Examining the Role of Sustainability Performance in Enhancing Competitive Capability: Insights from a Sample of Indian Manufacturing SMEs

Small and medium-sized enterprises (SMEs) have a significant impact on the economy, but their negative effects on the environment and society pose challenges for sustainability. Achieving sustainability is difficult for SMEs, as environmental and social performances do not always lead to cost reduction, and they struggle to balance their performance. This study analyzed 227 Indian manufacturing SMEs using structural equation modeling to investigate the combined impact of sustainability opportunity, operational performance, and competitive capability. The findings suggest that sustainability opportunity has a weak negative effect on operational performance, but it slightly helps achieve social and environmental performance. Environmental performance negatively impacts competitive capability, while economic and social performance enhances it. Motivations to focus on environmental performance are necessary in the present Indian market scenario and regulations that SMEs face. Overall, the study aims to facilitate sustainability in manufacturing SMEs.