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Social Sustainability Practices on Small Businesses in
Hitte)
Developing Economies: A Case of South Africa
Reginald Masocha
School of Economics and Management, University of Limpopo, Sovenga 0727, South Africa;
[email protected]; Tel.: +27-15-268-2802
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Received: 8 April 2019; Accepted: 19 May 2019; Published: 13 June 2019 !"#$%&'

Abstract: This study makes a significant contribution towards theory and knowledge of small
and medium enterprises (SMEs) within the social sustainability discourse. The study focused on
investigating if SMEs in developing economies directly benefit from practising social sustainability
through examining the relationship between social sustainability and financial performance, customer
satisfaction as well as employee satisfaction. A total of 238 SMEs from the Limpopo province of South
Africa were surveyed through a self-administered questionnaire at the hand of convenience sampling
technique. The hypotheses in the study were assessed through structural equation modelling (SEM)
through AMOS software version 25. The study results revealed that all three postulated hypotheses
were supported. Thus, social sustainability was found to be positively and significantly associated
with financial performance, customer satisfaction performance as well as employee satisfaction
performance. The findings in this study indicate that by practising social sustainability, SMEs
potentially benefit on a broader performance spectrum.

Keywords: social sustainability; sustainable development; SMEs; South Africa; firm performance;
developing economies

1. Introduction
Within the spectrum of sustainable development, there are mixed notions pertaining to what
constitutes the contribution of SMEs in the prevailing sustainable development dimensions, namely,
economic, ecological and social [1]. Consideration towards small medium enterprises’ (SMEs) general
contribution toward the economies of the world has grown immensely in literature and research
domains [2]. The progressive contribution that SMEs make in the global economy is irrefutable and
is enshrined in economic growth, poverty alleviation and job creation strategies pursued by many
economies both in the developed and developing world. For that matter, the essence of SMEs tied
with the upsurge of sustainability especially for the developing world means SMEs’ research is vital
for economic growth in the contemporary world [3]. Thus, the management and flourishing of SMEs
should seldom be approached in an unsystematic and disaggregated approach. SMEs strategically
contribute toward economic progression and wealth making predominantly in traditionally deprived
populations [4] and are considered as the mainstay of most African nations [5]. Alternatively, SMEs
stand as “the future” for many developing nations. Thus, their role in sustainable development is of
much research interest.
However, SMEs possess certain specificities and typical characteristics in terms of capabilities
and resources that di↵er from large corporations. This makes the application and utilisation of large
corporations’ strategies challenging, if not impossible. Particularly, considering that SMEs are prone
to a myriad of challenges which are seldom experienced by large firms. For instance, globalisation
and competition increase the number of competitors that native SMEs must deal with. According to
Wang and Shi [6], globalisation has heightened the extent of competition more than ever before as

Sustainability 2019, 11, 3257; doi:10.3390/su11123257 www.mdpi.com/journal/sustainability

Sustainability 2019, 11, 3257 2 of 13

governments are increasingly doing away with the traditional barriers on their borders that protected
local small businesses. In South Africa, the challenges for SMEs, tend to vary with location, thus, it is
crucial to note that all domestic SMEs seldom face similar challenges [7].
The general premise which has driven firms to adopt sustainable development is that by
practising sustainability a business stands to benefit widely [8,9]. On the other hand, pressure has
presently increased for business to drastically shift from sustainability strategies in the boardroom
to implementation and follow-ups of these strategies [9]. However, one of the least debated areas
-
in today’s research concerns the social sustainability role of SMEs in the sustainable development
spectrum and the subsequent impact on SMEs. The question arises pertaining to understanding
the nature of social sustainability practices within the small businesses spectrum in the developing
world. Latent literature acknowledges the contribution made by SMEs towards social sustainability in
creating employment particularly for the neglected categories of the society [10] within developing
nations. Some authors have termed sustainable development, planet, people and profits. Accordingly,
these activities of SMEs towards the development of people are positively related to the quests of
socially sustainable development.
As outlined by Sy [9] social sustainability pertains to the extent to which a firm translates its social
responsibility goals into reality. There is a need to ascertain the relationship between this translation
of social responsibility goals into reality with the performance of SMEs. The relationship between
SMEs’ participation in social sustainability and the subsequent impact on firm performance is still
unsatisfactorily researched and documented in latent literature. Social sustainability is critical for
firms regardless of whether they are huge or small because businesses highly depend on the health,
steadiness and a✏uence of their respective societies [3,8]. Henceforth, the aim of this study is to
determine if there is an impact on the firm of translation of social sustainability into practices and in
the context of SMEs within the developing economies milieu. Empirically, the study utilises SMEs
located in the South African province of Limpopo which is predominantly rural. Preceding the first
section in this study, the introduction, a literature review of SMEs in Africa as well as the concepts of
social sustainability and firm performance is provided. Next, the research methodology, data analysis,
results and then conclusions are provided in this paper.
i .

