Sustainable Practices and Business Performance: Evidence from Sri Lankan Manufacturing Firms

The purpose of this paper is to investigate the influence of sustainable practices (SP) on business performance (BP) of ISO 14001 EMS certified manufacturing firms of Sri Lanka and also to examine the moderator effect from firm size on the link between sustainable practices and business performance. The study used the questionnaire survey technique to collect data from a sample selected using simple random sampling from known population and SPSS software is used for survey data analysis. The major finding indicates that sustainable practices have a positive influence on business performance and it can be measured using environmental practices, corporate governance, and human resource management practices. Moreover, the results indicate firm size has no moderating effect on the link between sustainability practices and business performance. The findings of this paper is a novelty for Sri Lankan manufacturing industry and for policymakers as it provides new insights to the manufacturing industry on sustainable practices(SP) and the business performance (BP). Moreover, the results of the study is useful for manufacturing firms in Sri Lanka looking forward to install ISO 14001 based environmental management system within the firms as results provide areas need to be focused. This research is confined to ISO 14001 EMS certified manufacturing firms of Sri Lanka and therefore the findings obtained may not be generalized to other countries.

environmental, social, and market benefits (Prajogo et al., 2012). Borowy (2013), and Dyllick and Muff (2016) mentioned with the increasing adoption of sustainability by businesses the environment matters declining in a faster manner.

Sustainability Practices
'Sustainability Practices' become one of the vital concepts like the use of such practices within the firms provide tangible results. According to Sarkis (2001), the manufacturing firms' functions have been evolved over the years with regard to environmental practice and strategies and those are always the priority issues in the agenda of such firms' paving the way to handle the environmental sustainability. With the establishment of internationally recognized Global Reporting Initiative (GRI) guidelines, the usage of that has grown up and becomes very popular for documenting of sustainable practices (Garcia et al., 2016;Thijssens et al., 2016) According to Boons and Lüdeke-Freund (2013), an increasing trend of investigations are carried out by many intellectuals and practitioners to determine the possibility of changing the existing business models or developing new models in order to reduce the negative external impact for the environment and the society leading to a wealthy economy. Dhaliwal et al. (2011) concluded that socially responsible practices may lead to long term financial returns to the firm. Kurapatskie and Darnall (2013) indicated that sustainability practices were connected with the sustainability performance with varying strength and time horizon. Carrol (1999) mentioned that the connections of social and financial performance are shown widely linked with the models having the concept of corporate social responsibility.
Considering the environmental issues and the GHG Gas matters taking place globally manufacturing firms have taken positive aspects to implement sustainable practices. Moreover, Whiteman et al. (2013) indicated that organizations having donations for "sustainable development" of the economy and society by having a coherent mechanism using "social", "environmental", and "economic" factors are identified as "sustainability management". Wagner (2010); Orlitzky et al., (2003) indicated that a Corporate Sustainability (CS) have a considerable influence on economic enhancement and competitiveness. Furthermore, Orlitzky et al., (2003) indicated that most of the studies showed that corporate social responsibility practices have positive influence on business performance. At the same time according to Margolis and Walsh (2003), there were studies that showed no conclusion about the connection between corporate financial performance and corporate social responsibility. In view of the above, the following hypothesis is proposed. H1 Sustainable Practices has an influence on Business Performance Ntim et al. (2013), Jizi et al. (2014) and Allegrini and Greco (2013) proved empirically that board size and level of disclosure positively related. Jensen and Meckling (1976), indicated that one of the important factors of sustainability dimension as per Agency theory is Corporate Governance and there should be a positive relationship between corporate governance and firm performance.Corporate governance and firm financial performance association in evolving markets are empirically proved (Aguilera et al., 2011).Good corporate governance and a firm financial performance are correlated (Renders et al., 2010). No conclusion was made about the positive relationship between corporate governance and firm performance (Gupta, Chandrasekhar, Tourani-Rad, 2013). Considering the above, the following hypothesis was proposed. Hypothesis (H1a): Corporate Governance has a positive influence on business performance.

