The main advantage of such approach is indeed related to its unique coverage, as it captures 28,000 firms, mainly Small and Medium Enterprises (SMEs), in selected emerging countries (more than 40 countries covered by the Enterprise Survey), which is exceptional among the ESG scores already available on the market. Indeed, ESG disclosure covers mainly large, listed firms, while the large majority of companies is neither subject to it nor is assessed regarding ESG aspects. EU regulation, which is the most advanced worldwide on ESG topics, will gradually enlarge the spectrum of companies covered, but SMEs’ disclosure will remain extremely limited. In the United States, any ESG disclosure remains voluntary, while the situation in emerging countries is by far worse (no visibility on ESG topics of non-listed firms).

The “Corporate ESG Responsibility” composite indicator suggests that firms in emerging economies lag significantly in terms of ESG practices. South EU and Central and Eastern Europe perform better, followed respectively by Central Asia, the Eastern Neighborhood, and the Western Balkans, while firms in Middle East and North Africa (MENA), Russia and Turkey are among the worst performers. Among emerging economies, our analysis focused on firms in the Middle East and North Africa as some of those countries are in urgent need to decarbonize their economies. They have seen their CO2 emissions rising in absolute terms and also in per capita terms during the last years, and are significantly exposed to climate change (especially to climate “chronic” risk, and heat and water scarcity in particular) and the social development (including gender issues) is lagging. MENA economies are the worst performers across the entire spectrum of the economies covered by the ES in terms of Environmental, Social and Governance practices. Egypt and the West Bank and Gaza appear to be the worst among the MENA economies, followed by Lebanon, but also the worst among the 40 economies covered by the ES. MENA economies’ poor performance is mainly driven by the social component (worst performer among all regions, especially due to the gender subcomponent, as female representation in the workforce and among management is much lower than in other areas) and by the environmental component (second worst performer after Russia). Jordan, Tunisia and Morocco have ESG scores more in line with their level of economic development (represented by their per capita income).

Our composite indicator shows that SMEs’ Corporate ESG Responsibility practices lag those of large firms, particularly in emerging economies such as those in MENA. SMEs, which provide a staggering 70% of employment worldwide (ILO, 2019), face major challenges when it comes to working conditions, productivity and informality. Small firms in MENA are the worst performers across all economies and categories.

Poor ESG practices in emerging countries, especially for SMEs, call for urgent policy action to address such weaknesses: SMEs’ ESG aspects, but also those of micro enterprises, cannot be neglected or addressed at a later stage. The challenges of the green and social transitions cannot be met without the timely involvement of SMEs.

ESG practices should not be left solely in the realm of financial investors: commercial banks also need to assess the ESG performance of borrowers, SMEs included; insurance companies need to evaluate the ESG risks; and public authorities, national and local, must also be interested in the 19