Degrowth vs Green Growth: Strategic Choices for Sustainable SMEs

Growth or Sacrifice? This question is becoming increasingly urgent for you as an SME. The debate between Degrowth and Green Growth directly impacts your strategic decisions—from investments in green technologies to new business models. Here are the key points:

• Degrowth: Less growth, more focus on resource conservation, societal well-being, and ecological balance. Ideal for local markets and cooperative approaches.
• Green Growth: Growth through green technologies and efficiency. Supported by government funding programs and access to global markets.
• Challenge: Both approaches require adjustments to your business models, whether through technological innovation or structural changes.
• Opportunities: Green Growth offers subsidies and market potential, while Degrowth focuses on values and stability.

Your decision depends on your industry, objectives, and willingness to transform. Read on to find out which approach best fits your company.

Degrowth vs. Green Growth: Core Concepts and Differences

What is Degrowth?

Degrowth is based on the belief that unlimited economic growth is not possible within planetary boundaries. Instead, this approach consciously accepts lower or even negative growth rates to create a balance between natural and economic systems. Judith Butler aptly summarizes the ethical foundation:

"We are ethically obliged and incited to think beyond what are treated as the realistic limits of the possible".

At its core, it’s about fundamentally changing production and consumption patterns to promote societal well-being and ecological balance. Degrowth rejects GDP as the main indicator of societal success and instead focuses on metrics that emphasize well-being, ecological stability, and social justice. For small and medium-sized enterprises (SMEs) in Germany, this means deliberately reducing societal resource consumption—through measures to decrease demand, cultural changes, and new lifestyles. The three dimensions of sustainability—environment, economy, and society—are given equal weight. Internationally, the degrowth movement is gaining traction, as seen in the European Parliament’s 2023 resolution urging member states to consider alternative indicators to GDP and to prioritize social and ecological well-being (European Parliament).

Green Growth, on the other hand, takes a different approach by relying on technological innovation and efficiency to connect growth and environmental protection.

What is Green Growth?

Green Growth aims to create prosperity through investments in environmentally friendly technologies and measures. The goal is to combine economic growth and environmental protection. Sardokie et al. describe Green Growth as a strategy that

"improves well-being and social justice while reducing environmental risks and ecological footprint"

and at the same time

"should prioritize green innovation, decarbonization, green trade, resource efficiency, and social inclusion".

Here, GDP remains a central indicator of success, supplemented by additional sustainability metrics. The approach is based on the principles of eco-modernism and follows the concept of weak sustainability. The focus is on technological innovation and resource efficiency, aiming for progress through renewable energies and higher energy efficiency. For SMEs, this means investing in green technologies and sustainable practices to achieve net-zero emissions, create new jobs, and improve living standards. Notably, the International Energy Agency estimates that global clean energy investment will reach $2 trillion in 2024, highlighting the scale and momentum behind Green Growth (IEA).

Main Differences Between the Two Approaches

The differences between Degrowth and Green Growth are fundamental and are reflected in their approaches to sustainability and economic development:

In Germany, there is a clear preference for growth-critical concepts. A study by the German Environment Agency (UBA) found that 45% of experts support an A-Growth model, 30% prefer Degrowth, and only 25% favor Green Growth. Similarly, a survey in Spain shows that 37% of respondents would be willing to forgo growth to achieve sustainability. These results highlight the societal relevance of the debate and its impact on the strategic decisions of SMEs in Europe. Globally, the World Economic Forum notes that while Green Growth dominates policy, degrowth is increasingly discussed as a response to climate and resource crises (WEF).

