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Impact of Lean, Six Sigma and Lean, Six

Sigma and
environmental sustainability on environment

the performance of SMEs

Yousaf Ali, Ahsan Younus, Amin Ullah Khan and Hamza Pervez
Department of Management Sciences,
GIK Institute of Engineering Sciences and Technology, Topi, Pakistan Received 12 November 2019
Revised 2 April 2020
7 July 2020
31 July 2020
Abstract Accepted 31 July 2020
Purpose – This paper aims to explore the impact of lean, Six Sigma and environmental sustainability on the
performance of small and medium enterprises (SMEs) in Pakistan. The firm performance has been measured in
terms of operational, business and environmental performance.
Design/methodology/approach – A survey-based methodology is adopted for collecting data from the
main cities of Punjab, Pakistan. SMEs related to different industries such as service, manufacturing,
automotive and retail were targeted. The data gathered were ordinal, and Spearman’s correlation test was used
as the data analysis technique.
Findings – The findings indicated that the three management styles positively impacted the environmental
performance of SMEs. Moreover, no significant relationship was found between the three management styles
and the SMEs’ business and operational performance.
Research limitations/implications – To counter the inefficient and wasteful practices of SMEs and their
detrimental impact on overall firm performance, SMEs have to refocus and reconfigure their management
strategies. It is implied to use lean, Six Sigma and environmental sustainability practices to achieve this goal.
Originality/value – The study empirically investigates the impact of lean, Six Sigma and environmental
sustainability on the performance of SMEs in Pakistan, which is the first study to be conducted in the Pakistani
context.
Keywords Lean, Six sigma, Environment sustainability, SME, Firm performance, Spearman
Paper type Research paper