employV employei reine (Micro enterprises)

2. Literature Review
I small enterprises)
employees
5 to 50

P
2 :

5 to 2000 (2S)
2.1. Defining SMEs in Africa
3 .
5
+100employees (Medium-sized enterprises)
The definition of SMEs varies across Africa and a few African countries were randomly selected
and discussed herein. Firstly, in Tanzania SMEs were found in three di↵erent categories. The definition
utilises the two quantitative criteria, namely, the number of employees and capital invested in
di↵erentiating SMEs. The first category of SMEs in the Tanzanian context constitute of micro-enterprises
which employ up to five employees. As for the capital invested, micro enterprises need to have
↓
5 million Tanzanian shillings (TZS) invested in machinery. Secondly, small enterprises should have
five to 50 employees and TZS 5 to 2000 million. Finally, medium-sized enterprises ought to have 50 to
100 employees and TZS of 200 to 800 million [11].
In Ghana, various definitions have been propounded with regards to small-scale enterprises
but the most prominently utilised method is the number of workers in a firm. One of the official
sources, the Ghana Statistical Service (GSS) regards enterprises with less than 10 workers as small-scale
firms and those with more than 10 workers as medium and large-sized firms [12]. On the other hand,
the National Board for Small Scale Industries (NBSSI) of Ghana utilises a two-pronged approach to
define SMEs. The NBSSI utilises fixed assets and the number of workers in its definition. Accordingly,
the NBSSI defines a small-scale firm as a business with less than nine employees, and has plant and
machinery (disregarding land, buildings and vehicles) that are below 10 million Ghanaian cedes [12].
However, the continuous depreciation of the local currency has been regarded as posing definitional
challenges when the value of assets is utilised. As such, Asamoah [5] argues that the most used
Sustainability 2019, 11, 3257 3 of 13

definition is the one given by the EU which utilises the headcount of employees and turnover. In this
regards, the US dollar (US$) is used instead of the Ghanaian cedes. Based on this criterion, a small-scale
firm is defined as employing more than five workers and not exceeding 50 workers. The value of assets,
disregarding land, building and working capital-should be less than $US 30,000 and the annual income
turnover should be between $US 6000 and $US 30,000. On the other hand, a medium-sized firm is
deemed to be a business employing between 50 and 100 employees.
In Nigeria, still, the definition of SMEs di↵ers. According to Apulu, Latha and Moreton [13],
the Small and Medium Sized Development Agency of Nigeria (SMEDAN) categorises SMEs into micro,
small and medium sized enterprises. SMEDAN states that a micro firm is an enterprise constituting
fewer than ten employees with an annual turnover that is less than five million Naira. Furthermore,
SMEDAN details that a small firm is a business employing 10–49 workers with an annual turnover
ranging between five to 49 million Naira. Finally, the SMEDAN regards an enterprise as a medium
firm if it employees between 50–199 workers whilst the annual turnover of 50–499 million Naira.
In South Africa, the Department of Trade and Industry [14], defines small medium micro enterprise
(SMMEs) in South Africa as any business that is having less than two hundred employees or no more
than five hundred employees, and the annual turnover of less than five million rands, capital assets or
equipment of less than two million rands and the owner is directly committed to management of the
business. As such, in this study, both the quantitative and qualitative criteria are utilised from the
South African perspective. This definition ignores the variances that apply in terms of the variances in
industry as outlined in the definition contained in the National Small Business Act of South Africa
1996 as amended in 2003 [14]. Many of the SMMEs in South Africa eventually take place in rural areas,
whereby they operate on small premises and as time goes on they move to large premises that are
sustainable for their business [15].

