The Interconnections Between CSR, Financial Management, and Sustainability in Service Sector SMEs

Abstract

This study investigates the relationship between financial management, corporate social responsibility (CSR), and sustainability within small and medium-sized enterprises (SMEs) in the service sector across the Visegrad Four (V4) countries: Poland, Hungary, the Czech Republic, and Slovakia. The research aims to quantify the impact of financial management and CSR on SME sustainability, addressing a critical gap in understanding sustainability dynamics in this sector. The data was collected through a comprehensive survey of 339 SME owners or top managers across the V4 countries, employing a structured questionnaire. The hypotheses were tested using Structural Equation Modeling (SEM) to evaluate the causal relationships between the factors. The results reveal that financial management plays a more significant role in determining the level of sustainability in SMEs than CSR. Nevertheless, CSR also positively affects both sustainability and financial management, though the intensity of its impact on financial management is weaker. These findings are crucial for SME owners and managers, as they highlight the importance of integrating both financial discipline and socially responsible practices to achieve long-term sustainability. The study's implications extend to policymakers, educational institutions, and support organizations, providing a framework for developing strategies that promote sustainable business practices. This research offers a valuable contribution to the body of knowledge on sustainability in SMEs, especially in the context of post-pandemic recovery in the V4 region, and provides practical recommendations for enhancing the resilience and competitiveness of SMEs through improved financial management and CSR integration.