Author: Dr. Hossain et al. (2026)
Small and medium-sized enterprises (SMEs) play a fundamental role in economic development, employment generation, and social progress, particularly in emerging economies. As stakeholders increasingly demand responsible business practices, SMEs face growing pressure to integrate sustainability into their operations while maintaining competitiveness and long-term viability. Corporate social responsibility (CSR) has emerged as an important strategic mechanism through which firms can address social and environmental challenges while enhancing organizational performance. More recently, Environmental, Social, and Governance (ESG) principles have gained prominence as a comprehensive framework for guiding sustainability-oriented business practices. Although prior studies have examined the relationship between CSR and firm performance, limited attention has been given to how organizational and social factors influence the effectiveness of CSR initiatives in SMEs, particularly within developing countries. Furthermore, the moderating roles of gender diversity and social capital remain underexplored, despite their potential importance in shaping sustainability outcomes.
This study addresses these gaps by investigating the relationship between corporate social responsibility and SME sustainability performance in Bangladesh while examining the moderating effects of gender diversity and social capital. The research represents a novel contribution by integrating CSR with ESG-oriented sustainability practices and simultaneously assessing the influence of two distinct contextual factors that may strengthen or weaken the effectiveness of CSR initiatives. In doing so, the study extends existing sustainability literature beyond the direct CSR–performance relationship and provides a more nuanced understanding of the conditions under which CSR contributes to sustainable business outcomes.
The study is grounded in the sustainability perspective of Environmental, Social, and Governance (ESG) principles, which provide a comprehensive framework for evaluating responsible business practices. ESG integration has become increasingly relevant for SMEs as stakeholders, investors, regulators, and consumers place greater emphasis on sustainable value creation. Within this context, CSR serves as a practical mechanism through which SMEs can implement ESG principles and enhance their environmental, social, and governance performance.
Data were collected through a questionnaire survey administered to SME stakeholders in Bangladesh. A random sampling technique was employed to ensure broad representation. Of the 250 questionnaires distributed, 197 valid responses were returned, resulting in a response rate of 78.8%. The collected data were analyzed using regression techniques to evaluate the direct effect of CSR on sustainability performance and to examine the moderating roles of gender diversity and social capital.
The findings reveal a positive and statistically significant relationship between CSR and SME sustainability performance. The results indicate that SMEs that actively engage in socially responsible practices are more likely to achieve stronger sustainability outcomes, reflecting improvements in environmental stewardship, social responsibility, and governance effectiveness. These findings reinforce the argument that CSR should be viewed not merely as a philanthropic activity but as a strategic investment capable of generating long-term organizational benefits.
More importantly, the study uncovers significant differences in the influence of the two moderators. Gender diversity is found to significantly strengthen the relationship between CSR and sustainability performance, suggesting that organizations with more diverse gender representation are better positioned to translate CSR initiatives into meaningful sustainability outcomes. This finding supports the growing body of literature emphasizing the value of diverse perspectives in enhancing decision-making quality, stakeholder responsiveness, innovation, and sustainability-oriented governance. In contrast, social capital does not exhibit a significant moderating effect. This result challenges the commonly held assumption that strong social networks and relationships necessarily enhance the effectiveness of CSR initiatives. The findings suggest that while social capital may provide access to resources and information, it may not be sufficient to amplify the sustainability benefits generated through CSR practices.
The study makes several important contributions to the literature. First, it advances CSR and sustainability research by integrating ESG principles into the analysis of SME sustainability performance. Second, it provides one of the few empirical investigations that simultaneously examine gender diversity and social capital as moderators in the CSR–performance relationship. Third, it offers evidence from Bangladesh, a developing economy where ESG and sustainability research remains relatively limited. Most importantly, the findings reveal that gender diversity serves as a critical organizational mechanism through which CSR initiatives become more effective in generating sustainability outcomes.
The study also offers valuable practical implications. SME owners and managers should consider gender diversity not only as a social objective but also as a strategic governance mechanism that enhances the effectiveness of sustainability initiatives. Policymakers can support SME sustainability by promoting inclusive leadership practices, encouraging female participation in decision-making positions, and fostering ESG-oriented business environments. By strengthening CSR implementation alongside gender-inclusive governance structures, SMEs can improve their sustainability performance and contribute more effectively to sustainable economic and social development.
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