Do ESG ‐Related Managerial Capabilities Pay Off for SMEs ? Evidence From the Small and Medium‐Sized Enterprise ESG Capability Measure ( SM ‐ ESG )

ABSTRACT Large companies have a long track record of environmental, social, and governance (ESG) initiatives, whereas many small and medium‐sized enterprises (SMEs) lag in adopting sustainability‐related practices, often acting voluntarily or in response to stakeholder pressures and incentives. This study develops and validates a competitiveness‐based ESG capability measure for SMEs—the Small and Medium‐Sized Enterprise ESG capability measure (SM‐ESG)—that captures sustainability‐related managerial routines embedded in everyday business practices. Building on a validated ten‐pillar competitiveness framework, we operationalize ESG‐related managerial capabilities across strategy, marketing, technology, online presence, administrative practices, finance, collaboration, innovation, human resources, and internationalization, and map them into environmental, social, and governance dimensions. We validate SM‐ESG by examining its associations with marketing performance and owner value creation, proxied by equity accumulation. The results are consistent with SM‐ESG mediating the association between firm size and equity accumulation, indicating that higher SM‐ESG scores are concurrently associated with slightly stronger equity growth (indirect effect = 0.024, p = 0.028; 95% bootstrap CI: 0.003–0.045), conditional on firm size. The positive association between marketing performance and SM‐ESG suggests that strategic marketing capabilities can complement ESG‐related capabilities by enabling SMEs to differentiate themselves from competitors. These findings should be interpreted as theory‐consistent associations based on cross‐sectional, pre‐CSRD data from Hungarian SMEs.