Business Performance
Financial Performance is a well recognized proxy variable to assess overall business performance of an organization. To determine business performance for big corporations both market variables and accounting variables were considered from case to case basis. But in most cases SMEs are private partnerships or small unlisted public companies. Almost all the existing literature captured SMEs’ financial performance by respondent’s perception on selected financial parameters on a 5 or 7-point Likert Scale and then extracting 1 or 2 factors by factor analysis (Torugsa and Wayne, 2012; Tang and Tang, 2016; Banjo and Doren, 2012). In our case we interviewed the finance department of the respective SMEs and using a 5-point Likert scale asked them to rate the trend of sales growth, and profitability over last five years.
Attempts have been made to relate the sustainability performance with financial performance of the firm in case of big corporate houses and for some SMEs in developed countries. But for SMEs in developing market like India it is not a well researched area. With empirical evidence from Johnson & Johnson, Jessica & Seleshi, (2013) suggested that profitability can be sustained for a long period of time if economic performance is effectively integrated with social and environmental goals, as part of the business strategic planning process. In Indian context Ghosh (2013) suggested that superior sustainability performance leads to superior financial performance. These findings form the basis of our third research proposition where in we suggest that improved sustainability performance will drive financial performance in case of SMEs as well in the long run.