% increased product quality,
climate-conscious measures in the preceding three years, 17.3% accessed new markets, 16.6% increased
such as more energy-efficient technologies and air production, 10% reduced their input costs and 7% made
pollution controls (Figure 25). Companies producing new products or services (Figure 27).
according to buyer specifications were more likely to have
Some green investment projects do not seem to pay off
invested in these green measures.
financially in the short term. Forty-one per cent of the firms
Fifty-nine per cent of African firms that had invested in interviewed by ITC in Africa felt their green actions had not
greening their enterprise said it provided them with new yielded benefits (Figure 28).
FIGURE 26 New opportunities for 59% of firms making green investments
Firms reporting
41% new business opportunities
59% Firms not reporting

new opportunities

FIGURE 27 Environmental investment gains
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
FIGURE 28 Services firms see fewer opportunities
Share of respondents reporting that green investment

did not lead to business opportunities
All firms 41
Firms without certification,

produced to buyer specifications 68
Firms in
76
services sector
0% 20% 40% 60% 80%
Source: ITC SME Competitiveness Surveys of 1,359 respondents, in Zambia (Year 2018, 242 businesses), Botswana (Year 2019, 615 businesses) and Benin
Companies in the services sector were significantly more No support, no green transition
likely to say that their green investments did not provide
SMEs are increasingly attuned to the benefits of improving
opportunities. This may be because such firms use relatively
resource efficiency, being certified to a sustainability
fewer material inputs, with labour costs more important to
standard, connecting to actors within their business
their bottom line. As a result, greater efficiency in use of
ecosystem and continuously innovating. Many of them are
inputs delivers fewer dividends. In addition, as clients may
also keenly aware of the need to mitigate and adapt to the
view services firms as less polluting, market pressure and
effects of a changing climate. Showing how
rewards for improved environmental performance are lower.
competitiveness, resilience and sustainability go hand-in-
Many of the firms that invested in reducing their hand is a first step towards increasing incentives for a
environmental footprint and did not see benefits said they green transition.
produced according to buyer requirements, but were not
Some sustainable practices are known, feasible and ac-
certified to a voluntary sustainability standard. This is
tionable by SMEs. Implementing these may be a matter of
consistent with evidence that voluntary sustainability
time and entail minimum support. Other measures require
standards can enable firms to earn a return on their
additional information and more substantial technical and
environmental actions.
financial assistance. In the absence of a business case for
These results are in line with data from other sectors measures with clear social payoffs, enabling policies,
indicating that some climate change mitigation measures regulations and incentives are also needed.205
are not profitable for firms. For example, only half of the
Those supporting SMEs can and should help foster
measures available for the fashion industry to reduce its
change while it is not too late. Business support
greenhouse gas footprint save money.204 In fact,
organizations, large companies, national governments and
businesses may have no financial incentive to invest in
international organizations all have a role to play in creating
some of the measures needed to reach the Paris
the right incentives that enable small and medium-sized
Declaration’s climate goals.
enterprises to take action for climate change.

© shutterstock.com
THOUGHT LEADER
THOUGHT LEADER
SMEs must embrace circularity for

businesses and the planet to survive
Inger Andersen
Executive Director, The world has learned many lessons from the COVID-19
United Nations Environment pandemic, but none more important than this: we must change
Programme the way we run our businesses and economies to work with
nature, not against it.
United Nations
Under-Secretary General
W e brought this devastation upon ourselves by treating nature and its services as
an expendable and endless commodity, destroying natural buffers and coming
into closer contact with wild animals and the diseases they carry.
This same unsustainable consumption and production is driving climate change,

biodiversity loss and pollution – all of which carry greater potential for human misery and
economic disruption. To break this cycle, and ensure long-term prosperity, we have to
move to circular economies in which we eliminate waste and pollution by keeping
products and materials in use and regenerating natural systems.
SMEs will be crucial to – and the biggest beneficiaries of – this shift. Most businesses in
the world are SMEs. Given their strong roots in local communities, SMEs can be influential
agents of change and innovation. Value chains, like biodiversity, exist in complex and
interlinked ecosystems. Small changes in one area can lead to amplified changes
elsewhere.
The pandemic has shown how vulnerable SMEs are to global shocks. SMEs are
overrepresented in the sectors most affected by the crisis, particularly in wholesale and
retail trade, air transport, accommodation and food services, real estate, professional
services and other personal services. SMEs are 8% more likely to have shut down
temporarily than larger firms. They are 9% more likely to experience a fall in sales than
large firms. The longer the crisis persists, the more likely that decreased liquidity will
translate into insolvency and firm exit.

THOUGHT LEADER
Making the business case
UNEP has helped SMEs face these challenges through our eco-innovation approach.
This guides SMEs in incorporating circularity into every aspect of business models,
operations, strategy, products and processes to reduce the environmental and social
impact of human activity. It results in an agile, reactive and competitive company.
We have seen that businesses tend to benefit significantly by adopting more circular
business models. For instance, one personal care product company in Colombia moved
to 100% natural products, which increased sales. Employees felt greater loyalty to the
company, and worked harder during COVID-19 to ensure the company survived.1
When companies transition to circular business models, they protect themselves against
regulatory shocks, market changes, inefficient technical capacity, limited revenue streams
and narrow financing options. Instrumental to this transition are networks such as the
Global Network for Resource Efficient and Cleaner Production, which works with local
networks of SMEs to provide training, expertise and skills to implement eco-innovation.
Deep roots lead to circular systems

SMEs can only transition to circular business models as part of a wider economic shift
that values circularity, with governments actively promoting such a transition. UNEP
already is working with partners to ensure that the right conditions exist to support circular
business models, and the International Trade Centre’s efforts in this area are highly
appreciated. The SME Competitiveness Outlook will be key in furthering this drive and
making the business case for resilient, circular and truly eco-innovative SMEs.
It is a joint endeavour. Governments must shape the environment in favour of circular

business models and increase public sector funding to leverage private sector resources.
Consumers must continue demanding eco-innovative products and services from the
market. Multinational enterprises must expand and deepen their work. International
organizations such as UNEP must continue to promote initiatives that increase the
sustainability and the competitiveness of SMEs.
From the Global Alliance on Circular Economy and Resource Efficiency (launched in
February 2021 at the UN Environment Assembly 5.1 with some 39 countries on board) to
a one-person SME, all efforts are important.
The benefits are clear. More competitive SMEs. More safe and decent jobs. More
resilience to shocks. And more progress towards tackling all three planetary crises.
1 UNEP. (2021). The business case for eco-innovation. Nairobi: UN Environemnt Programme. First edition
published in 2014. http://unep.ecoinnovation.org/wp-content/uploads/2021/02/UNEP-Business-Case-for-
Eco-innovation.pdf.

THE GREEN RECOVERY PLAN
CHAPTER 4
The Green Recovery Plan
COVID-19 was a harsh reminder of the economic and Green businesses advance the SDGs
social damage that come with being unprepared. Still,
An SME-centred green recovery benefits individual
it displayed people’s ability to adapt if they know what to
enterprises, and society as a whole. Firms that adapt to
do – wear a mask, observe physical distance, stay at
and mitigate climate change gain economic opportunities.
home – and have the means to do it – loans, tax relief,
When these SMEs take a greener and more climate-
wage subsidies. It also demonstrated the collective
resilient path, they also create broader economic and
inclination to protect the most vulnerable. Governments
social benefits, contributing to the drive to achieve the
around the world scrambled to alleviate the impact of
United Nations Sustainable Development Goals (SDGs).
COVID-19 on SMEs, recognizing that they act as
a lynchpin connecting crises to broader socio-economic These outcomes go beyond improving employment,
losses. economic growth (SDG 8) and industrial development
(SDG 9). A green SME transition can help achieve the
There is need to act now to prepare for climate change.
sustainable production objectives contained in SDG 12.
As small firms seek support to recover from the pandemic,
SMEs are responsible for 70% of global pollution and 60%
all stakeholders should provide them with the knowledge
of global industrial carbon emissions.207 This partially
and means to become more competitive, resilient and
reflects their relatively lower efficiency208, as the least
sustainable. Small firms must be at the centre of a green
efficient quarter of companies are responsible for
transition, as investing in them generates a ‘double-
approximately half of the private sector’s negative
dividend’ of private and social gains.206
environmental impact.209
This report’s Green Recovery Plan is a set of
A lower carbon footprint of SMEs contributes to meeting
recommendations for key stakeholders to help SMEs
commitments under SDG 13 on climate action. SMEs face
embark on a green transition. These stakeholders are
climate-related risks over which they have no control. Yet,
business support organizations, governments, lead firms
they are not just climate takers, SMEs are also climate
in international value chains and international
makers. Greening SMEs can advance nationally
organizations. They should:
determined contributions and help meet national
Embrace environmental sustainability adaptation plan targets. In the long run, reducing carbon
Collaborate and coordinate emissions will help moderate the rise in global
Advocate for SMEs temperatures and lower the future mitigation and
Facilitate SME access to finance adaptation costs.
Strengthen SME technical capacity
It pays to adapt to climate change now, given the
enormous impact it will have in coming decades and
centuries.210 Many stakeholders already are determined to
`build back better’.211 Part of this commitment must be
geared towards supporting SMEs to adopt profitable,
climate-friendly strategies.

TABLE 1. The Green Recovery Plan to support small businesses


EMBRACE
SUSTAINABILITY

COLLABORATE,
COORDINATE
ADVOCATE
FOR SMES

FACILITATE
SME FINANCE
financing
STRENGTHEN
SME CAPACITY
The Green Recovery Plan skills that rarely involve a single organization working on its
own. Business support organizations should collaborate
A holistic approach can enable SMEs to strengthen with peers to support SMEs in their green transition.
competitiveness, build resilience to climate hazards and Creating or joining a network provides business support
contribute to safeguarding the planet. organizations with a platform to exchange knowledge and
information, good practices and experiences. It also gives
Four main groups have a role to play in fostering the green
clients access to more services to address their specific
transition of small firms. These are business support
needs.
organizations, governments, lead firms in value chains and
international organizations. Build the local ecosystem of support to SMEs.
Business support bodies can make the local ecosystem
Business support organizations build bridges
more supportive of small sustainable businesses by building
Business support organizations can offer timely, context- the capacity of the local services sector, including climate
specific and trusted solutions to build the resilience of SMEs experts, to serve SMEs.
and help them benefit from the opportunities offered by the
Business support organizations can identify gaps in
green transition. Business support bodies must be
available services and facilitate access to foreign providers.
proactive, especially during times of change. They can
Trade opens opportunities for domestic service providers,
design their interventions along the following five lines:
such as in constructing and maintaining renewable power
Develop internal, or seek external, expertise in plants. It also paves to way to train local workers, particularly
environmental sustainability. Business support for new technologies.
organizations embrace environmental sustainability by
Play the role of trusted intermediary. Most SMEs require
developing expertise in relevant areas, to the benefit of their
investment to green their business practices. Business
members. This can be accomplished by building the
support organizations can identify solutions that reduce risk,
organization’s internal technical ability to address climate-
such as credit guarantee schemes for climate smart
related issues, and/or by identifying external experts that
initiatives,212 and help SMEs access financial services under
can provide advice when needed.
more favourable conditions. Business support organizations
Create or join networks to share knowledge and can help to develop disaster risk insurance schemes for
information. SME sustainability requires access to a wide productive sectors213 and to raise the awareness and
variety of support services. These call for resources and capacity of member companies to use insurance.

In addition to conducting training programmes that improve Aligning development objectives is not easy. For example,
creditworthiness, such as through good inventory policies on whether to produce domestically or import
management and bank accounts, business support environmental goods, services and technologies are critical
organizations can act as a trusted intermediary. This allows to SMEs that rely on such products. Environmental activists,
them to encourage banks to reduce collateral requirements however, may resist cross-border movements of materials
for their members. They can identify promising SMEs and intrinsic to the circular economy, such as waste and scrap,
connect them to large buyers able and willing to support even though these allow SMEs to exploit opportunities
their green transformation financially. Finally, business associated with circularity.215
support organizations can help match climate investors and
Current and potential WTO rules and deep trade
SMEs in need of climate finance, including by developing
agreements can help to reconcile trade and climate policies
dedicated platforms.
so they support sustainable development and avoid
Train SMEs to adopt green approaches. SMEs often lack protectionism disguised as environmental objectives.
the ability to identify environmental threats and assess
‘Think small first’ when designing and implementing
adaptation options and the benefits they bring, such as
regulation. Governments should ‘think small first’ when
increased resilience, lower costs and higher productivity,
supporting environmental aims. This means assessing how
and access to markets. They also need support to
proposed regulation will affect smaller firms, and adopting
understand technical requirements, standards and
mechanisms such as longer transition periods that secure
regulations, and how these apply to their particular
benefits and mitigate losses.
circumstances. If business support organizations build such
expertise proactively, or provide access to it, they can help Governments can be proactive to ensure that green public
close a critical knowledge and awareness gap. procurement standards become widespread, and SME-
friendly. For example, they may consider options such as
Governments create incentives
facilitating consortia to ensure sufficient quantity from SMEs,
With appropriate incentives, policymakers can help their encouraging partnerships with investors or lead firms,
countries and businesses to deliver simultaneously on ensuring green procurement allocations or providing green
economic and environmental objectives. Among actions technical assistance to meet public procurement needs.
that governments can take are to:
Provide incentives for green finance. Countries need
Embed environmental sustainability in COVID-19 frameworks, strategies and green lending policies that
recovery plans. Governments increasingly recognize the encourage climate-smart entrepreneurship and attract
need to boost the resilience of SMEs in a post COVID-19 investments216 – while overcoming the high lending cost to
world. This report has shown that sustainability can smaller firms. Policies can provide tax incentives, such as
contribute to this goal. While the scope and content of lower property taxes for green buildings and accelerated
recovery plans depend on the country’s capabilities and depreciation schemes.217 They can also offer investment
must be tailored to its circumstances, governments should subsidies in business activities that reduce emissions,
ensure they contain regulation that supports climate particularly geared towards SMEs.218
commitments.
Policymakers can foster debt markets with climate bonds
They can provide economic incentives to adopt emission- and green securitization.219 They can design rules and
reducing technologies, phase out support for carbon- incentives for the financial industry that promote better
intensive industries and use of fossil fuels214 and encourage valuation of climate investment payoffs. Developing local
businesses to adopt nature-based solutions, such as land financial markets is key for firms to access liquidity in local
management that increases carbon storage. currency and reduce exposure to exchange rate risks.
Policies must be transparent and predictable to reduce
Coordinate internally and externally to ensure
riskiness of investments in new technologies. For example,
regulatory coherence. To be effective, regulation must be
renewable energy subsidies need to be stable.
coherent. Multiple and inconsistent regulation is especially
costly to smaller firms. Policymakers need to ensure that Promote innovation with access to skills and
legal frameworks and strategies underpinning the green technologies. Policymakers should improve access to
recovery are consistent across agencies, sectors and skills and technologies – to encourage innovation and adopt
administrative units. Sub-national regulation should be in technology. Governments can invest in infrastructure to
line with national policies, which must fit with international adapt to climate change and improve connectivity for SMEs,
commitments. which often depend on the internet and other
communication technologies.

