Growth of MSMEs on the track of sustainability: Kerala Focus
Author: Nandana S.
Kerala’s MSME story is no longer just about jobs and growth; it is increasingly about how a small‑enterprise state can align enterprise development with climate resilience, resource efficiency, and social equity. One may also say that the state offers a live laboratory of how sustainable practices can be embedded into everyday business decisions across micro, small and medium enterprises.
Kerala’s MSME engine, retooled for sustainability
Kerala’s MSME base has expanded rapidly in recent years, adding more than two lakh new units and over five lakh jobs in just two years under the “Year of Enterprises” initiative, backed by investments of more than ₹15,000 crore. This growth sits on top of the earlier wave of 52,000‑plus MSMEs set up since 2016 with investments above ₹4,500 crore and around 1.8 lakh jobs, underscoring how central MSMEs are to the state’s economic trajectory.
Unlike many industrialised states, Kerala’s fragmented landholdings make mega‑parks difficult, pushing policy to deliberately favour smaller, dispersed enterprises that can be plugged into local supply chains and community networks. This constraint has, in turn, nudged the state to think of MSMEs not only as employment generators but also as vehicles for balanced regional development, women’s economic participation and low‑carbon local production.
Policy signals shaping greener enterprises
Kerala’s MSME Facilitation Act, which allows investments up to ₹10 crore to commence operations without multiple upfront licences, has sharply improved the ease of doing business for small entrepreneurs. Coupled with the K‑SWIFT single‑window clearance system, which now delivers over 90 clearances across 21 departments online, this framework reduces transaction costs and creates space for entrepreneurs to focus on upgrading technology and sustainability practices rather than navigating compliance bottlenecks.
Parallel investments in roads, power, and digital connectivity – including Kerala’s status as India’s first fully electrified state – are crucial enablers for greener MSMEs that depend on reliable energy for efficient machinery, cold chains, and digital operations. The Kudumbashree movement and the state’s strong cooperative tradition have further normalised collective enterprise models, where decisions around waste, energy use, and community benefits are inherently more socialised than in purely individual firms.
Where MSMEs are already going green
Across India, MSMEs are increasingly integrating environmental sustainability into their operations through energy‑efficient technologies, solar installations, waste reduction, and water‑saving measures, and Kerala is no exception. In water‑intensive and resource‑heavy sectors such as coir, handloom, and agro‑processing, enterprises are beginning to experiment with cleaner production techniques like biodegradable packaging, non‑toxic dyes, and recycling of process water.
Kerala’s emerging tech and startup ecosystems – with thousands of startups and dozens of incubators – are also opening new possibilities for digital tools that can track energy use, optimise logistics, and enable MSMEs to sell online instead of relying solely on resource‑intensive brick‑and‑mortar channels. When such digitalisation is paired with local sourcing and shorter value chains, even nano‑enterprises operating from homes can reduce their material footprint while accessing wider markets.
A nine‑point sustainability agenda for Kerala’s MSMEs
For a state positioning itself as an investment and innovation hub, the next leap lies in mainstreaming a simple, action‑oriented sustainability agenda across MSMEs. Building on widely recommended best practices, Kerala’s enterprises can:
Invest in energy‑saving equipment, LEDs and, where viable, rooftop solar to cut power bills and emissions.
Adopt systematic waste management through reducing material use, reusing packaging, and tying up with authorised recyclers for paper, plastics, metals and textile scraps.
Conserve water with low‑flow fixtures, rainwater harvesting, and reuse of treated wastewater for cleaning and landscaping, especially in food processing and textile clusters.
Shift to eco‑friendly inputs and packaging – biodegradable materials, non‑toxic chemicals, and recyclable containers – in coir, handicrafts and FMCG segments.
Design durable, repairable products and offer refill/repair services, which both deepen customer relationships and reduce lifecycle waste.
Green their supply chains by sourcing locally, choosing vendors with ethical and environmental standards, and experimenting with electric vehicles for urban deliveries.
Go digital for documentation, marketing, and sales, using cloud storage, e‑invoices and e‑commerce platforms to reduce paper and physical overheads.
Institutionalise employee training on energy, water and waste, alongside safe and inclusive workplaces that mirror Kerala’s human‑development strengths.
Stay ahead of environmental regulations by proactively engaging with the Pollution Control Board and using compliance as a competitiveness lever in export markets.
Why sustainability is smart MSME strategy
For Kerala’s entrepreneurs, sustainability is less a moral add‑on and more a business resilience strategy. Evidence from Indian MSMEs shows that resource‑efficient practices directly lower input costs, expand access to green finance, and improve eligibility for supply chains and markets that now screen for environmental performance. As export destinations tighten standards and domestic consumers become more climate‑conscious, MSMEs that can demonstrate traceable, low‑impact production will be better placed to command price premiums and long‑term contracts.
For a state that already scores high on human development and is marketing itself at global investor platforms as a destination for knowledge‑ and green‑economy investments, embedding sustainability into MSMEs is the logical next step. Done right, Kerala’s micro and small enterprises can anchor a development pathway where livelihoods, local ecosystems, and climate goals reinforce – rather than undercut – each other, offering a replicable template for other states seeking inclusive, low‑carbon growth.