ESG Risk Management in SMEs: A Case Study from Italy

The increasing relevance of Environmental, Social, and Governance (ESG) factors has made ESG risk management a critical issue for small and medium-sized enterprises (SMEs), which play a central role in the Italian industrial system and contribute significantly to local economic development, employment, and innovation. Despite the growing attention to sustainability and ESG performance in the literature, ESG risk management remains underexplored, particularly in relation to SMEs and country-specific contexts. This study aims to advance understanding of ESG risk management in SMEs by examining how ESG-related risks are perceived, assessed, and integrated into strategic and operational decision-making processes. Special attention is given to the Italian context. The theoretical framework integrates Enterprise Risk Management (ERM) theory, stakeholder theory, Resource-Based View (RBV), and institutional theory. ERM conceptualizes ESG risks as integral to firm-wide governance and strategic decision-making processes. Stakeholder theory highlights the role of multiple stakeholders in shaping ESG risk exposure and legitimacy pressures. The RBV explains differences in ESG risk management practices based on firm-specific resources such as managerial commitment and organizational culture. Institutional theory emphasizes the influence of regulatory, normative, and mimetic pressures, including European sustainability frameworks, on corporate behavior. The study adopts a mixed-methods approach combining a systematic literature review (SLR) and an exploratory qualitative case study. The SLR follows the PRISMA protocol and analyzes peer-reviewed articles from the Scopus database published between 2015 and 2025 using a hybrid deductive-inductive content analysis. The case study focuses on an Italian SME operating in the paper and packaging sector, selected for its long- standing sustainability orientation. Data were collected through a semi-structured interview and triangulated with documentary evidence. Findings indicate that ESG risk management in SMEs is predominantly informal, fragmented, and reactive due to limited financial and managerial resources. However, increasing stakeholder expectations and regulatory requirements are fostering gradual formalization. The case study demonstrates that governance structures, entrepreneurial values, and European regulations significantly shape ESG risk identification, assessment, and mitigation practices. Firms leverage internal resources such as managerial commitment and organizational culture to overcome constraints and enhance ESG integration. The adoption of certifications, structured reporting, and participation in sustainability initiatives further strengthens both internal risk management and external legitimacy. This study contributes to theory by integrating multiple perspectives on ESG risk management, provides empirical insights from an Italian SME context, and offers practical implications for embedding ESG considerations into SME strategy as a driver of resilience and competitiveness.