The Relationship between Firm Sustainability Practices and Performance: Some Evidence from Small and Medium Enterprises (SMEs) in Australia

The main aim of the research is to analyse the relationship between sustainability practices and the performance of Small and Medium Enterprises (SMEs) in Australia. Although sustainability practices have received global attention, existing studies focus on large organisations, with limited empirical evidence on how SMEs adopt and benefit from these practices. This study addresses this gap by drawing on Stakeholder and the Resource-Based View (RBV) to examine, through a quantitative approach to examine how sustainability practices affect both financial and non-financial outcomes in Australian SMEs, as well as the challenges and opportunities of voluntary adoption. Survey data were collected from 322 respondents through Prolific, using a structured questionnaire developed in Qualtrics. The data are analysed using multiple regression analysis in IBM SPSS to assess the effects of environmental, social, and governance (ESG) sustainability practices on both financial and non-financial outcomes. The findings show that environmental sustainability practices have a significant positive relationship with financial performance, consistent with the RBV perspective that sustainability-driven capabilities can serve as valuable and difficult-to-imitate strategic resources that enhance competitive advantage. Furthermore, all three dimensions, i.e., environmental, social, and governance, demonstrate a significant positive association with non-financial performance, supporting Stakeholder Theory’s proposition that effective stakeholder management enhances reputational, operational, and stakeholder-related outcomes. This study contributes to the business, management, and accounting literature by providing empirical evidence from the Australian SME context. It extends research on ESG performance beyond large firms and offers practical insights for SME owners and managers on integrating sustainability practices into their operations.