1. Introduction
Every firm’s performance is based upon the fact that it must incorporate necessary steps that
make it sustainable, utilize resources efficiently and adopt relevant management styles that
can help it grow. Such measures are based on choosing various management styles for the
enhancement of firm performance, and for that purpose, this research focuses on evaluating
three different management styles. The three forms are listed as Lean, Six Sigma and
environmental sustainability.
Lean focuses on waste reduction and eliminating activities that do not add any value
to the business processes (Schulze and Stormer, 2012). The practical applicability of lean
has been useful in the manufacturing and service sectors, including healthcare, banking
and education. Just-in-time, Kanban, Kaizen (continuous improvement) are some of the
many “lean” techniques mostly applied by organizations (Jordan, 2017). Accordingly, this
study evaluates the effect of lean on SMEs’ performance, thus forming an objective for
this study.
Six Sigma is a quality management tool widely adopted by businesses to reduce variations
and defects in their products and processes. Recently, Six Sigma has been approved by
organizations, including financial enterprises, hospitals, educational institutes and electronic-
business (Alexander et al., 2019). There are structured methods to improve the quality International Journal of
standards, and with the help of specific performance metrics, an organization can efficiently Productivity and Performance
Management
achieve its strategic objectives (Schroeder et al., 2009). Sig Sigma tools have made a notable © Emerald Publishing Limited
1741-0401
improvement to various organizations’ profits, such as General Electric that reported a net DOI 10.1108/IJPPM-11-2019-0528
IJPPM income of 2bn US dollars in 1999 after implementing Six Sigma techniques. Similarly,
Motorola saved their expenditures by a factor of 150 times, with savings of $15bn over 11
years (Wasage, 2016). This study aims to evaluate the effect of Six Sigma on the performance
of SMEs.
Environmental sustainability is all about utilizing natural resources without
compromising the environment for future generations (Bauman, 2015). Similarly,
ecological awareness is a necessity considered for all of the corporate sectors, industries
and organizations, etc. Companies, along with their competitive advantages over the other
firms, must also ensure to balance their image in society by following the standards of
environmental sustainability. To compete in the global market, companies must focus on
environmental sustainability issues that can give them a competitive advantage in the long
run (L
opez et al., 2007). The effect of environmentally sustainable practices on firm
performance has been studied vigorously. Previous work is based on the view that there is a
positive relationship between environmental sustainability and firm performance. A study
by Zhu et al. (2018) supports the positive relationship between environmental sustainability
and firm performance, indicating that companies gain a competitive advantage by focusing
on environmental sustainability. However, some research works contradict and claim a
negative relationship between environmental sustainability and firm performance. Their
findings indicate that investing in sustainable practices increases not only their costs but also
the end product prices which affects the financial performance of the company due to the
decline in profits and market share (Brammer and Millington, 2008; Friedman, 2007; Tang
et al., 2012; Williams et al., 1993). Based on the discussion mentioned earlier, the effect of
environmental sustainability on SMEs’ performance is yet to be assessed in the context of a
developing country. It also forms to be an objective of the study.
The classification of small-medium enterprises (SMEs) varies from country to country.
According to the European Commission (2010), any organization with less than 250
employees is considered an SME. In the US, firms are recognized as SMEs if they employ less
than 100 people. According to the Small and Medium Enterprises Development Authority
(SMEDA) [1], Pakistani firms with less than 50 employees are considered small businesses
or SMEs.
vSMEs are essential determinants of the overall economic performance of the country
[2]. Have a robust, well-developed SME sector, whereas developing countries such as
Pakistan lack full productivity in their SME sectors. Due to subcontracting practices by
larger businesses to SMEs, SMEs’ quality and services have a direct impact on the
performance of a large corporation. The majority of the larger enterprises outsource their
production entities to the SMEs, which proves to be beneficial for them in the form of profits
and also increase the production level by manifolds (Agburu et al., 2017). Unless the issues
related to SMEs are not addressed, they can have drastic effects on the businesses, markets
and overall economies.
The performance of SMEs has remained weak in developing countries like Pakistan
(Kureshi et al., 2009). Due to a direct relationship between the overall economic growth and
health of the SME sector, poor SME performance has also had a significant impact on the
country’s overall economic growth. Hence, this sector needs a particular focus of businesses,
policymakers and academia for its economic growth and progression. It is a well-known fact
that managerial ability is closely related to firm performance. Considering Pakistan, SMEs’
economic performance has been negatively affected due to inefficient management practices
and a lack of skills (Aftab and Rahim, 1986). This is due to a lack of professional training of
managers, which makes them less aware of the current practices adopted by organizations in
developed countries to enhance firm performance. There is no proper research in Pakistan
that might address the factors responsible for improving SMEs’ performance. Furthermore,
according to Zhang et al. (2012), there is no adequate application of lean and Six Sigma
techniques or managerial styles in Pakistan. Most firms do not even know about these Lean, Six
concepts, are unaware of the benefits of the lean, Six Sigma and environmental sustainability Sigma and
and cannot thus apply them effectively (Zeeshan et al., 2017).
The purpose of this paper is to evaluate the effect of the three different management styles,
environment
i.e. Lean, Six Sigma and environmental sustainability on SMEs’ firm performance in the
context of Pakistan. Further, this study’s standpoint is based purely on policy, and no insight
of business is attached to it as it will widen the scope of the study when the consumer-based
perspective is also added to it. The overall purpose of this study is to identify the factors that
can be effective for the enhancement of SMEs’ performance. Similarly, countries like Pakistan
are under the severe harmful impacts of the SMEs in the form of water pollution, air pollution
and health. So, in this scenario, catering to the hazardous environmental effects of the SMEs
and improving firm image, the necessary factors that can provide both are the need of the
hour and must be carried out by identifying the suitable factors that can positively affect
SME’s performance. To this date, the empirical investigation in the case of Pakistan is
missing. By incorporating the required assessment, this study will explore the relationship
between the three managerial-style factors on the performance of SMEs.
In light of SMEs, this study will consider the operational, business (financial and market)
and environmental elements of the firm performance. The objectives of this study can be
depicted in the following way:
(1) To investigate the relationship between lean implementation and firm performance.
(2) To investigate the relationship between six sigma implementation and firm
performance.
(3) To investigate the relationship between environmental sustainability
implementation and firm performance.
The overall manuscript has been divided into two main parts, i.e. the first part focuses on
existing literature and hypotheses development. In contrast, the second part describes the
measurement, analysis, results and discussion. The structure of the paper is as follows.
Section 2 i.e. literature review, focuses on the theoretical framework and hypotheses
development. Section 3 describes the research methods covering data collection, whereas the
analysis and findings of the paper are presented in Section 4. The results are discussed in
Section 5. Finally, conclusions and future research agenda are presented in Section 6.

