Evaluating the integration of internal and external factors for balancing sustainability and profitability in SMEs

¹ Suan Sunandha Rajabhat University, 1 U-Thong Nok rd., Dusit, Bangkok, 10300, Thailand
² Rajamangala University of Technology Rattanakosin, 96 Moo 3, Phutthamonthon Sai 5, Salaya, Phutthamonthon, Nakhon Pathom, 73170, Thailand

^* Corresponding author: v.yingsak@gmail.com

Abstract

This study investigates the challenge of balancing sustainability and profitability in small and medium-sized enterprises (SMEs) in Nakhon Pathom, Thailand. Using a qualitative approach, 45 semi-structured interviews were conducted with SME operators across agriculture, manufacturing, and commerce sectors to assess the influence of internal and external factors on sustainable business practices. Internal factors such as resource optimization, cost efficiency, and dynamic capabilities were identified as critical to enhancing sustainability while maintaining profitability. However, financial constraints and short-term survival remain key concerns for most businesses, with sustainability often deprioritized unless it directly contributes to cost savings. Externally, institutional pressures, stakeholder demands, and environmental regulations were found to significantly influence SMEs' sustainability strategies, though weak enforcement and lack of consumer demand for sustainable products limit broader adoption. The study offers practical recommendations for enhancing the effectiveness of both internal and external factors in driving sustainable business practices, including the need for government support through flexible regulatory frameworks, financial incentives, and increased public awareness of sustainable products. The findings contribute to a deeper understanding of the sustainability-profitability paradox in SMEs and suggest that achieving a balance requires a combination of economic incentives, stakeholder engagement, and supportive policy environments. Future research should expand the scope to include quantitative analysis of the financial impacts of sustainability initiatives across different industries and regions.