Frugal. Local. Sustainable. The Quiet Green Revolution in SME India

While the conversation around environmental sustainability in business often centers on regulations, carbon credits, and big corporate pledges, a quieter revolution is underway in India’s Tier 2 and Tier 3 industrial towns. Here, countless small and mid-sized enterprises (SMEs) are practicing sustainability, not out of choice or branding strategy, but because resource constraints have left them no other way.

Whether it’s the reuse of effluents in Coimbatore’s dyeing units, repurposing metal scraps in Rajkot’s foundries or adopting solar-powered machinery in Morbi’s ceramics factories, many Indian SMEs are already “green by default.” They may not call it sustainability, but their practices reflect the very principles global ESG frameworks promote.

Scarcity Has Always Driven Ingenuity

For most SMEs operating in India’s manufacturing belts, cost-efficiency has always been paramount. Unlike larger firms with access to institutional finance or R&D budgets, these businesses have learned to stretch every rupee. And that often means using less – of water, fuel, chemicals and raw materials.

Take the textile processing units in Tiruppur and Coimbatore. Long before “zero liquid discharge” became an environmental norm, many of these units began reusing treated water due to erratic municipal supply and rising tanker costs. Today, over 60% of units in Tiruppur’s knitwear cluster recycle process water, not just to meet state board norms but to reduce cost per garment.

Similarly, foundries in Rajkot, a major hub for auto and general engineering parts, have long relied on metal scrap recycling. While framed as frugality, this practice significantly reduces the need for fresh mining inputs and avoids tons of potential waste.

In Morbi, Gujarat’s tile capital, several SME units are switching to solar-powered kilns and gasifiers, driven by rising electricity bills and state subsidies. The result? A measurable reduction in carbon emissions and a step closer to green compliance without formal ESG training.

A Missed ‘Sustainability’ Branding Opportunity

Despite these efforts, most of these SMEs remain invisible in sustainability conversations, largely because their practices are undocumented, unbranded and unaccompanied by certifications.

Unlike large corporations that issue sustainability reports and pursue green ratings, most SMEs do not have the bandwidth or systems to quantify their impact. As a result, their sustainable practices go unacknowledged, both by policymakers and procurement teams.

This creates a critical branding gap.

While a multinational supplier may receive ESG recognition for its efforts to reduce waste or switch to renewables, the Tier 2 SME actually manufacturing the parts, possibly with far lower energy and material use, remains outside that spotlight.

Bridging this visibility gap is not just a matter of fairness; it’s a matter of unlocking new markets and incentives. With global buyers increasingly under pressure to green their supply chains, Indian SMEs with embedded sustainable practices could become high-value partners, if only their efforts were validated and amplified.

Formalizing the Informal

What’s needed now is a systemic push to help SMEs formalize their green practices. This can take several forms:

1. Low-cost certification pathways : Simplified sustainability certification programs tailored for MSMEs can help businesses gain credibility without burdening them with bureaucratic complexity.
2. Cluster-level documentation and audits : Local industry associations or state-level MSME boards can facilitate the documentation of sustainable practices at the cluster level, allowing for collective branding and buyer outreach.
3. Recognition platforms : National or state awards and casebook features that highlight frugal sustainability innovations can boost morale and visibility, both key to peer replication.
4. Integrated finance links : Financial institutions could reward SMEs with verifiable green practices through marginally lower interest rates, extended credit lines or ESG-linked loan products. This provides direct business value for sustainable behavior.

Real-World Examples That Matter

In Tamil Nadu, a leather tannery cluster received acclaim for adopting a shared effluent treatment plant, which reduced chemical discharge by over 70% while allowing smaller units to comply with export norms. This decentralized solution, supported by SIDBI and the Tamil Nadu Pollution Control Board, is now a model for other regions.

In Maharashtra’s Kolhapur belt, a group of SME casting units jointly invested in fume extraction and sand reclamation systems, a move that reduced both emissions and sand wastage by over 40%. The business case was driven by operational savings and improved workplace health.

And in Punjab, auto ancillaries in Ludhiana have embraced bicycle logistics and electric forklifts for in-plant movement, reducing diesel consumption and emissions – again, more for cost reduction than climate strategy.

These are not isolated examples. They reflect a growing reality where sustainability emerges from the shop floor, not the boardroom.

Looking Ahead: From Invisibility to Influence

As India’s regulatory landscape evolves to accommodate ESG reporting, carbon border taxes, and sustainable procurement norms, SMEs that are already green, even informally, must not be left behind.

Policy efforts like the ZED (Zero Defect Zero Effect) scheme, green cluster grants, and PLI-linked compliance frameworks must prioritize this informal sustainability ecosystem. These businesses don’t need motivation – they need recognition, structure and access.

For Indian SMEs, especially those outside metro cities, being green isn’t a marketing message – it’s a business reality. Now, the challenge is to translate this reality into visibility and value.

Quiet Leaders of the Green Economy

India’s Tier 2 and Tier 3 SMEs may not speak the language of ESG. But in their daily operations – their recycling bins, water reuse tanks, solar panels and frugal inventories – they are already leading by example.

As we mark World Environment Day, perhaps it’s time to shift the spotlight. From high-budget sustainability reports to the quiet, unrecognized factories that are proving green growth is not only possible, it’s already happening.