Governments can promote recent technologies that provide Source from SMEs in non-traditional locations. Entering
more efficient and carbon neutral production and transport. international value chains can transform small firms. Lead
These include artificial intelligence algorithms to optimize firms and large buyers can build their own resilience by
transport routes to reduce delivery time and CO2 emissions, expanding their sourcing strategy to include SME suppliers
or smart grid systems that cut energy losses.220 in non-traditional locations. This is particularly beneficial if
The experience of Uganda’s tech start-up Innovex, accompanied by measures to assist small suppliers to
featured in this chapter’s Business Voices, relates to adapt to climate change in the countries it affects most,
such grids. such as LDCs and small island developing States.
Training and advisory services spread low-carbon Facilitate access to supply chain financing. Lead firms
technologies and models, energy audits, sustainability can provide supply chain financing to help suppliers invest
standards and other methods to advance the green in greening their businesses. They can also promote
transition of SMEs. Governments can provide technical technologies and best practices along value chains.
assistance to business support organizations on
Build the skills of small suppliers. To ensure that
climate-resilient innovations, climate-proofing business
demanding buyer requirements do not exclude SMEs,
infrastructure and managing disaster risks.
lead firms should incorporate continuous improvement in
Offering such training online, as well as in person, helps their environmentally friendly sourcing strategy. This includes
extend its reach and scope. Although small entrepreneurs in diffusing technologies and best practices. It also entails
developing countries may not have easy access to online providing sufficient notice and technical and financial
learning and advisory services, these are particularly useful assistance when changing standards or requirements.
post COVID-19. Use larger bodies, such as business Lead firms also can favour solutions that are sensitive to
support organizations, to channel training and reach firms at local, climatic and economic conditions of supplier SMEs.
the local level.
International organizations prioritize small
Lead firms support small suppliers
business
Lead firms concerned with the resilience of their value
International organizations and development partners can
chains can support small suppliers and thus strengthen the
accelerate SDG progress by putting a priority on small
entire chain:
business. SME competitiveness, resilience and sustainability
Adopt a holistic risk management approach. COVID-19 can be fostered by applying the following approaches:
has shown that a chain is only as strong as its weakest links.
Mainstream environmental sustainability into
If lead firms adopt a ‘whole of chain’ strategy to managing
development plans. Explicitly bring environmental and
climate risk that integrates small suppliers, they support the
climate change considerations into the design,
sustainability of SMEs and the resilience of the entire chain.
implementation and assessment of strategies, programmes
Harmonize or mutually recognize sustainability and projects across all sectors, particularly those targeting
standards. Lead firms should aim to define jointly, SME competitiveness. By taking such an approach,
harmonize or mutually recognize sustainability standards. international organizations and donors can encourage their
This will help reduce duplication and lower the cost of members and partners to embrace sustainability.
compliance and reporting for SMEs. Harmonization also
Be a platform for information and best practices.
allows SMEs to participate in multiple value chains and
International organizations can serve as a platform for
reduce reliance on a single buyer, which is detrimental to
intergovernmental negotiation on environment and climate
their resilience.
change action, and thus foster collaboration and
coordination. They offer a neutral forum to share information
and best practices. Their technical assistance programmes
can support members to design coherent, harmonized
policies, standards and regulations.

Bring SMEs to multilateral forums. Large firms often find Specific solutions include: designing regulation, labelling
a way to channel their concerns and influence policymaking. and harmonized standards for financial instruments to
SMEs find it harder to be heard. International organizations increase transparency; providing technical assistance and
should reinforce the channels through which SMEs funding to the local financial sector to improve screening
participate in decision-making. They are well positioned to and valuation of climate projects; filling financing gaps with
level the playing field for SMEs through public-private investment accelerators,222 impact investment initiatives and
partnerships and coordination between large and small alliances, and specialist funds; and building or facilitating
players, such as in international value chains and standard match-making platforms between climate investors,
setting. intermediaries and SMEs.
Promote financial solutions tailored to SMEs. Increase service offerings for SMEs. SMEs will not be
International institutions and development partners can able to benefit from a green recovery if they cannot identify
ensure availability and accessibility of funding for the green challenges and articulate needs. International institutions
transition, tailored to the needs of SMEs. Such assistance and development partners should increase their portfolio of
needs to tackle the double challenge221 of high transaction services for SMEs to better compete, connect and change.
costs for lending to small companies and low lender
COVID-19 taught the world hard lessons. Without action,
expertise on climate projects.
climate change will teach even harder ones. By acting now
and placing SMEs at the core of a green transition, it is
possible simultaneously to address the climate crisis and
build the competitiveness and resilience of the businesses on
which a large percentage of the global population depend.

© shutterstock.com
THOUGHT LEADER
THOUGHT LEADER
Making exporters more competitive

through environmental sustainability
Pedro Beirute Prada
CEO, As the world rebuilds from the COVID-19 pandemic amid the
Export Promotion Agency growing threats brought by climate change, there is even greater
of Costa Rica urgency to ensure that all economic activity, including exporting,
(PROCOMER) is environmentally sustainable.
C osta Rica over the past 40 years has pioneered policies to protect its natural habitat.
The United Nations recognized our country’s efforts with the Champions of the Earth
Award for policy leadership in 2019. The award singled out the country’s drive to combat
climate change, as shown by Costa Rica’s plan to decarbonize its economy by 2050.
At PROCOMER, we are very much integrated into our country’s sustainable development
strategy. We encourage environmentally sustainable practices among SMEs, to improve
their competitiveness and open new market opportunities. As questions raised by the
pandemic lead many people to rethink unsustainable forms of consumption, there is
growing demand for environmentally-friendly goods and services, including organic
products.
SMEs that develop sustainable strategies can differentiate from others in international
markets and contribute to Costa Rica’s sustainability drive.
To assist SMEs to develop the needed skills and implement new approaches,
PROCOMER uses a 3P strategy – People, Profit, Planet. We begin by identifying the initial
level of sustainability in SMEs; follow with services that help companies transform or
improve their value; and conclude by measuring the environmental impact.
Measuring SMEs’ environmental performance

We measure the environmental performance of SMEs, using a Unique Diagnosis tool.
By understanding requirements, gaps and specific needs of small firms throughout the
country, we obtain valuable information that helps to define our institutional services and
generate business intelligence. The tool also supplies data on how our services reduce
environmental gaps by region and by sector, and identifies regions with the greatest
environmental gaps.

THOUGHT LEADER
The gaps detected help PROCOMER to develop exporter training programmes. Between
2019 and 2020, we have increased the number of training sessions by 10% and the
number of people trained by 68%. Moreover, the information has led us to create
environmental training sessions on greenhouse emissions, environmental standards and
certification, renewable energies and water management.
In addition to bolstering sustainability capacities in companies through training,

we provide SMEs with advice on managing sustainability projects and offer funding for
their implementation.
Green Growth Platform spurs change

To help Costa Rican SMEs become more environmentally sustainable, productive and
competitive, PROCOMER launched the Green Growth Platform in 2018. This aims to
benefit 260 SME exporters or potential exporters over four years, representing 10% of the
export sector.
Companies compete to take part in the platform, with those chosen obtaining seed capital
to carry out transformative projects. These include environmental schemes to reduce
water-carbon footprints, cut energy use, adopt clean energy and manage waste.
The projects have cut CO2 equivalent emissions by SMEs, led to cost-reducing
investments and increased exports of participating SMEs by about 31%.
For example, one women-owned small firm radically transformed its fruit cleaning and
packaging, and increased exports. The firm reduced waste by 50% and water use by 97%
at its packing plant. Given local water shortages and the challenge of legalizing wells,
such results are critical. The company also obtained Rainforest Alliance certification,
allowing it to access the European market. Exports rose 35% in one year.
Of the SMEs we support, 41% are in less developed regions and 45% are owned by
women, demonstrating our commitment to inclusive development. The Green Growth
Platform obtained ITC’s global award in 2020 for the Best Inclusive and Sustainable Trade
Initiative among trade promotion organizations.
Promoting green tech start-ups

PROCOMER also contributes to Costa Rica’s sustainability efforts by supporting start-ups
in the environmental field. Our GreenTech initiative is an incubation programme for green
technology start-ups with high export potential. It prioritizes start-ups that offer
technological solutions with a positive ecological impact, have a viable product or service
and show highly innovative business models.
The programme strengthens the entrepreneurial capacities of start-ups and accelerates

their internationalization. Under it, experts provide company-specific advice on obtaining
investment capital.
We at PROCOMER are convinced that export promotion bodies like ours play a key role in
the drive to build back better and combat climate change.

© shutterstock.com
THOUGHT LEADER
THOUGHT LEADER
SMEs and climate change:

Establishing patterns of resilience
Ayman El Tarabishy
President and CEO, Our collective participation in the vitality of SMEs is essential to
International Council for keeping society functioning and stable.
Small Business
Deputy Chair, Department

of Management, George
Washington School of
Business A ccounting for two-thirds of global employment and half of global gross domestic
product, small and medium-sized enterprises (SMEs) are the best indicator of
economic and societal health.1 Throughout the coronavirus pandemic, we have seen just
how devastating it is to the global economy when an unexpected crisis shuts down
businesses.2
In a world that is dominated increasingly by the effects of climate change, SMEs need
more support than ever to keep economies running and citizens happy and healthy.
SMEs, governments, and industry leaders alike can work together to build a resilient
ecosystem through raising awareness, emphasizing proactivity over reactivity and
cultivating accountability.
Need for awareness

It is necessary for people to be aware of an issue, and accept its significance, for there
to be collaborative and coordinated efforts to address it. Only 19% of SMEs have been
able to work with their governments regarding climate change, according to the
UN Environment Programme Finance Incentive.3
1 Albaz, A., Mansour, T., Rida, T. & Schubert, J. (2020). Setting up small and medium-size enterprises for
restart and recovery. McKinsey & Company. https://www.mckinsey.com/industries/public-and-social-sector/
our-insights/setting-up-small-and-medium-size-enterprises-for-restart-and-recovery.
2 OECD. (2020). Coronavirus (COVID-19): SME policy responses. OECD. https://www.oecd.org/coronavirus/
policy-responses/coronavirus-covid-19-%20sme-policy-responses-04440101/.
3 AXA Group & UNEP. (2015). Business Unusual: Why the climate is changing the rules for our cities and SMEs.
AXA Group and the United Nations Environment Programme Financial Initiative Principles for Sustainable
Insurance Initiative.

THOUGHT LEADER
Although global programmes such as the SME Climate Hub offer a united front against
the climate emergency, participation is optional. This puts the onus on SMEs to act,
even though the problem is a shared one.
Once the awareness process has started, it becomes self-perpetuating. When

researchers and SME advocates successfully lobby governments to address climate
change, governments can reach more SMEs. From there, SMEs can spread the word
further through their local networks, increasing engagement with governments.
Disseminating information leads to a more informed and active population.
Proactive vs. reactive

There also must be a sharp shift in attitude regarding the climate crisis. Presently,
only 26% of SMEs have adapted plans for climate change; lack of political backing and
monetary support are viewed as the main obstacles.4 There also is a tendency to consider
climate change as an abstract concept when extreme weather conditions have yet to
affect day-to-day operations. Yet if support for SMEs only comes after such daily impact, it
will be much too late.
Governments can provide incentives for SMEs to be proactive in adapting to climate

change, through financial support and educational resources. Financial incentives,
including tax breaks and carbon offset programmes, reward entrepreneurs for their time in
creating sustainable businesses. In conjunction, small business associations can support
SMEs through training materials, published research and best practices for climate
adaptation.
Accountability
Positive results depend on ensuring accountability on the part of governments and SMEs.
Just as large corporations have a board of directors to supervise their business,
a dedicated oversight board on SMEs and climate change can set specific goals
and carry out regular checks to monitor participation. Furthermore, designated SME
representatives can act on behalf of small businesses and empower business owners
to collaborate with the wider ecosystem.
Such oversight helps to encourage and steer actions of SMEs, which must prepare for
climate change while struggling to keep up with day-to-day business demands, as well as
of governments’ balancing other urgent needs.
Action by governments and business leaders will allow SMEs to protect against the risks
of climate change and will contribute to the greater good. This is no small feat – the world
is increasingly complex and intertwined, with individual industries and countries requiring
unique solutions to the challenges they face. Despite the constraints, it is essential that we
realize our mandate to ensure a future for the next generation of SMEs and communities.
By fostering widespread awareness, protocols and accountability to address climate

change and alleviate its impact on SMEs, we can free them to innovate and create
solutions for local and global communities.
4 AXA Group & UNEP. (2015). Business Unusual: Why the climate is changing the rules for our cities and SMEs.
AXA Group and the United Nations Environment Programme Financial Initiative Principles for Sustainable
Insurance Initiative.