2. Literature review
The central concept of this study is to explore the effects of lean, Six Sigma and environmental
sustainability on SMEs’ performance in Pakistan. The ideas are not much observed within the
country, keeping in mind the various hurdles and issues.
Lean thinking was initially introduced by Taiichi Ohno of Toyota to develop TPS (Toyota
Production System) to help the company cope with resource constraints. Lean has many different
definitions applicable in different scenarios. One reason why no proper description exists for lean
is that the concept is still in the developing stages (Haddad and Otayek, 2018). The lean concept
aims to make and deliver the products and services in ways that use the least cost and time,
thereby reducing waste. Similarly, it has yet to extend toward the developing countries where the
resistance of change is very high and traditional work practices dominate (Douglas et al., 2017).
Furthermore, lean is focused on sustainability to gain a competitive advantage for the
firm. This is done to meet the customers’ needs and demands by coordinating workflows and
resource allocation processes. It can be made possible by looking at the manufacturing
processes in the limited resources situations (Ulewicz and Kuceba, 2016).
IJPPM Lean also possesses various applications which various studies have addressed, ranging
from the manufacturing firm’s value to the IT industries, to mention a few. One such study
observed the effect of lean in the enhancement of a manufacturing firm’s value. The study
concluded that positive results of research and development (R&D) and the implementation
of Lean manufacturing on the firm could increase its value (Zhu and Lin, 2017). Furthermore,
another study observed businesses in terms of Lean implementation. The results concluded
that lean and green implementation possessed high scores, which means that they can prove
useful for an organization in long-term business plans (Duarte and Machado, 2017).
The implementation of lean is a continuous process that circulates the principle of
continuous improvements (Kaizen) requiring continuous efforts. Its application is unique,
which also makes it difficult to imitate. The core principle of lean is based on resource
efficiency and waste minimization, which is why it is quantifiable in terms of tangible
financial returns, making it valuable. With the decrease in product life cycles, shrinking
profits and an increase in competition across the globe, the viewpoint that businesses must
operate by utilizing minimum resources and release minimum waste is crucial. In the
presence of such a highly competitive environment, lean philosophy is nonsubstitutable
(Jakhar et al., 2018). We perceive that lean practices are core competencies as it possesses all
the necessary elements required by a resource to be considered a core competency for a firm
(Lin and Wu, 2014). Hence the introduction of lean practices as a variable in this research is
underpinned by the resource-based view (RBV) of the firm, which states that for firms to
attain sustainable competitive advantage, the resources of the firm must possess the four
critical attributes (Barney, 1991) i.e. the resources must be valuable, rare, inimitable and
nonsubstitutable.

2.1 Lean and operational performance

Many researchers in the past have investigated the relationship between lean and operational
performance. Shah and Ward (2007) found a positive influence of lean practices on
operational performance by globally performing a survey of 136 manufacturing firms. This
positive relationship between the two variables was also significant in Indonesian firms
(Nawanir et al., 2013). Similarly, Chavez et al., 2013 investigated the impact of lean practices on
flexibility, cost, delivery and quality dimensions of operational performance and found a
positive association. (Kumar et al., 2006) also demonstrated that implementing lean practices
in Indian SMEs has resulted in a reduction in accidents, machine downtime and level of
inventories, consequently improving the operational performance of SMEs. Furthermore, an
empirical investigation of the relationship between lean practices and the operational
performance of Indian process industries also supported a positive correlation between the
two variables.
In light of the above discussion, this study proposes the following hypothesis:
H1. Lean is positively related to operational performance.

