Abstract:
In the global race toward sustainability, the necessity for small- and medium-sized enterprises (SMEs), especially in developing economies, to march towards a Sustainable Net Zero Economy (SNZE), became much more pressing. In particular, the study analyzes the impact of tangible resources, intangible resources, and human skills on the financial, environmental, and social performance of SMEs in Pakistan, considering sustainable manufacturing and circular economy capabilities as mediation variables. The model underlying the research grounded in the Natural Resource-Based View (NRBV) and Human Capital Theory, and data were quantitatively analysed using input from 309 SMEs. The hypothetical relationships of this model tested using Structural Equation Modelling (SEM) based on the Partial Least Squares (PLS) approach. The results suggested that tangible assets, organizational culture, and human capital most critically influence the adoption of SNZE practices. Furthermore, sustainable manufacturing and circular economy capabilities operate as key channels through which the resource inputs translate into better performance outcomes. While sustainable manufacturing enhances efficiency, innovation, and environmental compliance, circular economy capabilities assure cost savings, resource optimization, and engagement with stakeholders. Together with these mediators, it enables SMEs to improve competitiveness and resilience while contributing to environmental and social value. This study contributes to the theory by advancing sustainability research through an empirical examination of the application of the NRBV and human capital perspectives in the context of a developing country. In practice, the study identifies actionable strategies for SME managers and policymakers to help overcome constraints imposed by limited resources, weak provisions for their protection, and low sustainability awareness.
