Resource Constraints and ESG Implementation in MSMEs

The resource constraints impeding effective environmental, social, and governance (ESG) implementation among micro, small, and medium enterprises (MSMEs) are examined in this chapter. Despite their critical role in employment, innovation, and inclusive growth, MSMEs face financial, technical, human, and institutional barriers to sustainability. Key challenges include limited access to green finance, high upfront costs of clean technologies, insufficient ESG training, outdated infrastructure, and complex regulatory frameworks. Evidence from India and Malaysia indicates that MSMEs predominantly adopt compliance-driven rather than strategic ESG approaches. Structural inefficiencies in financial incentives, shortages of skilled personnel, and a digital divide further hinder reporting. The chapter advocates context-specific, multi-stakeholder interventions to facilitate inclusive and scalable ESG integration, highlighting the need for strengthened institutional support and policy alignment to enhance competitiveness, resilience, and long-term sustainability.