The micro-enterprise and informal sectors are a major part of the Caribbean economy and important for poverty reduction.
This includes many rural nature-based enterprises that are especially vulnerable to the impacts of climate change.
‘Climate proofing’ these enterprises and effective support for them is critical in COVID-19 recovery initiatives and a key pathway to sustainable, inclusive, fair, and climate resilient economic development in Caribbean SIDS.
By Nicole Leotaud, Executive Director Caribbean Natural Resources Institute (CANARI)
Green-blue Economy in the Caribbean Context
Catalyzing and supporting sustainable micro, small, and medium enterprise (MSME) development was identified as a key strategy to deliver a green economy, defined in the Caribbean context as one that “aims for long-term prosperity through equitable distribution of economic benefits and effective management of ecological resources; it is economically viable and resilient, self-directed, self-reliant, and pro-poor”. At regional dialogues held in 2010-2011 on what a green economy means in the Caribbean context, Caribbean stakeholders recognized the need to put economic inclusion, resilience, and SIDS vulnerability and justice issues at the center of ideas on green economy, and the role of MSMEs in this. Since then, the focus on leveraging marine resources for a ‘blue economy’ in “large ocean states” is now predominant across SIDS. Caribbean authors, however, emphasize that this should be framed by the principles of a green economy, including a focus on economic inclusion and the impacts of climate change.
The Power of Local Green-Blue Enterprises
Entrepreneurs in Caribbean rural communities develop businesses based on the use of nature, whether via community-based ecotourism, natural crafts and jewelry, fisheries and mariculture, or added-value agricultural products such as honey and chocolate. Many businesses develop a combination of income streams to take advantage of the resources and opportunities in their communities. Many actively practice stewardship approaches, which conserve the biodiversity upon which they depend and contribute to climate resilience, while supporting sustainable livelihoods and providing economic opportunities for rural communities. In this way they deliver the ‘triple-bottom line’ of social inclusion and equity, environmental sustainability and economic well-being, and viability, i.e., People, Planet, Profit. These local green-blue enterprises (LGEs) are an invisible but important part of the Caribbean economy and a pathway to inclusive, sustainable and resilient economic development.
Why are LGEs such a powerful pathway for Caribbean SIDS? MSMEs are the backbone of Caribbean economies, making up between 70% to 80% of businesses, contributing between 60% and 70% of the GDP and accounting for approximately 50% of employment. This is a conservative estimate as it does not consider informal enterprises, which in some Caribbean countries have been found to be more than double the number of enterprises in the formal sector. MSMEs are recognized as playing a critical role in addressing multiple development priorities in the Caribbean, including poverty reduction, social development, and environmental conservation. But it is the micro-enterprise sector, especially the informal sector, that plays a key role in addressing poverty, discrimination and exclusion, inequalities, and vulnerabilities. Very limited data is collected on this sector, and even less on the niche sector of nature-based enterprises, to support understanding of how it contributes to key industries such as tourism and agriculture and provides economic opportunities in rural communities. Such information could also illuminate what support is needed to amplify its impact.
Challenges Facing Local Green-Blue Enterprises
Challenges facing the micro-enterprise and informal sectors are well known, and include poor access to finance and technical support, exclusion from markets, and inappropriate policy, legislative, regulatory, and fiscal frameworks. These are amplified for LGEs, which also face additional challenges. A recent study in Trinidad and Tobago found that issues facing LGEs start with the absence of a formal definition, accessible information, and knowledge-sharing that would drive more attention to the sector. A special legal status and coherent and strong policy framework for social and green enterprises are needed, which could support certification schemes and financing. Existing business support services and incubator programs need to be reformed to better serve LGEs, with comprehensive “one stop shop” financial, legal, advisory, and capacity-building services. Financial products need to be tailored to fit the needs of the LGE sector and additional products must be explored, including concessional and senior loans, mezzanine debt, equity and quasi-equity loans, credit guarantees, insurance, and angel investing. Grant programs need to be tailored to better support the LGE sector. Strengthening LGEs’ market access is needed, both in terms of traditional markets and specialized niche markets. Driving this would require fostering the development and strengthening of networks and associations of LGEs, based on collaborative models they define, to facilitate knowledge sharing, collaboration to access markets, and collective policy advocacy.
