Abstract
This study investigated the question of whether environmental sustainability influences firm performance. Firm performance, a multidimensional construct, was researched utilizing innovation, ecological and social measures on the premises of SMEs in South Africa. Thus, the study hypothesized that environmental sustainability is positively and significantly related to innovation, ecological and social measures of firm performance. A cross-sectional research design was adopted in this study to test the abovementioned hypotheses. A total of 208 self-administered questionnaires distributed to SME owners and managers were analyzed utilizing structural equation modelling (SEM) and Amos Version 24 software. Primarily, the study established that environmental sustainability was significantly and positively correlated to all three measures of firm performance used in this study. Thus, the inferences from the findings suggest that environmental sustainability practices contribute positively towards firm innovation, ecological and social performances. The findings of this study greatly contribute towards the practice and theory of small businesses and firm performance by providing a more specific and streamlined perspective for approaching firm performance.
Highlights
The World Commission on Environment and Development (WCED) report notes that sustainable development requires firms to simultaneously develop long-term economic, social and environmental principles [1]
This study researched the relationship between environmental sustainability and the three indicators of firm performance that have been recently discussed in literature, namely, innovation, environmental and social
This study established the positive consequences of adopting sustainable development practices towards the three researched aspects of firm performance and suggests that SMEs that disregard the adoption of environmentally sustainable development risk failure in the current environment
Summary
The World Commission on Environment and Development (WCED) report notes that sustainable development requires firms to simultaneously develop long-term economic, social and environmental principles [1]. For firms to express sustainable development, they should incorporate these principles (economic prosperity, societal wellbeing and environmental promotion) in their products, policies and practices. The concept of sustainable development has become increasingly inescapable for the business world and continues to affect almost all aspects of business functions. The latest research shows evidence of sustainable development being utilised by business organisations as a competitive strategy [2,3]. Due to global output and employment concerns, it is and widely agreed that research on the economic contribution of SMEs could provide sustainable competitive advantage for all countries, especially in the developing world [5]
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