BUSINESS VOICE
Technology in the service

of environment
This tech start-up wants to transform the distribution of
off-grid energy systems and equipment in sub-Saharan
Africa. While it is often hard to make a business case for
solar energy systems, the COVID-19 pandemic has
highlighted their importance for health-care facilities.
‘We believe that renewable energies, and especially solar power, play an
important role in the fight against climate change.
Unfortunately, entrepreneurs like us face a big problem in sub-Saharan

Douglas Baguma markets. The small-scale solar system solutions we offer are not financially
Team leader, Innovex, viable for most companies and households, as it can take up to 20 years
Uganda for them to pay off. As a result, there is low demand for this technology,
which makes it difficult to attract investors and keeps prices high.
But solar power offers security, given that the national power grid can be
very unreliable. This is bad for businesses because power outages
undermine day-to-day operations. Solar power also improves the quality
of life in rural African communities that are not connected to the power
grid. Health centres in these regions often are not linked to the grid, so
they lack electricity to power their equipment. Access to an off-grid solar
system would solve this problem.
During the COVID-19 crisis, such weaknesses in the health-care system

became even more critical. To help health-care centres, solar energy
investments have increased. As most of our other clients were no longer
able to afford our services, this helped our business tremendously.
Joining ITC’s NTF IV project allowed us to develop a resilient business

model to survive the pandemic. We participated in business development
training and attended major trade fairs. This exposed us to our future
investors and helped us raise $600,000 in investments.’
The Netherlands Trust Fund IV (NTF IV) project in Uganda, funded by the Centre for the
Promotion of Imports from Developing Countries, covers the export development of IT
and IT enabled services. It supports tech start-ups and SMEs in going international and
works with tech hubs and other institutions to develop local technology ecosystems.

Endnotes, References
and Annexes

Endnotes
1. (IMF, 2020). 43. (Bollinger et al., 2012).

2. (Gereffi, 2020; ITC, 2020b). 44. (Fujita et al., 2020; Khanna, 2020).
3. (ITC, 2020b). 45. (World Bank, 2012).
4. On 21 April 2020 the ITC launched a worldwide online 46. (Swiss Re, 2019).
survey to assess the economic impact of COVID-19 on 47. (Pathak & Ahmad, 2018).
businesses. See Annex II for detail.
48. (IPCC, 2014).
5. (Dougherty-Choux et al., 2015; Herbane, 2010; Wishart,
2018). 49. (Ashe, 2014; Walshe & Stancioff, 2018; M. Williams,
2014).
6. (ITC, 2020b).
50. (Kulp & Strauss, 2019; Lakritz, 2019; Lu & Flavelle, 2019;
7. (Falciola et al., 2021; Lund et al., 2020). Oppenheimer & Glavovic, 2019).
8. (ITC, 2015). 51. (World Bank, 2010).
9. (ITC, 2015). 52. (Bollinger et al., 2012; Kjellstrom et al., 2019; Watts et al.,
10. (Conz et al., 2017; Holling, 1973; Hynes et al., 2020a). 2020; Woetzel et al., 2020).
11. (Arriola et al., 2020; Hynes et al., 2020b). 53. (IPCC, 2014).
12. (Battisti et al., 2019). 54. (Kumar et al., 2011).
13. (Bruneau et al., 2003). 55. (Gornall et al., 2010; Li et al., 2013; Ray et al., 2019).
14. (Falciola et al., 2020). 56. (Global Commission on Adaptation, 2019).
15. (Deloitte, 2020; A. Rose & Krausmann, 2013). 57. (Kasterine et al., 2015).
16. (Macuzić et al., 2016). 58. (IPBES, 2019)
17. (Cowling et al., 2020; Lyons et al., 2020; Pomeroy et al., 59. (Anderson, 2010; PwC Switzerland & WWF Switzerland,
2020). 2020).
18. See Annex II for detail. 60. (Anderson, 2010; Monnier et al., 2020).
19. Governments around the world launched programmes 61. (FAO, 2013).
to support SMEs during the pandemic. Measures 62. (Macdonald et al., 2009; Pittock et al., 2016).
to extend a lifeline to firms account for much of the
$11.7 trillion dedicated by governments to COVID-19 63. (Friedt, 2018; Volpe Martincus & Blyde, 2013).
relief as of 11 September 2020. These programmes have 64. (Cheney, 2021; Robin, 2021; United Nations Environment
saved many SMEs from closure, though businesses in Programme & International Livestock Research Institute,
wealthier countries have received more support from the 2020).
government than those in poorer countries ITC 2020b, 65. (IPBES, 2019).
ITC, 2020c).
66. (Cheney, 2021).
20. (Van Biesebroeck et al., 2016).
67. (ITC, 2020b).
21. (Williams et al., 2017).
68. (Gupta & et al., 2007; World Bank, 2020).
22. (A. Rose & Krausmann, 2013; Volpe Martincus &
69. (Kasterine & Vanzetti, 2010; World Bank, 2020).
Carballo, 2009).
70. (Crawford & Church, 2019).
23. See Annex II for detail.
71. (UNEP, 2020).
24. (Battisti et al., 2019; Lawson & Samson, 2001).
72. https://eciu.net/analysis/briefings/net-zero/net-zero-the-
25. (Păunescu & Mátyus, 2020).
scorecard.
26. (Agrawal et al., 2020; ITC, 2020a).
73. (Bradford & Fraser, 2008; Conway, 2015; Puppim de
27. (Ungerer & Portugal, 2020). Oliveira & Jabbour, 2017).
28. (Thorgren & Williams, 2020). 74. (Liu et al., 2020; WMO, 2020; WMO et al., 2020).
29. (ITC, 2019a). 75. (VividEconomics, 2021).
30. (Pal et al., 2014). 76. (Hepburn et al., 2020).
31. See Annex II for detail. 77. (Government of Japan, 2017).
32. (Falciola et al., 2021). 78. (Bissinger et al., 2020; Mohan, 2014).
33. (Borino et al., 2020). 79. (Baah et al., 2021).
34. (Aghion et al., 2018). 80. (Feber et al., 2021; Mohd Suki, 2016; Ritter et al., 2015).
35. (Borino et al., 2020). 81. (The Economist, 2019; Zhu & Sarkis, 2016).
36. (Hepburn et al., 2020). 82. (UN Global Compact & Accenture, 2019).
37. (Gates, 2020). 83. (Hahn & Lülfs, 2014).
38. (Henderson & Tryggestad, 2021). 84. (Ponte, 2019; Topple et al., 2017).
39. (AXA Group & UNEP, 2015; ITC, 2019b). 85. (Lamolle et al., 2019).
40. https://climate.nasa.gov/causes/. 86. (Lamolle et al., 2019).
41. (Selelo et al., 2017). 87. (Lamolle et al., 2020; OECD, 2017).
42. (Kuruppu et al., 2013). 88. (UNFSS, 2020).

ENDNOTES
89. (Lamolle et al., 2019). 140. (Lund et al., 2020).

90. See standardsmap.org. 141. (Sims et al., 2014).
91. (Meier et al., 2020). 142. (Sims et al., 2014).
92. (DMCC, 2020). 143. (Sims et al., 2014)
93. (ITC, 2016). 144. (Lamy et al., 2019; OECD, 2008).
94. (ITC, 2012; ITC & EUI, 2016; UNFSS, 2018). 145. (Bazan et al., 2015).
95. (ANDE, 2019; Carol & Spalding, 2018). 146. (IMO, 2020).
96. (Ernst & Young, 2017). 147. (Carlsson-Kanyama et al., 2002).
97. (Eccles & Klimenko, 2019). 148. ITC firm-level survey on global trends and enterprise
98. https://www.oecd.org/officialdocuments/ risks (803 responses globally, November-December
blicdisplaydocumentpdf/?doclanguage=en&cote=tad/ 2019).
pg(2020)1 149. (Cowe, 2002).
99. (Sedov & Mattison, 2017; Sommer, 2017). 150. (James, 2015; Koirala, 2018)
100. (GIIN, 2020). 151. (Huaide & Jingrong, 2011; VividEconomics, 2006).
101. https://www.europarl.europa.eu/news/en/press- 152. See chapter 1 of this report and (ITC, 2015) for more
room/20200615IPR81229/green-finance-parliament- about ITC’s competitiveness framework.
adopts-criteria-for-sustainable-investments. 153. (OECD, 2015).
102. (UNEP, 2016). 154. (Piletic, 2017).
103. (ITC, 2019a) 155. (ILO, 2020).
104. (Dettling, 2014). 156. (James, 2015).
105. (Anbumozhi et al., 2017). 157. (Stanhill, 1990).
106. (Sommer, 2017). 158. (Barrowclough & Birkbeck, 2020).
107. (Tamminen et al., 2020). 159. (WEF et al., 2016).
108. (Bakker & Schuit, 2017). 160. (Feber et al., 2020; Humphrey, 2009).
109. (Yamaguchi, 2018). 161. (UNEP, 2021).
110. (Shapiro, 2016). 162. (Feber et al., 2020).
111. (Hamwey & Ok, 2021). 163. See www.standardsmap.org.
112. (Hamwey & Ok, 2021). 164. See http://www.ecolabelindex.com/
113. (Robertson, 2012; Woetzel et al., 2020). ecolabels/?st=category,carbon for a selection of carbon
114. (Bekkers et al., 2018). footprint certification
schemes.
115. (Read, 2010; UNCTAD, 2014).
165. (Mohan, 2020; Trienekens, 2011).
116. (Cavallo & Noy, 2010; Friedt, 2018; Sytsma, 2020).
166. (Henson et al., 2011; Volpe Martincus et al., 2010).
117. (Boehm et al., 2017; Bollinger et al., 2012).
167. (Elder, 2021)
118. (Tamiotti et al., 2009).
168. (ITC, 2021).
119. (Mehling et al., 2019; Najam et al., 2007).
169. (UNEP & Tuck, 2021).
120. (Mehling et al., 2019; Sinner, 2002).
170. (Carballo et al., 2020).
121. (Lamy et al., 2020; Morgan, 2020; WTO, 2020).
171. (Deloitte, 2020).
122. (Condon & Ignaciuk, 2013; Cosbey, 2008).
172. (DMCC, 2020).
123. (Edwards-Jones et al., 2009; Kasterine & Vanzetti,
2010). 173. (Tuerk & Soumaré, 2021).
124. (Brandi et al., 2020). 174. (Bazan et al., 2015).
125. (Raza et al., 2020). 175. (Elder et al., 2013).
126. (ICTSD, ed., 2018). 176. (OECD, 2019).
127. (ITC, 2012). 177. (Romero-Hernández & Romero, 2018).
128. (DMCC, 2020). 178. (Consumers, Health, Agriculture and Food Executive
Agency et al., 2018).
129. (Bucher et al., 2014; de Melo & Solleder, 2020; World
Energy Council, 2016). 179. (Vinogradova & Rakowski, 2018).
130. (Steenblik et al., 2005). 180. (James, 2015).
131. (Kim, 2011). 181. (UNEP & Tuck, 2021).
132. (Tamiotti et al., 2009). 182. https://www.greenclimate.fund/project/fp114.
133. (UNCTAD, 2013). 183. (Singh et al., 2016; Symbiotics, 2020).
134. (ITC, 2017). 184. https://ecosummit.net/.
135. (ITC, 2020b). 185. (Lansigan, 2014; Sibiko et al., 2018; UNFCCC, 2017;
World Bank, 2011).
136. See chapter 1; (Baldwin & Evenett, 2020; Bonadio et al.,
2020; OECD, 2020a; Reuters, 2020). 186. (Golnaraghi, 2018).
137. (Lund et al., 2020). 187. (Nature Conservancy, 2020).
138. (Lund et al., 2020). 188. (Maccaferri et al., 2012)
139. (Lund et al., 2020). 189. (Pathak & Ahmad, 2018).

190. In this report, eco-innovation is defined to mean 218. (OECD, 2015).
innovation to create new products, processes and 219. (Dai, 2016).
services that are environmentally friendly. This is
in line with the classic definition of innovation, but 220. (OECD et al., 2018).
differs from broader definitions of eco-innovation that 221. (Dettling, 2014).
include reorienting business plans and operations for 222. For example the Renewable Energy and Energy
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191. (Rodríguez-García et al., 2019). 223. Intergovernmental Panel on Climate Change
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225. ITC (https://www.intracen.org/covid19/Blog/Resilience-
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197. (Adzawla & Baumüller, 2021). 226. (Condon & Ignaciuk, 2013).
198. (Koirala, 2018). 227. European Commission (https://ec.europa.eu/clima/
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209. Jason Clay, Executive Director of WWF’s Markets 237. Intergovernmental Panel on Climate Change
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210. For instance, some estimates suggest that investing 238. Intergovernmental Panel on Climate Change
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with technical assistance for mini-grid developers
to speed up electrification in rural areas through
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ANNEX I: GLOSSARY
Annex I: Glossary
Amortization Gradual repayment or writing off the cost or value.

