Examining the impact of corporate social responsibility on SMEs’ financial performance – A South African Perspective

Abstract

This study examines the intricate interactions between corporate social responsibility (CSR), eco-friendly behaviour, corporate image, and financial performance (FIP) within the context of Small and Medium Enterprises (SMEs) in South Africa. The study involves 360 participants from various SMEs and employs a partial least squares structural equation modelling (PLS-SEM) approach to analyze the complex interdependencies between these critical variables comprehensively. The research aims to unveil a paradox within SMEs by exploring how pro-environmental behaviour moderates the influence of CSR initiatives and financial performance. The findings from the study revealed that CSR significantly affects FIP, corporate image, and eco-friendly behaviour. In addition, the empirical evidence delineated from the analysis indicated corporate image and eco-friendly behaviour directly and substantially influence SMEs' FIP. The research also confirmed the favourable moderating influence of pro-environmental behaviour on the nexus between CSR and FIP. The outcome sought to extend academic understanding of CSR dynamics and also offer practical guidance for SMEs and policy-makers seeking to enhance sustainability and financial success through responsible business practices in the unique socio-economic context of South Africa.