2.2. Social Sustainability

Social sustainability transpires when prescribed and informal procedures, structures, associations
and interactions vigorously enhance the capability of contemporary and upcoming generations
to generate healthy and liveable societies. The social dimension or social equity principle under
sustainable development relates to all societal members having equal access to the available resources
and opportunities [16]. Thus, social sustainability refers to activities that ensure that communities are
impartial, varied, allied and self-governing and deliver a noble value of life. Acute to the delineation
of sustainable development is the recognition that “needs” contemporaneous and impending ought
to be achieved in an even-handed setting [17]. Bogt [18] argues that a firm may regard it socially
sensible to imitate other firms, that is, to adopt socially rational behaviours in order to achieve this
desired equilibrium.
Social activities focus on the community, sports, health and well-being, education, helping the
low-income earners as well as participating in the community [19]. These activities are regarded
as interventions towards the enhancement of social and cultural causes in the societies as well as
community development [19]. SMEs have been considered crucial to the support of community
activities in the European as well as Latin American economies. Accordingly, an empirical study
by Polášek [20] established that societal activities such as donations in the form of finance and kind,
volunteering, education to the society, assistance towards the societal standards of living (i.e., sports,
culture, etc.) as well as partnering with local schools, authorities and di↵erent community organisations
are vital for SMEs.
On the other hand, Thiel [21] indicates that there are four themes that define the social domain
in a sustainability context, namely, social-economics, stakeholders, societal-wellbeing and social
sustainability. Consistently, social sustainability includes definitions of society, community and culture
and is measured in the firm’s performance in donations, safety, strategic philanthropy and corporate
citizenship [22]. Thus, social sustainability places a demand upon firms to play an active role and
acknowledge more responsibilities toward stakeholders and the social environment they operate
Sustainability 2019, 11, 3257 4 of 13

in [23]. Human needs include basic needs such as food, shelter, clothing as well as good quality of
life, with quality of life including things like healthcare, education and political freedom [21]. Overall,
social sustainability is measured through principles, actions and measures implemented [9].
The firm’s appearance in the locality of its operations, the way in which it is regarded as
an employer, service provider and accomplice in the local confinements categorically influence its
competitive locus [20]. Moreover, businesses that are held as a socially dynamic stand to experience
an enhancement in their repute from the community and business guild. In this instance, this heightens
the prospects for businesses to draw capital together with improving their competitive situation [19].
SMEs are conspicuous in availing social sustenance in the areas of sporting activities in nearly all the
nations in Europe. Coherently, in Latin America, SMEs appear to be vastly dynamic in the fields of
sporting, healthiness and cultural happenings [19]. In Africa, among others, SMEs contribute towards
social sustainability through employing people with inadequate education and skills levels, women in
the lower spectrums of the society. According to Apulu et al. [13], SMEs support in enhancing the
living standards of people through bringing about extensive local capital formation and attaining great
levels of productivity and capacity.

2.3. Firm Performance

Firm performance constitutes the second construct in this study. Firm performance is not a new
concept in the field of business research [24]. However, despite its prominence in latent literature,
the construct of firm performance is challenged by incongruences pertaining to indicators being selected
based on the researcher’s convenience [25]. Another incongruence noted by Santos and Brito [25] is that
of inadequate consideration of the dimensionality of firm performance. Thus, firm performance means
di↵erent things to di↵erent people. According to Ha-Brookshire [26] firm performance is a complex
concept to define and the complexity of the definition is even more entrenched within the context of
SMEs operations. Consistently, Rodríguez-Gutiérrez et al. [24] argue that a vast di↵erence found in
firms is the main reason why the definition of business performance is challenging. Thus, there is
a need to consider how firm performance can be assessed within the context of SMEs which have
substantive di↵erences contrasted with large businesses [8].
This study utilises both financial and non-financial measures of ascertaining the impact of
social sustainability on SMEs. Financial measures have long proven to be reliable when it comes to
ascertaining the outcomes of strategies and decisions by businesses [27]. However, universal application
of financial measures in ascertaining business performance has since been subject to debate with
assertions promulgated that financial measures alone are not sufficient to measure the intangible
aspects of business such as social sustainability [28]. For adequacy of measurement, there is a need
to augment financial measures with non-financial measures so as to properly depict the outcome of
business activities that are undertaken by firms. To this end, the stakeholder approach has been utilised
in an endeavour to encapsulate the e↵ects of business activities on di↵erent contracts it has with various
interested parties. Whilst, financial performance is primarily concerned with the shareholders or
owners of the business, there is a need to also ascertain the performance of firms with regards to other
interested parties such as customers, employees, society and suppliers [28,29]. In this regards, this study
focuses on the three primary stakeholder groups, namely, shareholders, customers and employees.
As indicated in latent literature [30], sustainability practices by businesses should be designed
in a stakeholder-inclusive manner and respond to numerous demands by di↵erent stakeholders.
In addition, firms (large and small) need to proactively communicate their sustainability strategies and
outcomes so as to enhance their relationships with their respective stakeholder groups [30].
Consistently, latent research indicators have utilised either economic (profitability and productivity
measures) financial or growth indicators [24]. Furthermore, within the sustainability spectrum, it is
argued that there is a need to broaden the matrices utilised to measure firm performance [8,25]. On the
other hand, Santos and Brito [25] consider multidimensionality to consist of financial performance
and non-financial performance, with the financial performance dimension comprising profitability,
Sustainability 2019, 11, 3257 5 of 13