Adaptation The process of adjustment to actual or expected effects of climate change. Adaptation activities seek to minimize
the risk of harm or take advantage of opportunities arising from climate change.223
2030 Agenda for Sustainable Development
A plan of action adopted by 193 countries in 2015 to eradicate poverty and achieve sustainable development by
2030. At its heart are the Sustainable Development Goals (SDGs), 17 interconnected objectives in areas such as
poverty, education, health, job opportunities, climate change and the environment. The United Nations supports a
programme which measures progress in achieving the 169 targets associated with the SDGs and in the process
tracks action required to achieve the vision set out in Agenda 2030.
Biodiversity The variability among living organisms from all sources including terrestrial, marine and other aquatic ecosystems
and the ecological complexes of which they are a part.224
Business support organization
An institution created by governmental or non-governmental actors to promote enterprise success. Usually of
a non-profit nature, BSOs promote the interests of businesses they represent in relevant forums with a view
to establishing policies and procedures that support the growth of firms. Many of them also provide business
services such as technical assistance, training and coordination. Examples of BSOs are chambers of commerce,
sector associations, trade promotion organizations and investment promotion agencies.225
Border carbon adjustments

Climate legislation levying a border tax or requiring importers to surrender a quantity of carbon permits to prevent
carbon leakage – a situation where domestic climate policies result in increased emissions elsewhere in the world.226
Business continuity The regular and uninterrupted functioning of business operations and core functions.
Cap-and-trade scheme A system designed to lower greenhouse gas emissions, where a regulatory body decides on the limit to these
emissions. Companies receive or buy emission allowances that they can then trade with one another.227
Carbon accounting A means of measuring the direct and indirect emissions to the Earth’s biosphere of carbon dioxide and its
equivalent gasses from industrial activities.228
Carbon dioxide A colourless, odourless greenhouse gas which is generated by the burning of hydrocarbon fuels, burning of plant
matter such as wood, and other natural processes.229
Carbon footprint The quantity of carbon dioxide and other greenhouse gasses emitted by an individual, company, organization,
event, product or service, over a given time period, such as a product’s full life cycle or a company’s annual
operations.
Carbon leakage See border carbon adjustments.
Carbon tax A fee charged on sources of energy and production processes which emit carbon dioxide (and often other
greenhouse gasses, calculated in terms of CO2 equivalent) into the atmosphere and thereby worsen global
warming.
Carbon storage The long-term storing of carbon in plants, soils, geologic formations and the ocean. Also called carbon
sequestration.230
Cash flow Payments into or out of a business, project, or financial product. An enterprises’ management of its cash flow
ensures that there is cash on hand to pay operating costs and maintain assets.
Circular Production A restorative and regenerative economic system that aims to create a closed-loop system of material use
by reusing and recycling already existing resources, and repairing, refurbishing and sharing products. This
process decouples economic activity and the concept of growth from the linear throughput model of resource
consumption. It builds economic, social and natural capital.231
Climate Change A long-term change in average weather patterns. Shifts in the mean and variability of temperature, precipitation
and other measures can be the result of natural environmental processes or human activities. Significant
alterations in climate since the industrial revolution are largely attributed to human activities (‘anthropogenic’)
such as land use changes and the emissions of gasses that affect the composition of the Earth’s atmosphere.
Burning of fossil fuels, deforestation and other human activities have emitted carbon dioxide, methane, nitrous
oxide and other gasses that remain in the Earth’s atmosphere, trapping the sun’s rays and warming the Earth’s
surface temperature higher than historic levels.232 This leads to large-scale shifts in weather patterns.
Concessional loan Loans that are extended on terms substantially more generous than market loans. The concessionality is
achieved either through interest rates below those available on the market or by grace periods, or a combination
of both.233

Competitiveness Competitiveness is the demonstrated ability to design, produce and commercialize an offer that fully, uniquely
and continuously fulfils the needs of targeted market segments, while connecting with and drawing resources
from the business environment, and achieving a sustainable return on the resources employed.
Debt Funds borrowed by a company through loans or other financial instruments that the company promises to repay.
Eco-innovation The process of creating new products, processes and services that are aimed at reducing the environmental
impact of human activities.
Ecosystem (natural) A community of living organisms that live together in a specific geographic area where they interact with one
another and with non-living things. Plants, animals and bacteria cooperate and compete in forest, marine,
dryland and other ecosystems in interdependent systems that enable their survival, growth and decay.
Ecosystem (business) The context external to enterprises that influences their competitiveness at the meso-level, closer than national or
international policies. The availability of skilled workers, local infrastructure, access to finance, business support
organizations, and the nature and extent of cooperation with other businesses in their sector and value chain are
important elements in the business ecosystem.
Ecopreneurship The creation and management of new businesses focused on the production, marketing and use of
environmental goods and services.
Energy efficiency Using fewer energy inputs (in the form of fossil fuels, electricity, steam or heat) to attain the same amount of useful
output. Methods to improve energy efficiency lower the amount of energy feedstocks used by households and
businesses, and in so doing reduce costs, and the emission of greenhouse gasses associated with energy use.
Environmental goods Products that can help achieve environmental goals such as climate change mitigation, for example by gener-
ating clean and renewable energy, improving energy and resource efficiency, controlling air pollution, managing
waste, treating waste water, monitoring the quality of the environment, and combatting noise pollution.234
Equity (finance) Funds obtained by a company through the sale of shares in the future profits earned by the firm.
Exposure to climate change
The degree to which an enterprise’s assets, operations and processes stand to be affected by climate change-
induced alterations to the mean and variation in temperature, precipitation, storms and other weather- related
metrics. Often also expanded to include exposure to the impacts of policies to address climate change.
Fossil fuel feedstock Raw materials such as petroleum, coal and natural gas that were formed in the geological past from the remains
of living organisms and are used as an energy source.
Global warming The long-term heating of Earth’s atmosphere, surface and oceans incited by the greenhouse effect. Human
activities that emit carbon dioxide, methane and other gasses that remain in the Earth’s atmosphere trap heat in
the Earth’s atmosphere, leading to increases in global surface temperatures.235 Global warming, and the large-
scale shifts in weather patterns it produces, comprise climate change.
Greenhouse gasses
Gasses whose release into the atmosphere contributes to global warming and climate change because they
absorb infrared light and thereby incite increased global surface temperatures. Examples include carbon dioxide,
methane and nitrous oxide.
Green energy transition A process under which fossil fuels are replaced by renewable energy sources for energy generation.
Industry 4.0 The transformation of how products are made through the automation and the use of smart machines and
cloud computing that connect data to physical systems. Also referred to as the Fourth Industrial Revolution, this
combination of traditional computing with digital, big data and robotic technologies is leading to far-reaching
changes in how manufacturing industries operate.
Intergovernmental Panel on Climate Change
The United Nations body tasked with assessing the science related to climate change. The IPCC provides regular
assessments of the scientific basis of climate change, its impacts and future risks, and options for adaptation
and mitigation.
Inventory The inputs and outputs that a business holds in stock for production use and sales. Inventory management is
the process by which a company assesses how many production inputs they have in stock, whether that stock is
sufficient for production processes, acquires more inputs to replace shortfalls, and maintains sufficient stocks of
firm output for sales to satisfy consumer purchase requests.
Liquidity The extent to which a business has cash, and assets that can be readily converted into cash, on hand and
available to finance ongoing enterprise needs.
Market share The percentage of total sales in an industry that are generated by a specific company or country.
Methane A powerful greenhouse gas emitted during the extraction and processing of coal, natural gas and oil, as well as
by agricultural activities, such as livestock rearing, rice growing and land conversion, and the decay of organic
waste in landfills.236
Mitigation Actions taken to lessen the risk posed by climate change by reducing greenhouse gas emissions. Mitigation
efforts either reduce the sources (e.g. fossil fuel burning) or enhance the sinks (e.g. forests) of greenhouse gasses,
lowering their concentration in the atmosphere and thereby reducing the future extent of global warming.237

ANNEX I: GLOSSARY
Natural resources Renewable or non-renewable stocks of capital endowed naturally to planet earth. Renewable natural resources,
such as timber in forests and fish stocks can re-create themselves over time. Non-renewable natural resources
such as fossil fuels do not re-generate in human timescales, and can no longer be accessed once a stock is
exhausted.
Nature-based solutions The strategic conservation and use of plants, animals and other natural resources to adapt to and mitigate
climate change. Strategies build upon an understanding of ecosystem functioning and the planet’s own dynamic
systems for balancing climate to address specific climate issues. For example, planting mangrove trees in
coastal regions can reduce flooding.
Net-zero emissions The result of balancing emissions of greenhouse gasses to the atmosphere with the removal of greenhouse
gasses from the atmosphere as a result of deliberate human activities.238
Nearshoring The practice of moving business operations to an adjacent country, especially in preference to a more distant one.
Onshoring The practice of transferring a business operation that was moved overseas back to the country from which it was
originally relocated.
Paris Agreement Global climate change treaty adopted at the 21st Conference of the Parties to the UN Framework Convention on
Climate Change, held in Paris in 2015, to which 191 countries are party. It sets out a framework within which each
country is required to declare its own emission targets, and thus their contribution to fighting global warming,
as well as adaptation actions, through so-called nationally determined contributions (NDCs). The treaty also
provides a framework for financial, technical and capacity building support for countries that need it. The Treaty
aims to limit global average temperature increase to well below 2°C warming compared to pre-industrial levels,
with efforts to limit it to 1.5°C.239
Productivity How efficiently production inputs, such as labour and capital, are being transformed into outputs. It can be
measured as how much output is made per unit of inputs.
Renewable energy Energy from a source that is not depleted when used, such as wind or solar power.240
Resilience Resilience is the capacity and practice of withstanding disruption. It is the ability to absorb shocks and react to
new conditions through the development of situation-specific responses.
Small and medium-size enterprise
Companies with fewer than 100 employees. The term ‘SME’ thus includes micro-sized firms, understood as those
with fewer than five employees. It also covers small companies with 5–19 employees and medium-sized ones
with 20–99 employees.
Subsidies Government payments to support activities believed to be important for the country’s culture, history, values,
economy or political structure, but that would otherwise either not take place or be severely compromised.
Sustainable development goals
The 17 overarching objectives prioritized by the international community through the adoption of the 2030 Agenda
for Sustainable Development. They highlight the most important global issues that need to be addressed in order
to eradicate poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030.241
Supply chain The set of actors external to an enterprise that provide important inputs into each phase of an enterprises’
functioning, including its product development, operations, distribution, finance, marketing and customer service.
An enterprise’s supply chain spans firms that source and procure inputs to suppliers of intermediate outputs,
transport and logistics agencies, and export-import agents.
Tariff Customs duties on merchandise imports.
Thermal expansion The general increase in the volume of a material as its temperature is increased.242
United Nations Framework Convention on Climate Change
Multilateral environmental agreement, ratified by 197 countries, which entered into force in 1994 with the
objective of stabilizing greenhouse gas concentrations in the atmosphere at a level preventing dangerous human
interference with the climate system. It is the parent treaty, and was the negotiating forum, for the 1997 Kyoto
Protocol and the 2015 Paris Agreement.
Value chain The full range of activities required to bring a product or service from conception, through the different phases of
production, delivery to final consumers, and final disposal after use.243
Voluntary Sustainability Standards
Sets of rules that specify the production processes required to attain environmental, economic and/or social
objectives. They are developed at local, national or international levels by organizations from the public and
private sectors as well as non-governmental organizations. Particularly prevalent in the agricultural sector, these
standards sometimes cover a single product or a whole sector, but some of them can be applied in any context.
Vulnerability The degree to which an entity such as a business is susceptible to being strongly affected by crisis.
A businesses’ vulnerability is a function of the severity of the crisis, the degree to which the business is exposed
to its impacts, its sensitivity to harm, and its capacity to adapt to the new situation.
Zoonotic disease An illness that originated in an animal but has spread to humans. Ebola, HIV-AIDS and COVID-19 are examples of
zoonotic diseases.244

Annex II: Methodology note and data sources
This annex provides details for all figures and calculations Sectors
in the report. It includes definitions, sampling, econometric
This report classifies companies in sectors based on the
and statistical methods, and data sources. Additional
International Standard Industrial Classification of all
detail can be requested by email to the ITC Research team
Economic Activities (ISIC), Revision 4:
at SMEcompetitiveness@intracen.org.
The primary sector includes agriculture, forestry,
fishing, mining, and quarrying (ISIC divisions 01-09);
Definitions The manufacturing sector includes all activities related
to the transformation of raw materials into products
Micro, small and medium-sized enterprises (ISIC divisions 10 and 33);
The services sector includes wholesale and retail trade,
There is no internationally harmonized definition of micro,
transportation and storage, accommodation and food
small and medium-sized enterprises. For feasibility and
service activities, information and communication,
comparability reasons, this report classifies companies
financial and insurance activities, real estate activities,
based on the number of full-time employees:
and other services (ISIC divisions 35-99).
Micro: 0 to 4 employees
Small: 5 to 19 employees Women-led enterprises
Medium: 20 to 99 employees
Women-led firms are defined as those managed by a
Large: 100 or more employees.
woman and at least 30% owned by women. Otherwise,
SMEs are therefore companies with less than firms are defined as men-led.
100 employees. Micro firms are implicitly included in
the definition. Youth-led enterprises
Youth-led firms are defined as being run by a top manager
under the age of 35. Otherwise, firms are defined as non-
youth-led.
Exporters
Exporters include firms that export regularly and firms that
export in an irregular and intermittent manner.
Internationally-trading firms
Internationally-trading firms are companies that operate
internationally either through imports, exports or both.

