Posted: Thu 29th Jun 2023
Governments across the world need to develop small business-friendly policies that recognise the vital role entrepreneurs play in their communities and support their resilience and growth amid the current economic challenges.
That was the message from the Organisation for Economic Co-operation and Development, which this week organised a meeting in Paris of small business ministers and other experts from across the globe. Among the speakers was Enterprise Nation founder Emma Jones.
In a paper accompanying the meeting, it highlights how SMEs account for over 99% of firms and more than 60% of private sector employment in the 38 OECD economies.
SMEs are "important sources of innovation" and "the lifeblood of communities", the paper added, although recent global crises like the coronavirus pandemic "have had significant impacts on SME and entrepreneurship activity and tested the limits of SME adaptability".
There has also been a negative effect on the mental health of small businesses, with increased anxiety and depression rates reported in many countries.
Despite this though, the report said that the pandemic highlighted "the innate potential of many new and small firms to use their flexibility and rapidity to deliver solutions to new problems", with lessons that must be learnt by governments across the world about how to build resilience to future shocks:
"It can do this by developing the capabilities of SMEs and entrepreneurs to absorb adverse impacts such as short-term demand downturns, cost increases or drying up of funding and to innovate and adapt in their products and services and business models in response to market changes."
Strengthening small business resilience to future crises
To support small businesses during future economic shocks, OCED said "governments need to strike a balance between rapid and broad emergency support for protecting jobs and businesses in the short term, and more targeted interventions aimed at longer-term structural change objectives, including facilitating the entry of new, higher productivity start-ups and supporting the green and digital transitions".
They should also design emergency financial support to SMEs "to avoid over-indebtedness of recipients, by introducing alternatives to loans and loan guarantees and paying attention to repayment schedules", as well as ensure that specific groups of businesses "do not unintentionally fall through cracks in crisis response measures".
Finally, OECD said governments "should take account of the mental health pressures caused by shocks on entrepreneurs, who are disproportionately exposed to risk compared to the population as a whole".
A new OECD survey of small business owners found that 100% believed that the mental health of themselves and their workforce is important to the success of their business, with 59% saying that it is extremely important.
SMEs' contribution to green and digital transitions
SMEs and entrepreneurs will be "critical in the response to the climate change emergency", OECD said, "given their large weight in economic value added".
It said increased uptake of sustainable digital technologies can help SMEs adopt greener business models, boost their competitiveness and reach new markets and partners. The paper added:
"Lack of innovation and investment across the large and diverse SME population can jeopardise progress towards greening and digitalisation across the economy and have profound implications for individual business performance and survival, the performance of production networks and supply chains, and the competitiveness of national and regional economies."
"SMEs should take front stage in policy agendas for the green and digital transition", OECD said, with a need for governments to "adopt an SME and entrepreneur lens to the development of measures and policies that affect the green and digital transitions, taking a people centred approach, including consultations with diverse populations of SMEs and entrepreneurs to assess the impact of new policies and regulations".
Policies should improve awareness among SMEs of digital technologies and provide more access to support, resources and finance.
"Governments should promote digital and green start-ups by improving regulations, building entrepreneurial skills, and improving access to resources such as finance, skills and networks. Dedicated incubators and accelerators and one-stop shops for start-ups could form part of the package.
"Policy should target start-ups and potential entrepreneurs who can drive the transition, aiming at those with important potential impacts, whilst being inclusive and supporting diverse entrepreneurs."
Small businesses' desire to take on digital technologies is strong, a separate OECD survey found, with more than a third planning to adopt them to make their organisation more resilient.
Helpling entrepreneurs navigate global trade
OECD research from 2019 found that small businesses "undertaking international activities tend to have better productivity and growth performance than SMEs and start-ups in general, including in employment generation and innovation spillovers".
The paper said governments should work business groups, investors and other partners to support small businesses with international trade, such as help with finding markets and partners abroad, financing global expansion and export training.
In addition, OECD called for governments to improve small businesses' access to information on international trade regulations, including through "digital one stop shops, cooperating internationally to align administrative procedures that constitute obstacles to SME trade, and taking more account of the SME perspective in the development of the rules based international trade system".
An honour and pleasure to be part of this global SME gathering today. Huge thank you @BusinessatOECD My business @e_nation is committed to working with you on a digital one stop shop to drive growth and wellbeing for small firms. https://t.co/IPwNsFcGsI— Emma Jones (@emmaljones) June 26, 2023
At the ministerial meeting, Enterprise Nation founder Emma Jones joined other speakers including Ieva Valeškaitė, the Lithuanian government's vice-minister of the economy and innovation, on a panel covering "mobilising SMEs and entrepreneurs in the green and digital transformations".
"The meeting was about bringing the international community together to deliver a strategy that recognises the critical role entrepreneurs and SMEs play in global recovery, while ensuring future resilience and well-being. We can't achieve this in isolation.
"It was incredible to see recognition for the that fact that entrepreneurs have been driving forward despite higher levels of debt, inflation and soaring energy prices.
"Adopting digital technologies, diversifying products, and implementing innovative strategies will unleash the potential of global entrepreneurs and I look forward to working with delegates to develop a called-for digital one stop shop to drive growth and wellbeing for small businesses."