ESG as a Business Model for SMEs

Whenever there is a crisis in the corporate world or the economy more generally, the same questions continue to surface: What is the purpose of a corporation? Is the purpose of a corporation simply to make money? Or do they have a broader role in society? Do corporations also have a social responsibility to help improve the world?

The message is clear. Corporate strategies must include environmental and social factors — together with good (or, at least, better) governance. These elements are usually referred to as “ESG.” Still, “ESG” gets a lot of pushback. And, sure, companies often use ESG-statements as marketing tools to respond to the growing societal and political pressure to be more responsible. But, it’s not all jargon. ESG-strategies are here to stay. Companies that ignore the current trends will find themselves in an impossible position. More and more often, we see business leaders being put on the spot and asked, “what is your company doing to make the world a better place?” Silence or evasion isn’t an option either. It will be viewed as inaction. And inaction will be seen as a lack of concern or a tacit endorsement of the current state of affairs in the world.

Smooth-talking will be viewed as a lack of sincerity and commitment.

But there has been little or no discussion (yet) about how ESG strategies and ESG reporting (and ESG dialogue) will offer solutions to the many problems that SMEs face in today’s world – particularly in attracting and retaining investors, employees, and customers.

This paper sets out the impact of ESG on the performance of SMEs.