ANNEX II: METHODOLOGY NOTE AND DATA SOURCES
ITC COVID-19 Business Impact Survey
Content and sample services) and size (micro, small, medium and large).
The ITC COVID-19 Business Impact Survey is a global It includes both internationally- trading and domestic firms.
online survey aimed at assessing the economic impact of The sample is not representative in all countries and
the pandemic on businesses. It contains data on 13,884 response rates vary across countries and sectors
companies in 138 countries, collected between April and (Table A1).
August 2020.
The survey includes questions about firm characteristics
The analysis in this report is based on a subsample of such as size, sector and trade status, as well as age and
4,694 firms in 136 countries. The sample is well spread gender of the manager. It also includes questions about
across regions (Africa, Americas, Asia, Europe and the effects of the COVID-19 restrictions, and the coping
Oceania), sectors (agriculture, manufacturing and mechanisms adopted by companies (Table A2).
TABLE A.1. Sample size of ITC COVID-19 Business Impact Survey, by country
Number of Number of Number of

Country respondents Country respondents Country respondents
Afghanistan 5 Georgia 2 Pakistan 439
Albania 4 Germany 7 State of Palestine 38
Algeria 7 Ghana 27 Panama 8
Angola 1 Greece 2 Paraguay 1
Anguilla 1 Guatemala 17 Peru 68
Argentina 7 Guinea 43 Philippines 495
Armenia 1 Haiti 1 Poland 4
Australia 10 Honduras 5 Portugal 6
Austria 1 Hong Kong SAR 1 Qatar 2
Azerbaijan 3 Hungary 5 Republic of Korea 9
Bangladesh 16 India 76 Romania 3
Belarus 1 Indonesia 20 Russian Federation 5
Belgium 3 Iran 11 Rwanda 8
Benin 61 Iraq 893 Saint Lucia 6
Bhutan 42 Italy 20 Samoa 1
Bolivia 10 Jamaica 4 Saudi Arabia 5
Bosnia and 2 Japan 5 Senegal 31
Herzegovina
Botswana 11 Jordan 26 Serbia 2
Brazil 43 Kazakhstan 21 Sierra Leone 2
Burkina Faso 30 Kenya 70 Slovenia 4
Cambodia 286 Kyrgyzstan 73 Somalia 6
Cameroon 16 Lao People's 43 South Africa 25
Democratic Republic
Canada 4 Lebanon 2 Spain 25
Central African 1 Liberia 2 Sri Lanka 76
Republic
Chad 3 Lithuania 1 Sweden 1
Chile 2 Madagascar 7 Switzerland 7
China 169 Malaysia 5 Tajikistan 10
Chinese Taipei 5 Mali 7 United Republic of 10
Tanzania

Colombia 115 Malta 2 Thailand 6
Comoros 1 Mauritania 1 Togo 8
Congo 6 Mauritius 3 Tunisia 12
Costa Rica 20 Mexico 28 Turkey 97
Côte d'Ivoire 162 Moldova 3 Turkmenistan 1
Croatia 1 Mongolia 4 Uganda 31
Cuba 1 Morocco 27 Ukraine 5
Czech Republic 1 Mozambique 5 United Arab Emirates 10
Democratic Republic 5 Myanmar 343 United Kingdom 15
of Congo
Denmark 1 Namibia 2 United States 12
Dominican Republic 4 Nepal 36 Uruguay 3
Ecuador 11 Netherland Antilles 3 Uzbekistan 17
Egypt 28 Netherlands 5 Venezuela 5
El Salvador 12 New Zealand 3 Viet Nam 10
Ethiopia 9 Nicaragua 16 Zambia 17
Fiji 2 Niger 2 Zimbabwe 16
France 10 Nigeria 89 Total 4,694
Gambia 29 North Macedonia 1
TABLE A.2. Questionnaire for the ITC COVID-19 Business Impact Survey
How is your company affected by the coronavirus pandemic? Your feedback matters and will help inform assistance
from Governments and Donors. This anonymous survey will take less than 10 minutes to complete. The International
Trade Centre, a United Nations agency, appreciates your participation during this difficult time.
Q1. Which country is your company based in? (single select from the list of countries)
Q2. How have your business operations been affected by the coronavirus (COVID-19) pandemic?
- Not affected
- Slightly affected
- Moderately affected
- Strongly affected
Q3. Do you think there is a risk that your business will permanently shut down because of this crisis, and if so, when could
this closure occur? (single select)
- 1 month or less
- 3 months
- 6 months or more
- Business closure not envisaged
Q4. Has the coronavirus (COVID-19) pandemic affected the ability to purchase inputs for your enterprise and/or sell
outputs? (multi-select)
- Difficulty accessing inputs domestically

- Difficulty importing inputs from abroad
- Lower domestic sales to consumers
- Lower domestic sales to businesses
- Increased domestic sales
- Difficulty exporting
- Improved exporting
- Don’t know

Q5. Has the coronavirus (COVID-19) pandemic affected your enterprise in any of the following ways? (multi-select)
- Temporary shutdown
- Employee absences due to sickness or childcare
- Clients not paying their bills
- Reduced logistics services
- Reduced certification services
- New problems with infrastructure, e.g. internet or roads
- Increased administrative bottlenecks
- Reduced investment
- None of the above
- Other
- Don’t know
Q6. Please specify which other effect. (open ended question)
Q7. Have you adopted any of the following strategies to cope with the crisis? (multi-select)
- Temporarily reduced employment

- Laid off employees
- Loaned employees to other enterprises
- Teleworking
- Rescheduling of bank loans
- Increased marketing efforts
- Online sales
- Customized / new products
- Started sourcing from new suppliers
- Filed for bankruptcy
- Other
Q8. Please select the top three government measures that would be most helpful as you cope with the COVID-19 crisis
- Employment programmes (i.e. temporary unemployment programmes or social security waivers)

- Financial programmes, such as low interest credit line or credit guarantees
- Tax waivers or temporary tax breaks
- Reduction of tariffs on imported inputs
- Rent subsidies
- Cash transfers
- Support to self-employed people
- Other
Q9. Please specify which other measure. (open ended question)
Q10. How easy is it to access information and benefits from government COVID-related SME assistance programmes?
- Very easy
- Easy
- Standard
- Difficult
- Very difficult
Q11. How many full-time employees does the business have? (single select)
- 0
- 1-4
- 5-19
- 20-99
- 100-249
- 250 and more

Q12. What is the main sector of activity of the business? (single select)
- Agriculture
- Mining and natural resources
- Agri-food processing
- Non-food manufacturing
- Retail and wholesale
- Travel and transport
- Accommodation and food services
- Information technology
- Finance
- Other services
Q13. What is the gender of the top manager of the business? (single select)
- Female
- Male
- Don’t know
Q14. What is the age of the top manager of the business?
- 34 years and younger

- 35 years of age and older
- Don’t know
Q15. Is this establishment currently registered with or licenced by a national authority? (single select)
- Yes, registered business

- Freelancing/independent/consultant
- No, unregistered business
- Do not know
Q16. Does the business participate in international trade? (single select)
- No, we buy and sell within our country only

- We import but do not export
- We export but do not import
- We export and import
Q17. Please provide your email address if you would like to receive a copy of the report based on the responses to this
survey and agree to be contacted by the International Trade Centre about future opportunities in your country. Your data will
be kept confidential. (open-ended)

ITC SME Competitiveness Surveys
Content and sample SME competitiveness scores

The SME Competitiveness Survey (SMECS) is a national Based on ITC SME Competitiveness Survey responses,
firm-level survey of a representative sample of an classified by pillar, theme and level according to the SME
economy’s private sector. Data are gathered, to the extent competitiveness framework (Figure A1), ITC computes a
possible, from firms across all regions of the country, of all “capacity to compete”, “capacity to connect” and
sectors (agriculture, manufacturing and services), of “capacity to change” score for each firm, as well as an
differing sizes (micro, small, medium-sized and large) and overall competitiveness score. Each score has a value
export status (exporting and non-exporting firms).245 between 0 and 100, with 100 representing the best score.
Typically carried out in partnership with business support Questions in the SMECS questionnaire have different
organizations, the SMECS is designed to combine structures (from dichotomous to Likert scale). Each
information at the micro (firm capabilities) and meso response option is transformed on a 0-100 scale, with 100
(business ecosystem) levels to provide a holistic picture of representing the best possible outcome. As such, for each
the capacity of a country’s private sector to compete in surveyed firm it is possible to calculate a score for each
international markets. As of March 2021, more than 18,400 theme and level as a simple average of the transformed
companies had been surveyed in 50 countries. answers from relevant questions (see the list of questions
included in each theme-level in Table A3, Table A4 and
The baseline questionnaire of SMECS is based on ITC’s
Table A5 for the compete, connect and change pillars
competitiveness framework,246 which is composed of three
respectively). Pillar scores (compete, connect and change)
pillars – compete, connect and change – and three levels
are computed at a firm level as the average of the scores
– firm capabilities, business ecosystem and national
of each of their three component themes and two levels
environment. Each pillar is further disaggregated into three
(firm capabilities and business ecosystem). Finally, for
themes (Figure A1).
each interviewed firm, the competitiveness score is the
simple average of the scores of the three pillars.
FIGURE A1 SME competitiveness framework
Pillars Theme Levels
Quantity and cost requirements

COMPETE Time requirements
Quality requirements
Connecting to buyers
National environment
Business ecosystem
CONNECT Connecting to suppliers

Connecting to institutions
Firm capabilities
Financial requirements
CHANGE Skills requirements
Innovation and IP requirements

Capacity to compete
The capacity to compete score is calculated as the average of firm capabilities and business ecosystem competitiveness
scores in meeting market quantity, cost, time and quality requirements.
TABLE A.3. Questions by theme and level in the compete pillar
Levels of competitiveness
Themes Firm capabilities Business ecosystem
Capacity utilization
Economic records: Revenues
Access to electricity
Meeting quantity and cost requirements Economic records: Expenses
Access to water
Economic records: Liabilities
Economic records: Assets
Quantity delivered on time Quality of the logistics services

Compete
Time requirements
Inventory management system efficiency Cost of the logistics services
International certificates: Safety

certificates Availability of domestic information on
international certificates
International certificates: Quality or
performance certificates Quality of domestic information on
Quality requirements
International certificates: Sustainability
certificates Cost of domestic information on
International certificates: Other
Capacity to connect
The capacity to connect is calculated as the average of firm capabilities and business ecosystem competitiveness scores
in connecting with buyers, suppliers and institutions.
TABLE A.4. Questions by theme and level in the connect pillar
Availability of information on buyers

Business website Completeness of market information on
potential buyers
Forms of advertising: leaflet, poster, etc.
Connecting to buyers Quality of market information on potential
Forms of advertising: radio or tv
buyers
Forms of advertising: internet based
Cots of market information on potential
buyers
Availability of market information on

potential suppliers
Quality of market information on potential
Connect
suppliers
Reliance on biggest supplier
Connecting to suppliers Cost of market information on potential
Assess the performance of suppliers suppliers
Exchange of market information with
other companies in sector
Cooperation with firms in sector
Engagement with institutions: TPO Quality of services provided by TPO

Engagement with institutions: IPO Quality of services provided by IPO
Connecting to Institutions Engagement with institutions: Chambers Quality of services provided by
of Commerce Chambers of Commerce
Engagement with institutions: sector Quality of services provided by relevant
association sector association

Capacity to change
The capacity to change is calculated as the average of firm capabilities and business ecosystem competitiveness scores
in finance, skills, and intellectual property and innovation requirements.
TABLE A.5. Questions by theme and level in the change pillar
Bank account
Ability to manage cash flow
Business plan Quality of the banks
Financing forms: loan Quality of the insurance companies
Financing Requirements
Financing forms: equity financing Access to financial institutions is
Financing forms: financing through bonds an obstacle to operations
Financing forms: line of credit
Financing forms: letters of credit
Availability of skilled workers

Change
Skill set of employment matches the need

of the company Quality of bodies teaching relevant skills
Skills Requirements for the sector
Established hiring process
Cost of bodies teaching relevant skills for
the sector
Availability of market information on IP

Protected sensitive business information Quality of the services offered by patent
institutions registrations
Intellectual property and innovation Registered patent
Cost of the services offered by patent
requirements Resources to R&D institutions registrations
New or improved processes or products Quality of innovation supporting institutions
Cost of innovation supporting institutions
ITC SME Competitiveness and COVID-19 Business Impact Survey
Content and sample TABLE A.6. Sample size of ITC SME Competitiveness and
COVID-19 Business Impact Survey by country,
In 2019, before COVID-19 hit, ITC collaborated with firm size and sector
institutions in three countries – Benin, Cambodia, and the
Philippines – to conduct an in-depth assessment of the
Group Observations Share in total
competitiveness of enterprises through the SME
Competitiveness Survey. The questionnaire was Country
administered to 502, 400, and 514 businesses across Benin 44 6%
Benin, Cambodia, and the Philippines, respectively. Cambodia 272 35%
Philippines 454 59%
In mid-2020, a COVID-19 Business Impact Survey was
carried out in the three countries. Among the respondents Size Category
from the SME Competitiveness Survey, 770 firms (44 in micro (<5) 116 15%
Benin, 272 in Cambodia, and 454 in the Philippines) also small (<20) 431 56%
took part in the follow-up survey. medium (20-99) 147 19%
large (100 or over) 76 10%
The results provided in selected figures of Chapter 1 are
based on the 770 respondents that took part in both the Sector
SME Competitiveness Survey and the COVID-19 Business Manufacturing 404 52%
Impact Survey. This allowed for an assessment of whether Services 225 29%
and to what extent certain pre-crisis competitiveness factors Primary 141 18%
influenced business outcomes during the crisis. The Total 770 100%
sample includes companies of different size, sector and
region of the respective country.

