Policy Similar to large corporations, SMEs and mid-sized companies are looking for clearer guidance from governments regarding environmental and climate policies and how best to align with evolving policy expectations. In many cases, existing policies and regulations may not fully reflect the practical realities faced by smaller businesses and often lack the consistency and stability needed for long-term planning. There is an opportunity for governments to further outline their climate ambition and policy trajectories in the short, medium and long terms, while also considering how to design policies that are both effective and proportionate to the capacities of businesses of varying sizes. Harmonizing sustainability standards requires strong policy support to align national regulations with international frameworks, ensuring consistency across markets. Governments can play a key role by facilitating cross-border collaboration, incentivizing adoption and embedding SME-friendly pathways into sustainability policies. This enables smaller firms to comply more easily, participate in global value chains and contribute meaningfully to sustainability goals. Furthermore, governments should use incentive- based approaches rather than relying primarily on penalties. Positive policy incentives can encourage smaller businesses to invest proactively in sustainable technologies, improve energy and resource efficiency and adopt cleaner production practices. China has introduced policy measures26 to support SMEs in transitioning to greener operations, including financial incentives such as green loans, tax breaks for energy-saving and environmental protection projects and subsidies for adopting green technologies and digital solutions. The policy also promotes market-based incentives such as preferential government procurement for eco-friendly SMEs and facilitates their participation in carbon markets. Implementation Public- and private-sector support is essential for the successful implementation of sustainability initiatives among SMEs and mid-sized companies. As illustrated in the previous sections, governments can provide tailored financing, technical and policy guidance, while large corporations and industry associations can support SMEs by integrating them into sustainability efforts and sharing tools, data and expertise. Successful implementation also depends on collaboration with local partners who possess strong manufacturing process proficiency, ensuring that sustainability solutions are grounded in practical, operational realities within that region. Connecting with local manufacturers through the aforementioned networking resources (such as the SME Climate Hub’s regional hub network) is a great way to learn of well-regarded local system integrators and process experts who can assist in an SME’s specific region. These forms of support help SMEs move from commitment to execution – bridging capability gaps, reducing risk and ensuring that sustainability becomes embedded in everyday business operations. Sustainability Meets Growth: A Roadmap for SMEs and Mid-Sized Manufacturers 21

Sustainability Meets Growth 2025