The Impact of Lean Management Practices and Sustainably‐Oriented Innovation on Sustainability Performance of Small and Medium‐Sized Enterprises: Empirical Evidence from the UK

Abstract

While lean management practices (LMP) helps small and medium sized enterprises (SMEs) to be efficient, sustainability oriented innovation (SOI) facilitates to adopt environmental and social practices. Although prior research looks into the effect of LMP on economic performance of SMEs, less is known about the effect of LMP on sustainability (economic, environmental, and social) performance. Studies on effect of SOI on sustainability and economic performance are also scant. Additionally, examining the mediating effect of corporate social responsibility (CSR) practices (environmental and social practices) on both LMP and SOI achieving sustainability performance is rare. This research bridges these knowledge gaps by answering the question how LMP, SOI, CSR practices, sustainability and economic performance are correlated. Through a few hypotheses testing using structural equation modelling, this study reveals the impact of LMP, SOI, CSR (environmental and social) practices on sustainability and economic performance. The study uses data from 119 SMEs within manufacturing industries in the Midlands, UK. The analysis reveals that LMP and SOI facilitate achieve both sustainability and economic performance, and SOI mediates LMP to achieve sustainability performance. Additionally, although CSR practices mediate LMP to achieve sustainability performance, it does mediate SOI only borderline to achieve sustainability performance.

Full text

This is a pre-print of a paper accepted for publication in British Journal of Management
The impact of lean management practices and sustainable oriented innovation
on sustainability performance of small and medium sized enterprises: Empirical
evidence from the UK
Prasanta Kumar Dey1, Chrisovalantis Malesios1*, Debashree De1, Soumyadeb Chowdhury1
and Fouad Ben Abdelaziz2
1Aston Business School, Aston University, Birmingham B4 7ET, UK
2Neoma Business School; NEOMA Business School, 1 Rue du Maréchal Juin, 76130 Mont-
Saint-Aignan, France
*Corresponding author
Abstract
While lean management practices (LMP) helps small and medium sized
enterprises (SMEs) to be efficient, sustainability oriented innovation (SOI)
facilitates to adopt environmental and social practices. Although prior research
looks into the effect of LMP on economic performance of SMEs, less is known
about the effect of LMP on sustainability (economic, environmental, and social)
performance. Studies on effect of SOI on sustainability and economic
performance are also scant. Additionally, examining the mediating effect of
corporate social responsibility (CSR) practices (environmental and social
practices) on both LMP and SOI achieving sustainability performance is rare. This
research bridges these knowledge gaps by answering the question how LMP, SOI,
CSR practices, sustainability and economic performance are correlated. Through a
few hypotheses testing using structural equation modelling, this study reveals the
impact of LMP, SOI, CSR (environmental and social) practices on sustainability
and economic performance. The study uses data from 119 SMEs within
manufacturing industries in the Midlands, UK. The analysis reveals that LMP and
SOI facilitate achieve both sustainability and economic performance, and SOI
mediates LMP to achieve sustainability performance. Additionally, although CSR
practices mediate LMP to achieve sustainability performance, it does mediate SOI
only borderline to achieve sustainability performance.
Key Words: Small and medium sized enterprises, structural equation modelling,
sustainability practices and performances, lean management practices,
sustainability oriented innovation.

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List of the abbreviations
AGFI
Adjusted Goodness-Of-Fit Index
AVE
Average Variance Extracted
CSR
Corporate Social Responsibility
EFA
Exploratory Factor Analysis
EMS
Environmental Management System
GDP
Gross Domestic Product
GFI
Goodness-of-Fit Index
ISO 14000
International Organization for Standardization 14000
LMP
Lean Management Practice
PGFI
Parsimonious Goodness-of-Fit Index
R&D
Research and Development
RMSEA
Root Mean Square Error Of Approximation
SEM
Structural Equation Modelling
SMEs
Small and Medium Sized Enterprises
SOI
Sustainability Oriented Innovation
SRMR
Standardized Root-Mean-Square Residual
TPM
Total Productive Maintenance
TQM
Total Quality Management
WLS
Weighted Least Squares

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1. Introduction
Small and medium sized enterprises (SMEs) make up around 90% of the world‘s
businesses and they employ 50-60% of the world‘s population (Dey et al., 2018). The total
number of SMEs in the UK is 5.7 million, and they employ approximately 15.8 million
people, contributing close to 20% in the GDP (Department for Business, Energy & Industrial
Strategy, 2019). An SME is a small or medium-sized enterprise. According to the EU,
definition of an SME is a business with fewer than 250 employees, and a turnover of less than
€50 million (Hall, 2019). The UK SMEs are likely to contribute £250 billion by 2025, which
is 19% more than current figure (Global Banking & Finance Review, 2017).
It has been estimated that SMEs contribute up to 70 percent of global pollution
collectively. Especially manufacturing SMEs are reported to account for 64% of air pollution
whereas only a small portion of 0.4% of these SMEs complies with an environmental
management system (Bonner, 2019). Recent survey reveals that SMEs consume more than
13% of total global energy demand (around 74 exajoules (EJ)). Cost-effective energy
efficiency measures could shave off as much as 30% of their consumption, namely 22 EJ,
which is more energy than Japan and Korea combined consume per year (IEA, 2015).
Three quarter of UK SMEs are struggling to embed sustainability practices, citing
costs issues and unfavourable government policies as major stumbling blocks (Abdelaziz, et
al., 2018; Anderton, 2018). While 88% of respondents claimed to value sustainability, 70%
had struggled to embed practices and strategies (Mace, 2019). Although 8 out of 10 SMEs
plan to introduce more ethical and sustainable practices, 40% thought that sustainable
practices were too costly to implement, while 42% claimed that the UK Government wasn‘t
doing enough to encourage sustainable business practices (Mace, 2019). When chief
executives were asked on what makes a business ethical, 75% responded ‗treating people
fairly‘, 58% responded ‗sourcing manufacturing materials responsibly‘, 51% responded
‗maintaining energy efficacy‘, and 33% responded stakeholder engagement outside the
financial backers (Newsroom, 2018). Prior studies (Dey and Cheffi, 2013; Dey et al., 2018;
Zhu and Sarkis, 2004) reveal that there are number of barriers that do not allow SMEs to
achieve economic sustainability. There are intense competition, cash flow issues, demand
uncertainties, and business process immaturity. Additionally, SMEs suffer from skill shortage
and large employee turnover (Dey et al., 2018).
Many manufacturing and service companies adopt lean management practices for
achieving economic sustainability through emphasizing on waste reduction across the