Specifically, one in two surveyed firms are in manufacturing, TABLE A.7. Sample size of ITC SME Competitiveness Survey
one third are in services and the remaining 18% are in the with environment module by country, firm size
primary sector (Table A6). Nine out of ten companies in the and sector
sample are SMEs.
Group Observations Share in total

ITC’s resilience index
Country
The resilience index is based on analysis conducted by
Justine Falciola, Sarah Mohan, Barbara Ramos and Valentina Benin 502 37%
Rollo in “Identifying the drivers of SME resilience: evidence Botswana 615 45%
from developing countries during the COVID-19 pandemic”, Zambia 242 18%
ITC Working Paper 2021. The method adopted to calculate
the index is based on three steps. Size Category
First, qualitative analysis of the literature on SME resilience was micro (<5) 719 53%
undertaken to identify the firm-level factors that affect the small (<20) 420 31%
capacity of a firm to withstand a crisis, and classify them within medium (20-99) 135 10%
a multidimensional framework comprising of three pillars of firm large (100 or over) 85 6%
resilience – robust, related and responsive.
Sector
Second, the resilience framework was estimated using linear
factor analysis. This empirical analysis was conducted using Manufacturing 184 14%
variables from the ITC SME Competitiveness Survey (from the Services 959 71%
Philippines, Benin and Cambodia) identified as relevant to the Primary 216 16%
three resilience pillars. Factor analysis confirmed the relevance
of those factor variables in building a composite index for robust, Total 1359 100%
related and responsive, as well as the overall resilience index.
Third, a structural equation model analysis connected these
resilience factors, previously identified in step 2, to the data from
the COVID-19 Business Impact Survey from the same firms in ITC’s Resource Efficiency and Circular
the same countries. It modelled how these resilience factors
drive a latent resilience variable that, in turn, explains whether
Production interventions
firms performed well during the COVID-19 crisis.
Indeed, when each of the firms’ responses on these resilience-
Content and sample
driving factor variables are combined into the resilience index,
that index is highly statistically correlated with the probability of The objective of ITC’s Resource Efficiency and Circular
firms having stable sales and the likelihood that they did not lay Production (RECP) interventions is to increase SME
off employees during the pandemic. competitiveness through improved resource efficiency and
enhanced productivity. Selected companies, many of which
supply into international value chains, participate in a
ITC SME Competitiveness Survey with customized coaching programme based on the analyses of
buyer requirements and performance of local SMEs in terms of
environment module resource efficiency (e.g. energy, water and waste) and circular
production processes. Participating companies identify and
implement measures and can seek financing opportunities for
Content and sample measures that require significant upfront investments.
A set of survey questions focusing specifically on the Interventions started in 2018 and are ongoing in more than 15
environment was included in three national SME countries, as standalone RECP interventions, components of
Competitiveness Surveys conducted in Benin in 2019, Botswana larger projects or through ITC’s GreenToCompete Hubs.
in 2019, and Zambia in 2018. This environmental module was The statistics received so far cover measures identified by
designed by ITC’s environmental experts and added to the 56 participating companies in 5 countries and 3 sectors
organization’s standard questionnaire. (Table A8). Each measure is associated with financial information
The module assesses the extent to which environmental (upfront investment, recurrent yearly savings, and recurrent
concerns are affecting SME competitiveness, as well as the yearly costs) and savings of water, waste, electricity, and fuel in
extent to which enterprises are taking action on environmental terms of physical units. The analysis in this report is based on
issues. The environmental module was administered to 1,359 the estimated values. Once the measures are implemented,
businesses in the three countries. The sample spans across the ITC will be able to compare the estimated values to the
sectors, with almost three quarters of surveyed firms in services, actual values.
and the remainder split between manufacturing and primary
sectors (Table A7). More than nine out of ten companies in the
sample are SMEs.

TABLE A.8. Number of measures from Resource Efficiency and Circular Production interventions, by country and sector
Ethiopia Jordan Kenya Peru Viet Nam Number of

2018 2019 2019 2019 2020 respondents
Agriculture and 0 0 0 19 3 22
agrifood
Tea 0 0 96 0 0 96
Textile, clothing 35 62 0 15 5 117
Others 0 0 0 5 12 17
Total 35 62 96 39 20 252
Figures based on primary data

Figure 1. Respondents were asked ‘How many full-time groups the x-axis variable into 20 equal sized bins, computes
employees does the business have?’ and ‘How have your the mean of the x-axis and y-axis variables within each bin, and
business operations been affected by the coronavirus creates a scatterplot of these data points. By default, binscatter
(COVID-19) pandemic?’ Answer options ranged from 1 (not also plots a linear fit line using OLS, which represents the best
affected) to 4 (strongly affected). The results are statistically linear approximation to the conditional expectation function.
significant, even after controlling for sectoral differences.
Source: ITC COVID-19 Business Impact Survey Figure 5. The horizontal axis measures firms’ capacity to
compete (see definition above). The vertical axis measures
Figure 2. Respondents were asked ‘How many full-time firms’ responses to the question ‘How have your business
employees does the business have?’ and ‘Do you think there is operations been affected by the coronavirus (COVID-19)
a risk that your business will permanently shut down because of pandemic?’ Answer options ranged from 1 (not affected) to 4
this crisis, and if so, when could this closure occur?’ Answer (strongly affected). A company is given a score of 100 in robust
options included ‘1 month or less’, ‘3 months’, ‘6 months or if it answered 1 (not affected), a score of 75 if it selected 2
more’ or ‘Business closure not envisaged’. The results are (slightly affected), a score of 50 if it answered 3 (moderately
statistically significant, even after controlling for sectoral affected) and a score of 25 if it selected 4 (strongly affected).
differences. The results are statistically significant, even after controlling for
size and sectoral differences.
Source: ITC COVID-19 Business Impact Survey
Source: ITC SME Competitiveness and COVID-19 Business
Impact Survey
Figure 4. Respondents were asked ‘How have your business
operations been affected by the coronavirus (COVID-19)
pandemic?’ Answer options ranged from 1 (not affected) to 4 Figure 7. The horizontal axis measures firms’ capacity to
(strongly affected). Firms are considered robust if they answered connect (see definition above). The vertical axis measures firms’
1, 2 or 3. Respondents were also asked ‘Please rate the responses to the question ‘How easy is it to access information
efficiency of this company’s inventory management system.’; and benefits from government COVID-related SME assistance
‘Does your company keep the following types of records?’; and programmes?’ Answer options ranged from 1 (very difficult) to
‘At this time, does this company have a bank account for daily 5 (very easy). A company is given a score of 100 in related if it
operations which is separate from a personal account?’. Firms answered 5 (very easy), a score of 80 if it selected 4 (easy),
are considered to have efficient inventory management if they a score of 60 if it answered 3 (standard), a score of 40 if it
chose options 4, 5 or 6 on a Likert scale ranging from 1 answered 2 (difficult) and a score of 20 if it selected 1 (very
(inefficient) to 6 (highly efficient). Firms are considered to have difficult). The results are statistically significant, even after
complete financial record keeping if they kept all economic controlling for size and sectoral differences.
records (revenues, expenses, liabilities, and assets). The results Source: ITC SME Competitiveness and COVID-19 Business
are statistically significant, even after controlling for size and Impact Survey
sectoral differences.
Source: ITC SME Competitiveness and COVID-19 Business Figure 9. The horizontal axis measures firms’ capacity to change
Impact Survey (see definition above). The vertical axis measures firms’
responses to the question ‘Have you adopted any of the
Figures 5, 7 and 9 are the result of binned scatterplots, following strategies to cope with the crisis?’ Firms are considered
controlling for firm’s size and sector. Binned scatterplots are a responsive if they selected one or more of the following
non-parametric method of plotting the conditional expectation strategies: selling online; customized/new products or sourcing
function, which describes the average y-value for each x-value. from new suppliers. A company is given a score of 100 in
To generate a binned scatterplot, the binscatter command responsive if it used all three responsive coping strategies,

a score of 75 if it used two responsive coping strategies, a score Figure 10. Respondents were asked: ‘How many full-time
of 50 if it used one responsive coping strategy and a score of 25 employees does this establishment currently employ?’; ‘What is
if it did not use any responsive coping strategies. the age of the top manager?‘; ‘What is the gender of the top
Source: ITC SME Competitiveness and COVID-19 Business manager?‘; ‘What percentage of this establishment is owned
Impact Survey by women?‘. The figure shows the average index of resilience
(see definition above) for each category. The results on size and
age are statistically significant.
Figure 6. Panel (a) Respondents were asked: ‘How easy is it to
access information and benefits from government COVID- Source: ITC SME Competitiveness and COVID-19 Business
related SME assistance programmes?’. Answer options ranged Impact Survey
from 1 (very easy) to 5 (very difficult); the vertical axis in the
figure reflects the proportion of firms that answered 4 or 5. Figure 11. Respondents were asked ‘Has the coronavirus
Respondents were also asked ‘Are you actively engaged with (COVID-19) pandemic affected the ability to purchase inputs for
any of the following types of institutions: trade promotion your enterprise and/or sell outputs?’ Firms are considered to
organizations, investment promotion organizations, chambers of have maintained stable sales if they did not choose options
commerce or sector associations?’. Companies are considered ‘Lower domestic sales to consumers’ or ‘Lower domestic sales
engaged with business support organization if they said they to businesses’ or selected the option ‘Increased exporting’.
were involved with any of the four types of institutions. Panel (b) Respondents were also asked ‘Have you adopted any of the
Respondents were asked ‘Has the coronavirus (COVID-19) following strategies to cope with the crisis?’ Percentages reflect
pandemic affected the ability to purchase inputs for your the proportion of firms that selected ‘lay off employees’ as a
enterprise and/or sell outputs?’ Answer options included coping strategy. Firms with a resilience index below the median
‘difficulty accessing inputs domestically’; the vertical axis in the are classified as low resilience, and those with a resilience index
figure shows the percentage that choose this option. above the median are defined as high resilience. The results are
Respondents were also asked to ‘Please rate your reliance on statistically significant, even after controlling for size and sectoral
your biggest supplier’, with answer options ranging on a Likert differences
scale from 1 (strong reliance) to 6 (little reliance); firms are Source: ITC SME Competitiveness and COVID-19 Business
defined as independent of largest supplier if they chose 5 or 6, Impact Survey
and as dependent if they chose 1 or 2. The results are
statistically significant, even after controlling for size and sectoral
Figure 12. Panel (a): Respondents were asked ‘Does the
differences.
business participate in international trade?’ and ‘Has the
Source: ITC SME Competitiveness and COVID-19 Business coronavirus (COVID-19) pandemic affected the ability to
Impact Survey purchase inputs for your enterprise and/or sell outputs?’ Firms
are considered to have difficulty accessing inputs if they chose
Figure 8. Respondents were asked ‘Have you adopted any of options ‘difficulty accessing inputs domestically’ or ‘difficulty
the following strategies to cope with the crisis?’ Possible importing inputs abroad’. Panel (b): Respondents were asked
responses included: selling online; creating new/customized ‘How have your business operations been affected by the
products; or sourcing from new suppliers. Panel (a) The vertical coronavirus (COVID-19) pandemic?’ Answer options ranged
axis measures the share of firms selecting ‘creating new/ from 1 (not affected) to 4 (strongly affected). Percentages reflect
customized products’ as a coping strategy. Respondents were the proportion of firms that selected 4. Results are weighted
asked: ‘Please estimate the level of resources your company using each country’s share of the global population divided by
commits to research and development ‘Responses are the number of firms interviewed in each country to statistically
classified as ’high resources to R&D’ if the respondent chose reduce the weight of responses from small countries with a large
options 5 or 6 on a Likert scale ranging from 1 (low) to 6 (high). number of responses. The results are statistically significant,
Panel (b) The vertical axis measures the share of firms selecting even after controlling for size, sector and country fixed effects.
‘selling online’ as a coping strategy. Respondents were asked Source: ITC COVID-19 Business Impact Survey
‘Please rate the extent to which the skill set of currently
employed workers matches the needs of this company’. Firms
Figure 13. Panel (a): Respondents were asked ‘Does the
are classified as ‘high skill match’ if the respondent chose
business participate in international trade?’ and ‘How easy is it
options 5 or 6 on a Likert scale ranging from 1 (low) to 6 (high).
to access information and benefits from government COVID-19-
Panel (c) The vertical axis measures the share of firms selecting
related SME assistance programmes?’ Answer options ranged
‘sourcing from new suppliers’ as a coping strategy.
from 1 (very easy) to 5 (very difficult); percentages reflect the
Respondents were also asked ‘Please rate this company’s ability
proportion of firms that answered 1 or 2. Panel (b): Respondents
to manage its cash flow to reliably execute payments’. Firms are
were asked ‘Have you adopted any of the following strategies to
classified as ’high ability to manage cash flow’ if the respondent
cope with the crisis?’ Answer options included: Temporarily
chose options 5 or 6 on a Likert scale ranging from 1 (low) to
reduced employment, laid off employees, loaned employees to
6 (high).
other enterprises, teleworking, rescheduling of bank loans,
Source: ITC SME Competitiveness and COVID-19 Business increased marketing efforts, online sales, customized / new
Impact Survey products, started sourcing from new suppliers, filed for
bankruptcy. Percentages reflect the proportion of firms that
selected one or more of the following strategies: selling online;
customized / new products or sourcing from new suppliers.

