Article
Analysing ESG Risk in MSMEs: A Context-Sensitive Framework from Forestry Enterprises in India
MSMEs offer distinctive opportunities to influence sustainable development of the Indian economic structure as a result of their adaptability, scope, and local focus, yet ESG (Environmental, Social, and Governance) risk assessment remains limited to the large corporate context. This study aims to fill this gap by analyzing ESG risk landscape in MSMEs. The study conducts a qualitative analysis of data collected through a survey from 121 forestry-MSMEs situated in the Vidarbha region of India. Understanding ESG risks in MSMEs requires an approach tailored to their specific challenges and operational scale. This paper examines key ESG risks and their impact on MSMEs’ strategies to manage these risks. The findings highlight that environmental exposure dominates due to ecological dependence, while governance vulnerabilities remain structurally embedded. The study contributes to ESG measurement literature by offering a context-sensitive, statistically defensible, and MSME-appropriate framework. The integration of ESG principles can strengthen the resilience of MSMEs to operational risks, improve brand reputation, and reduce costs through increased resource efficiency. However, applying a common ESG framework to MSMEs, given their contextualized nature, would be a hindrance to their contribution to sustainable development.[1] Therefore, the proposed framework conceptualizes ESG integration in MSMEs not as a compliance outcome but as a cognitive-institutional process triggered by climate exposure. By theorizing ESG familiarity as a mediating mechanism, the model explains how ESG uncertainty becomes embedded in governance structures. The study contributes a process-based explanation for how informal risk perception evolves into formal governance structures.