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business processes. Recently, there is growing interest in linking LMP with environmental
sustainability. Lean is economy focused and environmental friendly, as philosophically lean
management focuses on waste reduction through resource optimisation (Dey et al., 2019; De
et al., 2018). However, a few environmental and social sustainability projects are cost
intensive (e.g. adopting environmental management system such as ISO 14000, specific
measures for reducing energy consumption, employee wellbeing. Corporate social
responsibility projects are also considered capital intensive (Tang et al., 2018; Walker et al.,
2019). There are a few constructs that are common for LMP and CSR practices and they are
all economy oriented. Prior literature has linked LMP with economic sustainability
(Martinez-Jurado and Moyono-Fuentes, 2014). LMP facilitates to adopt green manufacturing
principles and enhances environmental performance of many manufacturing companies.
Despite the fact that LMP contributes to environmental sustainability (Moreira et al., 2010;
Vinodh et al., 2011), the findings are still not conclusive, as both positive (King and Lenox,
2001) and negative (Rothenberg et al., 2001) relationships have been found to exist.
Moreover, the relationship between LMP, and environmental and social performance is also
non-conclusive.
LMP has been extended to SMEs‘ supply chain through eliminating waste, enhancing
quality, reducing costs and increasing flexibility across supply chain in different tiers (Inman
and Green, 2018). The economic sustainability of SMEs is achieved through supply chain
cost and risk reduction through joint investment in R&D and technology, optimised
inventory, improved products and services quality, and reduction of waste across the supply
chain (Arkader, 2001). Similarly, adopting LMP across supply chain helps achieve
environmental and social sustainability through collaborative relationship building across all
the stakeholders, engaging with suppliers at the early stage of product development,
introducing vendor managed inventory, considering environmental and social criteria for
supplier selection along with economic criteria (Inman and Green, 2018). Environmental
sustainability of supply chain could be achieved through reduction of emission and waste
across the supply chain (Martinez-Conesa et al., 2017).
Sustainability oriented innovation could be achieved through product, process and
organisational innovation (Klewitz and Hansen, 2014). In order to improve sustainability
performance of products, eco-design is an overarching concept. Process innovation means the
implementation of a new or significantly improved production or delivery method (including
significant changes in techniques, equipment and/or software) (Adams et al., 2016). Cleaner
production is an example of process innovation for environmental sustainability (Adams et

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al., 2016; Klewitz and Hansen, 2014). Implementing environmental management system
(EMS) including ISO 14000 is a typical example of organisational innovation for
environmental sustainability (Candi et al., 2018; Wu, 2017). Appendix A provides the
definitions of Lean Management Practices (LMP), sustainability Oriented Innovation (SOI),
Corporate Social Responsibility (CSR) practices, Sustainability Performance (SP) and
Economic Performance (EP), the variables that are used in this study.
LMP is by default economy focused (Inman and Green, 2018). Therefore, achieving
overall sustainability through lean approach enables organisations to emphasize on achieving
economic sustainability. On the other hand, SOI is responsiveness focused, which allows
organisations to achieve overall sustainability through right trade off among economic,
environmental and social factors (Adams et al., 2016; Yu et al., 2019). Although there are
studies on LMP and sustainability, and SOI through product, process, and organisation
innovation, according to authors‘ knowledge there is no study that links both LMP and SOI
with SMEs‘ supply chain sustainability performance. Moreover, although prior literatures
have established that both lean and SOI are the enablers for achieving sustainability, their
combined effect on sustainability performance of SMEs‘ supply chain remains unexplored.
Additionally, the mediating effect of environmental and social practices on LMP and SOI to
achieve sustainability performance is also scant. The overarching goal of this research is to
make SMEs sustainable. This paper aims to address the questions on how LMP and SOI are
correlated to sustainability and economic performance, and if there is any mediating effect of
CSR practices on the above relationship within SMEs in the Midlands, UK. Additionally, it
also examines the mediating effect of SOI for LMP to achieve sustainability performance.
This study uses structural Equation Modelling (SEM) through AMOS software to reveal the
stated relationship. The statistical software is widely used by researchers for SEM analyses
due to certain advantages, such as the support for advanced SEM methods, the ability to
create path diagrams or the direct access to fit indices for model validation. The contributions
of this research are three folds – relationship among lean management practices,
sustainability oriented innovation, corporate social responsibility practices, and sustainability
and economic performance of SMEs in the Midlands, UK; a diagnostic tool for SMEs‘
sustainable supply chain analysis, and means for achieving sustainability across SMEs‘
supply chain.
The remainder of the paper is structured as follows. Section 2 elaborates the literature
review explaining relevant constructs for sustainability analysis of SMEs‘ supply chain along
with identifying knowledge gaps. Section 3 develops hypotheses for this study along with

6
theorised model. Section 4 explains the methodology that has been used for analysing the
data. Section 5 illustrates the results and section 6 provides discussion and conclusion of the
study.
2. Literature review
The theoretical underpinning of this study follows complementarity theory
(Bergmiller and McCright, 2009; Mahapatra et al., 2010). Lean management practices and
sustainability oriented innovation are organizational competencies that enhance
organizations‘ competitiveness. These need strategic, policy and operational intervention to
implement. LMP and SOI are complementary as one set of practices support the other.
In principle, LMP eliminates all forms of waste across the supply chain through
appropriate supply, internal operations and demand management (Inman and Green, 2018) to
achieve efficiency. SOI is product, process, and organizational innovation for achieving
sustainability (Adams et al., 2016; Martinez-Conesa et al., 2017). LMP and SOI in
combination are likely to help achieve higher sustainability through appropriate trade-off
among economic, environmental and social criteria.
A systematic literature review is undertaken in order to explore the current state of
knowledge on the relationship among LMP, SOI, CSR practices, sustainability performance
and economic performance, and identify knowledge gaps. The following sub-sections first
briefly define the sustainability constructs (lean management practices, corporate social
responsibility, sustainability oriented innovation, and sustainability performance) that are
considered in this study. Secondly, the correlations among the constructs are explored from
prior literature. Finally, the knowledge gaps are established with appropriate rational for the
current research.
2.1 Lean management practices
Lean has been in industry since over 40 years and route for improving business
performance (Emiliani, 2006). Interest in the topic became widespread with the publication of
The Machine That Changed the World in 1990 (Womack et al., 1990). Several review articles
(Gupta and Jain, 2013; Jasti and Kodali, 2015; Stone, 2012) discuss the growth of lean
management practices across the manufacturing industries. Over the period lean management
principles and practices got refinement and as per Shah and Ward (2007) its main purpose is
to achieve ‗zero waste‘ in production, highest quality, and resource and energy optimisation.
The practices of Just-in-Time, Total Quality Management, Total Preventive Maintenance and

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Human Resource Management ‗bundled‘ together make up lean production (Shah and Ward,
2002).
2.2 Corporate social responsibility
CSR is the combination of environmental and social practices that are strategy driven
within an organisation (Martinez-Conesa et al., 2017). Environmental and social practices
across supply chain are also called green supply chain management practices, which include
green product development, green design, green procurement, green manufacturing /
operations, green logistics and green marketing (Luthra et al., 2011) and key aspects for
achieving sustainability performance. For the green manufacturer, these processes, practices
and techniques can result in lower costs, increased productivity and an enhanced image
within consumers and community. Sambrani and Pol (2016) and Sarkis et al. (2011) present
comprehensive literature on CSR.
2.3 Sustainability oriented innovation
Adams et al. (2016) via review presents a model for achieving sustainability oriented
innovation. They reveal that SOI could be initiated through product, process and organisation
level innovation to achieve higher sustainability performance. Operational optimisation (eco-
efficiency), organisational transformation (new market opportunities) and system building
(societal change) lead to SOI (Adams et al., 2016). Based on product life cycle concept, SOI
could be achieved through sustainable product design and development using eco-design,
design for the environment as well as for sustainability (Khor and Udin, 2013), reducing and
eliminating hazardous materials, minimizing wastes (Zsidisin and Siferd, 2001), improving
resource efficiency and preservation (Duflou et al., 2012), increasing resource recovery by
recycling, designing for reuse and remanufacturing (Lee et al., 2001), as well as increasing
the aspects of sustainability (Jaafar et al., 2007); sustainable process through reducing energy
consumption, waste reduction, and resource optimisation with the aim to reduce CO2
emission (Despeisse et al., 2012; Fang et al., 2011; Jayal et al. 2010; Pajunen et al., 2012),
sustainable supply chain management through sustainable warehousing (Carter and Jennings,
2002), sustainable packaging (James et al., 2005), reverse logistics (Prahinski and
Kocabasoglu, 2006), environmental purchasing (Jimenez and Lorente, 2001), sustainable
end-of-life management through reuse, and remanufacturing or recycling (Abdul-Rashid et
al., 2017).

