Acceleration of (rural) SME climate action - ramping up smart solutions, technologies and practices & addressing shortfalls in the low-carbon transition and resilience of supply chains

On the one hand, the contribution to global GHG emissions of SMEs - comprising MSMEs (incl. smallholder farmers) as micro enterprises are the backbone of economies in many parts of the developing world - on aggregate account amounts to at least 50% of GHG emissions of the business sector; and 30-60% of energy use of the business sector. Bigger companies rely on products or services of SMEs as part of their supply chains – finding almost 90 % of their carbon emissions in the supply chain. On the other hand, SMEs need to be prepared to address numerous risks they face, avoiding inability to deliver due to climate shocks.

Rural SMEs in the AFOLU sector and their importance to climate action

Rural SMEs, which are the focus of this blog, are critical for several reasons, whereas the general conclusions at the end of this blog do not only apply to SMEs in the agriculture, forestry, and other land uses (AFOLU) sector, though. In many countries, rural SMEs contribute significantly to GDP and employment, particularly in the AFOLU sector. They are often involved in food production and processing, making them essential for maintaining food security in the face of climate change. Rural SMEs frequently operate near natural resources and ecosystems, placing them at the frontline of both environmental impact and conservation efforts. They often lack the resources, knowledge, and infrastructure to effectively engage in climate action, whilst increasing shocks and crisis imposed on value and supply chains are exacerbated by climate change impacts at the same time.

Water-energy-food nexus as a concept and approach to understand, analyze and act on climate change in the agrifood sector

The food system accounts for 34% of the total GHG emissions, food production consumes 30% of the global energy supply and agriculture accounts for 70% of freshwater withdrawals. The nexus approach is a system-wide approach that recognizes the inherent interdependencies of the food, water, and energy sectors for resource use, seeks to optimize the trade-offs and synergies, and recognizes social and environmental consequences.

The reduction of vulnerability through adaptation is closely linked to the sustainable use and management of water, energy, and food, thus harmoniously addressing water, energy, and food security challenges. Next to the vulnerability of the three sectors, they all contribute heavily to climate change due to their GHG emissions. There are measures, in the energy sector that primarily deliver mitigation benefits, which can also be identified and promoted through the nexus approach.

Bringing the water-energy-food nexus perspective on the ground as part of rural development and climate action interventions: top-down and bottom-up

The nexus approach and the linkage between the nexus approach and climate action is integrated in the Water & Energy for Food (WE4F) program, for example. Climatekos supported the mainstreaming of climate change and action into the programme. The part of the program implemented by GIZ, WE4F is co-managed or -implemented by GIZ and USAID, focuses on:

• strengthening the skills of selected innovative companies;

• providing training and information to end-users and multipliers, directly targeting smallholder farmers and small and medium enterprises that develop and market innovative products (innovators);

• improving access to suitable financing and appropriate financing options;

• improving political and sectoral framework conditions (enabling environment) for the upscaling and systematic dissemination of climate friendly, energy and/or water efficient innovations; and

• strengthening exchanges among specialists at the regional and global levels.

Ultimately, the implementation and upscaling of the innovations and technology solutions through a climate-sensitive nexus approach aims to result among others in:

• an increase of the total mass of food produced and processed,

• a decrease in food losses,

• a decrease in greenhouse gas (GHG) emissions associated with energy production,

• an increase of the total amount of energy saved in the food value chain or a reduction of the total volume of water consumption.

Key innovations, technologies and practices applying a water-energy-food nexus perspective –

contributions to adaptation and/or mitigation of climate change

Climatekos and its international and local development partners do already implement and promote a water-energy-food nexus perspective and related innovations, technologies and practices as part of our climate action project and programme development and consulting work - focusing on SMEs and smallholder farmers. For instance, as part of the Green East Africa (GEA) climate action development programme - implementing an integrated grassroots climate smart and nature-based development programme in rural communities.

The latest addition to the GEA’s portfolio of projects will contribute to the establishment of deforestation-free supply chains. The promotion of shade-grown coffee, combined with further carbon farming and climate-smart agriculture and village practices is combined with the promotion of (blended) financial instruments. Cooperatives will pool production, jointly market and directly sell to small coffee roasteries in Germany – applying international sustainable coffee standards and certification schemes (e.g., Fairtrade) - and monitor and report on deforestation-free coffee production.

Another example is a project that aims at sustainably improved water management for small market gardeners in the catchment area of ​​Pout in Senegal. Solar photovoltaic pumps will be used to extract groundwater for market gardeners, located in the lowlands and building a new well-designed retention basin managed locally and involving all stakeholders at the bottom of Thiès plateau, including the gardeners.

What support is needed for further scaling (up) development and implementation capacities among (M)SMEs, smallholders and groups representing or supporting them in the Global South?

In 2022 Climatekos and other organizations conducted SME mapping studies in different regions of the world. The following knowledge and capacity needs that can be divided into two main categories have been identified. These do not only apply to the rural sector but climate action in many sectors by SMEs in general:

• Information, data and general knowledge

  • Provision of reliable information on climate change impacts and trends (prepared) for decision making and planning – including capacities to use climate data in business continuity plans/planning

  • Building a sound understanding of relevant (domestic) climate policies and plans, laws and regulations for or related to SMEs climate-friendly measures and adaptive solutions, allowing for an improved pro-active engagement of SMEs

  • Preparation of technical knowledge on climate action, including information on the existing measures and practical solutions, and assessment and prioritization of available (cost-effective) adaptation and mitigation measures and options

  • Provision of information on accessing financial resources and support for implementation

  • Creation of awareness about programs or trainings to help SMEs managing the risks of climate impacts and informing SMEs about different measures to make business operations more resilient, including support to identify available adaptation measures.

• Training, education and (technical & financial) skill building

  • Preparation of technical climate risk assessments and development of new skills to

    • address climate change impacts and technical skills and expertise

    • adopt new business processes to green the value chain,

    • develop innovative products or services, and

    • deploy climate-friendly technologies and practical climate action solutions

  • Creation of knowledge about the benefits of investing in climate action and related financial opportunities and related skills building on accessing financial support – including guidance on accessing climate finance in the form of credit lines, programmes and existing funds to implement climate change measures as well as carbon finance in the context of the compliance and voluntary markets

  • Financial proposal development and proposal writing

“In light of the much-needed increase of private sector climate action and decarbonization of supply chains, responding to recent regulatory requirements such as the EU deforestation regulation, requires more targeted international initiatives and support to empower the needed partnerships along the supply chains, in particular SMEs in the Global South” said Robert Tippmann, Managing Director at Climatekos, ahead of the Innovate for Climate (I4C) Conference from 10-12 September in Berlin.

Climatekos gGmbH is an independent social enterprise in the field of environment and development focusing on international climate protection.