New Globalization: How can Small & Medium Enterprises (SMEs) be more Resilient?

Great creativity knows no borders, but multiple external forces defining the 2020s have threatened to disrupt how successfully an idea can travel. From the stagnation of the global trade agenda to shifting geopolitical forces, digital and technological progress to concerns over inequality and climate change, the world is inherently riskier and more complicated than ever – and consumers are demanding more.

Small and medium-sized businesses account for about 90% of all companies worldwide, according to World Bank data, and contribute as much as 40% of GDP in emerging economies. Both of these figures increase when SMEs operating in the informal (grey economy) are included in the count. According to estimates, some 600 million additional jobs will have to be created by the year 2030 in order to accommodate a growing global workforce, making SME development a high priority for many governments.

SMEs that are located in developing countries in particular struggle to reap the benefits of global value chains, as they tend to lack the capital and technology know-how necessary to navigate international markets. Participation in global value chains can enable SMEs to spread production internationally, and to increase outsourcing, develop greater specialization, and better target market niches. SMEs are also often a part of value chains that include bigger players and must keep pace in terms of growing sustainability standards and efforts as a result – as more large corporations require suppliers to join in net-zero and decarbonization commitments.

International Cooperation is key for SMEs being resilient:

International cooperation among SMEs enables new market opportunities and access, under the right circumstances; joining an e-commerce platform, for example, can expand an SME’s customer base without it having to build its own distribution channels and marketing efforts. However, expanding internationally is a difficult exercise. Some related obstacles include higher requirements for innovation, and a potential loss of competitive advantage. Ultimately, SMEs with global ambitions need to aim for both a high level of information exchange with peers and with bigger companies, and for greater digitalization. Overall, their presence in the digital realm remains relatively limited, and certainly lags behind that of large corporations – mostly due to the fact that SMEs have a relative lack the necessary capital (both human and digital).

Trust in global trade is vital if we want to maximize the resilience of supply chains. Supply chains that are increasingly onshored or shifted along geopolitical boundaries are neither efficient not resilient. Rather than incentivizing these shifts, either directly or indirectly, governments should work to rebuild trust in global trade and define a new agenda for progress towards this end.

To achieve a more resilient economy to the benefit of all parties – consumers, producers, companies, brands and citizens – will require all stakeholders at the table to recognize what is happening and start discussions that focus on the solutions for solving this problem.

In the era of ‘new globalization’, businesses should be looking for and building more resilient and diverse global supply chains, to withstand impact and adapt to ever-changing market shifts, but they should also be sustainable and efficient. Finding the right balance is not an easy task, but one that needs to be tackled as soon as possible.

In order to fully contribute to building back better post-pandemic, however, it is essential that these companies develop a better understanding of how they can adapt – both by building their own resilience to these many global shocks, and by helping to generate more sustainable value for communities, the natural environment, and local economies.