The Critical Role of MSMEs in Sustainable Supply Chains

Micro, small and medium-sized enterprises (MSMEs) are fundamental in the Mexican economy and play a relevant role, as they represent more than 95% of businesses in Mexico and contribute significantly to the country's gross domestic product (GDP). They are present in all sectors, mainly in manufacturing, services, and commerce.

According to INEGI’s 2024 Economic Census, in the last five years microbusinesses, which employ from 0 to 10 people, have increased within the national economy. It should be noted that this type of business is the main engine of development, more than large companies, and they are also the ones that trigger more employment,  generating thousands of jobs.

Under this scenario and despite their importance, MSMEs face various challenges that are related to low productivity, lack of access to financing and digitalization, vulnerability to episodes of inflation and interruptions in supply chains, among other relevant points that prevent their growth and permanence.

And this is where there is a key issue regarding the "permanence" of MSMEs within a supply chain. In the era of sustainable development these businesses need, in addition to formalizing their legal status and strengthening their performance, to have greater capacities to respond to the new requirements of their customers, which is a greater challenge when the chain to which they belong works to become resilient and sustainable.

Formalizing and implementing best practices can open the door to driving small businesses to increase their sales and access financing. But the incentives to get microbusinesses to become SMEs and achieve higher productivity are not yet aligned, as it is still expensive to incorporate employees into social security when the payroll is small and incomes are low.

The INEGI census also highlights that microbusinesses employ 41.5% of the employed personnel, while SMEs employ 29.1% and large companies employ 29.3%.  These figures call for action and collaboration by public and private financial institutions, with the aim of strengthening microbusinesses, an important sector that moves the economy of our country but is mostly informal, with minimum working conditions and limited access to financing.

Now, given this panorama, it will be necessary to guarantee the financing of SMEs, with policies that allow their development through greater financial inclusion and education, differentiated mechanisms appropriate to the type of business and that offer competitive conditions and opportunities for growth, especially in sectors related to agriculture, manufacturing, commerce, and services in general.

That said, SMEs that wish to remain in modern, resilient and increasingly globalized supply chains will need to efficiently manage key objectives, not only in the economic aspect, but also in the environmental, social and governance areas.

Sustainable supply chains play a fundamental role in leading development, competitiveness, and corporate responsibility, as they can positively influence all members of the chain, implementing best practices in working conditions, in the efficiency of operations, in the efficient use of natural resources, and in new business models with long-term vision.

For chain leaders to promote the adoption of these practices, it is necessary to build channels of communication with their members, make use of coordination strategies between customers and suppliers to guarantee the positive flow throughout the chain, and thus achieve its permanence in the medium and long term. 

But where do you start? And what frames of reference can they use?

In Mexico, we already have the first Sustainability Reporting Standards (NIS), issued by the Mexican Council for Financial Reporting and Sustainability Standards (CINIF) in March 2024. These standards include metrics that allow an entity to evaluate its performance and identify risks and opportunities in terms of sustainability. The standards should be applied in the preparation and disclosure of sustainability information by all types of entities that issue financial statements under the terms established in the Framework of Financial Reporting Standards (NIF).

Supply chains that decide to move forward with early actions regarding the measurement of indicators contained in the NIS will have a clear guide to identify material aspects that can influence their economic, environmental, social, and governance performance,  evaluating whether there is coherence between its sustainable strategy and its business model.

Let's also not forget June 27, the day which the UN General Assembly has designated to recognize the crucial role of MSMEs in the global economy and their contribution to the Sustainable Development Goals.