The dusty grease-stained workshops in Nairobi echo with the sounds of welding, the rhythmic pounding of machinery, and the animated conversations of traders negotiating deals that will sustain families and communities across Kenya. In these vibrant commercial centers, micro, small, and medium enterprises represent the lifeblood of African economies. According to FSD 2024, MSME’s in Kenya constitute over 90% of all businesses, they create more than 30% of jobs annually and contribute more than 40% towards the country’s GDP. Beneath this economic vitality lies a stark reality that many business owners face daily; the increasing frequency and intensity of disasters that threaten not just individual enterprises but entire communities and regional economies.
The integration of Environmental, Social, and Governance principles with the four foundational priorities of the Sendai Framework for Disaster Risk Reduction offers African MSMEs a comprehensive approach to building resilience and promote their sustainability. This integration recognizes that disaster risk reduction is not just about preparing for emergencies but about reimagining how businesses operate within complex social, environmental, and economic systems. For African MSMEs, this means embracing approaches that strengthen both their immediate survival capacity and their long-term sustainability in an increasingly uncertain world.
The first priority of the Sendai Framework calls for understanding disaster risk in all its dimensions. For African MSMEs, this understanding extends far beyond traditional hazard identification to encompass the intricate web of vulnerabilities that characterize their operating environment.
As in ESG best practices on risk, businesses must comprehensively assess and understand risks, and their impacts in a more holistic and systematic manner. Environmental risks have a far-reaching effect on a business both as a singular entity and all through the value chain. Changing climatic conditions in the case of a mango processor could lead to a reduction of produce posing a threat to business sustainability, disasters such as floods could cut off road networks hampering both access to raw material and getting finished goods to the markets.
In addition to this, it is important for businesses to understand the inter connection between existing social dynamics and their sustainability. Through an ESG lens, businesses must endeavor to understand risk also through its impact on communities and people. Understanding that disasters pose a threat to people’s livelihoods and exacerbate vulnerabilities, businesses will promote more positive outcomes for their people and the communities they exist in.
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The second priority of the Sendai Framework emphasizes strengthening disaster risk governance to manage disaster risk. For African MSMEs, this involves building internal governance capacity while engaging constructively with external governance systems at community, national, and regional levels. Effective risk governance requires clear roles and responsibilities, transparent decision-making processes, and accountability mechanisms that ensure risk management strategies are implemented and maintained over time.
KIPPRA 2019 – the majority of MSMEs are informal in nature. This is evidenced by 5.8 million establishments that are not registered against a total 7.4million establishments on record. Internal governance for MSMEs often begins with formalizing business structures and processes that may have operated informally. This formalization creates the foundation for accessing support services, financial products, and partnership opportunities that can enhance resilience. However, formalization must be balanced with the flexibility that enables these businesses to adapt quickly to changing conditions and maintain community relationships that often provide crucial support during crises.
Building systems and capacity for effective risk management and stakeholder engagement will be key in enhancing resilience for MSMEs. This includes investing in financial management systems that provide real-time information about business performance and enable rapid response to changing conditions. It involves developing planning and monitoring systems that support adaptive management approaches. It encompasses building leadership capacity and succession planning that ensures business continuity during transitions.
Sendai Framework’s third priority calls for investing in disaster risk reduction for resilience. For resource-constrained African MSMEs, this investment must be strategic, focusing on interventions that provide multiple benefits while being financially sustainable. The integration with ESG principles creates opportunities for investments that simultaneously reduce risks, improve operational efficiency, and enhance market positioning.
Environmental investments often provide the most immediate and measurable returns for African MSMEs. Installing solar panels reduces both electricity costs and vulnerability to power outages while demonstrating environmental commitment to customers and partners. Implementing water conservation and recycling systems reduces operational costs while building resilience to water scarcity. Adopting sustainable sourcing practices can reduce supply chain risks while accessing premium markets that value environmental responsibility.
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Social investments in employee training, community development, and stakeholder engagement create resilience by building human and social capital. Community development investments build local capacity and social cohesion that can provide crucial support during crises. Stakeholder engagement creates networks of relationships that facilitate information sharing, resource mobilization, and collective problem-solving.
The fourth priority of the Sendai Framework emphasizes enhancing disaster preparedness for effective response, recovery, and building back better. For African MSMEs, preparedness extends beyond emergency response plans to encompass the broader capacity to adapt and recover from various types of shocks and stresses. This comprehensive preparedness approach aligns with ESG principles by recognizing that sustainable business practices enhance both normal operations and crisis response capacity.
The integration of ESG principles with disaster preparedness creates opportunities for building back better after crises. This might involve using recovery periods to implement environmental improvements, strengthen social relationships, or enhance governance systems. A small retail business that experiences flood damage might use the rebuilding process to install flood-resistant infrastructure, implement water conservation systems, and strengthen community partnerships that provide early warning and mutual support.
The interconnected nature of these four principles creates a comprehensive framework for MSME resilience that addresses both immediate survival needs and long-term sustainability objectives. Understanding disaster risk provides the foundation for all other activities by identifying vulnerabilities and opportunities for improvement. Strengthening risk governance creates the institutional capacity needed for effective risk management and stakeholder engagement. Investing in risk reduction builds the physical, human, and social capital needed for resilience. Enhancing preparedness ensures that businesses can respond effectively to crises while positioning themselves for improved performance afterward.
The practical implementation of this integrated approach requires careful attention to the specific contexts and constraints facing African MSMEs. Resource limitations necessitate phased approaches that prioritize interventions with the greatest impact and lowest cost. Capacity constraints require partnerships with technical assistance providers and peer learning networks. Market barriers demand creative approaches to accessing finance and customers that value ESG performance and resilience.
Despite these challenges, the opportunities for African MSMEs that embrace integrated ESG, and disaster risk reduction approaches are significant. Growing demand for sustainable and resilient products creates market opportunities for businesses that can demonstrate positive environmental and social impacts. Expansion of impact investing and ESG finance provides access to capital for businesses that might otherwise struggle to secure funding. Development of new technologies and business models creates opportunities for innovation and competitive advantage.
The success of these integrated approaches depends on creating supportive ecosystems that enable MSMEs to access the resources, expertise, and markets needed for implementation. This requires collaboration among government agencies, development organizations, financial institutions, and the private sector to create policy environments, financing mechanisms, and technical support systems that facilitate MSME resilience building.
The future of African MSMEs will be anchored on their ability to navigate an increasingly complex and uncertain risk environment while contributing to sustainable development in their communities. The integration of ESG principles with the four priorities of the Sendai Framework provides a roadmap for achieving this balance, creating businesses that are not only resilient but also regenerative, contributing to the wellbeing of the social and environmental systems upon which they depend.
The transformation of African MSMEs from vulnerable enterprises to resilient drivers of sustainable development represents one of the most important opportunities of our time. Considering the importance of MSMEs as driver for Africa’s growth and development, the collective impact of improved risk resilience and ESG integration will be transformative for African communities and economies. The frameworks exist, the need is clear, and the opportunities are abundant. Success will depend on the commitment to implement these integrated approaches at scale, ensuring that these MSMEs can thrive in an uncertain world while contributing to the broader goals of sustainable development and disaster risk reduction.