How Each Approach Impacts SMEs: Advantages and Challenges

Impact on Business Models

The approaches of Degrowth and Green Growth lead to different business models for German SMEs. Degrowth business models (DGMs) focus on reducing resource consumption, decreasing inequalities, and promoting overall well-being. Companies following this approach align their activities more closely with societal challenges, prioritizing problem-solving over pure shareholder interests. Post-growth companies place particular emphasis on environmental protection and improving quality of life. A central part of this process is collaboration and taking on a political role to ensure long-term sustainability. As Dirk Raith aptly puts it:

"Organizing for degrowth therefore demands from businesses - beyond being 'sustainable' and 'sufficient' - that they cooperate and become political".

In contrast, Green Growth models focus on investments in environmentally friendly technologies and infrastructures. The goal is to foster more inclusive and equitable growth, increase efficiency, and enable the transition to more environmentally friendly activities. This aims to decouple economic growth from negative environmental impacts. At the same time, a new generation of companies is emerging that consciously questions traditional economic logic to advance social and ecological goals. In addition to business models, regulatory and market factors also play an important role in strategic alignment. For example, companies like Interface and Unilever have demonstrated that integrating circular economy principles and decarbonization can drive both profitability and sustainability (Ellen MacArthur Foundation).

Regulatory and Market Factors

Depending on the chosen sustainability approach, German SMEs face different regulatory challenges and opportunities. Companies that focus on Green Growth benefit from extensive government support: Green technologies already account for 15% of Germany’s GDP, and the federal government plans to further promote climate and digital innovations as well as support start-ups in future technologies. Germany holds about 9% of the global market volume for environmental and resource-efficient technologies, with a projected annual growth of about 8% until 2030. Around 30% of all German start-ups can be classified as “green.”

An example of this support is the "GreenEconomy.IN.NRW" funding program in North Rhine-Westphalia. In the first funding round, 26 projects were selected that could receive a total of around €34 million in funding. These include projects such as the “Ecological Digital Product Passport for Metal Processing” by ASINCO GmbH in Duisburg or the “Re-Use – Repurpose of Electric Vehicle Batteries” project by Second Life Batteries GmbH in Wuppertal.

Degrowth-oriented SMEs, on the other hand, must adapt to a different regulatory landscape, which often requires greater democratization and repoliticization of the economy. Close collaboration beyond traditional economic structures can help overcome growth limits and make a positive collective contribution. These different frameworks influence the assessment of opportunities and risks for both approaches. The European Environmental Agency also notes that policy frameworks increasingly recognize the need for systemic change, including degrowth elements, to meet climate targets (EEA).

Advantages and Risks Compared

Current emission values show that the 1.5-degree Celsius budget could be exhausted in about seven years if the reduction rate is not significantly increased. Currently, CO₂ reduction in Europe is only at one third of the required speed (Climate Council). For German SMEs, this means choosing between the reliable government support of the Green Growth approach and the riskier but potentially more resilient Degrowth path, which requires a profound restructuring of business practices. Choosing the right approach enables SMEs to tailor their strategies to regulatory requirements and market needs.

Implementation Guide for SMEs: Choosing Degrowth or Green Growth

Tools and Methods for Implementation

Successfully implementing Degrowth or Green Growth strategies depends on targeted tools tailored to each approach’s requirements. SMEs opting for the Degrowth approach use instruments that help distinguish between basic needs and superfluous consumption. The goal is to reduce resource use. This includes revising sales strategies, developing new revenue models, and using technologies to cut consumption.

A vital tool for both approaches is Life Cycle Assessment (LCA). This method enables companies to analyze the environmental impacts of their products and services throughout their entire life cycle. Degrowth-oriented businesses use LCA to identify potential for reducing resource use and emissions. Green Growth companies, on the other hand, use the method to find alternatives and check for efficiency improvements.

Green Growth SMEs focus heavily on decarbonization and the use of low-carbon technologies. They work closely with markets and government institutions to achieve net-zero emissions. Another focus is the circular economy, which aims to decouple economic growth from resource use and CO₂ emissions. The Ellen MacArthur Foundation estimates that adopting circular economy principles could generate $4.5 trillion in global economic benefits by 2030 (Ellen MacArthur Foundation).