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The above paragraphs reveal that there are commonalities and differences among
LMP, CSR practices and SOI. LMP is efficiency focused, whereas CSR practices and SOI
are responsiveness oriented. In other words, by adopting LMP SMEs are assured of achieving
cost reduction but not guaranteed for better environmental and social performance. On the
other hand, Practicing CSR and SOI will help SMEs to achieve superior environmental and
social performance but will not assure achieving higher efficiency.
2.4 Sustainability performance
Sustainability from corporate perspective is defined as the right combination of
economic, environmental and social aspects (Elkington, 1994). A growing number of
businesses are adopting green initiatives in order to achieve sustainability (Teixeira et al.,
2012). Organisations achieve sustainability through economic outcomes and operational
outcomes. Economic outcomes are financial benefits through return on investment and
reduction of cost across the supply chain (Eltayeb et al., 2011). Business growth is another
measure for economic outcomes. Operational outcomes (i.e. productivity) have direct
relationship with sustainability performance, which leads to economic performance.
Environmental performance is highly dependent on energy usage, resource optimisation and
waste reduction, which have direct relationship with CO2 emissions (Yusuf et al., 2013).
Social performance refers to enhancing quality of life of all the concerned stakeholders
(Yusuf et al., 2013). This is measured through CSR project investments, employee wellbeing
initiatives, reduction of accidents etc. Social sustainability not only ensures that industries
making profits, but also ensures that industrial activities do not cause social degradation (Tsai
et al., 2009).
2.5 Economic performance
Economic performance is one of the pillars of sustainability performance and
equivalent to business performance, which is measured through – productivity, cost
reduction, revenue, profit, cash flow, and business growth.
2.6 Lean and corporate social responsibility practices
Lean, and corporate social responsibility practices have many common aspects such
as – waste reduction, resource efficiency, end-to-end supply chain management, workforce
empowerment, transparency, community strategy, better quality and higher productivity.
Many authors (Drohomeretski et al., 2014; Tang and Tang, 2017) argue that the main purpose

9
of implementing green supply chain is to achieve efficiency. Through empirical survey
Hajmohammad et al. (2013) found the level of LMP to be positively associated with the CSR
practices. However, a few CSR practices are capital intensive, and both short and long term
efficiency is also not assured.
2.7 Lean and sustainability performance
Research on link between lean and sustainability performance is somewhat scant as
indicated by Negrão et al. (2017) in their review paper. However, through case studies
(Azevedo et al., 2012) and analysis of secondary data (Hong et al., 2014) studies have
reported positive results of LMP on green performance. However, Hajmohammad et al.
(2013) via survey among Canadian manufacturing companies found that a positive
association between level of LMP and environmental performance was not supported. Hallam
and Contreras (2016) note that while LMP, and environmental and social practices share
waste reduction as an objective, both the philosophies may also work against each other.
LMP alone may not be able to achieve sustainability performance targets and never be
enough to address all sustainability issues (Inman and Green, 2018).
2.8 Sustainability oriented innovation and sustainability performance
New product development following sustainability practices (e.g. eco-design)
enhances environmental and social performance (Boons et al., 2013). However, achieving
economic performance is not assured. In a few cases, social performance may not get
effected. With effective energy management, not only there would be reduction of energy
consumption, in turn carbon footprint, but also help achieve efficiency through cost
reduction. Increasing resource recovery by recycling, designing for reuse and
remanufacturing (Lee et al., 2001) may enhance sustainability performance. With effective
energy management, the cost of manufacturing operations can be reduced significantly with
increased flexibility and improved quality (Schonsleben, 2007). Sustainable supply chain
practices (integrating various processes – inbound and outbound logistics, internal operations,
and both demand and supply sides management, along with SOI across supply chain) will
have strong impact on sustainability performance. Sustainable end-of-life management has
considerable effect on sustainable performance (Wu, 2017). According to Khor and Udin
(2013) one should focus on recovering end-of-use products at the earliest opportunity.
Recycling is the most common practice for sustainable end-of-life management since it
creates economic value. Even though remanufacturing has less environmental impact

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compared to reuse and recycling, it is less implemented in practice as it requires extensive
infrastructure (Amelia et al., 2009).
2.9 Lean manufacturing practices, Sustainability oriented innovation and sustainability
performance
Though, LMP and SOI are two driving forces of today‘s business success, they are
fundamentally different concepts, and some aspects of innovation may negatively impact a
firm‘s ability to be successful by incorporating certain types of innovations. For example,
should ideas/innovation that do not add value straightaway, but are likely to create value in
the future, be eliminated from the current agenda following the lean principles? It is worth
investigating, how innovation can be promoted by maintaining a good level of lean practices.
This will require an investigation into impact of different supply chain practices on the
performance measures (Dey et al., 2019; Malesios et al., 2018a,b). According to Brown and
Duguid (2002) business practices and innovation need to be established at the same time.
Lack of practices and creativity will result in less innovative ideas. The authors suggest that a
balance between practices and innovative processes will help to attain sustainability in the
firm.
Due to intense competition, SMEs business needs to be economy focused with
reasonable agility so as to adapt to the dynamic business environment quickly (Boiral et al.,
2013). Many SMEs adopt LMP formally and informally in order to achieve efficiency that
help them to become environment friendly to certain extent (e.g. resource efficiency). SMEs
also have accomplished several innovations in product development, process reengineering
and organizational transformation, the main driver of which is achieving strategic fits through
customer satisfaction and efficiency. SOI is lacking among the SMEs as achieving superior
environmental and social performance is perceived as cost intensive. Moreover, supply chain
integration through collaboration with customers and suppliers in different tiers is almost
absent within SMEs across the world. Prior studies (Adebanjo et al., 2016; Dey and Cheffi,
2013) reveal that the adoption of various CSR practices is mainly driven by customers and
policymakers.
2.10 Knowledge gaps and rational for this research
There are studies on examining relationship between lean and environmental practices
(Inman and Green, 2018) using varied approaches. These include questionnaire survey
(Akhtar et al., 2018; Green et al., 2012; Hajmohammad et al., 2013; Prasad et al., 2016; Zhu

