This chapter assesses the provision of policies that promote green behaviour among Latin American countries, both via the general policy framework for green and environmental policies, as well as through dedicated regulatory and financial incentives.
SME Policy Index: Latin America and the Caribbean 2024
Towards an Inclusive, Resilient, and Sustainable Recovery
SME Policy Index
11. SMEs in a green economy
Abstract
Assessment Framework
This pilot dimension analyses governments’ approaches to help SMEs improve their environmental performance, both via the general policy framework for green and environmental policies, as well as through dedicated regulatory and financial incentives. As a result, the assessment framework for this dimension is composed of the following (see Figure 9.1):
Framework for green and environmental policies targeting SMEs: This sub-dimension examines the overall set of environmental policies targeting SMEs, as well as the greening aspects in national SME, sectoral and innovation policy frameworks. It also considers the presence of operational government agencies assisting SMEs with the adoption of greener practices.
Incentives and instruments: The second sub-dimension explores the existence and implementation of different instruments and measures of whether the government provides regulatory and financial incentives to SMEs, whether there is any evidence that SMEs benefit from those incentives, and how such support schemes are structured and delivered.
Figure 11.1. Assessment framework - Green Economy
Analysis
Sub-dimension 9.1 Green and environmental policies
The first sub-dimension assesses the integration of greening initiatives into SME policy frameworks. It examines whether strategic documents on enterprise and innovation policy encompass eco-efficiency and eco-innovation, and to what degree SMEs are explicitly recognised as a target group.
Across the region, environmental policies rarely consider the specific needs of SMEs, and financial incentives for environmental initiatives are scarce. While all countries have some level of environmental regulations or strategies in place, only Colombia and Uruguay have made some efforts to address SME-specific environmental concerns. However, in general these strategies often lack clear targets, time-bound objectives, and expected impacts.
Moreover, ministries responsible for environmental issues often have limited engagement with SMEs. As a result, SMEs receive minimal guidance and support regarding environmental policies, hindering their ability to adopt greener practices. Furthermore, private sector involvement in the design and implementation of environmental policies remains limited.
Lastly, monitoring and evaluation of environmental policies for SMEs are generally weak in the region. The absence of SME-specific activities and targets in environmental policy documents indicates a lack of commitment by governments to assess the impact of their policies on SMEs.
Sub-dimension 9.2 Incentives and instruments
In the second sub-dimension, attention is given to the array of mechanisms available to assist SMEs in their greening efforts. It delves into whether governments offer regulatory and financial encouragements to SMEs, whether there are tangible outcomes indicating SMEs' utilisation of these encouragements, and the framework and implementation of such supportive measures.
Dedicated financial incentives for greening SMEs are uncommon across the LAC region. OECD countries have implemented information-based tools and regulatory and economic incentives to encourage SMEs to improve their environmental performance, to comply with regulatory requirements and to adopt broader green practices that go beyond what is required by law. Nevertheless, efforts in this area lag behind in most LA9 countries, though some incentive schemes exist for companies to adopt greener practices, albeit not specifically for SMEs. In many cases, donor-funded initiatives play a crucial role in bridging the financing gap for green-oriented investments. An example of good practice is the Philippines Environment Partnership Programme that encourages self-monitoring and self-regulation (see Box 9.1).
Public procurement also offers opportunities and incentives for companies to adopt greener practices. "Green" public procurement is either planned or already operational in some countries. For example, Paraguay’s National Public Procurement Directorate (DNCP) has been working on implementing the Sustainable Public Procurement Policy, approved by Resolution N°922/2020, which commits the Public Procurement System to sustainable development across environmental, social, and economic dimensions.
Box 11.1. Philippines Environment Partnership Programme
The Philippines Environment Partnership Programme (PEPP) was created in 2003 by the Environmental Management Bureau of the Department of Environment and Natural Resources (DENR-EMB) to support industry self-regulation and reporting while improving environmental performance. It includes incentives and assistance for SMEs to achieve cleaner production standards. The PEPP has two tracks:
Track 1 gives recognition and incentives to enterprises that go beyond compliance in their environmental performance.
Track 2 is an assistance programme aimed at industry associations and individual companies, particularly SMEs that are not yet compliant with environmental regulations but that are committed to improving their performance. Successful applicants sign an environment consent agreement, a legally binding accord between the company/industry association and the DENR-EMB that commits the company to:
implement environmental management plans within the framework of an environmental management system
attain waste reduction targets within an agreed timeframe and agree to means of verification
adopt pollution prevention and/or cleaner production
provide an environmental performance report
Source: (DENR-EMB, 2017[1]), Philippines Environmental Partnership Program (PEPP): Catalyst for Holistic Environment Partnership, http://pepp.emb.gov.ph/.
The way forward
Table 11.1. Policy recommendations for dimension 9. Green Economy
References
[1] DENR-EMB (2017), Philippines Environmental Partnership Program (PEPP): Catalyst for Holistic, https://pepp.emb.gov.ph/.
[2] OECD/EBRD (2023), SME Policy Index: Eastern Partner Countries 2024: Building Resilience in Challenging Times, OECD Publishing, https://doi.org/10.1787/3197420e-en.