growth and market value. Selvarajan, Ramamoorthy, Flood, Guthrie, MacCurtain and Liu [31] state
that return on investment (ROI), earnings per share and net income after tax have often been employed
as measures of financial performance. Profitability and growth indices are of high significance in
characterising firms between more and less successful ones [32]. However, the financial measurement
of firm performance faces criticism because it is primarily backwards-looking and it also partially
predicts the future pertaining to depreciation and amortization [33]. In this regard, the following
hypothesis was postulated:

Hypothesis 1 (H1). There is a significant positive link between social sustainability practices (SSD) and
financial performance (FFP) of SMEs in Limpopo Province.

Financial measures are ex-post and focus on recognised strategies whilst they disregard the
future [34]. Consistently, the phenomenon of definitional confusion with regards to firm performance
emanates from authors utilising antecedents of performance as indicators of performance [25].
Thus, Sambharya [34] critiques that financial measures also tend to be internally oriented and
assess management, whilst they disregard the stakeholders and external environments. Furthermore,
Al-Matari et al. [33] propound that financial performance is regarded to be insufficient as a firm
performance measure because it is subject to the accounting profession standards. Thus, it is
constrained by the accounting practice since it is determined by the accountant. Alternatively,
non-financial performance dimensions that have been utilised by authors include innovativeness,
employee satisfaction, customer satisfaction, entrepreneur satisfaction and competitiveness [26,35,36].
Whereas, Santos and Brito [25] note that the non-financial dimensions are measured at the hand
of competitive issues such as customer satisfaction, quality, innovation, employee satisfaction and
reputation. Furthermore, research on sustainable performance, in general, has been observed to be
insufficient from the milieus of developing countries, especially from a subjective perspective [37].
On this background, the following hypotheses were developed in this study.

Hypothesis 2 (H2). There is a significant positive link between social sustainability practices (SSD) and
customer satisfaction performance (CFP) of SMEs in Limpopo Province.

Hypothesis 3 (H3). There is a significant and positive link between social sustainability practices (SSD) and
employee satisfaction performance (EFP) of SMEs in Limpopo Province.

3. Research Methodology
This research area in this study was the Limpopo Province of South Africa. Limpopo province is
predominantly sustained by small businesses with a fairly small number of big businesses that have
been established in the province. The target population for this study was SMEs in general that were
operating in the Limpopo province. This is alluded to by the fact that Limpopo is primarily rural with
the majority (71%) of its population being located in rural areas [38]. Limpopo has been identified
as the fastest growing economy and this is parallel also to SME growth rate which has been noted
as the highest at 34% [39]. As such, the province was reckoned appropriate to provide information
pertaining to the behaviour of SMEs as pertains to sustainable development practices. Surveys can be
categorised into two broad classes, namely, the questionnaire and the interview [40].
The quantitative research approach was utilised for the study at hand. For sampling,
the convenience technique was selected due to the inherent accessibility, proximity of respondents and
costs advantages. A cross-sectional method using a self-administered questionnaire in the form of
a standardised measuring instrument was used (See Appendix A). Self-administered questionnaires
can either be printed or electronic [41]. Paper questionnaires can be distributed through the mail,
in-person drop-o↵, inserts or through fax. Electronically, self-administered questionnaires can be
completed through e-mails, internet website, interactive kiosks, or through mobile phones. This study
utilised both printed in-person drop o↵ and electronic mail (e-mail) as in distributing the questionnaire.
Sustainability 2019, 11, 3257 6 of 13
final no of
-

