Green Growth in MSMEs: Challenges and Opportunities Ahead

One-third of MSMEs adopt sustainable practices, but cost, awareness, and financing gaps challenge India’s green MSME growth.

May 15, 2025 - 14:42

Green Growth in MSMEs: Challenges and Opportunities Ahead

As the world moves toward a low-carbon future, India’s MSMEs face a critical challenge and opportunity: adopting sustainable business practices to drive green growth. While the sector is gradually embracing energy efficiency and renewable energy, awareness gaps, infrastructure constraints, and cost concerns hold many back. The journey to sustainability will be pivotal in shaping MSMEs’ future competitiveness and alignment with India’s climate goals.

MSMEs and the Growing Push for Sustainability

More than one-third of MSMEs surveyed have adopted some form of sustainable practice, such as energy-efficient machinery (31%) or renewable energy sources (21%). This is a promising start for a sector that contributes nearly 30% to India’s GDP and significantly to environmental impact. Sustainability is becoming a necessity, driven by:

Increasing regulations on emissions.
Demand from global buyers for green supply chains.
Rising operational costs linked to inefficient energy use.

Sectoral and Regional Differences in Green Adoption

Adoption of green practices varies widely:

Manufacturing units, especially in textiles and chemicals, are increasingly investing in cleaner technologies.
Service sectors like hospitality and IT show growing interest in green certifications.
Rural and agro-based MSMEs lag behind due to infrastructure and financing constraints.
Awareness remains a key barrier, with 33% of MSMEs citing limited knowledge as the main hurdle to adopting sustainable methods.

Government Initiatives Fueling Green Growth

The government has launched several schemes to support MSMEs’ transition to sustainability:

MSME Sustainable (ZED) Certification promotes environmental compliance.
Raising and Accelerating MSME Performance (RAMP) aids adoption of green technologies.
Financial incentives under schemes like PM Vishwakarma and cluster development programs facilitate eco-friendly upgrades.
These schemes aim not only to reduce carbon footprints but also to increase MSME efficiency and market access

Challenges to Scaling Sustainable Practices

Despite incentives, MSMEs report challenges including:

High upfront costs of green technology.
Lack of easy access to green financing.
Limited technical expertise for sustainable operations.
Fragmented supply chains making systemic changes difficult.

Such barriers require integrated solutions combining finance, training, and technology partnerships.

MSMEs as Champions of Sustainable Growth

With rising consumer and regulatory pressures, sustainability will be integral to MSMEs’ survival and growth. Digital tools, access to green credit, and enhanced awareness campaigns can accelerate adoption. MSMEs that embed sustainability early will benefit from cost savings, improved brand value, and better export potential.

India’s MSMEs are taking green shoots towards sustainable business, but full bloom demands stronger support and deeper integration of eco-friendly practices. Aligning MSMEs with climate goals is not just a policy priority—it’s a competitive imperative for India’s economic future.