SMEs in the environmental goods and services market: identifying areas of opportunity, policies and instruments: case studies: Argentina, Chile, Colombia and Mexico

Studies of Argentina, Colombia, Chile and Mexico conducted collaboratively by ECLAC and GTZ point to environmental impacts associated with small and medium enterprises (SMEs), particularly in the manufacturing sector. This impact is essentially local, though it can become significant at the aggregate level, i.e., SMEs are responsible for some of the environmental problems caused by industry as a whole. Though SMEs account for only a small fraction of such problems -at the national level, the effect is often marginal in terms of environmental degradation- the impact may be significant and fairly visible on a local scale. The studies summarized in this book identified the principal sectors in which SMEs exert such an impact. In all four countries, the sectors in which SMEs have the greatest environmental impact are in areas such as food and beverages, textiles, metal-mechanics (including galvanoplastic), brick manufacture and chemicals. In general, these activities are concentrated in the regions, provinces or municipalities where development or urban expansion is most advanced. All of the countries have some degree of regulation designed to mitigate and control the environmental impact of these activities, along with legal frameworks and functioning institutions to deal with such issues. Though there are significant differences in approach, and in the scope of enforcement, all countries have a body of regulations, control and prevention mechanisms, as well as laws, monitoring systems, sanctions, and incentives to encourage better environmental behaviour among productive sectors. The studies show that in all four countries this is the main force driving environmental improvements in productive sectors. Country assessments coincide in indicating that sustainable development in the SME sector depends largely on the ability of environmental regulation to drive change in a positive direction, while also promoting modernization of the productive apparatus. However, the weakness of environmental regulation is not the only factor accounting for the sector's failure to keep abreast of environmental requirements. The SME sector is in a state of crisis in all countries, principally as a result of financial factors, involving high debt levels and limited access to credit. This situation constrains investment in equipment and technology, thus reducing competitiveness and ultimately translating into lack of competitiveness in the marketplace. Nearly all of the major defects attributed to Latin American industry appear in the SME sector: traditionalism, risk aversion, scant awareness of environmental problems, an individualistic culture that hinders the formation of partnerships, scepticism regarding State action, a tendency toward short-term perspectives, and lack of courage in facing new challenges, especially in globalised markets. Against this background, access to emerging EGS markets will require novel public policy approaches and new efforts by entrepreneurs themselves. In short, the studies point to a need to approach the issues not from an exclusively environmental, social or economic point of view, but comprehensively. This emerges from their assessment components, their analysis of the demand for environmental goods and services and what is currently available, and their conclusions regarding policy proposals and instruments to drive supply and demand in the SME sector. The situation is complex, and the market must be allowed to play its role, while specific regulations are used to shape the process so that it contributes to sustainability at the national and local levels. SMEs will have significant opportunities here if good systems of partnership with large businesses are in place to promote good environmental behaviour. Public policy is essential, given the role that SMEs play in creating jobs, and government must act to help them to modernize and become more competitive. This complex situation offers interesting opportunities for achieving sustainable development in this productive sector, which will doubtless become an engine of development in the region's countries over the long term.