ASSESSING THE FINANCIAL PERFORMANCE OF MSMES WITHIN THE FRAMEWORK OF GREEN ECONOMY PRACTICES
Keywords:
Green Economy, Financial Performance, Digital Transformation, Green Process Innovation, Green Supply Chain ManagementAbstract
This research aims to empirically investigate the relationship between the adoption of green economy practices and the financial performance of Micro, Small, and Medium Enterprises (MSMEs). The transition towards a circular and sustainable economy presents both challenges and opportunities for MSMEs, which are crucial economic actors. While the strategic benefits of sustainability are often discussed, a clear, quantifiable link to financial metrics remains underexplored, particularly in the context of MSMEs in emerging economies. This study employs a quantitative, cross-sectional research design, collecting primary data from 150 MSME owners and managers across the manufacturing and services sectors through a structured questionnaire. The constructs of Green Process Innovation (GPI), Green Supply Chain Management (GSCM), and Digital Transformation (DT) are operationalized as independent variables, while financial performance is measured using self-reported indicators of profitability, sales growth, and return on investment. Data analysis was conducted using multiple linear regression. The results indicate that all three independent variables have a statistically significant positive effect on MSMEs' financial performance (p < 0.05). Digital Transformation emerged as the strongest predictor (β = 0.42), followed by Green Process Innovation (β = 0.31) and Green Supply Chain Management (β = 0.25). The regression model explains 58% of the variance in financial performance (R² = 0.58). The discussion contextualizes these findings within the broader literature, arguing that digital tools enable efficient green practices, which in turn reduce costs and open new market opportunities, thereby enhancing financial outcomes (Lerman et al., 2022; Yadav et al., 2020). This study contributes to the literature by providing empirical evidence from the MSME perspective, bridging the gap between sustainability theory and financial praxis. It concludes that integrating green economy practices, supported by digitalization, is not merely an ethical or regulatory compliance issue but a viable financial strategy for MSMEs. The study’s limitations include its reliance on self-reported data and a cross-sectional design. Future research should employ longitudinal designs and incorporate objective financial data.
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