11
and Sarkis, 2004), reviews (Dües et al., 2013; Hallam and Contreras, 2016), secondary data
collection (Hong et al., 2014), interviews (Campos and Vazquez-Brust, 2016), case studies
(Biggs, 2009; Miller et al., 2010; Azevedo et al., 2012; Campos and Vazquez-Brust, 2016;
Garza-Reyes, 2015), and conceptual models (Alves and Alves, 2015; Carvalho et al., 2011;
Pampanelli et al., 2014) using data from varied countries in developed and emerging
economies including the US, Canada, Japan, UK and other EU countries, Brazil, India, and
China, representing several industries – manufacturing, automotive, logistics, construction,
process and services. Some researchers argue that lean drives environmental practices (Dües
et al., 2013; Pampanelli et al., 2014), others that environmental practices drive lean
(Bergmiller and McCright, 2009), and some feel that both work synergistically (Azevedo et
al., 2012; Garza-Reyes, 2015; Miller et al., 2010).
Sustainability oriented innovation involves transforming organisation‘s philosophy
and values along with its products, and processes to achieve environmental and social
objectives along with economic results (Adams et al., 2016; Arena et al., 2018). The link
between SOI (product innovation, product and process innovation, and product, process and
organizational innovation), and environmental and social practices are well researched but the
results are non-conclusive as explained in the detailed review paper by Adams et al. (2016).
Although the link between CSR and business value has been investigated (Wu, 2017), a
significant research gap remains when considering relationship between CSR and innovation
(Martinez-Conesa et al., 2017).
Abdul-Rashid et al. (2017) reveal the co-relationship of sustainable practices and
performance in manufacturing industry and Adebanjo et al. (2016) study the impact of
external pressure and sustainable management practices on manufacturing performance and
environmental performance. Hajmohammad et al. (2013) observe that very few studies have
addressed integrated effect of environmental management practices and operation / supply
chain systems on environmental performance. The outcome of the review undertaken by
Hallam and Contreras (2016) to study the integration between lean and green reveals that
there are very few survey methods. They note that an integrated model of the firm relating
lean and green is lacking. Jabbour et al. (2013) also note that the literature is not conclusive
on positive effect of integrated environmental practices and lean operations on economic
performance. Similarly, relationship between lean management practices and SOI, and their
combined effect on sustainability performance remains unexplored. Accordingly, this
research intends to reveal the correlation of lean management practices and sustainable
oriented innovation with sustainability performance and economic performance. This will

12
enable SMEs to formulate right strategies and plans to achieve greater sustainability and
economic performance.
3. Conceptual model and hypotheses development
In view of the above, this study explores the combined impact of lean management
practices and sustainability oriented innovation on economic and sustainability performance.
In doing this, a conceptual framework is developed based on the literature review and tested
using structural equation modelling. The key constructs are also proposed to formulate the
framework. The framework can be used as a guideline to select the most appropriate LMP
and SOI practices to achieve desired sustainability performance.
3.1 Impact of lean management practices on economic and sustainability performance
Prior literatures reveal that LMP emphasize on resource efficiency, waste reduction,
and productivity enhancement, which in fact contribute to better economic performance
through cost reduction (Martinez-Jurado and Moyono-Fuentes, 2014). However, LMP may
cause lower environmental and social performance of SMEs as LMP may abstain from
implementing cost intensive environmental and social measures (e.g. by replacing energy
intense machine, undertaking CSR projects, taking employee wellbeing initiatives)
(Rothenberg et al., 2001). Energy efficiency in operating systems, by helping achieve lean as
well as desired environmental and social targets, could be the best candidate to achieve
overall sustainability of any type of organisation (Viesi et al., 2017). However, capital cost of
achieving energy efficiency could be a concern for many organisations and put them off from
adopting this. Accordingly, we formulate the hypothesis 1 and 2.
H1: LMP helps SMEs to enhance economic performance
H2: LMP helps SMEs to enhance sustainability performance
3.2 Impact of sustainability oriented innovation practices on economic and sustainability
performance
Sustainability oriented innovation in SMEs could be performed within new product
development, operational processes, organizational level and across the supply chain through
most appropriate tradeoff among economic, environmental and social aspects (Adams et al.,

13
2016; Wu, 2017). SOI is responsiveness focused (Adams et al., 2016) compared to LMP,
which is efficiency focused (Piercy and Rich, 2015). Therefore, although SOI may not
facilitate SMEs to achieve their economic performance, but quite likely to facilitate achieve
environmental and social performance. Accordingly, hypotheses 3 and 4 are formulated.
H3: SOI helps SMEs to enhance economic performance
H4: SOI helps SMEs to enhance sustainability performance
3.3 Impact of lean management practices on sustainability performance with sustainability
oriented innovation as a mediator
Although there are synergies between LMP and SOI as both the approaches aim to
achieve resource efficiency, energy efficiency, and waste reduction with enhanced
productivity (Adams et al., 2016; Inman and Green, 2018; Wu, 2017), however, the means
for achieving the desired targets following both the philosophies are different. Therefore, it is
worth empirically studying the impact of LMP on sustainability performance with SOI as a
moderator. Accordingly, hypothesis 5 has been formed.
H5: LMP affect sustainability performance positively with mediating effect of SOI
3.4 Impact of lean management practices on sustainability performance with mediating
effect of corporate social responsibility (CSR) (i.e. environmental and social practices)
CSR (i.e. environmental and social practices) across the supply chain has been named
as green supply chain initiatives. Prior research reveal that there are synergies between both
‗lean‘ and ‗green‘ approaches as they emphasize on research and energy efficiency; waste
and emission reduction with higher productivity (Inman and Green, 2018). Additionally,
although lean and green individually helps achieve sustainability of SMEs‘ supply chain,
LMP through mediating effect of environmental and social practices effect economic,
environmental and social performance to achieve overall sustainability performance.
Accordingly, hypothesis 6 is formed.
H6: LMP positively impact sustainability performance through mediating effect of corporate
social responsibility practices

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3.5 Impact of sustainability oriented innovation practices on sustainability performance
with corporate social responsibility as mediator
Sustainability oriented innovation happens across economic, environmental and social
practices covering new product development, business processes, supply chain management
processes and organization level (Adams et al., 2016) in order to achieve enhanced
sustainability performance. Moreover, CSR mediates SOI positively to achieve enhanced
sustainability performance. However, as SOI and CSR practices have many common goals
their integration may not be cost effective (Martinez-Conesa et al., 2017). Accordingly, we
introduce hypothesis 7.
H7: SOI positively impact sustainability performance through mediating effect of corporate
social responsibility practices
3.6 Theorised model
The theoretical model incorporating seven hypotheses is depicted in figure 1. The
model incorporates five constructs (lean management practices, sustainability oriented
innovation, Environmental and social management practices, sustainability performance and
economic performance) and seven hypotheses. The model is designed to test the combined
impact of LMP and SOI on sustainability performance of SMEs.
Figure 1. Theoretical model with hypotheses.

