The Impact of ESG Practices on SME Value Creation: Mediating Roles of Multidimensional Performance Metrics

M. Gomathy, Assistant Professor

doi:10.21844/smsjei.v11i02.30006

M. Gomathy, Assistant Professor Master of Business Administration, SA Engineering College, Tamil Nadu

DOI: https://doi.org/10.21844/smsjei.v11i02.30006

Keywords: Business Sustainability, Environmental, Social, Governance (ESG), Multi-Dimensional Performance (MDP), Small Medium Enterprises (SMEs), and Value Creation

Abstract

This study investigates the relationship between Environmental, Social, and Governance (ESG) practices

and value creation in Small and Medium-sized Enterprises (SMEs) with the mediating role of Multi-

Dimensional Performance measures (MDP). Using a descriptive and causal research design with stratified

random sampling, primary data were collected with a survey from 320 SMEs in Thiruvallur District, India.

Findings reveal that ESG practices significantly impact value creation (β = 0.384) and MDP mediates this

relationship (β = 0.247) indicates that ESG initiatives enhance value indirectly through improved

performance metrics. The total effect of ESG on value creation is strong (β = 0.643) highlights the benefits

of integrating ESG into business strategies. The findings bring out the strategic importance of prioritizing

ESG initiatives to enhance performance and value creation. Managers are encouraged to prioritize ESG

initiatives to align with stakeholder expectations, and invest in training and resources to build ESG

capabilities, while policymakers should create a regulatory environment that rewards sustainable practices.

Future research should explore the role of digital transformation and AI in ESG performance through

longitudinal studies.