Human Resource Management Practices and Business Performance
One of the main important thing to remove barriers for sustainable practices with a considerable commitment is to have an improved communication and training and development of employees as it supports to change the attitude and encourage for involvement (Stone, 2006).In furtherance Linnenluecke and Griffiths (2010) mention that ultimately these initiatives make the "green" or "sustainable organizational culture". Once the top Management got involved in the sustainability work then the concept can be facilitated within the organization (Bansal, 2003). Similarly, K'Obonyo, Busienei, and Ogutu (2013) indicated the examination of previous research studies reveal that the firms implement certain human resource practices, policies show excellent results when compared to competitors. Moreover, Stoughton and Ludema (2012) indicates that currentresearch findings reveal that commitment of top management plays a vital role in implementing sustainability within thefirm.Moreover, Busienei (2013) proved that HRM practices contribute significantly for firm performance. Considering the above, the following hypothesis was proposed. Hypothesis (H1b): Human Resource Management Practices have a positive influence on business performance.

Environmental Practices and Business Performance
The scholars Berrone et al. (2013), Colwell and Joshi (2013) and Moon et al. (2014) indicated for research work on environmental protection activities Institutional Theory provides a good outlook. Young and Tilley (2006) European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.12, No.5, 2020 indicated that at business level the focus towards sustainability practices has shifted from "pollution control" to "eco-efficiency" and "socio-efficiency". Main purpose is to have a win-win situation where environmental performance such as minimization of "resource consumption" and "waste generation" are connected to economic benefits whereas reducing of negative social impacts or increasing of positive ones are linked with the social performance.According to Smith (2012), manufacturing firms are pressurized to use less resources to manufacture more green products having low waste generation and less pollution to meet the ever-changing quality of life of people. It could, therefore, be argued that environmental sustainability could contribute both to economic profitability and competitive advantages (Wagner, 2005).According to Kang and Lee (2016), whether there is a causal positive or negative relationship between environmental strategy and company performance is one of the most favorite concern of the studies related to environmental sustainability development. Hence the following hypothesis is proposed. Hypothesis (H1c): Environmental Practices have a positive influence on business performance.

Moderating role of Firm Size
Firm size shows the capacity According to Temtime (2003), the development and execution of strategies want commitment of insufficient resources as the firm size provides the resource funding that is connected with the planning. Gimenez et al. (2012) proved that the performance of the firm varies according to the firm size. H2:Firm Size moderates the relationship between sustainable practices and business performance Considering the foregoing information, the following hypothesized model is proposed to evaluate the sustainable practices of ISO 14001 EMS certified Sri Lankan manufacturing firms in Sri Lanka. The ISO 14001 EMS certified manufacturing firms are considered for the study and used three dimensions in assessing the hypothesized model used for this study.

Pilot Study
A well-structured questionnaire was developed based on the comprehensive literature review findings using previously validated items by different scholars and questions were categorized under each dimensionswith a 5 point Likert scale. There were three sections in the questionnaire with 53 questions. The questionnaire was pretested with the support of the knowledgeable personnel and then distributed it among randomly selected 20 manufacturing firms and based on the findings the certain items of the questionnaire were modified. The reliability of data was ensured by conducting Cronbach's Alfa value tests.

Population and Sampling
Population of the study obtains from the ISO 14001 environmental Management Systems certified manufacturing firms of Sri Lanka. Simple random sampling technique was used to select the sample using Sekaran and Bougie (2016) sampling tables and also consideration was given to response rate for the pilot study to select the corresponding sample size of 151 manufacturing firms. The main respondents to this study were managing director, senior directors, managers, executives who have thorough knowledge and experience in the applicationof ISO 14001 environmental management system concepts within the manufacturing firms. After reviewing the received questionnaires, for the study 138 usable questionnaires were used.

Data Analysis Techniques
The study used the SPSS software 21 version for the analysis of data and a number of tests such as screening for missing data, normality tests, validity & reliability test, Descriptive statistics analysis, Linearity test, homogeneity test, multicollinearity tests were performed and checked the suitability of data for further analysis. Then for the analysis of hypotheses, multiple regression and hierarchical regression analysis techniques were used. The above analysis given in table 2 shows that 92% respondents are having six or over six years working experience and hence majority of respondents are very knowledgeable about the actual practices of these firms. This indicates that the to a very great extent survey answers are sound.