Additionally, both approaches benefit from strategic spatial planning that considers social and spatial transformation processes. Alternative models such as the sharing economy or cooperatives also offer interesting approaches for SMEs. These tools lay the foundation for specialized consulting services, which will be explored in the next section.

How Fiegenbaum Solutions Supports SMEs

Fiegenbaum Solutions offers German SMEs comprehensive consulting in developing and implementing ESG strategies that combine elements of Degrowth and Green Growth. Johannes Fiegenbaum’s boutique consultancy helps companies develop sustainable business models that respect planetary boundaries while reducing social inequalities and increasing well-being.

A key part of the consulting is conducting Life Cycle Assessments (LCA) for products and organizations. This data-driven method helps SMEs make informed decisions and achieve measurable results in climate protection. Fiegenbaum Solutions also provides support in complying with regulatory requirements, such as CSRD, VSME, and EU taxonomy compliance.

For companies oriented toward Degrowth, the consultancy develops customized strategies to reduce resource consumption and introduce cooperative value creation models. For Green Growth strategies, the focus is on practical implementation of net-zero strategies and carbon emission reduction. Flexible consulting models—from project-based support to long-term retainer agreements—ensure tailored guidance, also suitable for start-ups and impact-oriented companies.

Combining Social, Ecological, and Economic Goals

Integrating social, ecological, and economic goals is the next logical step for SMEs seeking to implement sustainable strategies. The challenge is to align short-term financial goals with long-term sustainability ambitions. Dr. Alexander Deicke aptly describes this balancing act:

"Such a dilemma requires a balanced approach that considers both sustainable growth and short-term financial goals. It is important to develop a strategy that combines long-term investments in sustainable projects with measures for short-term profit maximization."

Degrowth models rely on democratic governance structures and corporate leadership that is clearly committed to its own values—both privately and professionally. At the same time, they emphasize minimizing environmental impacts throughout the entire life cycle of a product or service and promote the development of durable, repair-friendly products.

Green Growth companies bridge the three dimensions by investing in sustainable practices that reduce costs in the long term. A 2020 IBM survey shows that 57% of consumers are willing to change their buying habits to reduce negative environmental impacts (IBM). Companies that actively reduce their CO₂ emissions have also saved an average of $1.2 billion over five years (CDP).

A step-by-step investment approach helps manage short-term financial requirements while laying the foundation for sustainable development. Metrics such as CLV (Customer Lifetime Value) and ROIC (Return on Invested Capital) provide precise insights into the added value of such investments.

Conclusion: Balanced Sustainability for SMEs

Combining Elements of Both Approaches

The analysis is clear: For small and medium-sized enterprises (SMEs), the key to a sustainable future lies in skillfully combining Degrowth and Green Growth approaches. It’s not about strictly choosing one path, but about leveraging their strengths together. A “post-growth” approach could help transform the economy and society by reducing emissions, conserving resources, decreasing social inequalities, and simultaneously improving quality of life. This way, ecological boundaries can be respected without losing sight of economic success.

Interestingly, only about 2% of companies follow a purely growth-oriented model (Circle Economy). This gives SMEs the opportunity to flexibly adapt their structures and develop sustainable business models. The focus should be on essential needs and societal challenges, rather than solely prioritizing shareholder interests.

A cooperative mindset plays a central role here. Through collaboration, SMEs can amplify their impact, initiate systemic change, and foster economic democracy. To successfully implement these approaches, a diverse strategy is needed—one that considers differences in development stages and inequalities. Tensions between the two approaches—Green Growth and Degrowth—can serve as a catalyst for deep reflection and innovative solutions.

Next Steps for SMEs

Building on this combination, concrete fields of action emerge for SMEs. A first step could be to align management more closely with sustainability goals. Business areas should be adapted so that they enable customers and producers to make socially and environmentally responsible decisions.

