With finance at the top of the United Nations Climate Change Conference (COP29) agenda in Baku, Azerbaijan, the International Trade Centre (ITC) unveiled its newly developed guidelines to help countries incorporate micro, small, and medium-sized enterprises (MSMEs) into the upcoming cycle of Nationally Determined Contributions (NDCs).

ITC is a joint agency of the UN and World Trade Organisation (WHO) supporting the internationalisation of small businesses.

Despite their importance, MSMEs have often been overlooked in climate policy discussions and NDCs and rarely targeted as a distinct group, ITC says.

The Nationally Determined Contributions (NDCs) are the commitments made by countries under the Paris Agreement, which aim to keep carbon emissions at 1.5C by 2030.

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The Paris Agreement, negotiated in 2015, requires that NDCs are updated every five years with increasingly higher ambition, taking into consideration each country’s capacity.

Now countries have to submit their third round of submissions (NDC 3.0), which is a critical stage to raise ambition and stay on track to meet the Paris Agreement’s long-term goals of limiting global warming.

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With the launch of NDC 3.0, analysts say there is a timely opportunity for governments and stakeholders to use the guidelines to better integrate trade and MSMEs into national climate commitments.

"Small businesses form the backbone of most economies and the bulk of suppliers along global supply chains, so their action – or inaction – when it comes to climate change matters,” ITC Executive Director, Pamela Coke-Hamilton, said at the conference.

The guidelines demonstrate international trade as an amplifier of MSME activity, the role of trade in climate change mitigation and adaptation, benefits and state of play of trade integration in NDCs, andthe benefits of mainstreaming MSME perspectives in NDCs.

They also show challenges and opportunities for MSME participation in NDC processes, several sources of climate finance that governments can access and use to finance MSME-inclusive NDCs.

According to ITC, the guidelines show the five steps of MSME-conscious NDC development and the five steps that should be underpinned by a clear and robust monitoring and evaluation framework in which indicators and metrics to track MSME contributions are jointly developed and endorsed by all stakeholders.

The guidelines also show that capacity building and platforms are essential for successful design, planning and implementation of NDCs.

Incorporating MSMEs into NDCs

Small and medium-sized enterprises play a key role in curbing emissions, as they make up 90 per centof all companies and the bulk of suppliers along global supply chains.

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At the same time, they are also among the most vulnerable actors to climate change as they account for 40-60 per cent of all emissions, so their action matters.

ITC endorsed the Baku Climate Coalition for SMEs Green Transition Declaration and signed a partnership with the Small and Medium Business Development Agency of the Republic of Azerbaijan (KOBIA) and the Brazilian Support Service for Micro and Small Businesses (SEBRAE) to roll it out.

The SME Declaration – which would be the first of its kind – would help establish small businesses as a key group to engage with in advancing the green transition, on the road to COP30 in Brazil.

To practically support implementation of the SME Declaration, ITC launched on November 14 "NDC 3.0” guidelines for countries to work with small businesses to design their Nationally Determined Contributions to address their climate needs, as well as the broader ecosystem that they work in.

Laying the foundation

The inclusion of small businesses in countries’ climate plans – which are the pledges that countries made under the Paris Agreement to reduce greenhouse gas emissions and to increase climate resilience – lays the foundation for small businesses to access climate finance.

The ITC Guidelines are set to offer practical recommendations for policymakers, outlining how to design inclusive climate policies that enable MSMEs to access finance, green technologies, and capacity-building support

By incorporating MSMEs into climate strategies, analysts believe countries can ensure a broader, more inclusive approach to meeting their climate goals, empowering smaller businesses to play a more prominent role in national and global efforts.

Tags: NDCs, COP29, small businesses, MSMES,climate finance, Paris Agreement.