2.2 Lean and business performance

The impact of lean practices on business performance can be identified from various previous
research studies. Lean stresses productivity improvement, waste reduction and resource
efficiency leading to enhanced business performance via cost reduction (Mart
ınez-Jurado and
Moyano-Fuentes, 2014; Khanchanapong et al., 2014; Bortolotti et al., 2015). Waste reduction in
the form of defects leads to improving productivity and reducing the firm’s cost, which in turn
raises return on assets (Yang et al., 2011). Moreover, the reputation of an organization’s
quality can lead to the improvement of its market acceptance and turnover (Kaynak, 2003).
Various lean practices such as total quality management (TQM), Kaizen, just-in-time (JIT), etc.
are established to aid in the cost-effective and sustainable growth of a firm (Mart
ınez-Jurado Lean, Six
and Moyano-Fuentes, 2014; Yang et al., 2011). In SMEs, implementing TQM practices such as Sigma and
lean is indirectly linked to financial performance (Sajan et al., 2017). A recent study conducted
by Valente et al., 2019 investigated how lean practices influence the business performance of
environment
manufacturing SMEs in terms of financial, market and operational performance. The results
supported the claim that aggregated lean practices positively impact the global performance
of SMEs. Based on the above discussion, the following hypothesis can be proposed:
H2. Lean is positively related to business performance.

2.3 Lean and environmental performance

A literature review conducted on analyzing the impact of lean practices on a firm’s
environmental performance identified only a single article that directly related both, which
indicates the scarcity of extant literature in this area (Negr~ao et al., 2017). However, the
viewpoint that lean practices positively impact the environmental performance of the firm
can be supported by various case studies (Biggs, 2009; Azevedo et al., 2012; Dieste et al., 2019)
and secondary data analysis (Yang et al., 2011; Hong et al., 2012). Lean practices such as
keeping maximum inventory levels low and ISO 9001 standards reduce emissions and waste
generation (King and Lenox, 2001; Chugani et al., 2017). Similarly, the combined effect of lean
and green practices can enhance environmental performance by reducing greenhouse gases
(GHGs) in logistics and transport operations of a company (Garza-Reyes, 2015). In the context
of SMEs, (Panizzolo et al., 2012) highlighted that the carbon emissions and waste generation
could be reduced significantly by keeping a check on inventory levels in SME. The lower the
inventory levels, the lesser will be the waste and carbon emissions.
Based on the above discussion, the following hypothesis can be proposed:
H3. Lean is positively related to environmental performance.
Another management style that this study aims to study is the concept of Six Sigma in the
case of firm performance. Motorola developed Six Sigma, and it evolved increasingly after its
adaption by General Electric. Six Sigma was defined by (Banuelas and Antony, 2004) as an
operational methodology that contributes to breakthroughs in productivity, profitability and
product quality. They concluded its method as being rooted in multiple statistical and
problem-solving tools for handling complex problems in a procedural manner. Since then, Six
Sigma has seen significant success in large companies, but its implementation in SMEs is low.
SMEs play a pivotal role in the supply chain of large organizations as they provide high-
quality products at reduced costs. To have a smooth functioning of business operations,
SMEs have also considered the use of a Six Sigma approach, just like in the case of Portugal
(Fonseca, 2017). There is still an element of ambiguity about whether the implementation of
Six Sigma can be useful for SMEs. One such study in the Tunisian context highlighted the
uncertainty in the identification of Six Sigma and TQM practices that can contribute toward a
company’s performance (Lamine and Lakhal, 2018).
Similarly, the British Standards Institute (BSI) proved through its quality management
approach that the implementation of quality management techniques is low in SMEs due to
complexity issues and costs associated with bureaucracy (Isa et al., 2016). In United Kingdom
(UK), studies have been conducted to find out the level of implementation of lean and Six
Sigma in manufacturing SMEs. These studies carried out qualitative approaches by
gathering literature on the experiences of academics and practitioners. The findings of the
study indicated that Six Sigma specifically was not popular among the SMEs. Furthermore,
applications of Six Sigma can also be found in the area of health care where generally the Six
Sigma is considered for the whole hospital rather than focusing on individual functional
departments (Antony et al., 2018).
IJPPM The implementation of Six Sigma in the firms and organizations also follows the concept
of the resource-based view. A company’s competitive advantage in utilizing its resources
sustainable accounts for the adoption of RBV in its operations. Existing literature focuses on
the adoption of Six Sigma in the organization from the lens of the RBV theory. One such study
observed the applicability of the RBV theory in the implementation of Six Sigma. Four
different enablers of Six Sigma were identified that included organizational, financial,
technological and human resources. Through these enablers of Six Sigma in a firm, it was
concluded to have the firm’s image enhancement, operational performance and financial
benefits as expected outcomes (Kiatcharoenpol et al., 2011). It shows that the implementation
of Six Sigma in an organization for sustainable utilization of resources is imminent to have a
competitive advantage (Gowen and Tallon, 2005).

