Why is ESG important for SMEs? A hypothesis on motivational factors for different organizational roles

At present, we at Taival are collecting information on the status of ESG in the Finnish SME sector in order to share the learnings later in the form of a report. In addition, I’m working on my personal Ph.D. project about SMEs and sustainability.

I have been working in the SME sector for my whole career, in several industries, and in all of the organizational roles listed below. I hold a Master’s degree in Management & Organizations, and I have been interested in the functioning and motivational factors of organizations for a long time. I want to share my hypothesis on the motivational factors for different organizational roles with you in this article. I hope it will be the beginning of a fruitful discussion.

For me personally, there are two main drivers of my thinking. First: cynicism will not lead us anywhere, but inspiration, discussion, piloting, and co-developing will. Second: Each and every individual and entity, private or public, small or large, should participate in making the world a better place, and commit to giving hope to our planet.

Climate change, or for instance loss of biodiversity, are not interested in our “more important work to do”. The time to act is now. The people who act should be us.

In light of this, I have long pondered the question: why are sustainability and ESG important for different organizational levels of an SME: the owners, the board, the management, and the rest of the operative organization?

Let’s dive deeper into each of these areas to understand better the roles of each.



Operative organization

The operative organization really feels both the commercial and compliance market pressure. What a pain to fill in the awful supplier sustainability questionnaires in order to respond to a tender, or to search for all the numbers for sustainability reporting. There would be so many more important things to do!

But still, for many, sustainability and responsibility give meaning and a sense of purpose to their work. Most people are born with a need to do good. Research shows that we are happier when we do good around us and when we act altruistically. Should ESG be considered a form of occupational well-being?

In SMEs leading the way by setting a strong example of corporate responsibility, ESG KPIs are already set. So for those organizations, the topic is embedded into the daily work in the form of setting team targets that help in the achievement of the company’s ESG goals.

Management team

The management team is crucial in the strategic success or failure of the company. They need to live, breathe, and fulfill the strategy, values, and mission. If ESG is mentioned in any of these (and it frequently is: 69% of SMEs include ESG or sustainability in their mission statements & 51 % in their strategies according to the World Economic Forum), then the management team really needs to know what the topic is about and what it means to their business line or function in order to be able to fulfill the mission statement at all.

It is also in the interest and duties of the management team to recruit the best possible employees and to keep employee turnover low. There is evidence that responsible companies attract better talent and achieve lower employee retention.

From an administrative point of view, it is the duty of management to ensure that the company is fulfilling all regulations, including ESG regulations. Incentivizing ESG KPIs concerns management as well as the rest of the operative organization.


Since board members are the representatives of the owners, let me first walk you through the owners’ part. For SME owners the company means either a workplace, an income, their life’s work, a mission, or all of these. To simplify motivation from the economic perspective you either want to get long-term dividends or you want to make a lucrative exit. Regardless of your position, you want to avoid risks, especially in the latter option, to make your company look good – to ensure continuity or to ensure that your business is attractive and makes it through the due diligence stage with excellent grades.

The Board

Board members are the representatives of the owners, and in many SMEs, they are the owners themselves. Depending on the activity level of the owners and capabilities of the operative management team, the role of an SME board can vary a lot from being a purely administrative guard to a rather operative sparring body, with the proven and most often preferred role as the strategic captain in between.

The primary responsibility of the board, as stated by the Limited Liability Companies Act, is to ensure that the company generates profit for shareholders unless the articles of association stipulate otherwise. Thus, the same economical drivers are valid for the board as for the owners. The EU Taxonomy should not be forgotten. When the “EU-wide classification system for sustainable activities will guide financing to greener projects and companies, building the company in a more responsible direction will get you to a better position in financing markets, which then leads to better profitability and better investment opportunities.

When it comes to the administrative and controlling duties of boards, the ESG regulation part of the management team applies. In addition to complying with the Limited Liability Companies Act, board members are fulfilling the owner’s intent, and the owners may list guidelines, constraints, and demands for the business. I don’t have data available about how often the current owner’s intents include ESG topics, but hopefully, they are paying increasing attention to sustainability.

The board is in a deciding role when it comes to the financing of new projects and new business opportunities, and sometimes also participating in seeking and exploration as well. ESG themes and new ways of operating (e.g., circular business models) are opening countless new business opportunities; therefore, the board should be insightful about ESG topics to identify and capture good initiatives or brave enough to use external resources when their own knowledge of the matter is limited.




I have just touched “the tip of the iceberg” when it comes to this topic, which is near and dear to my heart. I know ESG is somewhat of a buzzword nowadays, and it is still partly fighting for its relevancy, especially as its significance is not fully understood. Even if you are not “a sustainability believer”, I hope I was able to argue why ESG should be in the interest of everyone in SMEs.

As this is the first in a series of 3 articles, I will soon continue the discussion around the following themes to further expand the discussion:

  • Article 2: What are E, S, and G, in SMEs?
  • Article 3: ESG as part of the SME’s management system


In addition, I continue to research this topic both within the Taival “Sustainability in the SME sector” project, and as part of my Ph.D. studies. So, I’d love to hear from you, regardless of your role in SMEs. Are you focusing on ESG topics? On which of them? How is ESG perceived in your organization – as an integral part of the strategy, as a compliance necessity, or something else? Or is ESG perhaps already an ordinary part of your operations and management practices?


About the author: Sini Saalasti

  • Advisor, Taival – a Finnish-German advisory company helping companies of all sizes with sustainable success
  • Board Member, Saalasti; Teräspyörä – technology industry family company SMEs
  • Member, Future Board – a pioneer network of young company board members  
  • Shareholder & Co-Founder, Alvar Pet – a startup minimizing the CO2 pawprint of dogs


Harnessing power of SMEs can shape the future of sustainability | World Economic Forum (weforum.org) 

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