Strategies Forum: Small and medium-sized enterprises (SMEs) make up 98.1% of companies in Jordan

Environmental, Social, and Governance (ESG) practices include standards for measuring business sustainability and impact, such as disclosing resource consumption and greenhouse gas emissions, committing to fair wages, providing decent and healthy work environments, as well as promoting transparency, compliance with international standards, and the application of good governance principles.

A global trend towards sustainability

Globally, the paper noted, based on the 2025 Global Sustainability Report issued by the Organization for Economic Cooperation and Development (OECD), that listed companies that disclosed sustainability-related information represent 91% of the total market capitalization of listed companies, while the outstanding value of corporate sustainable bonds reached approximately $2.4 trillion by the end of 2024.

In contrast, the paper showed that only 25% of SMEs in the European Union have developed an ESG strategy, reflecting the gap between large and small companies in adopting these practices.

Regionally, the implementation of sustainability practices remains relatively limited, especially in the environmental and social aspects, while governance aspects—such as the existence of business strategies, boards of directors, and international quality certifications—appear more mature, particularly in Jordan, Tunisia, and Morocco.

The paper stressed the importance of increasing women's participation in the workforce and management positions, and increasing companies' attention to monitoring energy consumption, waste management, and tracking emissions, given the region's exposure to the repercussions of climate change.

Jordanian efforts to promote sustainability

In Jordan, the adoption of these practices has seen growth, especially among large companies listed on the Amman Stock Exchange (ASE), in parallel with the national trend towards a green economy and the priorities of the Economic Modernization Vision and national green growth plans. These efforts are linked to the Kingdom's climate commitments aimed at reducing greenhouse gas emissions by 31% by 2030.

The paper reviewed the efforts of the Amman Stock Exchange in this field, noting a directive it issued in 2022 to the 20 largest companies listed on the ASE20 index to prepare sustainability reports in accordance with the Global Reporting Initiative (GRI) standards.

The Exchange also launched policies, guidelines, and a regulatory framework for climate-related disclosure, scheduled to come into effect in 2027, requiring ASE20 index companies to comply with IFRS S1 and IFRS S2 standards issued by the International Sustainability Standards Board (ISSB).

The paper expected that the effects of these requirements would extend through supply chains to SMEs, making their readiness to provide and disclose sustainability data an important factor in maintaining their business relationships.

It also pointed out that the Amman Stock Exchange was selected by the United Nations Sustainable Stock Exchanges (SSE) initiative to chair the Advisory Group on SMEs and Sustainability, which published a practical guide for stock exchanges around the world in June 2025.

The guide includes tools for implementing ESG practices, case studies, and checklists for best practices, in addition to three strategies focused on raising awareness, building capacity, and facilitating access to finance and services. The paper called for leveraging the Exchange's experience with large companies and adapting it to suit the capabilities and needs of SMEs.

Financing and compliance challenges

In its diagnosis of the reality of SMEs, the paper explained that a number of them view the adoption of sustainability practices as an additional cost, in light of financial constraints and poor awareness of their business benefits. A survey prepared by Amman Arab University showed that more than 60% of the companies included in it face general financial constraints.

An analysis of the green business ecosystem in Jordan conducted by GIZ also showed that 13.8% of the 500 SMEs surveyed classify themselves as "green businesses," reflecting the novelty of this sector and its growth potential.

These practices are becoming increasingly important for companies dealing with foreign markets, in light of European Union requirements related to sustainability reporting, due diligence, and the Carbon Border Adjustment Mechanism (CBAM). Jordanian companies participating in global value chains need to measure their emissions and provide reliable data to maintain their business partnerships.

In this context, the paper reviewed the European Voluntary Sustainability Reporting Standard (VSME), which provides a simplified disclosure framework for SMEs. The standard includes two parts: the first is basic disclosure standards, and the second is additional optional standards for companies facing more advanced requirements from banks and large clients.

The paper considered this standard a suitable option for Jordanian companies engaged in exporting or regional partnerships, as it helps them meet data requirements and enhance their readiness without bearing the complexities of disclosure standards applied to large companies.

