Report on Small Business Capital Expenditure and its Alignment with Sustainable Development Goals

Introduction: SME Investment as a Catalyst for Sustainable Development

Investment in human capital, aligning with SDG 4 (Quality Education), is foundational for economic progress. However, for this potential to be realized, skilled labor must be integrated with physical capital. Small and medium-sized enterprises (SMEs) serve a critical function in this integration, acting as intermediaries that foster the partnership between labor and capital. This process is central to achieving SDG 8 (Decent Work and Economic Growth) and SDG 9 (Industry, Innovation, and Infrastructure). An analysis of recent SME investment trends reveals key insights into the progress and challenges in advancing these global goals at the local level.

Analysis of Capital Expenditure Trends and SDG 8

The June Small Business Economic Trends report by the NFIB indicates that 50% of small business owners undertook capital expenditures in the last six months. While this investment is vital for economic activity, the current level is historically low, approaching the 45% trough observed following the 2008 recession. This subdued investment rate poses a potential challenge to the robust economic growth and creation of decent work envisioned in SDG 8. The peak investment of 72% in 1998 highlights the potential for higher capital formation, which is essential for enhancing productivity and economic resilience.

Types of Capital Investment and Linkages to SDG 9

The nature of these expenditures directly contributes to the targets of SDG 9, which calls for building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation.

• Vehicles: 32% of expenditures were for vehicles, a key component of logistical and transport infrastructure.
• Equipment: 9% of businesses purchased new equipment, which is fundamental for industrial capacity and innovation.
• Structures and Facilities: A combined 16% of SMEs invested in upgrading structures (3%) or acquiring new facilities (13%), directly enhancing the quality and availability of industrial and commercial infrastructure.

These investments, from basic tools to advanced AI computers, form the backbone of a modern, productive economy and are indispensable for sustainable industrial development.

Sectoral Investment Patterns and Their Role in Sustainable Progress

Investment activity varies significantly across industries, indicating different sectoral contributions to the SDGs.

High-Investment Sectors

1. Transportation and Communication: This sector reported the most frequent and highest-value expenditures, with 29% of outlays exceeding $100,000. These investments are critical for SDG 9 (Infrastructure) and SDG 11 (Sustainable Cities and Communities) by improving connectivity and logistics.
2. Manufacturing and Production: Businesses that “made stuff” were substantially more likely to invest in capital goods. This directly supports the industrialization targets of SDG 9 and contributes to job creation under SDG 8.

Lower-Investment Sectors

• Retail, services, and professional services industries were less active in capital investment. As these sectors are often labor-intensive, their primary contribution to the SDGs may be through direct employment (SDG 8) and skills development (SDG 4), rather than heavy capital formation.

The Foundational Partnership for Achieving the SDGs

Sustainable progress is fundamentally the result of a productive partnership between capital and labor. This synergy is the essence of all business operations and the primary driver for achieving multiple SDGs.

• Productivity and Prosperity: The combination of well-managed capital assets and a qualified workforce (SDG 4) enhances productivity. This is the source of increased profits and wages, which helps achieve SDG 1 (No Poverty) and SDG 8 (Decent Work and Economic Growth).
• Local Economic Ecosystems: “Main Street” businesses are the starting point for this virtuous cycle. Their investments build local economic resilience, contributing to SDG 11 (Sustainable Cities and Communities) and laying the groundwork for larger-scale innovation and growth.

The report on business inventories, while an accounting component of GDP, also reflects production patterns relevant to SDG 12 (Responsible Consumption and Production). Ultimately, consistent and strategic capital investment by SMEs is a prerequisite for the continuous process of building a more sustainable and equitable global economy.

SDGs Addressed in the Article

• SDG 4: Quality Education
• SDG 8: Decent Work and Economic Growth
• SDG 9: Industry, Innovation, and Infrastructure

Specific SDG Targets Identified

1. SDG 4: Quality Education

   • Target 4.4: Increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship.

     The article begins by stating, “Education and training are important investments in workers (human capital).” This directly acknowledges the importance of skills and training for the workforce, which is essential for productivity and economic progress, aligning with the goal of equipping adults with relevant employment skills.

2. SDG 8: Decent Work and Economic Growth

   • Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.

     The article links investment in physical capital (from “shovels to AI computers”) and qualified workers to enhanced productivity, which it calls the “fundamental driver of profits and wages.” The data on capital expenditures in equipment and vehicles across various industries illustrates the process of technological upgrading to boost productivity.

   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises.

     The entire article centers on the economic activities of small businesses. It describes small business owners as “‘intermediaries,’ bringing capital and labor together in a working partnership” and emphasizes their foundational role in the economy with the statement, “Main Street is where it all starts.” The analysis of their capital expenditure is a direct examination of the factors supporting the growth of small enterprises.

3. SDG 9: Industry, Innovation, and Infrastructure

   • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure… to support economic development and human well-being.

     The article details the capital expenditures made by small businesses, which include “vehicles, equipment, fixtures and furniture, buildings or land, along with improvements to existing buildings or land.” These investments are fundamental components of the physical infrastructure necessary for businesses to operate and contribute to economic development.

   • Target 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product (GDP).

     The article analyzes investment patterns across different industries, such as transportation, construction, retail, and services. It also discusses “gross private domestic investment” and its relation to GDP, directly connecting industrial investment to national economic output.

   • Target 9.3: Increase the access of small-scale industrial and other enterprises… to financial services… and their integration into value chains and markets.

     The article’s focus on capital spending by small businesses implies their access to the capital needed for such investments. By acting as intermediaries that “bring capital and labor together,” these enterprises are shown to be integrating into the market, a key aspect of this target.

Indicators for Measuring Progress

1. For SDG 8 & 9 Targets

   • Percentage of small businesses making capital expenditures.

     The article explicitly states, “50% of small business owners reported making a capital expenditure in the past six months.” This metric directly measures the level of investment and economic activity among small enterprises.

   • Types and amounts of capital expenditure by industry.

     The article provides detailed data, such as “Thirty-two percent reported purchasing vehicles,” and breaks down spending by industry (e.g., transportation businesses had the highest spending). These figures serve as indicators of infrastructure development and industrial investment.

   • Change in business inventories and Gross Private Domestic Investment.

     The article mentions these as components used to measure GDP. These are established economic indicators that reflect industrial production and investment levels, relevant to tracking progress on economic growth and industrialization.

2. For SDG 4 Target

   • Investment in worker education and training.

     While the article does not provide a specific number, it implies this as a key indicator by stating, “Education and training are important investments in workers (human capital).” The level of this investment would be the metric to track progress toward a skilled workforce.

SDGs, Targets, and Indicators Analysis

Source: forbes.com