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4. Methodology
The study adopts primary research using survey method (Green et al., 2012) to reveal
the role of LMP and SOI for facilitating SMEs to achieve sustainability. A structural equation
modelling (SEM) methodology is used to process the data collected from SMEs in order to
test the proposed seven hypotheses (Hussey and Eagan, 2007), according to the hypothesized
sustainability model (Figure 1).
4.1 Data collection
The data used for this study has been collected from randomly selected manufacturing
SMEs in the Midlands, UK. Manufacturing SMEs have been chosen for this study as
manufacturing industry is one of the most polluting industries but also have undertaken
several measures for reducing their impact. Manufacturing industries currently contribute
11% of GDP in the UK economy. Although this has been substantially reduced from a 25%
in 1970, UK is likely to be within World‘s first 5 countries in manufacturing outputs by 2021
(current position is 8th). Midlands is the heart of manufacturing with the home of many
manufacturing maestros – original equipment manufacturers such as Rolls Royce; Jaguar and
Land Rover, JCB, Bombardier, East Midlands train, Toyota, etc. Midlands is the home of
many tier one and other suppliers that are within SMEs sector (employee number not more
than 250).
A survey questionnaire (Appendix B) has been designed using the latent variables of
the constructs (LMP, SOI, CSR, sustainability performance and economic performance) to
gather quantitative data on sustainability practices and performances of SMEs in the UK,
instead of collecting secondary data, e.g., by using GRI reports (Gold et al., 2017). Table 1
shows the constructs, latent variables and proxies.
Table 1. Latent variables of constructs for the conceptual model
Constructs
Latent variables
Proxies
References
Lean management
practices
All form of waste reduction
practices
With suppliers
With customers
Within operations
Shah and Ward (2007);
Inman and Green (2018)
Productivity enhancement
program
Total quality management
Total productive maintenance
Statistical process control
Inventory management
Capacity utilisation
Stakeholder management
practices
Supplier relationship
management
Customer relationship

16
management
Employee involvement
Management commitment
Sustainability oriented
innovation
Eco-design
Design of products for
reduced consumption of
resources
Design of products for reuse,
recycle, and recovery
Design of products to reduce
emission
Matos and Silvestre (2013);
Martinez-Conesa et al.
(2017);
Hansen et al. (2009);
Wu (2017)
Green supply chain
management
Green procurement
Green manufacturing
Green marketing
Organisational strategy
Environmental management
system
ISO 14000
Corporate social
responsibility practices
Environmental management
practices
Energy management
Waste management
Resource management
Baumgartner (2013);
Martinez-Conesa et al.
(2017)
Social management practices
Employee wellbeing
Wellbeing of concerned
stakeholders
Undertaking CSR projects
Sustainability
performance
Economic performance
Productivity
Turnover/sales
Cost reduction
Business growth
Abdul-Rashid et al. (2017);
Adebanjo et al. (2016)
Environmental performance
Energy efficiency
Waste reduction
Resource efficiency
Social performance
Employee turnover
Accident reduction
CSR investment
Economic performance
Productivity
Abdul-Rashid et al. (2017)
Turnover/sales
Cost reduction
Business growth
Figure 2: Respondents of the survey (left) and industry type (right).

17
Initially a workshop was organized with the involvement of relevant researchers and
SME managers along with a few representatives of policymakers (Birmingham and Derby
City Council) to validate the questionnaire (Appendix B). Secondly, an initial pre-sample
telephone survey was conducted on 20 SMEs in the Midlands, UK. This was accomplished in
a period of one week. This helped to finalise the questionnaire following feedback from the
pilot survey. The final data has been collected from a total of 119 SMEs in the Midlands. We
have chosen SMEs from the region on the basis of their maturity of business and adoption of
environmental management system.
Sampling was done based on the snowballing strategy. In particular, we have
contacted close to three hundred SMEs in the Midlands of the UK via email and received
consents for taking part in this research from around 150 SMEs. Interviews were done with
few selected SMEs and further surveys were done by sending questionnaire through
federation email. Hence the sample was small, focused and consisted of potential
respondents. This ensured a high response rate of 50% and a minimum data cleaning effort in
the survey. We interviewed each SME‘s representative via telephone or in person. Only 119
responses were considered eligible for detailed analysis. The sample of SMEs is from
manufacturing industries that generally impact environment more than SMEs in other
industries (Figure 2 shows demographic summary of the SMEs that responded to our survey).
The entire data collection took close to six months.
All variables in the questionnaire have been measured at a 5-point likert scale.
Specifically, we measure lean management practices, sustainability oriented innovation,
corporate social responsibility, economic performance, and sustainability performance
through the questions as depicted in Appendix B.
4.2 Statistical analysis
This section demonstrates statistical analysis using structural equation modelling
(Bollen, 1989; Hussey and Eagan, 2007; Jöreskog et al., 1979) to test the proposed
hypotheses (H1 to H7) establishing correlations among LMP, SOI, CSR, sustainability
performance and economic performance (Figure 1). All the latent constructs used in the
analyses are measured via the indicator variables developed from the responses obtained from
the interviews with the SMEs‘ managers / owners (Appendix B). More specifically, in order
to test the influence of the various latent variables of interest on the latent construct of
sustainability, we fit a structural equation model, as hypothesized in section 6.

18
Structural equation models are a system where causal relationships are modelled
between variables and latent factors. SEM consist of multiple regression equations for both
observed and latent items that can be visually illustrated by graphical structures called ―SEM
diagrams‖ or ―path diagrams‖. We have chosen the specific statistical method since the
complex higher order structure of our research hypotheses constitute a typical SEM
application. Further, SEM allows for observed or latent variables to be included as predictors
or dependent variables and can handle the fit of complex model structures that assume
different layers, such as the hypothesized structure of our modelling framework. Finally,
SEM include more than one dependent variable.
Fitting a SEM model with maximum likelihood assumes multivariate normal data.
However, with non-normal data, for instance to apply structural equation modeling with
ordinal variables, the method of Weighted Least Squares (WLS) is a typical alternative
(Jöreskog, 1994), which is the estimation method followed in the current analysis.
In addition to the SEM analysis, we test for mediating effects as posed through the
research hypotheses H5-H7. A variable may be considered a mediator to the extent to which
it carries the influence of a given independent variable to a given dependent variable. The
bootstrap approach introduced by Preacher and Hayes (2004) is one of the most widely used
methods to test the mediation hypotheses (see, e.g., Adebanjo et al., 2016). In the current
study, the formal significance test for deciding on the absence or presence of a mediation
effect, relying on a nonparametric bootstrapping procedure is utilized (Preacher and Hayes,
2004). The bootstrap test for the significance of an indirect effect is based on bootstrapping
the sampling distribution of the mediation effect and subsequently deriving a confidence
interval with the obtained bootstrapped sampling distribution. The advantage of this
procedure is that no assumption about the shape of the distributions of the variables is made
and can be applied to small samples with more confidence (Preacher and Hayes, 2004).
Hence, we analyzed and calculated the mediating effects (i.e. both direct and indirect effects)
through the bootstrap approach.
To assess fit of our SEM model, several alternative fit statistics are utilized (see, e.g.,
Marsh and Balla, 1994), such as the GFI (goodness-of-fit index), the AGFI (adjusted
goodness-of-fit index) and the PGFI (parsimonious goodness-of-fit index). Typically, for a
good fit the indices should be above 0.9, however this cut-off threshold has been often
criticized. Another popular measure is the root mean square error of approximation
(RMSEA) and the residuals-based fit index of the standardized root-mean-square residual