respondents
f
-

All in all, 500 questionnaires were dispersed in the survey and 254 were returned which represents
a 50.8% response rate. A further 16 were not usable due to partial responses, and 238 questionnaires
were subsequently utilised giving an e↵ective final survey response rate of 47.6%. The self-administered
questionnaire was designed as well as operationalised following a thorough literature review and
constituted a 5-point Likert scale type of questions. Social sustainability items (See Appendix A)
used in the study were primarily adopted from a study by Høgevold et al. [22]. The psychometric
measurements in the scales that were utilised were reckoned to be fitting as they exceeded the
threshold of 0.6 with Cronbach’s alpha statistics of between 0.66 and 0.68 values. For firm performance,
the questionnaire items (see Appendix A) were operationalised based on previous works [25,31,33,34].
The obtained data were analysed in two ways, namely, descriptive and inferential analyses. Statistical
Package for Social Sciences (SPSS) Version 25 and Analysis of Moment Structures (AMOS Version 25.0)
were used as analytical software.
Furthermore, Amos was specifically used to perform hypothesis testing under inferential analysis,
through structural equation modelling (SEM). SEM comprises a measurement model and a structural
model. The measurement model pertains to the relationship between the latent (endogenous and
exogenous) constructs and their relative observation variables, while the structure model relates to the
correlation between latent constructs, exclusively [42]. In SEM, a researcher can utilise three approaches,
namely, confirmatory approach, alternative model approach and model generation approach. Herein,
this study utilised the confirmatory approach whereby the aim was to establish whether the data
would fit the model based on a literature review [43].

4. Results
Maiden analyses pertaining to screening for missing data, outliers, and normality (kurtosis
and skewness) revealed that no significant inconsistencies in the data were identified. Table 1
presents information on the respondents’ demographic attributes as well as the surveyed firms’
characteristics. Herein, most of the respondents were males (59.7%), aged 31 to 40 years (36.1%),
and owners (57.1%). Additionally, the firms surveyed mostly employed 6–20 employees (40.3%) and
were urban-based (77.7%).

Table 1. Demographic details and business profile.

Variables Category Frequency Frequency (%)

Gender Male 142 59.7
Female 96 40.3
Age (in years) Below 20 25 10.5
20–30 86 33.8
31–40 80 36.1
41–50 24 10.1
Above 50 23 9.7
Role in organisation Owner 136 57.1
Manager 102 42.9
Number of employees 5 and Below 85 35.7
6–20 96 40.3
21–50 39 16.4
51–200 18 7.6
Location of business Rural 53 22.3
Urban 185 77.7

Furthermore, exploratory factor analysis (EFA) was performed through principal component
analysis (PCA) and varimax rotation to determine the dimensionality of factors contained in the study.
Data was regarded to be orthogonal; as such the Varimax rotation option was used in this study.
Sustainability 2019, 11, 3257 7 of 13

Orthogonal rotation is utilised when factors are deemed to be uncorrelated and make use of a 90
rotation of factors from each other [44,45]. Of the three prominent orthogonal rotation techniques,
namely, quartimax, varimax and equimax, varimax was preferred because it reduces the number of
variables that contain high loadings on each given factor and aims to ensure that small loadings are
even more minimised [45]. Before EFA, data were initially examined for sample adequacy through
Kaiser-Meyer-Olkin (KMO) and Bartlett’s test of sphericity (BTS) tests, of which all the items had KMO
values above 0.5 and BTS was significant (p < 0.5) implying suitability of data for factor analysis [46]
(see Table 2). EFA results on factor loadings are shown in Table 3 with all items showing considerably
high loadings exceeding the threshold of 0.50 [44].

Table 2. Descriptive statistics.

Measures MEAN SD EIGEN TVE (%) KMO BTS

SSD 4.18 1.244 8.513 84.306 0.905 0.000
FFP 2.68 0.717 3.665 70.283 0.879 0.000
CSP 3.56 1.330 2.821 83.424 0.897 0.000
ESP 3.98 1.248 1.967 16.343 0.680 0.000

Table 3. Factor loadings, Cronbach’s alpha, Average Variance Extracted (AVE), Composite reliability
(CR) and R-squared.

