A new ESG scoring methodology for small and medium-sized enterprises

Abstract

Small and medium-sized enterprises (SMEs) are vital to economic growth and sustainability, yet most existing Environmental, Social, and Governance (ESG) scoring systems focus on large, publicly listed firms, leaving SMEs largely overlooked. This research introduces a new ESG scoring methodology specifically designed for SMEs, which addresses the challenges of limited disclosure, sector-specific materiality, and data quantifiability. Using publicly available information and expert input, we construct a questionnaire-based ESG index aligned with the Sustainability Accounting Standards Board (SASB) framework to ensure sector-specific materiality. The methodology applies advanced optimization techniques to determine indicator weights and uses multiple mapping functions to generate robust, interpretable ESG scores. The findings contribute to advancing methodologies for ESG scoring in SMEs and inform policy discussions on enhancing sustainability disclosures tailored to SMEs’ operational contexts.