The “G” in ESG: the challenges and obstacles affecting SMEs’ sustainability in Saudi Arabia

Hebah Shalhoob (), Noha Alessa () and Mbarek Rahmoune ()
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Hebah Shalhoob: The Applied College, King Abdulaziz University, Department of Business Administration
Noha Alessa: Princess Nourah bint Abdulrahman University, Department of Accounting, College of Business Administration
Mbarek Rahmoune: The Applied College, King Abdulaziz University, Department of Business Administration

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 11, No 94, 28355-28377

Abstract: Abstract This study examines the key challenges hindering the implementation of Corporate Governance (CG) practices in Small and Medium Enterprises (SMEs), with a specific focus on the Saudi Arabian context. Using qualitative research design, the study draws insights from interviews conducted with 30 participants in the post-pandemic period of 2022, building on the methodology of Shalhoob and Hussainey (2023). Despite a low response rate, the researchers conducted rigorous qualitative analysis using thematic coding, NVivo software, and validation techniques to ensure data credibility and derive meaningful insights. Findings reveal that Saudi SMEs face several barriers to adopting CG, including limited awareness, resource constraints, cultural factors, an underdeveloped regulatory environment, and restricted access to finance. Despite these challenges, the study identifies actionable strategies for improving governance and sustainability outcomes. These include establishing a board of directors, developing a code of conduct, implementing internal control systems, engaging stakeholders, integrating sustainability into core business strategies, and providing training on sustainable practices. The adoption of such measures can enhance SME credibility, attract investors and customers, and support long-term business viability. It has practical implications intended for SME owners and managers, encouraging the uptake of CG to reduce financial risks and improve external perceptions from investors lenders, and rating agencies. Furthermore, it underlines the need for policymakers to develop a robust regulatory framework that promotes CG adoption across the SME sector, fostering sustainable economic development and closing existing knowledge gaps.

Keywords: Corporate governance; SME; Sustainability; Saudi Arabia (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-025-06841-w

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