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.