2.4 Six Sigma and operational performance

Based on previous literature, it was concluded that the implementation of Six Sigma in an
organization or a firm could contribute to the enhancement of human resource and
operational performance. The relationship between Six Sigma and the operational
performance can be justified from a critical assessment of various studies. One of the
researchers adopted the lean–Six Sigma framework in which Six Sigma was aligned with the
firm’s operational performance. Upon the implementation, Six Sigma resulted in prioritized
waste to be eliminated, reliable and accurate real-time data and proper identification of the
complex operational problem (Cortes et al., 2016). Similarly, another study highlighted the
impact of adopting a Six Sigma framework for the successful enhancement of maintenance,
repair and overhaul (MRO) facility’s operational performance (Hill et al., 2018). Furthermore,
Parast, 2011) highlighted that Six Sigma alone could not enhance operational performance
and project innovations. The firm must address the needs of its customers on a priority basis
and product innovation to tackle uncertainty. Based on the above literature, the following
hypothesis can be proposed:
H4. Six Sigma has a positive impact on operational performance.

2.5 Six Sigma and business performance

Six Sigma is usually known for maximizing and sustaining business success. It is adopted by
various organizations to meet consumer needs and improve a structure to achieve business
success. Earlier literature has also identified the relationship of Six Sigma with the business
performance of a firm. A study conducted in Turkey depicted that the implementation of Six
Sigma for firm performance resulted in an 80–100% improvement in business profitability,
thus showing the impact Six Sigma can have on the business performance of a firm (Erturk
et al., 2016). Furthermore, Six Sigma also helps to enhance the performance of the supply
chain network of a firm by contributing toward the improvement of perfect order fulfillment
(POF) and quality level (QL) (Mishra and Sharma, 2017). Oil exporting countries can always
improve their business performance during the price falling stages by adopting Six Sigma
guidelines and the concept of lean (Chaurasia et al., 2016). In place of the previous literature,
the following hypothesis can then be drafted:
H5. Six Sigma has a positive influence on business performance.

