Investors are usually interested in proprietary approaches and models for the evaluation of firms. Recently, also Authorities, such as Bank of Italy, have decided to privilege some extra-financial dimensions in their investment choices, in order to contribute to sustainable economic development. Despite the importance of ESG factors for firms, SMEs do not seem yet to be the focus of analysis, since the main literature results are based on listed companies or institutional investors. However, SMEs should have a deeper knowledge of the ESG information to be able to manage long-term value creation and to mitigate risk, so that opportunities and threats can be preliminarily and adequately identified.
The research aims at filling this gap, by examining the way Italian SMEs and micro-firms consider the integration of ESG information into their strategies. We identify three main objectives for unlisted Italian SMEs and micro-firms: a) the definition of a transition model to sustainability accounting for strategic aspects, governance and risk management; b) the design of a survey on the ESG factors; c) the construction of a self-assessment model useful in their journey to sustainable transition. Finally, the research aims at promoting a dedicated Observatory.
To answer our research questions, we: i) perform a science mapping analysis to build-up the state of the art of SMEs¿ ESG factors; ii) examine whether and how these companies respond to ESG thresholds to contribute to the research on ESG dimension of SMEs and micro-firms; iii) build a qualitative/quantitative model that provides Italian SMEs and micro-firms with a roadmap that accompanies them towards a full transition to a holistic ESG attitude. The research team, composed of ten members, covers three different research areas: management, finance and statistics. Moreover, the research team is also supported by two relevant partners operating in the research field and with great expertise, such as Sole24Ore and M.E.T.
Non-financial performance and, in particular, ESG information have gained increasing importance and attention among firms and their stakeholder groups. Against this background, integrating ESG factors into a firm strategy fits into the overall concept of risk governance (Sassen et al., 2016). This concept incorporates risk management at a macro and micro level, with the macro-level focusing on society¿s ESG requirements and the micro-level on operational and financial risks. The innovation of our research project is related to the creation and testing of an informative and customizable dashboard (by Power BI - Microsoft) for the governance and management of transition of the SMEs and micro-firms towards ESG factors. It includes macro-economic factors (technological barriers, patrimonial problems, average technological modernity of the area), financial and economic aspects (i.e. asset structure, income capacity, access to finance), management aspects (i.e. characteristics of the board, level of management of the structure, investments in R&D) and allows to monitor and guide real strategies related to implementation of ESG in the corporate business.
The dashboard will rely on some specific mathematical and statistical models producing elaborations under alternative provisional scenarios based on the simulations of various policy interventions. This will allow the assessment of the possible different conditions that could concretely affect the strategies of SMEs.
It will also be interesting to study the context resilience degree versus public grant, in order to better promote sustainability policy. In other words, in order to evaluate the ability of companies to implement ESG behaviors in the transition phase, it will also be necessary to study the degree of context resilience. There is evidence, in fact, that not all the areas are able to incorporate external subsidies to stimulate business behavior towards ESG factors. Indeed, it is also necessary to evaluate the degree of absorption of the contest towards aid. In some studies, in fact, it has been argued that the human capital endowment (measured by the share of the population with at least a high school diploma) and the administrative capacity of local institutions can slow the absorption of public grant.
By starting from state of the art, our analysis will return a transition model of SMEs and micro-enterprises that makes them ESG compliant, not only with respect to output-based KPIs, but also in terms of impact and outcome under different perspectives: i) Governance organization; ii) Management strategy; iii) Finance and Risk Management; iv) Contextual situation.
The ambition and originality of the research project are well explained by the several critical points that have to be suitably addressed and developed, such as:
- the definition of the multiple components characterizing the ESG and their relative importance, in order to contribute to the definition of a more analytical and unified framework for measuring and (self-)assessing the ESG factors;
- comparison and relationships with existing methods of evaluating the orientation to sustainability;
- the study of the association with other investment forms, endogenous/exogenous factors affecting the ESG strategies, among which the structural and behavioral factors of the companies that influence the level reached in compliance with the ESG requirements;
- analyzing how and to what extent the ESG direction acts, in turn, in the determination of the performance outcomes.
Additionally, the research project will create an Observatory to design a framework devoted to identification of the ESG features of the SMEs and micro-firms.
In so doing, we will identify specific data useful for policy makers and academic researchers working to better understand ESG.