Supporting small and medium enterprises (SMEs) to take climate action
How city governments can support and work with local SMEs to help them grow while reducing emissions.
What you can learn from this page
This webpage provides a comprehensive guide on how city governments can support and collaborate with local small and medium enterprises (SMEs) to help them grow while reducing emissions. The guide outlines six actionable steps municipal leaders can take to bridge these gaps: localizing global sustainability frameworks, establishing peer learning networks, delivering hands-on training and site audits, leveraging procurement and financial incentives, mobilizing corporate and academic partnerships, and celebrating SME milestones through public recognition and streamlined impact tracking.
Why SMEs Matter in City Climate Transitions
Municipal operations produce just around 4% of total citywide emissions, while the vast majority comes from private sectors, buildings, and transport. To deliver on Climate Action Plans, cities must collaborate with businesses. Small and Medium Enterprises (SMEs) make up over 90% of all businesses globally and employ around 60% to 70% of the workforce. They form the backbone of local economies and are deeply rooted in their communities. Furthermore, as Scope 3 emissions reporting and ESG regulations tighten globally (such as the EU’s CSRD guidelines), SMEs within city supply chains face immense pressure from larger corporations and regulatory bodies to report and reduce their environmental footprint.
However, SMEs face distinct hurdles—primarily severe time constraints, limited financial backing, and dedicated capacity gaps. By establishing targeted city-business networks, municipal support, and financial incentives, cities can bridge these gaps and drive local green economic development.
Key levers for municipal action
City governments can play a key role in supporting SMEs to take climate action. Here are 6 actions cities can take to better support their local small businesses:
01. Translate global goals into local frameworks
- Simplify & localize frameworks: Translate complex frameworks like the UN SDGs and ESG requirements into industry-specific, localized language (e.g., framing SDG 12 as “Circular Economy” or practical waste reduction) so SMEs can meet global supply chain standards without being overwhelmed.
- Education: Support SMEs to understand why their sustainability and climate action is important to their business and how it will benefit them and their employees
- Build digital toolkits: Provide interactive, self-serve tools (such as Melbourne’s SDG Align Toolkit) that enable small business owners to quickly assess, align, and act on sustainability targets.
Example: Melbourne (SDG Align Toolkit): Led by the City of Melbourne, this initiative provides SMEs with an accessible digital toolkit to translate global SDGs into day-to-day business practices, helping small businesses access international supply chains and meet ESG expectations
02. Build a local sustainability network & community platform
- Create a dedicated network: Establish a formal or informal business network to engage local companies on climate targets, ensuring it remains low-barrier and action-oriented.
- Facilitate peer-to-peer learning: Host regular, accessible events such as breakfast roundtables, webinar series, and monthly virtual roadshows to share best practices and build community momentum.
- Offer technical & regulatory updates: Translate complex ESG and carbon reporting standards (e.g., CSRD, Scope 3) into plain language to keep local suppliers competitive and compliant.Read more about this on this page
03. Provide practical training & advisory services
Access to early-stage capital remains a major barrier for hardware-heavy clean technologies.
- Organize structured workshops: Deliver training on key topics like greenhouse gas (GHG) balancing, energy efficiency, circular economy practices, and workplace safety.
- Conduct on-site weak-point analyses: Offer site visits by professional consultants or municipal environmental officers to inspect energy consumption, waste streams, and regulatory compliance.
- Establish sector-specific academies: Partner with regional trade associations to create specialized training programs
04. Leverage policy, procurement, financial support & incentive programs
- Incentivize through procurement & policy: Use municipal procurement and administrative levers—such as preferential bidding, expedited zoning, or lower permit fees—to reward SMEs with verified social and environmental progress.
- Offer tax & rate incentives: Explore property tax or business rate discounts for enterprises making structured progress through municipal sustainability accreditations.
- Provide targeted municipal grants: Design direct funding or micro-grants for investments in energy-efficient upgrades (e.g., LED transitions, HVAC optimization, and rooftop photovoltaics).
- Collaborate with regional/national funds: Leverage state, national, or regional funding pools to co-fund local climate initiatives for SMEs.
05. Mobilize large businesses & academic institutions
- Promote corporate supply chain mentorship: Encourage large corporations to mentor SME suppliers, share tools, and financially co-support supply-chain decarbonization (Scope 3) efforts.
- Leverage local universities: Partner with higher education institutions and research centers to grant SMEs access to green innovation prototypes, academic expertise, and technical testing.
- Form expert commissions: Create project commissions comprising big business representatives, chambers of commerce, and local universities to evaluate SME progress and offer guidance.
05. Recognize, celebrate & measure impact
- Recognize incremental progress: Celebrate SME “micro-wins” (e.g., switching to local suppliers or creating local apprenticeships) to demonstrate that sustainability is achievable for businesses of all sizes.
- Public directory & awards: Launch public online specialist directories of certified green SMEs and host annual award ceremonies with city leadership to boost SME marketing and trust.
- Streamline impact reporting: Develop simple, streamlined metrics platforms for SMEs to report carbon data, enabling cities to track contributions toward municipal climate goals without overburdening small business owners.
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