19
(SRMR). For a good model fit, GFI and AGFI should approach one, whereas RMSEA and
SRMR should be small (typically RMSEA less than 0.05 and SRMR less than 0.07).
5. Data analysis and results
The research hypotheses presented in the introduction section have been tested via the
application of SEM modeling, and specifically through the utilization of the weighted least
squares method (Jöreskog, 1970). Model estimation was performed with the use of the
AMOS software (Arbuckle, 2014). Sample size selection for valid analyses and fit of SEM
models in AMOS often depends on out-dated general rules of thumb, however recent studies
suggest sample sizes ranging between 30 and 450 observations, depending on the complexity
of the fitted model (see, e.g., Sideridis et al., 2014; Wolf et al., 2013). The medium
complexity, strong factor loadings of our fitted SEM model and minimum missing values
indicates that the sample size of 119 responses is sufficient for correct model identification
(Wolf et al., 2013).
An exploratory factor analysis (EFA) has been performed in order to obtain information
about the formulation of the latent factors and test their reliability and validity. Hence, the
constructs and latent variables indicated by EFA and subsequently utilized for the SEM
analysis are described below (Table 2). The Cronbach‘s α (Bollen, 1989) along with and the
percentage of variance of the selected items explained by each of the latent factors is also
presented. As we observe, the constructs utilized for the statistical analysis are adequately
addressing the reliability and validity. In addition, the collected data do not seem to suffer
from common method bias, since that the total percentage of variance explained by each
single factor is much higher than 50%.
Table 2. Reliability and validity measures for constructs and latent variables
Constructs
Latent variables
Cronbach‘s α
% of
explained
variance
Lean management practices (LMP)
All form of waste reduction
practices
0.684
61.31
Productivity enhancement
program
Stakeholder management
practices
Sustainability oriented innovation
(SOI)
Eco-design
0.622
57.99
Green supply chain
management
Organisational strategy

20
Corporate social responsibility
practices (CSR)
Environmental management
practices
0.836
76.39
Social management practices
0.754
67.26
Sustainability performance
Economic performance
0.652
64.07
Environmental performance
0.592
54.03
Social performance
0.603
55.40
Economic performance
Productivity
0.752
59.01
Turnover/sales
Cost reduction
Business growth
Next Table (Table 3), shows the correlations among the five latent constructs along
with the square root of the Average Variance Extracted by the constructs (AVE), presented in
the diagonal of the table (except for the two observed items of LMP and SOI).
Table 3. Correlation matrix of the construct correlations (square root of the Average Variance
Extracted by the constructs (AVE) are provided in the diagonal)
LMP
SOI
Sustainability
performance
CSR
Economic
performance
LMP
---
SOI
0.155
---
Sustainability
performance
0.589*
0.503*
0.82
CSR
0.741*
0.24*
0.747*
0.65
Economic
performance
0.459*
0.461*
0.732*
0.613*
0.59
*Correlation is significant at the 0.01 level.
The above results are indicative of adequate reliability and consistency in the data,
thus can be deemed suitable for conducting SEM analysis. SEM modelling enables us to
obtain the estimates of beta coefficients of the regression equations that relate each latent
construct of sustainability (response variables) with the selected individual items or latent
factors of LMP and SOI constructs (explanatory variables).
In the remaining of this section we present the derived results of structural equation
analysis. The results are summarized in Figure 3.
Previous to this, fit statistics for the evaluation of the good fit of the model are
presented in Table 4. Fit statistics show that the SEM model tested provided a good fit, since
that most of the fit indices are higher or near the borderlines of the acceptable limits for good
fit.

21
Table 4. Values of goodness-of-fit measures for assessing SEM model fit
Fit statistics
PGFI
GFI
AGFI
RMSEA
SRMR
SEM MODEL
0.709
0.915
0.89
0.031
0.0085
SEM results in the form of standardized path coefficients are displayed in Figure 3
and corresponding significances along with support for the four direct hypotheses (H1-H4)
are summarized in Table 5. As one observes from the fit of the Model (Figure 3 below and
Table 5), LMP is proven to be a significant factor for achieving sustainability (path
coefficient is +0.473; significant at the 0.05 level), thus verifying research hypothesis H2.
Also, looking at the standardized regression weights, it is seen that LMPs are highly
positively associated with economic performance, completely verifying hypothesis H1 (path
coefficient is +0.996; significant at the 0.01 level). Regarding research hypotheses H3 and
H4, we see that both of the latter are supported by the data, with a stronger verification being
observed however, for the H3 hypothesis (path coefficient is +0.958; significant at the 0.01
level), indicating a positive and very strong association between SOI and economic
performance. SOI is also a significant moderator of sustainability as revealed by the SEM
results (path coefficient is +0.405; significant at the 0.05 level).
Lean Management
Practice
Sustainability
Oriented
Innovation
CSR Practices Economic
Performance
0.994
0.252
-0.955
0.996
0.958
0.047
0.473
0.405
Sustainability
Performance
0.4
Figure 3. Path diagram of SEM model along with standardized regression weights (see also
Table 5)
Next, we examine the support by our data of the indirect research hypotheses H5-H7,
associated with mediating effects of SOI and environmental/social practices on LMP and
SOI, respectively. Hence, we analyzed and calculated the mediating effects (i.e. both direct

22
and indirect effects) through the bootstrap approach and the corresponding results are shown
in Table 6.
First, our findings seem to support an indirect mediation effect of SOI in the
relationship between LMP and sustainability (hypothesis H5). Indeed, while the direct effect
of LMP and SOI is negligible (direct effect is 0.049; non-significant), the indirect effect of
the former construct on sustainability through SOI is statistically significant (indirect effect is
+0.327; significant at the 0.05 level).
Table 5. SEM model results
Model Link
Std.
coefficient
s
Significanc
e (p-value)
Hypothese
s support
LMP
--->
SOI
0.047
n.s.
SOI
--->
CSR
0.252
*
LMP
--->
CSR
0.994
***
SOI
--->
Sustainability
0.405
**
H4:
supported
LMP
--->
Sustainability
0.473
**
H2:
supported
CSR
--->
Sustainability
0.400
**
Sustainabilit
y
--->
Social
performance
0.987
***
Sustainabilit
y
--->
Environmenta
l performance
0.979
***
Sustainabilit
y
--->
Economic
performance
-0.995
***
CSR
--->
Environmenta
l practices
0.847
***
CSR
--->
Social
practices
0.728
***
LMP
--->
Economic
performance
0.996
***
H1:
supported
SOI
--->
Economic
performance
0.958
***
H3:
supported
*** p-value<0.01; ** p-value<0.05; * p-value<0.1; n.s.: non-significant
Similarly, regarding hypothesis H6, it is observed that indeed CSR (environmental
and social) practices is a mediator factor between LMP and sustainability, since that the
indirect effects of SOI on the association between LMP and sustainability are statistically
significant at the 0.01 level of significance (indirect effect is 0.569).
Finally, although we do not have strong evidence to reject research hypothesis H7,
since the indirect association between SOI and sustainability through the CSR mediator is

23
statistically significant (indirect effect is +0.103; significant at the 0.1 level), however
significance is at the borderline while the direct effect between SOI and sustainability is
strong and positive (direct effect is 0.517; statistically significant at the 0.01 level of
significance). In overall thus, the bootstrap analysis results for mediation effects offer in
general support for hypotheses H5-H7.
Table 6. Mediation bootstrap test of research hypotheses H5-H7
Effects
Hypotheses
Estimate
Significance
Direct effect
H5
0.049
n.s.
Indirect effect
0.327
**
Total effect
0.377
**
Direct effect
H6
-0.176
*
Indirect effect
0.569
***
Total effect
0.393
**
Direct effect
H7
0.414
**
Indirect effect
0.103
*
Total effect
0.517
**
Support for the seven (direct and mediation effects) hypotheses as obtained from the
current study is summarized in Table 7. Table 7 additionally includes past research support
for comparisons.
Table 7. Comparison of study findings on the direct (H1-H4) and mediation effects (H5-H7)
hypotheses
Direct effects
Hypothesis
Supported
Not supported
This research
Positive relationship
between lean
management practices
and economic performance
(H1)
Martinez-Jurado and Moyono-
Fuentes (2014)
Pannizzolo et al.
(2012)
Supported
Positive relationship
between lean
management practices
and sustainability
performance (H2)
Moreira et al. (2010); Vinodh
et al. (2011); King and Lenox
(2001); Viesi et al. (2017);
Dües et al. (2013)
Rothenberg et al.
(2001)
Supported
Positive relationship
between sustainability
oriented innovation
Klewitz and Hansen (2014)
Piercy and Rich
(2015)
Supported