Hypothesis Testing 4.2.1 Results of Reliability Analysis
The reliability analysis of survey data was done by calculating the Cronbach's Alfa vale. The results of analysis were given below in table 3. Cooper and Schindler (2008) indicated that if Cronbach's Alfa value is greater than 0.7 the data is reliable. As per the results for all dimensions the Cronbach's Alfa was above 0.7 hence the data is reliable and can be used for further analysis. given below showed the results of reliability analysis of data. Since Cronbach's alfa value for all dimensions are over 0.7 the data are reliable and can be used for further analysis. Since the p-value is less than 0.05, the alternative hypothesis is accepted, which provides that there is a weak contribution of Sustainable Practices (Corporate Governance, Environmental Practices, and Human Resource Management Practices) on Business performance, at level (α≤0.05). This finding is in line with the results of European Journal of Business and Management www.iiste.org ISSN 2222-1905(Paper) ISSN 2222-2839(Online) Vol.12, No.5, 2020Dhaliwal et al. (2011 which indicates that sustainability practices contribute to enhance business performance. Furthermore, Hypothesis H1a is supported as (Beta=0.224, sig. =0.012) that means p is less than 0.05 and in other words, this indicates that corporate governance has a weak positive influence on business performance, at level (α≤0.05). This provides that corporate governance plays an important role on enhancing business performance and the finding is also consistent with the previous research findings of Renders et al. (2010) The Hypothesis H1bis supported as (Beta=0.208, sig. =0.012) that means p is less than 0.05 and therefore human resource management practices have a weak positive influence on business performance at level (α≤0.05). This finding is also supported with Busienei (2013). In furtherance, H1c is not supported as (Beta=0.025, sig. =0.775) that means p is greater than 0.05 and that indicates the environmental practices have no positive influence on business performance as per the analysis results. The above table 5 of hierarchical linear regression indicates in Model 1, R Square value of .277 and when Firm size scores were added as shown in Model 2, the value for R Square increased to .282 (28.2%)leading to a difference of 0.005 which means with addition of Firm Size scores contributes 0.05% additional variance in business performance. On the same basis when other interaction variables were added in Model 3 the value for R square increased to 0.333 (33.3%) having an increase of 0.050 giving an additional 0.5% variance in business performance. Furthermore, in Model 2, β value of firm size (0.075) and in Model 3, β values for interaction variables are -1.795, -0.564 & -.089 are not significant. Moreover, when consider the above results only Model 1 is Sig. F Change is less than 0.001 and hence this indicated with the addition of new variable do not produce statistically increase invariance for the dependent variable of business performance. Therefore, H2 is not supported. Hence firm size has no moderating effect on the relationship between sustainability practices and business performance.

Conclusions
In summary sustainability practices have an influence on business performance of the ISO 14001 environmental management system certified manufacturing firms. Moreover, corporate governance of the firm is important as per the analysis to enhance business performance. This is a very important finding as board of directors' are the decision-making body of any firm and therefore their support is very much required to adopt sustainable practices leading to enhance business performance of the firm. Furthermore, the analysis revealed that human resource management practices also support to enhance business performance. In other words, the results of the study suggest to focus on human resource management practices as it is vital for manufacturing firms to enhance the business performance. Surprisingly, study revealed that one of the sustainable practices namely environmental practices do not have a contribution for business performance. Since the research has been done using the manufacturing firms certified to ISO 14001 environmental management system in Sri Lanka and therefore the respondents of these firms are well aware about the actual situation of the environmental practices of these firms. Hence study suggests that the CEOs' of these firms should give considerable attention to the implementation of ISO 14001 based environmental practices within these firms to gain the real benefits.
Moreover, findings indicate that firm size has no moderating effect on the relationship between sustainable practices and business performance. This indicates irrespective of the firm size the ISO 14001 environmental management system certified manufacturing firms can use sustainable practices to enhance business performance. In furtherance, the firm size is not a factor to consider when implementing sustainable practices within the ISO 14001 environmental management system certified manufacturing firms.

Research Limitation
European Journal of Business and Management www.iiste.org ISSN 2222-1905(Paper) ISSN 2222-2839(Online) Vol.12, No.5, 2020 This study was limited to ISO 14001 certified manufacturing firms in Sri Lanka and therefore results are applicable only to such manufacturing firms. Moreover, the study used a Likert based questionnaire and hence the respondents have no choice other than select one of the answers which limit to obtain the real ground situation of the firms.

Future Research Direction
The future research may be expanded to specific sectors such as Food, Ruber, health and education with a larger sample which would further improve the results having an uniqueness to specific sector. Moreover, future research can also focus on selecting a specific category of manufacturing firms like large, medium or small as that would enable to make unique recommendations to that category of firms.