The Role of Economic Sustainability to Improve the Performance of Manufacturing Industry Companies in Indonesia: A Path Analysis

Abstract

Economic and technological development is a factor that has greatly changed environmental conditions, resulting in increased population, exploitation of nature, and improper management of industrialization. Waste output and resource consumption are significantly attributed to the industrial sector worldwide. These sectors have also been shown to be the most significant contributors to environmental pollution and carbon emissions. This research aims to determine how economic damage affects business performance by analyzing the impact of Green Intellectual Capital (GIC) and Environmental Management Accounting (EMA). The use of an explanatory causality approach achieved the stated objective. The selection of managers from the manufacturing sector as research samples, survey data gathering, and primary data sourcing were some of the steps in this methodology. The sampling strategy used was simple random sampling, and each participant served as the unit of analysis. Data was examined using Structural Equation Modeling [SEM], using a cross-sectional temporal horizon. GIC and EMA favorably impact economic sustainability, regardless of the numbers gathered. Economic sustainability, GIC, and EMA have also been shown to improve business performance. The findings demonstrated that the connection between economic and business performance sustainability was effectively mediated. The EMA and GIC, The variable also signified that the costs associated with environmental protection were relatively high, even though companies could still generate profits. This typically made the performance of manufacturing companies efficient but ineffective. For protection against environmental pollution, industrial enterprises in Indonesia often adhere to the Global Risk Index's (GRI) recommendations and voluntarily apply environmental and social responsibility.

Received: 7 November 2024 / Accepted:  5 January 2025 / Published: 11 January 2025