The Drivers of Sustainability Practices in SMEs and the Impact on Business Performance

Abstract

The concept of sustainability practices by Small and Medium-sized Enterprises (SMEs) is often ignored, specifically in developing countries. This requires optimal attention, considering the significant role of SMEs in economic growth and the significant collective impact on the ecological environment. Therefore, this study aimed to analyze the impact of collaboration and innovation on SMEs sustainability practices and business performance. A total of 169 samples were obtained from metal manufacturing companies located in the Tegal, Klaten, and Greater Jakarta regions through purposive sampling. The results showed that collaboration significantly and positively affected SMEs sustainability practices, using SEM-PLS analysis. Innovation also positively influenced sustainability practices and business performance. Furthermore, the positive impacts of collaboration and innovation on business performance were mediated by sustainability practices. Sustainability practices also positively affected business performance, showing that the enhancement of sustainability practices commitment was required to achieve Sustainable Development Goals (SDGs) without sacrificing SMEs business growth. From the results, the implementation of other variables was recommended for future analyses, to improve the understanding of the different factors driving sustainability practices in SMEs.