Understanding ESG Adoption in SMEs: A Cross-Country Qualitative Study Using Activity Theory

Small and medium-sized enterprises (SMEs) play a central role in economic development but face distinctive challenges in adopting environmental, social, and governance (ESG) practices. While existing research identifies key drivers and barriers, there remains limited understanding of how SMEs navigate competing pressures and implement ESG in practice across different institutional contexts. This study addresses this gap by examining ESG adoption in SMEs across Ireland, Germany, Poland, and Türkiye through the lens of Activity Theory (AT). Using a qualitative multiple-case design, we draw on semi-structured interviews with SME owner–managers, ESG experts, and vocational education and training (VET) stakeholders (N = 44). Findings show that ESG engagement in SMEs is shaped by leadership framing, resource constraints, and increasing external pressures from customers, regulators, and financial institutions. ESG practices are uneven across pillars, with environmental initiatives the most developed, social practices emerging, and governance largely limited to compliance. AT highlights how persistent contradictions, such as tensions between short-term survival and long-term sustainability, or between complex regulatory demands and limited organisational capacity, shape SME responses. When supported by appropriate mediating artefacts, including training, simplified frameworks, financial incentives, and networks, these contradictions can enable learning and more strategic ESG integration. Cross-country differences reflect variations in ecosystem maturity, which condition whether ESG engagement stabilises at compliance or develops toward operational and strategic integration. The study contributes a theory-driven, practice-based explanation of SME ESG adoption, including a typology of compliance-oriented, operational, and strategic engagement modes, and offers insights for policymakers, educators, and support organisations seeking to promote more effective and context-sensitive sustainable SME transformation.