An organizational and operational capability and maturity assessment for SMEs in emerging markets towards the ESG criteria adaptation
Authors: Haseena Alkatheeri, Evangelos Markopoulos, Hamdan Hamdan Al-qayed
Abstract: SMEs are considered the backbone of every economy forming nearly 95% of the private sector globally. As they are mostly family businesses, start-ups or specialized enterprises, they operate mainly locally or regionally with a direct impact to the society, the, employment and the national economy. On the other hand, due to their limited size and operations they cannot afford the cost and effort needed for long term planning and strategy development that can secure the value, volume, reputation and recognition needed to attract investments. The ESG criteria can be considered as a privilege system primarily for the large-scale organizations and the Multinational Enterprises whose financial and human resources can be easier allocated on ESG activities that return serious financial and reputational benefits. Research indicates that more than 90% of the investors invest only in companies with high social and sustainable profiles. The message from investors and consumers is that if companies cant show any sign of changing their business models, they wont be able to sell. The same applies at country level. Finland for example does not offer any business opportunities to any company that does not have a solid and proven sustainability strategy and track record. This trend, for clients and investors, to consider only Green (sustainable) or Pink (Social) products and companies for their purchases and investments, drives all types of organizations towards that adaptation of the ESG criteria. However, and since such a strategy requires investments, resources, funds and time that only Multinational organizations can provide, SMEs are left out from any opportunity to develop, grow, and compete. This paper highlights this ESG discrimination among the SMEs and MNEs and intends to bridge this gap by identifying, in a smaller scale, activities that reflect the ESG criteria and can be implemented by the SMEs at organizational and operational level. Such an approach provides SMEs the opportunity to record, report and receive credit, visibility and recognition for their sustainable, social and ethical governance efforts and actions, that can potentially enlarge their customer base and attract the investments needed to further develop themselves. The proposed approach is based on an assessment that creates an SME ESG roadmap framework for the SMEs to initially identify their ESG awareness and maturity before adopting any ESG related strategy and commitment. The assessment highlights the SMEs capability and maturity to adopt such a mid-range strategy and align their operations with the ESG criteria on a smaller scale. The results of the assessment formulate an achievable ESG related strategy for each SME, identify the key ESG activities to be implemented, indicate their order of execution, and predict a performance score upon the completion of the proposed strategy. This score can be utilized by SMES to receive social, reputational and financial recognition for their contribution to the local and regional society and economy. To secure the relevance of the SMEs ESG oriented activities with the actual ESG requirements, the proposed approach has been developed after studying several ESG reporting and scoring methodologies such as the Refinitiv, FTSE Russel, BHI, and others, and extractive the most relevant ESG requirements and metrics that can be implemented and measured with the abilities of an SME.Due to the significant variations of the SMEs operations, the proposed framework is targeted primarily to SMEs in emerging markets where the economic development and a structured business environments can help such a novel approach in SMEs strategic management and leadership.
Keywords: ESG, SMEs, MNEs, MIS, Decision Support Systems, Management, Leadership, Technology.
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