Identification of Environmental, Social, and Governance Implementation in Micro, Small, and Medium Enterprises

Abstract

Environmental, Social, and Governance (ESG) has become a stakeholder demand for companies today. However, not all companies have successfully integrated the concept into the business model and gained value. In Micro, Small, and Medium Enterprises (MSMEs), the implementation of ESG is considered insignificant. Therefore, this study aims to identify ESG practices and gain insight into MSME's understanding of ESG. Hence, it provides an initial overview of current ESG practices as part of non-financial activities in the MSME sector. This research is also expected to provide additional insight to regulators. Research data was obtained through questionnaires on ESG and analyzed according to the responses of each pillar. Enumerators then guided the questions to MSMEs in the Sub-districts of Nanggewer Mekar, Pabuaran Mekar, and Pondok Rajeg. MSMEs in these sub-districts were selected because Nanggewer Mekar, Pabuaran Mekar, and Pondok Rajeg are actively involved in the Ministry of Environment and Forestry climate village program. Results show that from the initial identification of ESG understanding in MSMEs, respondents know about climate change issues and their impact on the environment, society, and governance. However, respondents understanding varies according to the perceived benefits to their business. In addition, respondents have not implemented elements of the ESG concept systematically and holistically. Therefore, the ESG concept has not been integrated into their strategy or business model. The study is limited in scope and area. Therefore, research also might be developed into empirical research to support the recent findings. Further, this research studies MSME's initial understanding of ESG activities.