Another important aspect is prioritizing human rights and environmental risks in the supply chain. Instead of relying on general supplier statements, traceability in global supply chains should be the focus. The German Supply Chain Due Diligence Act (LkSG) exemplifies this shift, requiring companies to ensure transparency and compliance throughout their supply chains (BMAS).

Green investments should be specifically directed toward sustainable technologies, infrastructure, and lifestyles. At the same time, social investments—such as in public services, retraining programs, and a progressive tax system—are essential. These measures can not only improve quality of life but also initiate changes in consumption habits and lifestyles.

The German Sustainability Strategy provides a proven framework with its guiding principles—intergenerational justice, quality of life, social cohesion, and international responsibility. SMEs can use this to integrate the four pillars of sustainability—people, society, economy, and environment—into their strategic planning.

However, such change requires active industrial policy. This should direct investments, promote innovation, and effectively coordinate collaboration between different stakeholders. SMEs that take this path can position themselves as sustainability pioneers and thus lay the foundation for long-term economic success in a changing world. This integrated approach forms the basis for a sustainable future and seamlessly ties in with the concepts described above.

How to Save the Planet: Degrowth vs Green Growth?

FAQs

What opportunities and risks do Degrowth and Green Growth strategies offer for SMEs in Germany?

Green Growth Strategies and Their Opportunities for SMEs

For small and medium-sized enterprises (SMEs) in Germany, Green Growth strategies open up numerous possibilities. They not only promote sustainable innovation but can also strengthen competitiveness and help meet environmental requirements. According to the OECD, SMEs that invest in green innovation report higher productivity and improved export performance (OECD). However, there are also hurdles: In particular, high initial investments and uncertainties about the long-term profitability of these measures can pose challenges for companies.

Degrowth Strategies: Opportunities and Risks

Degrowth approaches aim to reduce ecological burdens while increasing companies’ resilience. These strategies can help use resources more efficiently and operate more sustainably. However, they also carry economic risks, such as possible revenue declines or market uncertainties. A 2023 study in the journal Ecological Economics found that companies adopting degrowth principles often experience improved employee well-being and stronger community ties, but must navigate reduced short-term profitability (Ecological Economics).

For SMEs, the key is to find a balanced strategy that aligns ecological goals with economic stability. Only then can they operate successfully and sustainably in the long term.

How can SMEs decide whether to pursue Degrowth or Green Growth to operate sustainably and successfully?

For small and medium-sized enterprises (SMEs) in Germany, the decision between Degrowth and Green Growth is a strategic crossroads shaped by various influencing factors. While Degrowth aims to minimize resource consumption and environmental impact, Green Growth focuses on sustainable growth through innovation and efficiency.

To choose the right path, SMEs should closely examine their industry, long-term goals, and legal requirements. An honest assessment of their own innovative capacity, competitive position, and societal expectations can also provide valuable guidance in decision-making. The crucial point is that the chosen strategy is designed to be both ecologically and economically viable.

With thorough analysis and a clear view of environmental and market requirements, SMEs can lay a solid foundation for long-term success.

What is the significance of government funding and legal requirements for SMEs in implementing Green Growth strategies?

Government Funding and Legal Requirements: A Driver for Sustainable Growth

Government funding and legal regulations play a crucial role in realizing Green Growth strategies in small and medium-sized enterprises (SMEs) in Germany. They create clear incentives for sustainable investments, make it easier to comply with environmental requirements, and promote innovations that strengthen competitiveness while advancing ecological goals.

Funding programs provide SMEs with financial support, for example when introducing energy-efficient technologies or using renewable energies. At the same time, regulatory instruments such as the EU taxonomy or sustainability-oriented financing models steer companies toward a more environmentally friendly future. These measures not only help meet legal requirements but also offer SMEs the opportunity to benefit from the advantages of a sustainable economy in the long term. The European Investment Bank reports that over €200 billion in green financing was mobilized for SMEs in 2023 alone (EIB).