2.6 Six Sigma and Environmental performance

Six Sigma incorporates the concept of continuous improvement and waste elimination from
the overall processes of a firm. This helps the firms to eliminate pollution and implement more
environment-friendly products and services. The relationship of Six Sigma has always been
highlighted in the past literature by considering various scenarios. A study conducted by Lean, Six
Chugani et al., 2017 reviewed the concept of Six Sigma. It concluded that it could contribute to Sigma and
the preservation of resources and help the world tackle global warming issues. It will help
various firms to make clean technologies, thus enabling their processes to become
environment
environment-friendly. Similarly, a study conducted in the health sector for the six Sigma
implementation concluded that the six Sigma philosophies, along with lean capabilities, could
significantly help reduce the environmental impact of the hospitals (Zhu et al., 2018). Lastly,
six sigma also holds its applications in the Indian automotive industry with efficient energy
consumption, reduction in defective parts, and reduction in scrap, thus reducing the firm’s
overall environmental impact (Ruben et al., 2017). Based on the above discussion, the
following hypothesis can be proposed:
H6. Six sigma has a positive impact on environmental performance.
This study aims to utilize the concept of lean and six sigma separately. Although the terms
act in unison, some industries implement them independently according to that specific
industry’s requirement. For a firm to correctly work in the manufacturing and logistics, lean
six sigma must be considered ideally (Management and Strategy Institute, 2017). As most
industries adopt them separately, this study will observe both the terms independently in the
case of SMEs’ performance.
The third concept that this study tries to explore the effects on the performance of SMEs is
environmental sustainability. Environmental sustainability has been a global challenge for
organizations of all sizes. Existing literature on environmental sustainability contains claims
of building core competencies for a business that is non-imitable, valuable, rare, and non-
substitutable. These sets of characteristics of core competencies provide a sustainable
competitive advantage to the firms in the form of enhanced firm performance (Barney, 1991).
This concept of developing core competencies to gain sustainable competitive advantage is
widely recognized as the resource-based view (RBV). In an attempt to connect the sustainable
competitive advantage of the firms with the environmental sustainability due to growing
concerns of the impact of firm practices on the environment, Hart proposed a natural
resource-based view (NRBV) of the firm which argues that for a firm to be able to gain
competitive advantage, it is necessary to incorporate and reduce the impacts of firm practices
on the environment through three strategies, i.e. pollution prevention, product stewardship
and sustainable development (Hart, 1995). This modification in the RBV has only added to the
increase in acceptability of the theory that to attain sustainable competitive advantage, a firm
or business must build a set of path-dependent core competencies based on its technology,
processes, knowledge base and resource structure to leverage its economic gains (Koufteros
et al., 2012; Jakhar et al., 2018). Whether the set of core competencies is quality-centric or
environment-centric (NRBV) is a query that researchers may address according to their aims
and objectives of a study. Still, such core-competencies are critical to improving firm
performance (Jakhar et al., 2018).

2.7 Environmental sustainability and operational performance

The relationship between Environmental Sustainability and operational practices can be
hypothesized based upon a review and analysis of existing literature. For instance, the
implementation of environmentally sustainable practices (ESP) in firms tends to reduce their
energy and raw material consumption, resulting in a reduction in operational costs (Hasan,
2013). Another study investigated the implementation of environmentally sustainable
practices in Japanese pulp and paper industries and found a positive influence on firms’
operational performance (Shimomura, 2001). A significant association between ESP and
improved quality was reported (Melnyk et al., 2003). Similarly, (Nidumolu et al., 2009) said that
the implementation of ESP, such as life cycle assessment in a multi-national firm, has led to an
IJPPM increase in quality operational performance. A study by (Sroufe, 2003) also supported the
claim that ESP tends to enhance firms’ operational performance. Based on these studies, the
following hypothesis can be proposed:
H7. Environmental Sustainability has a positive influence on operational performance.

2.8 Environmental sustainability and business performance

Various studies have identified that environmental sustainability has a positive influence on
a firm’s financial performance. (Zeng et al., 2010) in their research determined that the
implementation of cleaner production strategies has a positive influence on business
performance. (Tan et al., 2017) examined the relationship between environmental
sustainability and financial performance in the hotel and tourism industry across various
geographies and found a significant positive correlation between the two variables. (Gotschol
et al., 2014) proposed that firms that implement environmental sustainability practices across
the entire supply chain patiently get a reward in the form of enhanced financial performance
in the long term.
Similarly, in Slovenian SME’s context (Tomsic et al., 2015) found a positive relationship
between environmental sustainability and the economic performance of SMEs. Besides
financial performance, environmental sustainability has also been perceived to have a
positive influence on firms’ market performance. (Gonz
alez-Benito and Gonz
alez-Benito,
2005) examined the relationship and proved a positive impact of environmental
sustainability on the market performance of firms. Similarly, firms’ enhanced
environmental performance is an indicator of the firm’s commitment to reducing its
harmful impacts on the environment (Starik and Rands, 1995). Various other scholars have
confirmed these findings and verified these findings (Radhouane et al., 2018; Plumlee et al.,
2015). This commitment to reducing ecological impacts may lead to the improvement of its
brand image, consequently enhancing the firm’s market performance (King and Lenox,
2002). Since firms’ business performance is based on the value and profit maximization of
shareholders, this study amalgamates both financial and market performance to represent
business performance as a single measure.
Based on the above discussion, this study proposes the following hypothesis:
H8. Environmental sustainability has a positive impact on business performance.