Results are weighted using each country’s share of the global Figure 21. Values show the total number of measures by sector
population divided by the number of firms interviewed in each and category. Only most popular categories of measures are
country, to statistically reduce the weight of responses from shown. Measures have been selected for the implementation by
small countries with a large number of responses. 56 firms participating in ITC RECP interventions.
Source: ITC COVID-19 Business Impact Survey Source: ITC Resource Efficiency and Circular Production
interventions
Figure 14. Respondents were asked ‘Which of the following
environmental risks are significant for your business?’ Answer Figure 22. Respondents were asked ‘In the last three years, did
options included changing temperatures; changing sea levels; your company invest in any of the following measures to reduce
water scarcity; floods; decreased air quality (e.g. air pollution); the environmental risks that your company is facing?’ Answer
more severe and frequent storms; decreased quality of inputs options included irrigation systems; water purification systems;
(e.g. natural resources); scarcity of inputs (e.g. natural flood prevention systems; power generation systems; soil
resources); other environmental risk not listed; none; do not management practices; transportation means; air pollution
know. If the respondent company chose one or more controls; temperature controls; other measures to reduce
environmental risk options, saying they were significant to their environmentally-related risks; none; and do not know.
business, they are identified as facing significant environmental Respondents that chose any of the answer options (besides
risks. none and do not know) are defined as ‘adapting to
Source: ITC SME Competitiveness Survey with environment environmental risks’; those that chose ‘none’, ‘do not know’ or
module did not choose are defined as ‘not adapting to environmental
risks’. The probability of firms investing in these measures to
adapt to climate change differs across gender of firm
Figure 15. Respondents were asked ‘Which of the following
leadership, age of firm leadership, firm size, and export status:
environmental risks are significant for your business?’ Answer
the pairwise comparison of each category of firm is statistically
options included changing temperatures; changing sea levels;
significant in a t-test. Furthermore, in a multivariate probit
water scarcity; floods; decreased air quality (e.g. air pollution);
regression on the determinants of the probability of adaptation,
more severe and frequent storms; decreased quality of inputs
which included controls for sectors and whether the firm said
(e.g. natural resources); scarcity of inputs (e.g. natural
they had already been affected by environmental risks, gender
resources); other environmental risk not listed; none; do not
of firm leadership, age of firm leadership, and firm size were
know. The proportion of respondents choosing each of the
statistically significant.
options is shown in the figure.
Source: ITC SME Competitiveness Survey with environment
module
module
Figure 23. Values represent the cumulative net benefits in

Figure 17. Respondents were asked ‘To what extent are
1000 $ for each year, plotted for 10 years forward (values are
environmental regulations an obstacle to your continued
projections). Net benefits are calculated as the difference
operations?’ Answer options included 0 (no obstacle), 1 (small
between the recurrent yearly savings and the sum of the initial
obstacle), 2 (moderate obstacle), 3 (high obstacle), 4 (very high
investment and the recurrent yearly costs, hence the negative
obstacle), and ‘do not know’. Firms choosing options 1, 2, 3 or 4
numbers are costs and the positive numbers are savings/
are defined as saying ‘environmental regulations are an
benefits. The numbers are cumulative, i.e. each year includes
obstacle’; those choosing option 0 are defined as saying
the net benefits of all preceding years. Year zero shows the initial
‘environmental regulations not an obstacle’; and those choosing
investment. Values are simple averages for 202 resource
‘do not know’ are excluded from the calculations.
efficiency measures identified by 56 companies participating in
Source: ITC SME Competitiveness Survey with environment ITC RECP interventions.
module
Source: ITC Resource Efficiency and Circular Production
interventions
Figure 18. Respondents were asked ‘Does this establishment’s
main product or service hold any of the following types of
internationally recognized certificates?’ Answer options included
safety certificate; quality or performance certificate; sustainability
certificate; other certificate. Percentages reflect the proportion of
firms that selected ‘sustainability certificate’. The number of
employees has a positive and statistically significant influence
on the likelihood of certification to a sustainability certification in
a multivariate probit regression analysis with controls for sector
and export status. Similarly, the higher number of employees in
sustainability-certified firms as compared to non-sustainability-
certified ones is statistically significant in a t-test.
Source: ITC SME Competitiveness Surveys

Figure 24. The figure plots the correlation between the initial Figure 27. Proportions indicate the share of respondents that
investment in 1000 $ (horizontal axis) and cost savings projected undertook environmental investments and said they presented
to cumulate over 10 years in 1000 $ (vertical axis). The size of business opportunities. Since respondents could choose more
each bubble is proportionate to the total reduction in than one option, the percentages do not add to the 59% that
greenhouse gas emissions from saving wood, fuel and said there was an opportunity.
electricity. Values are simple averages for 202 resource Source: ITC SME Competitiveness Survey with environment
efficiency measures identified by 56 companies participating in module
ITC RECP interventions and aggregated by measure category.
Only top measures (by cost savings) are shown.
Figure 28. Respondents were asked ‘In the last three years, did
Greenhouse gas reductions are calculated on the basis of the your company invest in any of the following measures to reduce
estimated savings of wood, fuel and electricity, using the its negative impact on the environment?’ See previous note for the
following coefficients: answer options. The companies that chose one of the options
Wood: 1 m³ wood = 1 ton of CO2 and are defined as ‘undertaking environmental investment’ were
asked ‘Did these investments present any of the following oppor-
Fuel: 1 litre = 2.68 kg of CO2
tunities for your business?’ Answer options included access to
Electricity: Varied, as per OECD (2018)
new markets; increased production; increased product quality;
Source: ITC Resource Efficiency and Circular Production lower input costs; new products or services; other opportunities;
interventions no new opportunities; do not know. The proportion of respondents
that chose ‘no new opportunities’ or indicated ‘no’ for each option
Figure 25. Respondents were asked ‘In the last three years, did are defined as ‘average firms’ ‘reporting that green investment did
your company invest in any of the following measures to reduce not lead to business opportunities’.
its negative impact on the environment?’ Answer options ‘In a value chain’ refers to those respondents that chose ‘yes’ to
included renewable energy sources; more energy-efficient the following question: ‘In the last year, did you produce
technologies; more water-efficient technologies; reduction of the according to any requirements imposed by buyers?’
use of chemicals; waste management systems; air pollution Respondents were also asked ‘Does this establishment’s main
controls; sustainable/recyclable packaging; other measures; product or service hold any of the following types of
none; do not know. Panel (a): Respondents that chose at least internationally recognized certificates?’ Answer options included
one of the answer options (besides none and do not know) are safety certificate; quality or performance certificate; sustainability
defined as ‘undertaking environmental investment’; those that certificate; other certificate. Respondents that did not choose
chose ‘none’, ‘do not know’ or did not choose are defined as ‘sustainability certificate’ are defined as being without
‘no environmental investment’. Panel (b): Percentages reflect the certification. The figure reflects the proportion of those
share of all investments undertaken by all firms in the sample respondents that undertook environmental investments and said
that are accounted for by that measure option. Since they did not present business opportunities, and were in a value
respondents could choose more than one option, 782 options chain without certification. Among those in a value chain, the
were chosen. The share of each chosen category in 782 total is proportion that received benefits from undertaking environmental
shown in the graph. For this reason, the percentages add to investments is statistically significantly higher for those that held
100%, and not to the 42% that chose any option. a sustainability certificate than those that did not. Similarly,
Source: ITC SME Competitiveness Survey with environment among those that undertook environmental investments, firms in
module the service sector were less likely to say they benefited from
those investments than non-services firms. The difference in the
proportion of services and non-services firms that benefited from
Figure 26. Respondents were asked ‘In the last three years, did
environmental investments was statistically significant in a t-test.
your company invest in any of the following measures to reduce
its negative impact on the environment?’ See previous note for Source: ITC SME Competitiveness Survey with environment
the answer options. The 556 companies that chose one of the module
options and are defined as ‘undertaking environmental
investment’ were asked ‘Did these investments present any of
the following opportunities for your business?’ Answer options
included access to new markets; increased production;
increased product quality; lower input costs; new products or
services; other opportunities; no new opportunities; do not know.
Respondents that chose at least one of the answer options
(besides no new opportunities and do not know) are defined as
‘reporting new business opportunities’; those that chose ‘no new
opportunities’ or indicated ‘no’ for each option are defined as
‘not reporting new opportunities’.
module

ANNEX III: ITC’S GREENTOCOMPETE STRATEGY AND TOOLBOX
Annex III: ITC’s GreenToCompete strategy and toolbox
GreenToCompete is ITC’s strategy to support developing SMEs in value chains

countries in leveraging trade to seize the opportunities of
the green economic transition.
BioTrade Knowledge-Sharing and
With a focus on climate change, circularity and biodiversity, Self-Assessment Tool
GreenToCompete supports countries across the following Brings together in a platform information about biodiversity-
areas: based initiatives. It allows SMEs to connect with value chain
actors and benchmark their sustainability practices against
Green competitiveness: Support SMEs to compete the UNCTAD BioTrade Principles and Criteria.
through environmentally friendly business practices
and access to green finance. The platform is developed by ITC and the UNCTAD
BioTrade Initiative, under the framework of the Global
Ecopreneurship: Support innovative entrepreneurs
BioTrade Programme.
build and grow solutions to environmental challenges.
Business ecosystems: Work with key ecosystem

stakeholders to unlock the relevant services that SMEs Climate Resilience Coaching Programme
require to succeed. Develops company-specific investment opportunities to
better manage climate risks. It is based on climate risk
Sustainable value chains: Work with market partners
assessments of targeted value chains and production
to connect SMEs to international value chains,
premises, and analysis of localized climate data in the
generate more local value, and realize green business
countries’ main production zones. The programme
opportunities.
consists of three steps:
Green policies: Support policymaking to transform
1. Climate risk awareness
trade and investment and build conducive institutional
2. Coaching guided by local and international
and regulatory frameworks at the domestic, regional
experts
and multilateral levels for the green transition.
3. Implementation of adaptation measures.
First, companies are sensitized to the benefits of climate

To accompany the strategy, ITC has a range of tools to
adaptation through workshops. Second, data on past and
help businesses, business support organizations,
future climate impacts on the selected SMEs are collected
policymakers, lead firms and development partners to
and climate risks identified. Climate adaptation measures
become greener and more competitive.
and business opportunities are then identified, and their
financial viability is assessed through a cost-benefit
For more information, contact
analysis. The adaptation strategy is tailored to the specific
GreenToCompete@intracen.org.
needs and goals of the particular SME, and is finally
implemented.

Continuous Improvement: Sustainable Companies are sensitized to use resources, such as water,
Packaging and Waste Reduction Assessment energy or chemicals more efficiently, and improve waste
Takes a circular economy approach to reduce and management. Data on current production practices and
repurpose waste, and to increase recycling efficiency. related resource consumption are collected. A gap
A key area is packaging, which is made more sustainable assessment then compares the data to efficiency
and cost-effective. benchmarks specific to the target country and sector.
Investment opportunities to make resource use more
The programme is implemented in four phases, during
efficient and introduce circular production practices are
which the business receives training on tools and
identified, to build a company-specific strategy. Finally,
methodologies, processes in need of improvement are
priorities are implemented with follow-up and monitoring.
identified, strategies are developed, and results are
evaluated.
Responsible Sustainable Ethical Trade for
the Fashion Sector
Greening Tech Startups: Training on
Environmental Sustainability in ICT Brings together social and environmental responsibility
tools to enable value chain actors in the fashion sector
Improves ICT environmental sustainability through training.
to manage their production activities in an ethical and
Startups and SMEs learn how to lower their environmental
sustainable manner.
impact while reducing business costs, increasing investor
attractiveness, and anticipating future environmental The framework takes a circular economy approach,
regulations. assessing the full value chain, from raw materials to
recycling. Businesses can assess the climate impact of
The training covers the following one-hour long modules:
supply chain segments and establish science-based
1. Electronic waste management improvement targets contributing to the low-carbon,
2. Data storage and energy efficiency climate-resilient development agenda.
3. Voluntary sustainability standards for
ICT sustainability (in development) Standards Map and Self-Assessment Tool
for Companies
International Executive Programme on Helps companies choose the right voluntary sustainable
Sustainable Sourcing and Trade standard to certify their goods or services, providing
A network of leading academic institutions and teaching information on over 290 standards. Certification allows
modules on international value chains and sustainable SMEs to access a broader range of sustainable markets
development. The programme is open to executives from and become more competitive
small, medium and large enterprises engaged in
The map provides an in-depth comparison between
international trade. Content was developed with support
standards based on five sustainability dimensions –
from Cranfield University, Cambridge Institute for
environment, social, management, quality and ethics –
Sustainability Leadership, ISAE Brazil Business School and
as well as a free online self-assessment open to all
HEC Lausanne.
companies.
Resource Efficiency and Circular Production

Sustainable Finance for SMEs
Coaching Programme
The Access to Finance and Investment approach supports
Supports SME processors in developing countries to
SMEs to access sustainable finance to grow their green
enhance the use of natural resources and implement
and inclusive business or to implement sustainable
circular production practices. The approach is
business practices. The approach is implemented in three
implemented through a coaching programme and
steps:
consists of three phases:
1. Access to sustainable finance landscape study
1. Sensitization on resource consumption and waste
2. Access to sustainable finance bootcamp
generation in production processes
3. Access to sustainable finance coaching
2. Coaching guided by local and international
programme.
experts
3. Implementation.