Climate-Proofing Local Green-Blue Enterprises
The impacts of climate change on vulnerable LGEs also need to be addressed. These businesses are especially vulnerable to the impacts of climate change, given their dependence on natural ecosystems and location in rural areas.
In the Caribbean, a method for building resilience or ‘climate proofing’ LGEs has been developed and looks at impacts of climate change along the entire value chain of an enterprise. Raising entrepreneurial awareness about the specific projected climate impacts for their location is a critical first step, bringing together scientific and local knowledge. Entrepreneurs can then assess vulnerabilities to these impacts at each stage along their value chain – inputs, production, processing and distribution, marketing, and consumers – and identify actions to address these vulnerabilities through resilience-building strategies.
There are concrete actions that entrepreneurs can take to climate-proof their business. For example, farmers and apiculturists can install rainwater harvesting systems to build resilience to droughts. Farmers can consider shifting to drought-resistant crops. Chocolate-making and other agricultural processing enterprises can install solar power systems for processing facilities to enhance stability and reliability of electricity supply given the vulnerability of overheard power lines. Entrepreneurs can develop storage facilities where they secure their supplies until roads damaged by landslides are reopened. These actions not only build resilience to short-term and long-term climate impacts, but also improve the enterprise’s production and supply systems, including via cost-saving measures.
Entrepreneurs can also identify actions that need to be undertaken by governments or others, for example to strengthen critical infrastructure or to enhance access to technical support and technology (e.g., renewable energy systems) via grants or subsidies.
Supporting Local Green-Blue Enterprises in COVID-19 Recovery
The COVID-19 pandemic heavily impacted the MSME sector in the Caribbean, with disproportionate impacts documented on vulnerable groups such as small-scale fishers, farmers, women, and the informal sector. Extremely stringent responses by Caribbean governments, fearful of a health crisis, meant restrictions on travel, closure of non-essential businesses, quarantine and social distancing measures, remote work and reduced operating hours. This decimated tourism and related service industries, especially in micro and informal sectors, where entrepreneurs were often unable to access whatever government support programs were available.
Concerted efforts are needed to enhance support to this vulnerable sector as part of economic development in the region, including COVID-19 recovery. Ongoing research by the Caribbean Natural Resources Institute (CANARI) on public sector recovery initiatives found that 22% of the 437 initiatives mapped aim to support the MSME sector. It remains to be seen to what extent these initiatives will support the micro-enterprise and informal sectors, and the LGE sector specifically, but this will certainly require social dialogue and a transformation of approaches.
The Way Forward
Global calls for enhanced support to the LGE sector arose in the Caribbean with the Green Economy Coalition’s 2017 Santa Cruz Declaration on Local Green Enterprises, enhanced by the 2020 Delhi Declaration on Local Green Enterprises to continue building this global movement. This is especially relevant for SIDS, and there is an opportunity to use COVID-19 recovery investment to re-think where support is most needed and will have the most impact.
Support initiatives can draw on experiences in fostering rural bottom-up development, eco-social and climate justice, development of micro-enterprises and the informal sector, triple-bottom line businesses, climate resilience, environmental stewardship, participatory governance, etc. The valuable insights and tools that have already been developed can be brought together in a tailored approach to enhance support to LGEs and address intertwined socioeconomic, environmental, and climate injustices in rural communities in Caribbean SIDS.
A strong focus on LGEs can drive inclusive and resilient green-blue economic transformation. LGEs effectively reach economically marginalized groups such as rural communities, women, and youth, and provide social benefits through local employment. They are resilient and innovative and can respond quickly to risks and opportunities due to their small size and flexibility. They encourage and practice stewardship of natural ecosystems that sustain local livelihoods and deliver climate adaptation and mitigation. Supporting LGEs and helping them to build resilience to climate impacts along their value chains is crucial to delivering sustainable, inclusive, fair, and climate resilient economic development in SIDS.
This article was written for Perry World House’s 2022 Global Shifts Colloquium, ‘Islands on the Climate Front Line: Risk and Resilience,’ and made possible in part by a grant from the Carnegie Corporation of New York. The views expressed are solely the author’s and do not reflect those of Perry World House, the University of Pennsylvania, or the Carnegie Corporation of New York.