Cost reduction and risk management

The paper indicated that improving the use of energy, water, and materials and reducing waste can achieve tangible operational savings, citing resource efficiency and cleaner production projects in local industries.

It presented the experience of Malaysia, where 38% of SMEs that adopted these practices achieved revenue increases exceeding 51%, while 24% of them recorded cost savings exceeding the same percentage.

In the area of risk management, the paper noted that more than 40% of SMEs globally face financial risks associated with climate change. A 2023 survey by the Central Bank of Jordan also showed that credit risks are affected by drought, floods, and water scarcity.

According to the paper, production disruptions and rising costs may lead to a decline in company revenues and weaken their ability to meet their obligations, in addition to limiting their access to finance.

Green finance and government procurement

Regarding financing opportunities, the paper addressed the Green Finance Strategy launched by the Central Bank of Jordan in 2023, aiming to raise the share of green finance to 30% of total financing by 2028, in addition to mainstreaming green taxonomy and its role in mobilizing finance.

Outstanding credit granted to SMEs reached 3.18 billion dinars by the end of 2023, equivalent to 10.7% of total private sector credit.

The Green Economy Financing Facility (GEFF), launched in 2022, also contributed to providing $41 million in financing, equivalent to 29 million dinars, to about 760 sustainable investment projects through three Jordanian banks and two microfinance institutions. The paper noted that these tools and green credit lines have made the financing environment in Jordan more supportive of sustainable investments.

The paper also addressed the opportunities for SMEs in government procurement, noting the 2024 directives of the Government Tenders Department to stimulate green public procurement and enhance the participation of micro, small, and medium enterprises, with special attention to projects involving women, youth, or persons with disabilities.

It considered that these trends act as an incentive for companies to improve their environmental and social performance and develop their governance, thereby enhancing their chances of accessing contracts related to government procurement.

The paper reviewed international experiences in this field, including the "Tesco" program for financing suppliers with sustainability-linked terms, the Singaporean company "Bestcoat" obtaining a green loan, and the experience of the British company "Bar One Clothing," which achieved annual energy savings of £1,900 with an investment of £13,500. It also addressed the role of sustainability certifications in enhancing customer trust, and the use of government procurement to achieve social and environmental goals in New Zealand.

Recommendations for empowering SMEs

The Forum called on policymakers to develop clear guidelines for ESG practices that take into account the differences in sectors, company sizes, and revenues, and to develop targeted financial incentives and technical assistance programs aimed at companies and financial institutions.

It also recommended expanding support packages through existing financing mechanisms, including the Renewable Energy and Energy Efficiency Fund, the Environmental Protection Fund, and the Industry Support Fund, in addition to encouraging green loans and insurance products with preferential terms.

The recommendations included expanding the scope of public procurement to favor companies with good performance in these practices, and establishing a central platform for data, benchmarks, and best practices, which would help companies compare their performance with their peers and provide policymakers with reliable data on emissions and green finance.

The Forum called on chambers of industry and commerce and business associations to develop capacity-building programs in partnership with the Amman Stock Exchange, addressing materiality assessment, stakeholder analysis, women's economic empowerment, resource efficiency, and sustainability reporting.

It emphasized the importance of providing practical tools in Arabic, leveraging international guides and the Stock Exchange's guidelines, the Sustainability and Circular Economy Glossary launched by the Forum, and the Greenhouse Gas Protocol.

The paper also set a roadmap for small and medium-sized enterprises (SMEs) starting with energy and water consumption audits and implementing low-cost improvements, followed by improving waste management and adopting circular economy practices. The roadmap includes adopting policies for transparency, compliance, fair wages, and women's economic empowerment, exploring green finance and impact investment opportunities, developing team skills, and communicating transparently with customers, partners, and investors regarding progress made.

The Forum concluded by emphasizing the necessity of enhancing cooperation between stakeholders to transition from raising awareness to practical application, by addressing financing challenges, building capacity, and creating a supportive environment that helps SMEs adopt Environmental, Social, and Governance (ESG) practices.