The Impact of ESG practices in China's manufacturing SMEs on regional economic coordination

Li Mengsi and Neszmélyi György Iván (2026) The Impact of ESG practices in China's manufacturing SMEs on regional economic coordination. In: ESG - Risk Management or New Sustainability? VIII.BUEB International Sustainability Student ConferenceProceedings - Budapest University of Economics and Business 2025. Budapesti Gazdaságtudományi Egyetem, Budapest, Magyarország, pp. 1-14. ISBN 978-615-6886-27-9

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Abstract

In recent years, the integration of Environmental, Social, and Governance practices has become pivotal for enterprises aiming to enhance competitiveness and contribute to sustainable regional economic development. Manufacturing Small and Medium-sized Enterprises (SMEs) in China, as significant contributors to the national economy, play a crucial role in this transformation. This study investigates the current state of Environmental, Social, and Governance implementation among China's manufacturing SMEs and examines its impact on regional economic coordination. An Environmental, Social, and Governance evaluation index system tailored for SMEs is constructed, encompassing environmental performance, social responsibility, and corporate governance. Utilising multiple linear regression analysis and mediation effect models, the research empirically assesses the influence of Environmental, Social, and Governance practices on regional economic indicators such as Gross Domestic Product growth, employment rates, and income distribution. Findings indicate that robust Environmental, Social, and Governance practices significantly enhance enterprise performance, thereby fostering balanced regional economic development. Moreover, enterprise performance partially mediates the relationship between ESG practices and regional economic outcomes. Based on these insights, the study proposes policy recommendations to strengthen Environmental, Social, and Governance capabilities among SMEs, improve information disclosure mechanisms, and optimise policy support systems, thereby promoting sustainable development within the manufacturing sector and achieving coordinated regional economic growth.