Small is Powerful

Why don't governments do more to develop the small and medium enterprises (SMEs) that are the backbones of most nations' economies?

This is not a rhetorical question. There are many reasons that the owners and bosses of SMEs are hard to reach. First, they tend to be incredibly busy keeping their small companies afloat and may not have time to take advantage of the educational and advisory programs that are available for SMEs.

Second, many SME owners, faced with the vast and complex bureaucratic mazes erected by many governments, have elected to opt out of the ‘formal' (registered, licensed, tax-paying) sector. Governments cannot reach them because they have no record of them.

Yet the development of SMEs can be crucial to creating inclusive economic growth reaching the majorities of populations. In developing countries, more than 90% of firms outside the agricultural sector are SMEs and micro-enterprises, and they generate a significant portion of GDP. A single SME may not be a major polluter, but given their numbers, they can be major emitters of everything from toxic chemicals to greenhouse gases. If governments can reach small entrepreneurs with advice on eco-efficiency, they may be able to help SMEs clean up in ways that save the small companies money and save the nations resources such as water and energy.

The WBCSD has published an issue brief on SMEs in collaboration with the Netherlands development organization SNV. The brief explains how governments can help alleviate poverty by focusing on SMEs and how larger corporations can help themselves by including SMEs in their value chains. It describes some of the comparative advantages of SMEs and the challenges they face in developing countries. The brief also includes a set of key messages to both business and governments on promoting the growth of SMEs.

This focus on SMEs is part of the logic of the recently published "Statement of Intent for Doing Business with the World", in which the leaders of 12 WBCSD member companies commit to looking beyond corporate philanthropy to search for responsible, sustainable and inclusive business models that are good for business and good for development. The fact that our members are increasingly willing to put their signatures to such statements of principle is powerful evidence of their determination to make big companies an even more powerful force for economic development.

Meanwhile, the WBCSD is working with its members, our national BCSD partners and other stakeholders to broker new business ventures that are both good business and good for development. A key element in this work is a partnership agreement with SNV to broker real and sustainable business in eight Latin America countries, which taps SNV's client base of SMEs, small producers, producer associations, as well as governments and municipalities. The work program includes advocacy work to improve framework conditions for this type of inclusive business. President Rafael Correa of Ecuador has made the concept of inclusive business part of the country's new social development agenda.

The WBCSD is working to raise awareness of the business contribution to development, while at the same time improving that contribution. We are helping business and non-business stakeholders understand what is possible by providing case studies, guides and tools that advance our understanding of development challenges and opportunities. This should help make globalization truly inclusive.