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Why a Green, Digital and Competitive SME Index?

Small- and Medium-Sized Enterprises (SMEs) have never been more important to Europe and Europe's future. They form the backbone of the economy, accounting for 53% of gross domestic product and 65% of jobs. They employ an astonishing number of people – almost 100 million. And many provide crucial essential services that provide crucial support to many in these difficult times and form the backbone of many communities.

And policymakers have even more in mind. Lately, SMEs have been tasked with important social goals – some aimed at helping them grow their businesses and create more jobs, others aimed at helping Europe reach its ambitious goal of full employment with zero net-carbon emissions. Either way, these new targets – spelled out in important policy initiatives such as the European Green Deal, the Eco-Innovation Action Plan, the European Commission’s SME Strategy, the Digital Compass and the European Industrial Strategy – underline one essential fact: we are all in this together. Without strong, vibrant small businesses, Europe will not succeed. But without Europe, the SMEs cannot succeed, either. That is why the Lisbon Council put together this unique three-pillar indicator: The Green, Digital and Competitive SME Index. It looks at the emerging ecosystem for SMEs in European countries, ranking them not with subjective views or virtue-seeking statements but based on the SME performance they are actually able to deliver:

  • Pillar I: How digital are a country’s SMEs? How much use are they able to make of cutting-edge technologies that allow them to reach more customers, deliver more customer value and focus on core business without having to build up needless capacity and back office.
  • Pillar II: How green are the SMEs? This is a crucial indicator. Europe won’t reach its ambitious net-zero-emissions climate targets without greening a sector that accounts for 53% of the economy. But, even beyond the immense political significance, there is a selfish, down-to-earth reason for SMEs to go green. Customers are demanding it; and regulations are requiring it. How well are countries' SMEs able to deliver?
  • Pillar III: How competitive are a country’s SMEs? This is measured by looking at company growth and success in new markets – both within and outside of the European Union.

But this is no ordinary beauty contest. The goal here is not to say that one country is better than another – to the contrary, all countries, including Sweden, No. 1 on the Green, Digital and Competitive SME Index, have areas where they could improve. The goal is to bring transparency to this crucial process. Thanks to this tool, the actual transition can be measured. And, once that measurement is taken, areas for potential improvement can be identified and addressed.

To encourage movement down a positive path that delivers prosperity and helps Europe move in unison towards goals we have commonly defined, the Green, Digital and Competitive SME Index is a composite index – based on weighting and re-weighting of publicly available data, much of it from Eurostat and other official sources. The Methodology section provides a detailed list of the indicators and sub-indicators that make up the index.

We' ll be refining the questions we ask – and looking at the answers they produce – based on the ongoing field work we will conduct. And we want to hear from you. To be a part of this ground-breaking study – write to us at gdc@lisboncouncil.net. The Green, Digital and Competitive SME Index is your index. We hope it reflects many of your own experiences with doing business in Europe and will come to be a crucial tool as you work to grow your business and make the world a better place.

Methodology

The Green, Digital and Competitive SME Index is a ranking composed of three pillars, nine indicators and 21 sub-indicators. The data used to build the index comes entirely from public sources. All scores are computed using the most recent data available at the close of 2021 (taking March 2022 as the data freezing point). The sub-indicator data ranges from the period 2019 to 2021, depending on the most recent year available for the sub-indicator in question.

For aggregation perspective, the normalisation method used to standardise the indicators’ values is the min-max, with the normalisation range of 10 to 100. For the majority of the sub-indicators (19 of 21 indicators), the highest value corresponds to the best performance (100 points), while the lowest value is considered the worst performance (10 points). For two sub-indicators, II.2.1 Share of greenhouse gas emissions produced by SMEs in total greenhouse gas emissions and II.2.2. Change in greenhouse gas emissions, the method is reversed: the lowest value gets the highest score (100 points) and the highest value gets the lowest one (10 points).

The main aggregation method used is arithmetic average. All pillars, indicators and sub-indicators have been assigned equal weights in the aggregation process. Therefore, an indicator’s performance is computed as the arithmetic average of the sub-indicators included in the indicator. Similarly, a pillar’s performance is the arithmetic average of the indicators included in the pillar. The overall assessment of a country is the arithmetic average of the component pillars.

Table 1. Structure by Pillar, Indicator and Subindicator
Pillar Indicator Subindicator Source
I. Digital Transition I.1. SME Digitalisation I.1.1. SMEs using big data analysis Eurostat
I.1.2. SMEs using cloud computing services Eurostat
I.1.3. SMEs using social media (two or more) Eurostat
I.1.4. SMEs with high and very high digital Intensity Eurostat
I.1.5. SMEs using any type of ICT security measures Eurostat
I.2. E-commerce I.2.1. Share of SMEs with e-commerce sales in total SMEs Eurostat
I.2.2. Share of SMEs' total turnover from e-commerce sales in total turnover Eurostat
I.3. Digital Skills I.3.1. Share of SMEs that employ ICT specialists in total SMEs Eurostat
I.3.2. Share of SMEs for which ICT functions are performed by own employees in total SMEs Eurostat
I.3.3. SMEs providing training to develop or upgrade ICT skills of their personnel Eurostat
II. Green Transition II.1. Natural Resource Conservation II.1.1. Share of SMEs reducing consumption of natural resources (e.g. saving water, energy, materials or switching to sustainable resources) European Commission
II.1.2. Share of SMEs recycling, by reusing material or waste within the company European Commission
II.2. Emission Reduction II.2.1. Share of greenhouse gas emissions produced by SMEs in total greenhouse gas emissions Eurostat
II.2.2. Change in greenhouse gas emissions Eurostat
II.3. Green Output II.3.1. Share of SMEs offering green products or services European Commission
II.3.2. Share of SMEs in low intensive greenhouse gas emission sectors in total SMEs Eurostat
III. SME Competitiveness III.1. Exports III.1.1. Share of exporting SMEs in total SMEs Eurostat
III.1.2. SME trade to GDP ratio Eurostat
III.2. Productivity III.2.1. SMEs labour productivity Eurostat
III.3. Growth III.3.1. Share of high-growth enterprises in total active enterprises (10+ employees) Eurostat
III.3.2. Share of persons employed in high-growth enterprises in total employment (enterprises with 10+ employees) Eurostat

You can directly comment on the indicators and methodology at https://makingspeechestalk.com/ch/GDC/?id_speech=79

Sources

The Index and dashboard are based entirely on official, publicly available data from the European Commission and Eurostat. The following publications and databases served as the key reference points. The date of access, where relevant, is included as well.

European Commission. Flash Eurobarometer 498: SMEs, Green Markets and Resource Efficiency (Brussels: European Commission, 2022)

Eurostat. Digital Economy and Society, Information and Communication Technology Usage in Enterprises, online version, accessed 17 January 2022

--------------. Sustainable Development Indicators, Goal 13: Climate Action, online version, accessed 14 January 2022

--------------. Structural Business Statistics, online version, accessed 16 March 2022

--------------. Air Emissions Accounts, online version, accessed 11 February 2022

--------------. Annual National Accounts, online version, accessed 21 January 2022

--------------. International Trade in Goods, online version, accessed 25 January 2022