EXPLORING THE IMPACT OF SOCIAL CAPITAL ON SMES' ESG STRATEGY

Abstract

Sustainable development has emerged as a prominent global trend for business corporations, leading to a significant increase in awareness of the importance of Environmental, Social, and Governance (ESG) strategies for business sustainability. However, the adoption of ESG strategies among Malaysian small and medium enterprises (SMEs), which constitute a substantial portion of the economy, remains low. Social capital is one of the key factors that can enhance ESG strategies among SMEs. Grounded in the Resource-Based View (RBV), this study aims to explore the link between social capital and ESG strategies. Based on data collected from 200 small Malaysian firms and analysed using partial least squares structural equation modeling (PLS-SEM), the study highlights the significant role of social capital in enhancing ESG strategies. Overall, the model demonstrates strong predictive power, offering both theoretical insights and practical implications that can guide future research in improving the ESG strategies of SMEs.