Empowering SMEs for a Greener Future: OECD’s Blueprint for Sustainable Growth

The OECD’s 2025 report urges governments to scale up financial and technical support to help SMEs adopt sustainable practices, bridging gaps in finance, skills, and data. It argues that with tailored incentives and digital innovation, small firms can become powerful drivers of the global green transition.

The OECD report Scaling Up Public Financial and Non-Financial Support for SME Sustainability: Innovations and Good Practices (2025), prepared by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE) and the OECD Platform on Financing SMEs for Sustainability, presents a detailed roadmap for empowering small and medium-sized enterprises to lead the sustainability transformation. SMEs make up more than 90 percent of businesses worldwide and generate over half of global employment, giving them enormous leverage in the green transition. Yet most remain constrained by limited access to finance, technology, and expertise. The report argues that bridging these gaps through smart financial and institutional support is essential if the global economy is to meet its climate and development goals.

Different Roles, Different Needs

Recognising that SMEs are not a monolith, the OECD classifies them into three groups: innovators, enablers, and adopters. Innovators develop green technologies but face barriers to early-stage finance. Enablers supply the goods and services that help other firms decarbonise but need working capital to scale operations. Adopters, the largest group, integrate sustainability into existing business models but often lack the financial means and technical knowledge to do so. Because these groups have different challenges, the report insists that “one-size-fits-all” policies fail to deliver impact. Tailored interventions, aligned with firm maturity and sectoral context, are crucial for success.

Unlocking Green Finance

Access to credit remains the toughest obstacle to SME sustainability. Many environmentally beneficial investments, energy-efficient machinery, waste reduction systems, or renewable energy installations require high upfront costs and offer uncertain short-term returns. Commercial banks, wary of risk and weak collateral, hesitate to lend. The report calls for public financial institutions to act as catalysts, using instruments like partial credit guarantees, concessional loans, and blended finance to attract private capital. The goal is not perpetual subsidy, but demonstration, showing that green business models can be commercially viable. Programmes that balance accessibility with accountability, the OECD notes, achieve the highest impact.

Beyond Money: Building Capabilities and Confidence

Financial incentives alone are insufficient if firms lack the skills and systems to act. The report underscores the equal importance of non-financial support, including technical assistance, training, and sustainability reporting tools. Global examples highlight how governments can help SMEs bridge knowledge gaps: Malaysia’s Simplified ESG Disclosure Guide standardises reporting for firms and financiers; Denmark and Singapore have introduced automated self-assessment tools that cut red tape; and Finland’s business training programmes equip entrepreneurs with the skills to measure and manage carbon footprints. Such initiatives make sustainability tangible, embedding it in day-to-day operations rather than leaving it as an abstract corporate goal.

Partnerships, Technology, and the Path Forward

The success of green finance schemes depends as much on design as on delivery. Public-private partnerships ensure that funds reach firms effectively, while digitalisation simplifies access and increases transparency. Online application systems, real-time monitoring dashboards, and digital credit scoring platforms not only streamline bureaucracy but also build trust in green finance frameworks. Case studies from across the OECD and partner economies illustrate how this works in practice: Canada’s Climate Tech Fund II and the Asian Development Bank’s ADB Ventures support climate innovators; Korea’s Industrial Bank ESG Loan rewards sustainable performance; and Australia’s Environmental Upgrade Finance programme enables property retrofits. These examples show that when capital, technology, and knowledge converge, small firms can make big contributions to national climate goals.

The OECD’s central lesson is integration. Green support must align with broader economic and environmental priorities, avoiding fragmentation and duplication. It must target real market failures, information gaps, long payback periods, and perceived risks, rather than simply distributing subsidies. Policymakers should also invest in strengthening the financial ecosystem: improving banks’ capacity to assess green projects, supporting sustainability service providers, and promoting consistent standards and data-sharing.

The OECD report makes a compelling case that scaling up SME sustainability is not only an environmental imperative but an economic opportunity. Governments must de-risk green investment through smart financial tools, empower firms with knowledge, and strengthen the institutional frameworks that reward sustainability. With coherent policies and active collaboration, SMEs can evolve from hesitant participants to central drivers of the green economy, proving that the path to competitiveness now runs through sustainability itself.