This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.
Today, the United Nations marks the annual celebration of micro, small and medium-sized enterprises (MSMEs): resilient recovery is this year’s focus. With this dedicated day, the UN honours entrepreneurs in societies everywhere as they face the triple threat of COVID-19, conflict and climate. This is the fifth anniversary of MSME Day, which the UN General Assembly created to raise awareness of the contribution of small businesses to job creation, economic growth and thriving communities.
These micro and small enterprises account for over 70% of businesses and more than 50% of jobs worldwide. In Europe, 99.8% of all businesses are SMEs, and they provide 65% of employment. They ensure basic needs, employment and social cohesion, especially in rural areas. And they are a strong contributor to the training of young people.
SMEs—along with the rest of the world—are on a rollercoaster of events: preparing for the digital and green transition, they have been hit by the COVID-19 pandemic. Sanitary measures had a disproportionate impact on the SME tissue of our economy. Even though several support measures were created, many entrepreneurs took on debt financing to keep their companies afloat and are in the red. An increasingly overheated economy now combines with a war in Europe’s backyard.
More on the Forum Network: Turbulent Times: A new tool to help SMEs and entrepreneurs navigate rough waters by Céline Kauffmann and Lucia Cusmano, SME and Entrepreneurship Division, OECD
SMEs suffer from high energy and commodity prices, persistent disruptions in supply chains, shortages of skilled labour and negatively impacted investment capacity, all of which puts them in an extremely precarious situation. This instability poses significant challenges to achieve the overall objectives of the twin transition and a resilient economy.
Moreover, the current—and very ambitious—European Commission is putting in place a highly demanding policy agenda. Many legislative acts have already been approved, and many more are moving through the EU decision-making process. Some might contribute to a facilitating environment for SMEs to transition their business to the next level, digital and green; most will require additional investments for the future and threaten to put excessive burdens on SMEs. Their resources would be better dedicated to real change rather than reporting on policy demands.
OECD analysis of global support measures for digital and green transition clearly shows that public authorities lag behind in supporting SMEs: only 3% of support measures are invested for SMEs to go green and 23% for SMEs to digitalise.
SMEs are the main actors driving the transition to ensure a resilient economy. To allow them to play their full role, governments should undertake several actions:
- First, we must create a more diversified and secure energy supply. We have to promote renewable energy, ensure interconnectivity, develop energy storage solutions and stimulate energy efficiency;
- Second, we must invest in and develop the necessary skills. With these skills, SMEs will be able to innovate, adapt to and implement new technologies;
- Third, public funds should be invested wisely, particularly in the much-needed infrastructure and SME support measures;
- As a fourth action, we insist on enhancing research and innovation to develop and commercialise the technologies required for the twin transition;
- Finally, we call for an environment that stimulates private investment and promotes public-private collaboration
To conclude, we stress that micro, small and medium-sized enterprises are increasingly concerned by growing administrative burdens, such as sustainability reporting and due diligence. Policy makers should be aware that businesses are overwhelmed by the manifold challenges of our times. SMEs require a simple and predictable regulatory environment.
Before approving a new legislative or policy proposal, decision-makers should imagine themselves in an entrepreneur’s shoes. Would they feel supported to make their business flourish? Would they even be able to comply with the proposed rules? If they would have difficulties implementing their own rules in a business, they should vote against it.
We ask governments and institutions: “think small first” and act accordingly!
Petri Salminen Veronique Willems
President Secretary General