Financial Sustainability Challenges and Opportunities for SMEs in Andhra Pradesh: An Empirical Analysis

Abstract

Small and Medium Enterprises (SMEs) play a vital role in Andhra Pradesh's economy, yet they face persistent challenges in achieving financial sustainability. This study uniquely explores the relationship between Environmental, Social, and Governance (ESG) practices and financial performance, addressing a critical gap in the existing research. By analyzing a dataset of 200 SMEs using descriptive statistics and correlation analysis, this study uncovered significant variability in financial performance and ESG compliance. The findings reveal that effective ESG integration positively affects financial outcomes, highlighting its importance for long-term growth. Additionally, the study identifies barriers, such as limited access to affordable credit and insufficient awareness of ESG benefits. Policy recommendations include creating tailored financial products, offering training programs on ESG adoption, and incentivizing sustainable practices through tax benefits and grants. These strategies aim to enhance SME resilience, enabling them to balance financial growth with sustainability goals, while contributing to regional economic stability and development.