What policy mix works for MSMEs

Micro, small, and medium-sized enterprises (MSMEs) are critical to economic growth, employment, and emissions reduction, making them central to a just transition toward environmentally sustainable economies. However, MSMEs face significant barriers such as limited access to finance, technology, and skills, which hinder their ability to adopt greener practices. The ILO’s Guidelines for a Just Transition emphasize integrated policies that combine environmental, economic, and social objectives, including decent work, social protection and social dialogue.

While most MSME policies (75%) include climate or environmental provisions, none explicitly reference a “just transition,” and they largely focus on enterprise development, neglecting social protection, labour rights, and stakeholder dialogue. Climate diagnostics, measurable targets, and attention to vulnerable groups are often missing, and governance gaps persist due to limited involvement of environment and labour ministries. Although recent policies show progress—67% integrate environmental considerations post-2020 versus 44% before—alignment with NDCs remains weak, and MSMEs are scarcely mentioned in them. Enterprise policies dominate among the nine ILO guideline areas, while social dimensions are absent. To enable MSMEs to drive a fair and sustainable transition, governments should embed just transition goals throughout policy design, set measurable targets, integrate social and labour measures, formalize informal enterprises, foster social dialogue, and ensure stronger inter-ministerial coordination aligned with NDCs.