Factor
Factor Item Cronbach’s ↵ AVE CR R-Squared
Loading
SSD1 0.799 0.898 0.571 0.887 ———
SSD2 0.834
Social Sustainability Practices SSD3 0.816
(SSD) SSD4 0.739
SSD5 0.841
SSD6 0.752
FFP1 0.815 0.915 0.655 0.908 0.07
FFP2 0.822
Financial Firm Performance
FFP3 0.796
(FFP)
FFP4 0.756
FFP5 0.800
CSP2 0.529 0.893 0.799 0.922 0.17
Customer Satisfaction
CSP3 0.712
Performance (CSP)
CSP4 0.770
ESP1 0.712 0.934 0.873 0.933 0.16
Employee Satisfaction ESP2 0.850
Performance (ESP) ESP3 0.889
ESP4 0.810

4.1. Measurement Model

Data were analysed for convergence through Cronbach’s coefficient alpha (↵) scores and all the
values exceeded the threshold of 0.7 signifying significant convergence. Information presented in
Table 3 shows Cronbach’s coefficient values ranging between 0.893 and 0.934 which specify significant
reliability. Composite reliability (CR) and average variance extracted (AVE) were utilised to ascertain
internal consistency in the study. CR and AVE determine the extent of variance captured by a construct’s
measure in contrast to the measurement error [47]. The Fornell and Lacker [47] approach was utilised
to in the computation of the CR and AVE values whereby parameter estimates and their relative
t-values for each construct where utilised. CR values exceeding 0.7 and AVE values greater than 0.5 are
as viewed satisfactory for internal consistency [48]. As shown in Table 3, all the CR and AVE values
exceed the postulated cut-o↵ values depicting internal consistency.
Sustainability 2019, 11, 3257 8 of 13

Correlation coefficients of constructs (CCC) and the square root of average variance extracted
(square root of AVE) were applied for the purposes of discriminant validity ascertainment. Herein,
Table 4 reflects that most of the correlation coefficients of constructs were lower than the specified 0.80.
Per se, discriminant validity is explained by the low correlation between constructs which represent
uniqueness or distinctiveness of theoretical operationalisations [40,41,45]. The square roots of AVE
values for each construct are in the bold and diagonal (see Table 4). Respectively, all the square root
of AVEs exceed their respective correlation coefficients thereby positing satisfactory discriminant
validity [47].

Table 4. Correlation matrix and Square roots of AVEs.

Factor/Item 1 2 3 4
1 Social sustainability 0.756
2 Employee Satisfaction Performance 0.35 0.883
3 Customer Satisfaction performance 0.35 0.82 0.894
4 Financial Performance 0.21 0.63 0.57 0.814
Square roots of AVE (average variance extracted) values are presented diagonally (in italics).

Furthermore, a measurement model was formulated through confirmatory factor analysis (CFA).
CFA concentrates on determining the extent to which the manifest variables satisfactorily measure the
latent variables as well as ascertaining matters of validity and reliability [49]. CFA depicted acceptable
fit (chi-square = 318.530, df = 86, p = 0.000, N = 238, confirmatory fit index (CFI) = 0.963, Tucker–Lewis
Index (TLI) = 0.946, root mean square error of approximation (RMSEA) = 0.096, SRMR = 0.0462,
and the chi-square/df = 3.704). Thus, all the fitness statistics were acceptable apart from the chi-square
statistic which is required to be insignificant and is seldom so in huge sample sizes because of its
sensitivity to sample sizes above 200. However, in order to achieve acceptable fitness, an item (CSP1)
pertaining to customer satisfaction performance construct was dropped due to high residuals of 2.987
and 2.886 which exceeded the acclaimed threshold of within +/ 2.58 values [50].