The sustainable finance landscape study gives SMEs an Voluntary Sustainability Standards:
overview on the current offering of green finance products Capacity building
in their country. The bootcamp lasts around three days and Supports SMEs to identify relevant sustainability standards
introduces SMEs to requirements of sustainable finance and implement associated requirements, allowing them to
providers, and provides information on how to approach access new markets.
them. The coaching programme builds the capacity of
First, SMEs conduct an online self-assessment against a
SMEs to develop a green business plan, enhance financial
standard of their choice through the Standards Map. Next,
management skills and ultimately connect to green finance
locally trained experts conduct a gap analysis, identify the
providers through matchmaking facilitated by the ITC.
issues companies need to address and strategies to do
The programme helps financial institutions understand and so. A business case for certification is developed through
improve their environmental, social and governance break-even point analysis. The results are summarized in
frameworks and assists them in developing appropriate an action and communications plan.
products and services for SMEs. It also facilitates their
The programme also supports SMEs to adopt ISO
access to de-risking solutions such as credit guarantee
management standards on quality and environmental
schemes from development partners.
compatibility of industrial products and manufacturing
procedures, such as ISO 14001 (environmental
Sustainable Investment: A guide to management systems) and ISO 50001 (energy
environmental and social compliance management systems) as well as standards related
Outlines the social, environmental, and economic practices to ISO 14067 (GHG/carbon footprint) and ISO 14046
that international businesses must understand when (water footprint).
entering a new market. The guide makes the case for why
caring for the environment and local communities is good Young Entrepreneurs Going Green
for business and provides examples of sustainability
Aimed at young entrepreneurs (18-35) and business
practices relevant to investing.
support organizations that cater to their needs, this
The guide is complemented by national companion guides initiative provides online and offline training courses and
for Ethiopia, Kenya, Mozambique, and Zambia, which links participants with ITC’s offerings on sustainable trade.
provide a concise breakdown of the mandatory
In this context, ITC is launching a Green Entrepreneurship
sustainability requirements in each country. It also includes
Challenge for young entrepreneurs from developing
practical resources such as worksheets and diagrams to
countries that provide innovative solutions to pressing
help investors mainstream environmental and social
environmental challenges.
sustainability in their business operations.
Value-Based Supply Chain Transformation

Enables value-based production chains that generate and
distribute value more equitably and sustainably. The aim is
to create climate-smart production and commercialization
systems.
The approach entails environmental, social and economic

sustainability assessment of a selected value chain. The
assessment is discussed with value chain stakeholders to
identify interventions that improve environmental
sustainability in terms of investments and capacity-building
for business support organizations and SMEs.

Business support organizations Policymakers
Business Support Organization Benchmarking: Green Trade Strategy

Mainstreaming sustainability
A methodology and a process that incorporate
Helps business support organizations quantify, measure environmental sustainability and climate change resilience
and assess the efficiency, effectiveness, cost and risk of into national and sector export strategy development. It
their institutional practices and processes. Organizations aims to create a policy framework and plan of action that
are assessed based on the following four areas: can allocate resources to initiatives that can achieve green
trade objectives; institutions that can provide services and
1. Leadership and direction
facilities tailored to businesses in the environmental goods
2. Resources and processes
and services sector; and enterprises that have the capacity
3. Products and service delivery
to link to these value chains.
4. Measurement and results.
The strategy design process follows four steps:
The benchmarking results show the institution’s position at
all levels, in relation to the generally accepted good 1. Pre-engagement
practices. ITC is currently upgrading the benchmarking 2. Analysis and prioritization
methodology to incorporate sustainability elements such 3. Design
as environment, youth and gender. 4. Strategic plans of action and implementation
management.
Advocacy Practices for Sustainable Trade The blended approach incorporates quantitative and
Targeted to business support organizations, a needs qualitative tools in the form of desk research, surveys and
assessment is conducted to enhance the advocacy SME interviews, as well as broad stakeholder participation
capacity and practices and better contribute to formulating, and consultation.
implementing and monitoring trade and environment
regulations. Greening cross-border trade and procedures
Make trade at the border more efficient and less resource-
GreenToCompete Hubs intensive, with better cross-border trade procedures and
Provides integrated solutions and tools for SMEs to trade facilitation measures that focus on the logistics
implement green and sustainable business practices. sector. The accent is on digitization of procedures and
Hosted by local business support organizations in the formalities and steps to create shorter waiting times at the
Caribbean, Ghana, Kenya, Laos, Nepal, Peru and Viet border, as well as on reforms to facilitate trade of
Nam, the hubs act as one-stop shops for SMEs to develop environmental goods and services in particular.
environmentally sustainable business strategies through
coaching programmes, webinars and e-learning. Aligning Trade, Industry and Investment Policies
and Agreements with Green Economy priorities
Supporting conformity assessment bodies for Ensures that policies incorporate environmental
environment-related standards sustainability, at the intersection of trade, industrial and
Supports national inspection and certification bodies, investment areas. Examples of activities: build capacity of
testing laboratories and other institutions to ensure reliable trade agreement negotiating teams in developing countries
test results and inspections for environmental sustainability. to conduct sustainability impact assessments; identify
The initiative supports standards development to reduce priorities in low-carbon or renewable industries to link to
the environmental impact of production and meet higher- trade negotiations; review and set up investment facilitation
end consumer market demand. policies and practices to attract investment for cleaner
technologies and capital goods.

Development partners Cross-cutting tools
Mainstreaming Sustainable and Inclusive E-learning on Sustainability

Development Guidelines
The SME Trade Academy offers multiple e-learning
Offers a one-stop approach for project managers to courses on sustainability topics. Participants from all
embed consistently the principles of sustainable and backgrounds learn how to leverage sustainability solutions
inclusive development throughout the project cycle. for their own organizations or businesses. Working with
experts, participants also exchange knowledge. It is not
The guide outlines a process to identify climate and
necessary to be affiliated with an ITC project to access
environmental impacts, and measures to mitigate them in
the courses, which include:
project design. The guide also offers indicators to measure
a project’s contribution to environmental sustainability. 1. Competitiveness through enterprise sustainability
2. Enterprises and climate change
Climate and Environment Risk Assessment in 3. How to measure and manage your social impact
Agriculture 4. Introduction to corporate social responsibility
5. Introduction to standards and sustainability
Supports project managers to identify climate and
6. Meeting standards in the agrifood sector
environment related risks across agricultural value chains
7. Organic agriculture trade development (accessible
during the project design phase. Through a risk
through Sustainability Map)
assessment methodology, the tool identifies climate
8. Social entrepreneurship
hazards and risks at each stage of the value chain and
9. Standards and certifications for IT and ITES
proposes adaptation and mitigation actions. It is divided
outsourcing
into four steps:
10. Standards and technical requirements for the
1. Mapping leather industry
2. Strategy 11. Resource efficiency and circular production for
3. Opportunity SMEs (forthcoming)
4. Capacity Building. 12. The role of standards in sustainable supply
chains.
First, the potential risks posed by climate change on
selected agricultural value chains are mapped. Next,
strategies to mitigate and adapt to the risks are developed SME Competitiveness Survey: Environment
and economic opportunities are identified. The strategies module
are then implemented to strengthen the chain’s climate Collects data on the strengths and weaknesses of
resilience, and to provide SMEs with new business enterprises, and their business ecosystem. In cooperation
opportunities. with local partners, ITC designs a customized
questionnaire, identifies a representative sample of SMEs,
and gathers data. Data are then analysed and a report of
findings is prepared to inform evidence-based production
optimization, investment and policymaking.
Business performance is analysed based on the three

pillars that drive competitiveness – the capacity to
compete, connect and change – across three levels of the
economy – firm capabilities, the business ecosystem, and
the national environment. The survey has standardized
core questions, and an optional environmental module that
covers perceptions on climate risk assessment, risk
reduction, resource efficiency, policy and business
opportunities.

Previous SME Competitiveness Outlook Reports
2020: COVID-19: The Great Lockdown and its Impact on Small Business
The SME Competitiveness Outlook 2020 analyses the impact of the pandemic on small firms, international supply
chains and trade. It provides projections and a 15‑point action plan for businesses, policymakers and business
support organizations to weather the crisis - and gear up for a ‘new normal’ that needs to be resilient, digital,
inclusive and sustainable.
The report combines analysis of the impact of COVID-19 on firms based on a large‑scale global survey, with case
studies and a thought leader viewpoint. The projected drop in supply chain trade is evaluated by region, and in 85
country profiles.
2019: Big money for small business: Financing the Sustainable Development Goals
Increasing annual investments in small and medium-sized enterprises by $1 trillion would yield disproportionate
dividends in terms of progress towards the Sustainable Development Goals. These investments also have the
potential to deliver healthy returns for investors.
To boost investment in developing country small firms, the SME Competitiveness Outlook 2019 finds that stronger
investment facilitators (actors that connect firms to investors) are key. Other major findings: bundling investments
for small firms into large packages helps scale up financing; disseminating information on small business credit
performance improves risk assessments; and helping these firms to be investor-ready improves their commercial
viability.
2018: Business Ecosystems for the Digital Age

Digitalization and the rise of the platform economy are rapidly changing the way in which firms do business.
A strong business ecosystem is necessary to manage this change. The SME Competitiveness Outlook 2018 tells
how to build it.
The report combines data analysis, academic insights, thought leader views and case studies to guide
policymakers, businesses, and trade and investment support institutions in designing the business ecosystem
that is necessary for small businesses to embrace and benefit from industry 4.0. This year’s edition includes 50
country profiles on SME competitiveness, with a focus on strengths and weaknesses of the business ecosystem.
2017: The region: A door to global trade

The SME Competitiveness Outlook 2017 focuses on regions as a stepping-stone to international value chains for
small and medium-sized enterprises (SMEs). It provides new evidence showing that deep regional integration is
good for SMEs. These agreements can be both powerful and inclusive.
It finds that deep regional trade agreements help deliver inclusive growth. These agreements attract value chain
activity and narrow the competitiveness gap between large and small firms. When investment is part of such
agreements, the impact is stronger. The report provides targeted advice for policymakers, businesses, and trade
and investment support institutions.
2016: Meeting the standard for trade

The SME Competitiveness Outlook 2016 focuses on standards and regulations. The report combines data
analysis, academic insights, thought leader opinions and case studies to provide guidance for policymakers,
business managers and standard setters.
Standards and regulations have a major impact on SME competitiveness. By meeting the standard for trade,
SMEs increase their chances to connect to international value chains and consumers in a socially and
environmentally sustainable manner. The report contains governance insights for voluntary sustainability
standards; new evidence on how standards and regulations affect trade and business performance; guidance for
SMEs on how to select and implement standards and regulations; and a policy action plan to strengthen SMEs’
ability to meet standards and regulations.
2015: Connect, compete and change for inclusive growth

The SME Competitiveness Outlook 2015 is a “one-stop shop” on the topic of SME internationalization, and
combines unique analysis, thought leader insights and case stories about developing country SMEs in
international markets.
Organized around the theme Connect, Compete, Change for Inclusive Growth, the report shows that SMEs are
generally less productive than large firms are. The productivity gap is wider in developing countries, and the wage
gap is similar. It also shows that firms connected to international markets are more productive and create more
employment. The book combines unique analysis, thought leader insights and case stories about developing
country SMEs in international markets, along with 25 country profiles.

Printed by ITC Digital Printing Service.
A free pdf is available on ITC’s website at:
www.intracen.org/publications

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SME COMPETITIVENESS OUTLOOK 2021

This publication is a contribution to the annual Micro, Small and Medium-Sized

MSME Day takes place each year on 27 June.

© International Trade Centre 2021

The International Trade Centre (ITC) is the joint agency of

Street address: ITC

Postal address: ITC

Telephone: +41-22 730 0111

Fax: +41-22 733 4439

Publisher: International Trade Centre (ITC)

Digital image on the cover: © Shutterstock and ITC

iv SME COMPETITIVENESS OUTLOOK 2021

CHAPTER 1: Business lessons from the pandemic 2

CHAPTER 2: Climate change: What impact for small business? 16

CHAPTER 3: Going green as a business opportunity 30

EMPOWERING THE GREEN RECOVERY v

CHAPTER 4: The Green Recovery Plan 45

ANNEX II: Methodology note and data sources 72

ANNEX III: ITC’s GreenToCompete strategy and toolbox 85

vi SME COMPETITIVENESS OUTLOOK 2021

EMPOWERING THE GREEN RECOVERY vii

viii SME COMPETITIVENESS OUTLOOK 2021

BSO Business support organization

EMPOWERING THE GREEN RECOVERY ix

In January 2020, very few would have predicted that a

© ITC / Antoine Tardy

The effects of the pandemic are truly global, but

EMPOWERING THE GREEN RECOVERY xi

Put small firms Resilience matters

The fundamentals of resilience

Companies that did best had

Good inventory Diverse suppliers Innovation

management Connections to business Employees with

Climate change matters for small firms

Who views environmental risks

Who acts to reduce environmental risk?

What they do?

*All ITC data except as noted by an asterix. See endnotes in report.

xii SME COMPETITIVENESS OUTLOOK 2021

Environmental investment gains

Increased product quality 19

Access to new markets 17.3

Increased production 16.6

Lower input costs 10

New products or services 7

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

For companies that don’t see short-term gains, remember:

The Green Recovery Plan to support small businesses

BUSINESS SUPPORT GOVERNMENTS LEAD FIRMS INTERNATIONAL

Develop expertise Embed sustainability Adopt a holistic Mainstream

Create/join Coordinate Harmonize/recognize Be a platform

Be the trusted Provide incentives Facilitate access Promote tailored

EMPOWERING THE GREEN RECOVERY xiii

Smaller, youth-led firms are less resilient

By firm size By gender By age

xiv SME COMPETITIVENESS OUTLOOK 2021

Environmental risks significant for two-thirds of African companies

Smaller, women-led and youth-led firms less likely to invest in adaptation

EMPOWERING THE GREEN RECOVERY xv

Lesson 1: Focus on fundamentals

CHAPTER 1: Business lessons from the pandemic 2

CHAPTER 2: Climate change: What impact for small business? 16

CHAPTER 3: Going green as a business opportunity 30

CHAPTER 4: The Green Recovery Plan 45

ANNEX II: Methodology note and data sources 72

ANNEX III: ITC’s GreenToCompete strategy and toolbox 85