Academic journal article IUP Journal of Management Research

Sustainable Development Practices Adopted by SMEs in a Developing Economy: An Empirical Study

Academic journal article IUP Journal of Management Research

Sustainable Development Practices Adopted by SMEs in a Developing Economy: An Empirical Study

Article excerpt

Introduction

"Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (WCED, 1987). Wealth creation without harming the environment and at the same time also giving back something to the society is the fundamental principle of the concept of sustainability. From a business perspective, it simply means that wealth maximization cannot become the sole objective of any business. Consequently, the ways and means used by firms to achieve wealth maximization has come under the scanner.

Small and Medium Enterprises (SMEs) contribute to 16% of the Gross Domestic Product (GDP) in low-income countries and 51% in high-income countries (Edinburg Survey, 2010). In India, SMEs make up 80% of the total industrial enterprises, provide employment to more than 100 million people and contribute 8% of the country's GDP (Assocham SME Expo, 2015). Though the impact of SMEs on environment and society is insignificant when considered individually, the collective impact cannot be underestimated and hence justifies research attention (Johnson and Schaltegger, 2016). However, the available research in sustainability has been focusing for a long time only on large firms (Hillary, 2000) and a huge vacuum exists in the SME literature on sustainability (Sloan et al., 2013).

Sustainability research in large firms has been progressive, encompassing studies to identify the practices, drivers and regulatory framework to developing models that can be applied to build and run sustainable businesses. However, in SMEs, specifically in developing economies like India, there is hardly any empirical evidence on the sustainability practices undertaken in such firms. Knowledge about such practices would form the basis on which future research could be built. In this background, the empirical investigation reported in this paper was carried out.

Literature Review

The evolution of the domain of sustainability began as early as in 1960, when developed nations realized the enormity of the environmental impact on the society. These nations responded with policy initiatives, regulatory framework and formation of exclusive environmental ministries. The business sector, a silent spectator until then hesitantly responded to these developments. Consecutively, by the 1990s, the business community accepted the need to participate proactively in these initiatives. However, these initiatives were mostly in the area of environmental sustainability and involving in such sustainability practices was projected as a competitive advantage. In the later years, focus slowly shifted towards social sustainability (Barkemeyer et al., 2014). This led to the emergence of the threepillar model of sustainability as proposed by Elkington (Figure 1). The model emphasized that environmental sustainability, economic sustainability and social sustainability (Elkington, 1999) required equal attention. Environmental sustainability relates to the prudent utilization of natural resources and the constant monitoring of the impact of business on such resources. Economic sustainability aims at initiatives that provide economic support to the business to operate indefinitely. Social sustainability measures are those that add value to the community in which the businesses operate in (Dyllick and Hockerts, 2002). Sustainable development is possible with the fine balancing of these three pillars.

Environmental Sustainability

The widespread enthusiasm among firms involved in environmental activities was sparked by the increasing media attention (Holt and Barkemeyer, 2012). Murphy (1995) has defined environmental sustainability as "the practice of responding to environmental issues in a socially responsible manner". Environmental sustainability includes adoption of environmental management system, corporate greening, subscription to environmental certificate program, energy conservation, waste reduction and audits (Cunha and Fensterseifer, 2011; and Blowers, 2013). …

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