4.2. Structural Equation Modelling

In order to examine the hypothesised relationships pertaining to social sustainability practices and
financial performance, customer satisfaction performance as well as employee satisfaction performance,
a path analysis approach in structural equation modelling (SEM) was done. SEM is also called
covariance structure analysis, covariance structural modelling, or analysis of covariance structures,
as well as causal modelling. SEM is a family of superior analytical techniques that are highly efficient
because it evaluates a series of dependence and interdependence relationships [51,52]. The SEM
technique is regarded as a second-generation multivariate method that integrates multiple regressions
and confirmatory analysis to predict simultaneously various interrelationships amongst the constructs
of the hypothesised model [52]. Thus, through AMOS version 25, the SEM approach was utilised
because it is advantageous when it comes to simultaneous estimation of parameters in a single model.
Model fitness was deemed satisfactory despite of a significant chi-square (chi-square = 553.896, df = 196,
p = 0.000, N = 238, CFI = 0.910, TLI = 0.897, chi-square/df = 2.826, RMSEA = 0.086). In the research,
R-squared (R2 ) values pertaining to the endogenous latent variables, explicitly, financial performance
(7%), customer satisfaction (17%) and employee satisfaction performance (16%) indicate the magnitude
of predictive ability of the model (see Figure 1).
Sustainability 2019, 11, 3257 9 of 13
Sustainability 2019, 11, x FOR PEER REVIEW 9 of 13

Figure 1. Structural model.

Figure 1. Structural model.
Table 5 is a presentation of the results of path analysis through the structural model and Figure 1
diagrammatically illustrates the
Table 5 is a presentation ofmodel. Standardised
the results regression
of path analysis weights
through were usedmodel
the structural to conduct a path
and Figure
analysis and the results supported H1, meaning that there is a significant positive bond between
1 diagrammatically illustrates the model. Standardised regression weights were used to conduct a
social
path sustainability
analysis and thepractices
resultsand financial H1,
supported performance
meaning (that = 0.263,
there tis= a3.484, p < 0.001).
significant The results
positive bond
also exposed
between a significant
social positive
sustainability association
practices between
and financial social sustainability
performance (β = 0.263, tpractices
= 3.484, pand customer
< 0.001). The
satisfaction performance ( = 0.410, t = 5.289, p < 0.001), supporting H2. Lastly, pertaining to H3,
results also exposed a significant positive association between social sustainability practices and
acustomer
significantsatisfaction performancebetween
positive relationship (β = 0.410, t = 5.289,
social p < 0.001), supporting
sustainability practices and H2.employee
Lastly, pertaining to
satisfaction
H3, a significant positive relationship between social
performance ( = 0.397, t = 5.135, p < 0.001), was also established. sustainability practices and employee
satisfaction performance (β = 0.397, t = 5.135, p < 0.001), was also established.
Table 5. Results of hypotheses testing.
Table 5. Results of hypotheses testing.
Hypothesised Relationship S.E. C.R. P Decision
Hypothesised Relationship β S.E. C.R. P Decision
H1: Social sustainability ! Financial Performance 0.263 0.092 3.484 *** Supported
H1:
H2: Social sustainability!→
Social sustainability Financial
Customer Satisfaction 0.410 0.080 5.289 *** Supported
0.263 0.092 3.484 *** Supported
H3: Social sustainability
Performance ! Employee Satisfaction 0.397 0.075 5.135 *** Supported
, standardised
H2: Social sustainability → Customer
regression weight; S.E., standard error; C.R., critical ratio; P, probability value; ***, Denotes p < 0.001.
0.410 0.080 5.289 *** Supported
Satisfaction
5. Conclusions
H3: Social sustainability → Employee
0.397 0.075 5.135 *** Supported
Satisfaction
The study presented social sustainability as a major driver of SMEs performance in developing
β, standardised
in economies, with aregression weight;Africa
case of South S.E., standard error; C.R.,
being utilised. The critical
impactratio;
of P, probability
social value; ***,in this
sustainability
Denotes p < 0.001.
context was determined by considering three aspects of firm performance, namely, financial, customer
satisfaction and employee satisfaction performance. In other words, the study endeavoured to integrate
5. Conclusions
the broader impact of social sustainability by considering the perspectives of employees, customers
as wellTheas study
the firm. This approach
presented is consistentaswith
social sustainability latent
a major literature
driver of SMEs [10]performance
in the socialinsustainability
developing
context as it provides
in economies, with a acase
fairer
of understanding
South Africa being of the contribution
utilised. The impact of social sustainability
of social towards
sustainability the
in this
firm by assessing
context the major by
was determined social stakeholders.
considering threeFrom the results
aspects of firm of path analysis, social
performance, namely,sustainability
financial,
was significantly
customer linked to
satisfaction andfinancial
employeeperformance, customer
satisfaction satisfaction
performance. In performance,
other words,and employee
the study
satisfaction
endeavoured performance,
to integraterespectively.
the broader impact of social sustainability by considering the perspectives
of employees, customers as well as the firm. This approach is consistent with latent literature [10] in
Sustainability 2019, 11, 3257 10 of 13

