Unveiling the Drivers and Hurdles of ESG Practices Adoption in Vietnamese SMEs

This study explores the motivating and obstructive factors in the adoption of environmental, social, and governance (ESG) practices among Vietnam’s small and medium enterprises (SMEs). To better understand SMEs’ outlook on ESG conducts, qualitative ḥ collected from in-depth semi-structured interviews with local SMEs’ representatives was analyzed. Our findings reveal several prominent themes propelling ESG execution, specifically attracting foreign investments, enhancing brand image, increasing long-term profitability, and aligning firms’ practices with leaders’ ethical values. Despite pronounced benefits in implementing ESG, studied SMEs are presented with multiple challenges in materializing their ESG outlooks. Existing practitioners struggle with translating their ESG awareness into actions due to the lack of expert support, the difficulty in comprehending metrics, and the challenging processes of data collection. Financial constraints and negative impacts of implementation on short-term profits are also recognized as contributing factors discouraging ESG adoption. In addition, the common perception of ESG as a set of standards strategically significant only to large-scale enterprises with a specific global agenda further distances SMEs from efforts of ESG education and integration. Drawing from stakeholder theory and agency theory, these findings, at a disaggregate level, offer insights for policymakers, investors, and supporting agencies. Policies and practices addressing the current knowledge gaps and fostering a culture of ESG best practices can encourage more extensive and intensive ESG integration within Vietnam’s SMEs landscape.