ESG PERFORMANCE AND FINANCIAL OUTCOMES IN CHINESE SMES: A SYSTEMATIC REVIEW OF REGIONAL AND INDUSTRIAL DISPARITIES

Abstract

This study examines the influence of Environmental, Social, and Governance (ESG) performance on the financial results of Small and Medium Enterprises (SMEs) in China, emphasising variations across regions and industries. A Systematic Literature Review (SLR) provided an extensive synthesis of the ways in which ESG initiatives affect profitability, liquidity, and access to capital. The analysis indicates that SMEs in economically advanced regions, such as Shanghai and Guangdong, derive greater financial advantages from ESG practices compared with those in regions with lower levels of economic development. Furthermore, SMEs operating in the technology and renewable energy sectors exhibit superior ESG performance and financial outcomes relative to other sectors. The research highlights three key determinants—government regulation, CEO managerial competence, and methods of capital acquisition—as critical factors influencing the financial returns associated with ESG engagement. The findings underscore the need for targeted policy interventions to facilitate the adoption of ESG practices, particularly for SMEs in resource-intensive industries within less developed regions. Overall, the study offers practical guidance for stakeholders to establish conducive conditions for integrating sustainability into business strategies, thereby enhancing the financial performance of Chinese SMEs.