Firstly, social sustainability was found to be significantly and positively related to financial
performance. In consistency with past studies [53], the results of this study suggest that the SME
owner/managers perceived that an increase in social sustainability practices potentially enhanced
the financial performance of their small firms. Thus, with traditional aspects of firm performance,
namely, financial performance, SMEs should expect readjustment of business performance due to
social sustainability. Secondly, a positive and significant association was also established between
social sustainability and customer satisfaction performance in SMEs. Equally, this means that
achieving customer satisfaction amongst SMEs is now somewhat determined by social sustainability
practices [54,55]. Lastly, employee satisfaction was closely associated with social sustainability practices.
Accordingly, the positive and significant relationship between social sustainability and employee
satisfaction performance confirmed in the study is consistent with existing empirical studies [56].
This then follows that increasingly employees are scrutinising social sustainability issues of SMEs.
The confirmation of all the postulated hypotheses in this study has several implications. Firstly,
the reviewed literature indicated that amongst the three areas of sustainability, namely, economic,
environmental and social, little e↵ort has been directed towards the area of social sustainability.
The findings of this study are therefore essential as a justification for business practising social
sustainability. While in the past, social issues were only a concern for large businesses, these findings
further substantiate that even small businesses need to be proactive as this has broad e↵ects on the
other areas of firm performance. Especially, considering the closer and dyadic relationship between
small businesses and the society, it may be found that small businesses need to social sustainability
practices more than large organisations. The owner/managers need to consider the two parental
variables investigated in this study. As such, managers and owners of SMEs in developing countries
cannot ignore social sustainability concerns as highlighted by its vitality to shareholders, customers
and employees, respectively. These findings indicate the need to consider social sustainability as
a competitive advantage tool by SMEs.
In the same regards, governments, policymakers, as well as business practitioners, need to
consider the huge possibility for SMEs to be instrumental in advancing social sustainability especially
considering that SMES are usually located in areas that are socially disadvantaged. Thus, though it is
generally consented that there is an increasing growth in the rate that social sustainability is being
practised by businesses, the rate of adoption and practice can be increased. As part of recommendations,
there is a need to ensure that social sustainability becomes institutionalised as a business practice.
Researchers, academics and policymakers have a huge role to ensure that there is some form of
codification in the social sustainability spectrum. These results need to be interpreted within the
constraints of the study. The major limitation is that the study only considered one developing country,
namely South Africa. Again, the study was only focused on one specific province of South Africa,
namely, Limpopo province. Thus, future studies can adopt a broader spectrum of the study area and
can pursue a comparative approach between developing and developed countries in order to establish
the di↵erences in the e↵ects of social sustainability.

Funding: The APC was funded by the University of Limpopo.

Conflicts of Interest: The author declares no conflict of interest.

Appendix A. Research Instrument

Indicate with an X to what extent do you agree to your firm applying the following sustainability
practices by using the scale below where: 1 = Strongly Disagree and 5 = Strongly Agree.
Sustainability 2019, 11, 3257 11 of 13

Social Sustainability Our Sustainable Business Practices

take current activities in the community into account 1 2 3 4 5
consider the social well-being of society 1 2 3 4 5
promote women to senior management positions 1 2 3 4 5
focus on equity and safety of the community 1 2 3 4 5
focus on improving the general education level 1 2 3 4 5
promote individual rights both civil and human rights 1 2 3 4 5

Rate the performance of your business in the past three years in the following areas indicating
with an X using the scale below where: 1 = Significant decline to 5 = Significant increase.

Financial Performance
Net revenue 1 2 3 4 5
Gross Profit 1 2 3 4 5
Sales growth relative to competitors 1 2 3 4 5
Number of Employees 1 2 3 4 5
Market Share 1 2 3 4 5
Customer Satisfaction Performance
Sales (turnover) 1 2 3 4 5
Customer service 1 2 3 4 5
Relations with customers 1 2 3 4 5
Customer loyalty 1 2 3 4 5
Employee Satisfaction Performance
Employee remuneration 1 2 3 4 5
The working environment 1 2 3 4 5
Employees’ loyalty 1 2 3 4 5
Employees’ morale 1 2 3 4 5

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