The Impact of Green Economy Implementation on Financial Performance and Sustainability of MSME Business Models in Indonesia

Mia Audina

doi:10.56442/ijble.v7i1.1357

Authors

Mia Audina S1 Management Study Program, Sanz Magnatya University Palembang Jl. Kamil No.1061, Suka Bangun, Kec. Sukarami, Km.6, Kota Palembang-30961, Indonesia

DOI:

https://doi.org/10.56442/ijble.v7i1.1357

Keywords:

Green Economy; Financial Performance; Sustainability; MSMEs; Business Model

Abstract

This study aims to analyze the influence of green economy implementation on the financial performance and sustainability of MSME business models in Indonesia. Employing a quantitative approach and Structural Equation Modeling–Partial Least Squares (SEM-PLS) analysis, this research examines MSMEs that have adopted environmentally sustainable practices through green innovation, green accounting, and green human resource management. The findings indicate that implementing the green economy has a positive, statistically significant effect on financial performance, with financial performance serving as a partial mediator, reinforcing the relationship between green practices and the sustainability of business models. These results substantiate the notion that successful green transformation not only engenders environmental legitimacy but also enhances financial resilience, which serves as the foundation for MSMEs' long-term competitiveness. Practically, this research offers implications for policymakers to strengthen the green regulatory and financing ecosystem, for MSME stakeholders to incorporate innovation alongside financial literacy and digitalization, and for financial institutions to develop inclusive, environment-based funding instruments.

References

Achmad, F., Suhanda, H., & Wijaya, A. (2025). The role of Green Innovation and Knowledge Management in fostering organizational performance and competitive advantage. Journal of Cleaner Production. https://doi.org/10.1016/j.jclepro.2025.

Andini, P., Paramita, & Sanskara, K. I. (2023). Innovation and Sustainability: Examining the Adoption of Green Technologies by Indonesian MSMEs. EPEB (East / South Institute), 1(1), Article 45. https://doi.org/10.58812/epeb.v1i1.45

Ardhiyansyah, A., & Juniansyah, M. (2024). Have MSMEs in Indonesia Focused on Business Sustainability? The Influence of Environmental Orientation, Technology Implementation, Green Marketing, and Innovation Capability. Jurnal Riset Ekonomi Manajemen (REKOMEN). https://doi.org/10.31002/rekomen.v7i2.1679

Ginting, H., & Rijal, S. (2024). Assessing The Role Of Environmental Innovation, Credit Access, And Governance In Shaping The Financial Sustainability Of Indonesian MSMEs. Journal of Economic, Business and Accounting (COSTING). https://doi.org/10.31539/costing.v7i4.9655

Hadi, D., Wahyuhastuti, N., Wuryandini, E., & Putra, F. (2024). Sustainability Strategy in the Development of MSMEs by Bank Indonesia in Increasing Economic Growth by Using Green Economic Policy as an Intervening Variable. Revista de Gestão Social e Ambiental. https://doi.org/10.24857/rgsa.v19n1-059

Indriastuti, M., & Mutamimah, M. (2023). Green Accounting and Sustainable Performance of Micro, Small, and Medium Enterprises: The Role of Financial Performance as Mediation. The Indonesian Journal of Accounting Research. https://doi.org/10.33312/ijar.691

Jayanto, I., Rahmiyati, N., Prihanto, P., & Parwita, G. (2025). The Impact of Green Innovation, Market Orientation, and Digitalization on MSME Performance in Indonesia. Indo-Fintech Intellectuals: Journal of Economics and Business. https://doi.org/10.54373/ifijeb.v5i2.2940

Joeliaty, J. (2024). Green Growth and Beyond: The Influence of Environmental Practices, Financial Management, Market Access, and Digital Integration on the Resilience and Sustainability Business Practices of MSMEs in Indonesia. International Journal of Business, Law, and Education. https://doi.org/10.56442/ijble.v5i1.446

Kusuma, H., Muafi, M., & Kholid, M. (2023). Pro-Environmental MSMEs Performance: The Role of Green IT Adoption, Green Innovative Behavior, and Financial Accounting Resources. Journal of Law and Sustainable Development. https://doi.org/10.55908/sdgs.v11i4.673

Muafi, M., & Roostika, R. (2022). MSMEs Business Sustainability Models in Indonesia. International Journal of Sustainable Development and Planning. https://doi.org/10.18280/ijsdp.170120

Setyawati, A., Suggangga, A., Wibowo, N. A., Rahma, A., & Maula, F. I. (2023). Ability to use digitalization in increasing the competitive advantages of MSMEs in Indonesia: A systematic literature review (SLR). International Journal of Economics and Management Research, 2(2), 48–65. https://doi.org/10.55606/ijemr.v2i2.94

Sirjani, N., Taufiq, A., Andriani, D., Erlianasari, N., & Wikanso, W. (2025). Green Human Resource Management and Business Performance of MSMEs in Indonesia. International Journal of Innovative Research and Scientific Studies. https://doi.org/10.53894/ijirss.v8i2.5766

Soesetio, Y., Soetjipto, B. E., Handayati, P., Winarno, A., Rudiningtyas, D. A., Mawardi, M. C., & Realita, T. N. (2024). Innovation and firm competitiveness as intervening variables in improving financial performance of MSMEs. Jurnal Aplikasi Manajemen, 22(2), 524–546. https://doi.org/10.21776/ub.jam.2024.022.02.16

Sumastuti, E., Harahap, S., & Sianipar, G. (2024). Exploring The Impact Of Green Finance, Financial Literacy, And Social Capital On The Performance And Financial Sustainability Of Indonesian MSMEs. Journal of Economic, Business and Accounting (COSTING). https://doi.org/10.31539/costing.v7i4.9719

Susanti, E. (2023). MSMEs performance and competitive advantage: How digital transformation and innovation mediate the effects in women-owned MSMEs. Cogent Business & Management, 10(1), Article 2239423. https://doi.org/10.1080/23311975.2023.2239423

Umar, F., et al. (2024). The effect of digitalization on business performance: Mediating role of competitive advantage in SMEs in Semarang. JOISER, Issue 2024.

Whittleliang Hakki, T., Surjadi, M., & Jocelyn, J. (2024). Testing of MSME Financial Performance Model in Indonesia with Financial Technology Moderation and Green Innovation Towards Advanced Indonesia. Dinasti International Journal of Education Management And Social Science, 6(1), 508–519. https://doi.org/10.38035/dijemss.v6i1.3262

Yaskun, M., Sudarmiatin, S., Hermawan, A., & Rahayu, W. P. (2023). The effect of market orientation, entrepreneurial orientation, innovation, and competitive advantage on business performance of Indonesian MSMEs. International Journal of Professional Business Review, 8(4), Article E01563. https://doi.org/10.26668/businessreview/2023.v8i4.1563