MSME Sustainable (ZED) Certification Scheme
Part of: Prelims and GS-III: Economy
Context: The MSME Sustainable Certification scheme has been launched..
- This Scheme is an extensive drive to enable and facilitate MSMEs to adopt Zero Defect Zero Effect (ZED) practices and motivate and incentivize them for ZED Certification while also encouraging them to become MSME Champions.
- Through the journey of ZED Certification, MSMEs can reduce wastages substantially, increase productivity, enhance environmental consciousness, save energy, optimally use natural resources, expand their markets, etc.
- ZED aims to provide a roadmap to global competitiveness for the MSMEs of India.
- ZED will not only attempt to improve productivity & performance, it has the capability to change the mind-set of manufacturers and make them more environmentally conscious.
The sector faces finance-related problems due to three main factors
- Absence of viable credit providers
- Absence of credit products and schemes such as micro-insurance that help enterprises tide over business downturns
- Delayed payments leading to a persistent crunch in working capital. The average number of days it takes for enterprises to receive cash for the credit sale are 176, 112 and 81 days for micro, small and medium enterprises, respectively.
Delayed payments entail four kinds of costs for firms —
- Costs in retrieving payments in the form of personnel, time and effort;
- Interest forgone beyond the prescribed period;
- Business forgone due to working capital crunch;
- Losses due to non-reconciliation.
ZED is based on the principle of:
- Zero Defect – Production mechanisms wherein products have no defects
- Zero Effect –Production processes that have no adverse environmental and ecological effects.
Significance for MSME Sector
- Export Competitiveness – Through better quality products, and also due to manufacturing space created by China owing to huge increase in its factory wages.
- Domestic consumer base –Better quality products will attract more customers.
- Improved profits –Through technological up-gradation, use of Intellectual Property Rights, reduced wastage and increased productivity.
- Reduced costs –Energy efficiency, waste recycling, and better production processes.
- Increased investments –With a more environmentally aware world, it’s easy to access credit for green initiatives.
- Awards and Recognition –Help build a brand image for the MSMEs through the “ZED Mark” and showcase them globally.
- Environmental responsibility –Make them ‘Responsible Manufacturers’ and in long run make them sustainable businesses.
- Boost to Startup Culture –Governmental handholding, innovative solutions, and newer technology.