Charting Change
Charting Change
Charting Change
Charting Change

Inclusive Economies

Greening South America, one business at a time

A look at how small and medium-sized businesses on the continent are starting to play a bigger role in environmental sustainability

Posted by Alanna Mitchell on June 21, 2016

An employee at a print shop in Peru carries a stack of paper on his head. By recycling and using new printing techniques, the shop is seeking to reduce its environmental impact — something other small and medium-sized businesses across South America are learning more about as they begin to play a key role in sustainability in the region. (Photo: Courtesy of CENIT)

How does the world’s industrial production go green? While much of the focus in recent years has been on whether the brand-name, billion-dollar multinationals are doing it, economists in Latin America have begun wondering about the smaller links in the production chain.

The logic is sound. Those non-multinationals may be small, but they are massive when it comes to their cumulative effect on both employment and pollution, says Ben Petrazzini, senior program specialist at the regional office for Latin America and the Caribbean of Canada’s International Development Research Centre in Montevideo, Uruguay. “The issues are very important when it comes to the future of the environment and climate change,” he says. “And when it comes to small and medium-sized enterprises, there hasn’t been much attention.”

Recently, because Latin American economies are in the throes of a lengthy boom, there has been pressure from more developed countries for that growth to be environmentally friendly, no matter what size the business. That’s driven by an idea that took hold in the wake of the global economic collapse of 2008: that green growth can create jobs, alleviate poverty and reduce social inequality.

But there’s a hitch. While large companies tend to have money to put into green strategies, smaller enterprises are less likely to be able to put aside cash for that sort of investment. Not only that, but governments historically have focussed policy measures on the larger companies, leaving smaller ones to their own devices, without much explanation of what to do or why it matters.

It adds up to a conundrum. Worse, as Petrazzini and his colleagues at IDRC discovered, there was a near total lack of data on the smaller business and their attempts to go green.

That led IDRC to support two studies worth $1.39 million to find out the basics in countries across the region, including Argentina. Both studies ended in 2015.

Daniela Ramos, an economist and principal researcher at the non-profit foundation Centro de Investigaciones para la Transformación in Buenos Aires, oversaw a two-year study that examined how efforts to go green affected the competitiveness and employment at about 20 food and beverage, textiles and machinery businesses. She says her team had to agree not to name any of the companies studied to allay fears that the information could be used against them somehow, a common barrier to research in Argentina.

One of the first findings was just how little the smaller firms knew about making their operations more environmentally sustainable, whether it was reducing the amount of industrial waste put into the land and water or reducing carbon-based fuels in production. They didn’t know which technologies to use or how to apply them. “We found that firms that intended to green their processes in some cases could not,” says Ramos. “They were not very well informed.”

And even if they knew what to do, they rarely had the money to accomplish their goals. In addition, few could see how greening production would do anything but cost them money. They didn’t link it to future savings in production costs or to potentially increased markets from environmentally savvy consumers.

Nevertheless, all the firms had improved environmental standards to some extent over time, Ramos says. During the process, they were also able to keep employment at stable levels, rather than having to cut staff because of extra costs. “It’s not a dichotomy. It’s a process, a continuous path,” she says. “They realize this is something they can’t avoid so they start incorporating some technology and they walk along a path to become greener.”

Eduardo Bianchi, a professor at the Instituto Universitario Escuela Argentina de Negocios in Buenos Aires, was involved in the other IDRC-supported study, a three-year project coordinated by the Argentine branch of the Latin American Faculty of Social Sciences and carried out by the Latin American Trade Network that looked at the impact of low-carbon economies on growth and inclusion. Bianchi says that an in-depth study on the dairy industry that he co-authored for the IDRC project showed that small and medium-sized firms need policy regulation if they are to become greener. He added that governments must help them gain access to financing.

While the studies showed that the smaller firms have a long way to go to become greener, they also showed the tremendous environmental benefits Latin America could reap with a little policy help. “The environment is seen as a cost,” Bianchi says, “but it is also an opportunity.”

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