2.9 Environmental sustainability and environmental performance

Another concept that the studies have addressed is the effect of adopting environmentally
sustainable practices to enhance a firm’s environmental performance. One study concludes
that the combination of Supply Chain Orientation (SCO) and environmental orientations
contributes positively towards the firm or an organization’s environmental performance
(Kirchoff et al., 2016). Furthermore, the adoption of Corporate Environmental Sustainability
(CES) policies in the retail sector of an organization can help achieve Sustainable
Development Goals (SDGs). This will also ensure effective environmental sustainability
reporting by firms or organizations (Naidoo and Gasparatos, 2018). Eco-innovation is a
concept that can help contribute towards the environmental performance of an organization
and indirectly contributing to its positive effects on the economic performance of the firm (Cai
and Li, 2018). Since a firm’s environmental performance is based on the environmentally
sustainable practices that it adopts, this study tends to uncover its impacts in the case of
Pakistani SMEs.
Based on the above discussion, the study proposes the following hypothesis:
H9. Environmental sustainability has a positive impact on environmental performance.
The SME sector is comprised of a large part of Pakistan’s economy. However, SMEs have Lean, Six
always seen low performance and contributed to the weak performance of large scales Sigma and
businesses. SMEs are significant suppliers to large scale businesses, and there is no real
growth in these businesses, which has resulted in the performance degradation of Pakistan’s
environment
economy. There is very little to no implementation of lean and six sigma techniques in small
scale businesses, causing low performance. This low level of application is due to low
awareness of such concepts. The study of Kureshi et al. (2009) suggests a lack of diffusion of
lean and six sigma concepts in Pakistani businesses.
Similarly, a study conducted in Pakistan shows that no SME in Pakistan has published an
environmental sustainability report. Furthermore, the study also highlighted the hurdles that
the SMEs in Pakistan face in the publishing of sustainability report. The report concludes
that lack of personnel training, implementation issues, lack of support from the government,
and infeasible sustainable infrastructure are some of the reasons that SMEs in Pakistan fail to
employ environmentally sustainable practices and, in return, sustainable reporting (Zeeshan
et al., 2017).
The conceptual model for this research has been devised, as shown in Figure 1. We shall be
linking the independent variables, including lean, six sigma, and environmental
sustainability (three different management styles) with the dependent variables, including
operational, business, and environmental performance. The firm performance is measured in
three aspects, as mentioned above. These practices have been seen to be highly correlated not
only with the operational and business performance but also with environmental
performance. This correlation has already been observed in SMEs in developed countries.
The below-proposed model will test the correlation in Pakistan, a developing nation. In the
next section, we will describe the research methods for this study.

3. Research methodology
3.1 Measurement of lean, six sigma, environmental sustainability, and firm performance
A survey questionnaire was designed for each of the independent and dependent variables.
This process was done to check the degree of the implementation of lean and six sigma