24
practices and
economic performance
(H3)
Positive relationship
between sustainability
oriented innovation
practices and
sustainability performance
(H4)
Lee et al. (2001); Khor and
Udin (2013)
Altenburg and
Pegels (2012)
Supported
Mediation effects
Hypothesis
Supported
Not supported
This research
Sustainability oriented
innovation mediate lean
management practices and
sustainability performance
(H5)
Adams et al. (2016)
Achanga et al.
(2006)
Supported
Corporate social
responsibility practices
mediate lean management
practices and sustainability
performance (H6)
Inman and Green (2018)
Supported
Corporate social
responsibility practices
mediate sustainability
oriented innovation and
sustainability performance
(H7)
Adams et al. (2016);
Rantala et al. (2018)
Ratnawati el al.
(2018);
Martinez-Conesa et
al. (2017)
(Borderline) Supported
6. Discussion and conclusion
This section first discusses the findings of this research in line with the research
questions along with illustration of the theoretical contribution. Secondly, the limitations of
the study are elaborated. Thirdly, the practical implications of this research are explored and
finally, the scope for future work is stated.
6.1 Discussion on results / findings
Sustainability could be achieved through the right combination of economic,
environmental and social factors and it is the major concern of today‘s business (Dey et al.,
2019; Dües et al., 2013). SMEs‘ sustainability is crucial for every economy as they contribute
largely to gross domestic product and additionally employ a major portion of workforce of
any economy. However, SMEs contribute negatively to environment not individually but
collectively. Therefore, the drivers that contribute towards enhancing sustainability of SMEs

25
need attention. SMEs are different from larger organisations with respect to their policies and
strategies (Perrini, 2006), and therefore, SMEs supply chain sustainability has been discussed
separately in literature. Lean management practices lead to achieving sustainability (Dey et
al., 2019). However SMEs find it difficult to implement. SMEs struggle with finance to adopt
lean management practices (Chiarini, 2012; Moreira et al., 2010). The sustainability oriented
innovation of SMEs is discussed as a facilitator for their sustainability (Klewitz, and Hansen,
2014).
Prior studies reveal that LMP and SOI are the enablers for achieving sustainability of
supply chain. Although prior studies examined the impact of each LMP and SOI separately
on sustainability performance there is no work that reveals the impact of both LMP and SOI
collectively on sustainability performance of SMEs‘ supply chain (Piercy and Rich, 2015).
The present study explores and investigates the combined impact of lean management
practices and sustainability oriented innovation on SMEs‘ supply chain sustainability
performance and economic performance empirically. Additionally, we examine the mediating
effect of CSR practices to correlate LMP and SOI with sustainability performance. This
enables SMEs to identify means for achieving sustainability through right combination of
LMP, SOI and CSR through their respective constructs.
The underpinning of this research is to answer the question of whether lean
management practices in combination with sustainable oriented innovation could enable right
trade off among economic, environmental and social performance in order to make SMEs
more sustainable. The main purpose of this empirical research is to investigate the potential
effects of LMP and SOI on sustainability performance and economic performance.
Additionally, we have examined three under-examined associations, relating to (a) the
mediating effects of SOI in the relationship between LMP and sustainability performance, (b)
the mediating effects of CSR practices in the relationship between LMP and sustainability
performance and (c) the mediating effects of CSR practices in the relationship between SOI
and sustainability performance within SMEs in the Midlands of the UK.
We reveal that LMP and SOI are both positively associated with sustainability
performance. Our findings are at a large part consistent with prior research. In particular, we
have found that LMP effects sustainability performance in a positive way, in accordance with
the findings of Inman and Green (2018), Moreira et al. (2010), Vinodh et al. (2011) and King
and Lenox (2001), and despite the contrasting results of Rothenberg et al. (2001). We
additionally contribute to the limited research on the effect of SOI on sustainability
performance, finding again a positive effect of the former on the latter latent construct,

26
through SEM modelling. These results come as verification to our initial argument that LMP
and SOI in combination may help SMEs to achieve higher sustainability performance levels.
Hence, we may say that LMP and SOI are complementary practices since they support each
other in enhancing sustainability.
Our results also verify the economic focus of LMP, since we have found a strong and
positive effect of LMP on the latent structure of economic performance. Similar strong
positive effects, however, have been found for the SOI on the economic performance, in
contrast to existing research (see Piercy and Rich, 2015), since that SOI is perceived as more
responsiveness focused compared to LMP, which is efficiency focused.
According to previous research, the associations between SOI and CSR practices are
non-conclusive (see Adams et al., 2016), thus a significant research gap remains when
considering relationship between CSR and SOI (Martinez-Conesa et al., 2017). We contribute
on this issue, by finding moderate positive associations between the two constructs, for the
UK SMEs. Previous literature argues in favour of positive effects of SOI on environmental
and social performance (Piercy and Rich, 2015). On the other hand, however, noteworthy is
the finding of the strong and positive direct effect of LMP on CSR practices. This finding is
in contrast with previous research which argues that LMP causes lower environmental and
social performance for SMEs (Rothenberg et al., 2001).
There is scant literature for examining the mediation effects of SOI on the relationship
between LMP and sustainability performance. Hence, it is useful to empirically examine the
impact of LMP on sustainability performance with SOI as a mediator. Our findings indicate a
significant positive indirect effect from LMP to sustainability performance through the
mediation of SOI. This implies that Midlands based SMEs with lean management practices
will achieve better sustainability performance if they also have sustainability oriented
innovation implemented. This is in line with the complementarity theory.
Additionally, the mediating effect of CSR practices on both LMP and SOI to achieve
sustainability performance is rare (Adams et al., 2016; Inman and Green, 2018). Our analysis
also reveals that improvement in sustainability performance of the UK SMEs do not come
only through LMP and SOI, but also mediating effect of CSR practices. On one hand, LMP
along with SOI help to achieve SMEs sustainability performance. On the other hand, both
LMP and SOI through implementation of CSR practices enable achieving enhanced
sustainability performance.
This study also contributes a conceptual framework for sustainability performance
measurement with four major constructs – lean management practices, sustainability oriented

