Driving Azerbaijan's green economic agenda: Empowering SMEs for sustainable development

In 2024, Azerbaijan declared "The Year of Solidarity for a Green World" and hosted prestigious events like COP29, underscoring the relevance of the green economic concept.

The Agency for the Development of Small and Medium Enterprises (KOBIA), under the Ministry of Economy, plays a crucial role in enhancing the role of SMEs in green economy initiatives. Until 2030, the agency supports the development of alternative energy in Azerbaijan within the framework of national priorities.

KOBIA actively promotes the participation of companies engaged in green energy, recycling, and circular economy sectors at various local and international exhibitions, thus fostering their activities.

Small and medium enterprises (SMEs) play a significant role across various sectors of the economy. In recent years, we have witnessed the development of SMEs in the green economy sector.

In his comment to Azernews on the issue, economic expert Khalid Karimli highlighted the high value of SMEs in employment, emphasizing that such businesses play a pivotal role in economic growth.

"SMEs primarily contribute to solving employment issues and play a crucial role in exports. They are involved in addressing social issues within the economy. The Azerbaijani government provides incentives to micro and small entrepreneurs, including those operating in technology parks. For instance, special tax-free regimes have been established for entrepreneurs in the Alat Free Economic Zone," the expert noted.

It should be noted that the support and services provided to SMEs cover the entire process from business establishment to development. This includes various tax and customs incentives, infrastructure support, institutional support measures, favorable credit, subsidies, and more. The Agency for the Development of Small and Medium Enterprises (KOBIA) focuses on enhancing state policy in the sector, improving the effectiveness of implemented measures, and ensuring institutional support to facilitate the creation of new SMEs and support the development of existing businesses.

Additionally, the Medium-Term Socio-Economic Development Strategy, prepared within the framework of "Azerbaijan 2030: National Priorities for Socio-Economic Development," identifies small and medium entrepreneurship as a strategic goal to become a major source of economic growth and employment in the country.

The Economic Priorities Act, approved by the Cabinet of Ministers' Decision dated February 5, 2024, provides for continued support for SMEs in accordance with the list of priority areas of the economy, government priorities in entrepreneurship, and international calls related to SMEs.

According to Khalid Karimli, small and medium businesses can support green economy efforts by addressing their business challenges, increasing resource efficiency, and minimizing environmental impact to support sustainable economic growth.

"In the field of renewable energy, SMEs can compete with large corporations, but they cannot play a driving role in this sector," the expert added.

"SMEs can also play a role in employment, solving social issues, and addressing the government's ecological problems through tax payments. These businesses can contribute to sustainable economic growth by ensuring environmental cleanliness in their operations and efficient use of resources," the expert stated.

It should be noted that overall, ESG (Environmental, Social, and Governance) principles are at the forefront of KOBIA's attention. The E component evaluates how conscientiously a company treats the environment, including its corporate climate policy, energy use, waste management, and measures to conserve natural resources. The other two components of ESG, S and G, cover the company's relations with employees, suppliers, and customers, the application of accurate and transparent accounting during management selection, and responsibility to shareholders.

Legal benefits, privileges, and support measures are considered for each component of ESG. For instance, incentives for environmental protection include the exemption of electric and hybrid vehicles and compressed natural gas buses from additional value-added tax (VAT). Additionally, there are tax exemptions for the production and import of equipment in the field of renewable energy and the use of recovered energy sources.

The creation of the Balakhani Industrial Park, based on the Presidential Decree of May 4, 2011, aims to revive production in the country. The park's residents enjoy exemptions from land, property, and profit taxes for 10 years. Moreover, according to the Tax Code, equipment imported based on the confirming document of the relevant executive authority is exempt from taxes for 10 years from the date of registration in the industrial and technology park.

In conclusion, Azerbaijan's initiatives to promote SMEs and green economy initiatives reflect a holistic approach to sustainable development. By supporting SMEs in adopting environmentally responsible practices and fostering innovation, Azerbaijan is poised to achieve long-term economic growth while addressing pressing environmental and social challenges. These measures illustrate Azerbaijan's commitment to promoting sustainable economic development through robust support for SMEs and green initiatives.