Building a model to study the impact of ESG on business performance at small and medium enterprises

ESG (Environmental - Social - Governance) is a set of standards on the environment, society and corporate governance in the process of firm operations. In the development of the current socio-economic situation, the community increasingly understands the necessity of sustainable development for the economy in general and each firm in particular. ESG plays an important role in helping stakeholders understand how firms manage risks, as well as opportunities for sustainable development for firms. Capital investors are more interested in creating sustainable investments as a result of the current surge in interest in sustainability challenges brought on by climate change. Furthermore, stakeholders, regulators, and the general public are becoming more interested in finding out more about the benefits of sustainability reporting on corporate outcomes. From the standpoint of an investor, it is interesting to think about if this investment might have a good effect on a firm's financial success because sustainable investments are usually accompanied with high costs. This study developed a theoretical model based on the theories of risk management and stakeholder theory, where the independent variable is ESG and the dependent variable is business performance. This paper presents the theoretical model through a review of existing literature and related studies and provides a more specific direction for the ensuing empirical analysis. Researching the influence of ESG on the business performance of SMEs has many practical implications and contributes to perfecting the theoretical framework for business performance in Vietnam today.