Small and Medium Enterprises in Emerging Economies : The Achilles' Heel of Corporate ESG Responsibility Practices?

The information contained in the Enterprise Survey'administered by the World Bank (WB), the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB)-is used to build a firm-level "Corporate Environmental, Social, and Governance Responsibility" composite indicator. The novelty of the indicator, compared with the corporate social responsibility scores and environmental, social, and governance (ESG) scores already available, is due to its unique coverage, namely, a large number of private sector small and medium-size enterprises in selected emerging economies (more than 40 economies covered by the Enterprise Survey). The composite indicator summarizes information on private sector actions on environmental, social, and governance factors. The analysis shows that the actions of private sector small and medium-size enterprises in emerging economies to foster sustainability and green growth significantly lag in the transition to a more sustainable business environment, and large gaps persist. Among emerging economies, those in the Middle East and North Africa-which deserve special attention due to the urgent need to green their growth model-are among the worst performers. Larger companies in the Middle East and North Africa show better environmental, social, and governance performance than small and medium-size enterprises in other areas; but smaller firms in the Middle East and North Africa show extremely weak performance in many aspects, even if controlling for the relative level of economic development. The weakness of environmental, social, and governance practices among firms in the Middle East and North Africa is due to the social (with large gaps in female participation in the workforce and management) and environmental topics. This calls for urgent policy action to address such weaknesses and exploit the full potential of the region