27
innovation, corporate social responsibility and sustainability performance. The latent
variables act as sub-constructs and data could be gathered in line with the proxies related to
each sub-construct. The framework will enable to measure the current state of SMEs
sustainability performance and means for improvement. Data collected using the proposed
performance measurement framework can be processed using multiple criteria decision-
making method. Dey and Cheffi (2013) demonstrate a multiple criteria based sustainability
performance measurement framework, which uses the Analytic Hierarchy Process.
Lean management practices and sustainability oriented innovation are organizational
competencies that not only help achieve efficiency but also responsiveness in line with
stakeholders‘ satisfaction. LMP brings efficiency and SOI emphasizes on responsiveness.
Combining both LMP and SOI, SMEs achieve sustainability across their supply chain.
Additionally, CSR practices helps enhance sustainability performance. This clearly depicts
the alignment of the findings of this research with complementarity theory.
6.2 Limitations of the study
This study focuses on the lean management practices and sustainability oriented
innovation of SMEs (manufacturing) in the Midlands of the UK. Additionally, only corporate
social responsivity practices is considered as mediator. There are many studies that have
conceptualized the sustainability performance measurement through different constructs and
antecedents. External pressure from customers and policymakers, and internal obstacles are
the popular moderators for the sustainability analysis in many recent studies. The data has
been gathered from limited number of SMEs (119) in the UK. The latent variables and
proxies are also limited (see Table 3 and Appendix B). Average experience of the responders
is 12 years. As SEM uses perceptions of the responders, the correctness of the perceptions is
very important in order to reveal the overall results.
6.3 Practical implications
Figure 4 demonstrates the correlation between lean management practices,
sustainability oriented innovation, economic performance and sustainability performance.
Although LMP assures higher economic performance, LMP alone is not adequate for SMEs
to achieve higher sustainability performance. SMEs‘ managers / owners aspiring greater
sustainability performance need to implement sustainability oriented innovation through eco-
design, green supply chain management and adopting environmental management system in

28
strategic level along with lean management practices. Similarly, SOI alone may also help
achieve higher economic performance. However, sustainability performance of SMEs
improves marginally when only SOI implemented. Adopting CSR practices through
appropriate environmental and social measures along with LMP and SOI will help SMEs
achieve higher sustainability performance. The effectiveness of implementing LMP, SOI and
CSR will depend on the roles of each stakeholder across the SMEs‘ supply chain. Individual
SME owners/managers must undertake diagnostics of their current state through
sustainability analysis using the constructs, and in line with the findings of the analysis,
improvement measures will be pursued. Both industry consortium and policymakers need to
foster positive environment for motivating SMEs to implement a combined lean management
practices, CSR and sustainability oriented innovation planning. Both customers and suppliers
must incorporate sustainability constructs in their procurement contracts.
Figure 4. Correlation between LMP and SOI practices, and sustainability and economic
performance.
6.4 Scope for future work
A similar study could be undertaken in other industries and varied geographical
locations. Additionally, comparative analysis across the industries and geographical locations
would be very interesting. The objective of the study is to reveal combined effect of LMP,
SOI, CSR practices on sustainability and economic performance and accordingly the model
has been formulated with limited constructs. However, the model could be more robust with
several constructs and moderators (external pressure, internal obstacles etc.). Effect of lean

29
management practices and sustainability oriented innovation on sustainability and economic
performance could be derived using other quantitative methods (e.g. data envelopment
analysis, multiple criteria decision-making techniques such as the analytic hierarchy /
network process, goal programming, fuzzy theory etc.) and qualitative approaches such as
ethnographic study, case study, and grounded theory. This study uses complementarity
theory. However, resource based and institutional theories could also be deployed. Finally,
we did not consider identifying the commonalities and differences of LMP, CSR and SOI as
one of our research objective / question in this study. Additionally, economic performance is
considered as one of the pillars of sustainability performance. Therefore, we did not develop
any hypothesis to examine the correlation between economic and sustainability performance.
Future studies may look at the commonalities and differences of all these variables.

30
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Appendix A. Construct Definitions
Constructs
Definition
Lean management
practices (LMP)
A management improvement program comprised of lean practices
with suppliers and customers that emphasise setup time reduction,
pull systems, continuous flow, statistical process control,
preventive maintenance and employee involvement designed to
eliminate all forms of waste from all supply chain processes (Shah
and Ward 2003; 2007). LMP emphasize on any type waste
reduction (Inman and Green, 2018).
Sustainability
oriented innovation
(SOI)
Innovation plays an important role in enhancing sustainability
performance (Matos and Silvestre, 2013, Yu et al., 2019, Candi et
al., 2018). SOI is the integration of social aspects into products,
processes, and organisational structure (Martinez-Conesa et al.,
2017). SOI describes a direction, which to follow requires the
deliberate management of economic, environmental and social
aspects (Hansen et al., 2009)
Corporate social
responsibility (CSR)
practices
CSR is usually associated as approach to integrate social and
environmental aspects into corporate activities (Baumgartner, 2013;
Martinez-Conesa et al., 2017, Walker et al., 2019; Tang et al.,
2018)
Sustainability
performance
Sustainability performance is the combination of economic,
environmental and social performance (Abdul-Rashid et al., 2017)
Economic
performance
Economic performance is measured by productivity, profit,
turnover, cost reduction and business growth etc. (Abdul-Rashid et
al., 2017)

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Appendix B. Measurement scales
Lean management practices (Shah and Ward, 2003, 2007; Inman and Green, 2018)
Please indicate the extent of implementation of the following practices in your organisation.
(1 = no implementation; 2 = below average implementation; 3 = average implementation; 4
= effective implementation; 5 = benchmark implementation
All forms of resource waste management
1. We have implemented resource waste management program with suppliers
2. We have implemented resource waste management program with customers
3. We have implemented resource waste management program in our operations
Productivity enhancement programs
1. We have implemented TQM effectively
2. We have implemented TPM effectively
3. We have adopted statistical process control in our production
4. We have inventory reduction program in place
5. We have achieved capacity utilisation
Stakeholders‘ management
1. We use effective supplier relationship management practices
2. We use effective customer relationship management practices
3. Our employees are totally involved and committed to organisation
4. Our organisation‘s management is totally committed to organisation
Sustainability oriented innovation (Zhu, Sarkis and Lai, 2008; Matos and Silvestre, 2013;
Martinez-Conesa et al., 2017; Hansen et al., 2009; Wu, 2017)
Eco-design
1. Design of products for reduced consumption of resources
2. Design of products for reuse, recycle, and recovery
3. Design of products to reduce emission
Green supply chain management
1. We undertake green procurement
2. We undertake green manufacturing
3. We undertake green marketing
Organisational strategy
1. We have organisation wide integrated environmental management system
2. We have implemented ISO 14000
Corporate social responsibility practices (Baumgartner, 2013; Martinez-Conesa et al.,
2017; Zhu, Sarkis and Lai, 2008)
Environmental management practices
1. We practice energy management program
2. We practice waste management program
3. We practice resource optimisation program
Social management practices

45
1. We have implemented employee wellbeing program
2. We have concern for every stakeholder (e.g. customers, suppliers, community
etc.)
3. We have undertaken several improvement projects for communities
Sustainability performance (Zhu, Sarkis and Lai, 2008; Inman and Green, 2018; Abdul-
Rashid et al. 2017; Adebanjo et al., 2016)
Please indicate the extent to which you perceive that your organisation has achieved each of
the following during the past year (five point scale: 1 = not at all; 2 = a little bit; 3 = to some
degree; 4 = relatively significant; 5 = significant)
Economic performance
1. Our productivity has improved
2. Our turnover has increased
3. Our cost has reduced
4. Our business experiences growth
Environmental performance
1. We have reduced energy consumption
2. We have reduced waste across the supply chain
3. We have achieved resource efficiency across the supply chain
Social performance
1. Our employee turnover have reduced
2. We have reduced accident
3. We have enhanced our investment in community based projects
Economic performance (Abdul-Rashid et al., 2016; Zhu, Sarkis and Lai, 2008)
1. Our productivity has improved
2. Our turnover has increased
3. Our cost has reduced
4. Our business experiences growth