H1
Operaonal
Lean
Performance
H2
H3

H4
H5
Business
Six Sigma
Performance
H6

H7
H8
Environmental
Environmental Performance
Sustainability H9
Figure 1.
Conceptual framework
Firm Performance
IJPPM techniques and the use of environmental sustainability practices to gauge firm performance.
The measures were taken from the literature, and the questions were tailored to design a
questionnaire that would apply to the SMEs in Pakistan. A total of forty-five items were
developed for the six scales. The responses were obtained on a five-point Likert scale ranging
from 5(strongly agree) to 1(strongly disagree).
3.1.1 Independent variables. Lean was measured using a nine-item scale proposed by Shah
and Ward (2007). The measure was checked for its discriminant validity and reliability, and
after the removal of one item, the Cronbach’s alpha of this scale was evaluated as 0.850.
Questions about six-sigma were adapted from Zu et al. (2008). A twelve-item range was used
to measure six sigma, and the items were checked for their validity and reliability. Four items
were removed as they disturbed the validity of the data. The Cronbach’s alpha for this scale
was calculated as 0.881. A five-item scale for environmental sustainability was adapted from
Zhu and Sarkis (2004). The Cronbach’s alpha for this scale was evaluated as 0.873. Thus, this
scale also achieved a reliability target and was considered valid for use.
3.1.2 Dependent variables. For Operational performance, a six-item scale was developed
from Shah and Ward (2003) and Zu et al. (2008). This scale is almost consistent with the scale
proposed by Zu et al. (2008), comprising seven items. The Cronbach’s alpha for this scale was
0.826. Therefore, the scale was also found to be reliable and valid. Business performance was
measured using six items, which were also adapted from Zu et al. (2008). Business performance
was measured using a combination of market and financial performance factors. Two items
were removed to get a better validity of the data. The Cronbach’s alpha of this scale was 0.714.
Environmental performance was measured using a seven-item scale from Zhu and Sarkis
(2004). This scale was also valid and reliable as the Cronbach value was found as 0.870.
3.1.3 Control variables. Seven items were designed to acquire data about the respondent
and firm. These included gender, age, name of the firm, time since the start of the firm,
number of employees in the firm, nature of the industry, and the respondents’ work
experience. Descriptive Statistics of some of these variables are shown below in Table 1.

3.2 Research approach

This study aimed to investigate the research question from multiple firms within the SME
sector. Methods to analyze the data can take different approaches (qualitative or quantitative)
for various studies depending on the research question. In this study, a quantitative approach
using a survey instrument was chosen to quantify and analyze it for two reasons. First, data
was required to be collected from numerous businesses; therefore, a survey strategy is an
economical way to collect data, and data collected is also perceived to be reliable. Secondly,
existing studies are mostly based on respondents’ accounts; therefore, it is justified to conduct
empirical research to provide authentic evidence to test the hypotheses.
3.2.1 Data collection, sampling, and procedure. The survey was conducted in Sialkot,
Faisalabad, and Lahore, the three major cities of Punjab, Pakistan, in terms of the number of

Frequency Percentage (%)

Gender Male 39 100

Female 0 0
Age 18–25 1 2.6
Table 1. 26–35 23 59
The frequencies and 36–45 11 28.2
percentages of 46–55 4 10.2
respondents Above 55 0 0
SMEs. A total of 3.2 million SMEs are present in various cities of Pakistan, The total Lean, Six
contribution of SMEs is about 30% to the country’s GDP, 78% contribution towards Sigma and
industrial employment and 30% to overall exports (Rs.140 billion) (Shah and Syed, 2018).
Approximately 84% of SMEs have a yearly income of less than Rs. 0.5 million (Qureshi and
environment
Herani, 2011). Punjab possesses the highest percentage of the number of SMEs, i.e. 65.4%,
followed by Sindh, Khyber-Pakhtunkhwa, and Baluchistan, with 18%, 14.3% and 2.3%
(Zafar and Mustafa, 2017). Due to the largest contribution of Punjab in terms of the number of
SMEs, it has been chosen for the survey. The questionnaire was sent to SMEs through email,
which contained an online link to the questionnaire. The link was also sent to contacts on
LinkedIn targeting people who had worked in small businesses. A total of 70 SMEs were
contacted for a questionnaire survey, of which 39 responses were received, which were used
for analysis. The response rate was 55.7%. A study by (Baruch and Holtom, 2008) examined
1,607 research studies and confirmed an average of 35.8% as the response rate of firms.
Similarly, a few other research studies consider 20% the minimum allowable response rate
(O’Leary-Kelly and Vokurka, 1998; Malhotra and Grover, 1998). Hence, the response rate of
55.7% can be considered suitable for further statistical analysis. Data were collected in two
weeks, and respondents were ensured of data confidentiality.
A total of 39 small businesses participated in the questionnaire. One respondent chose not
to disclose the name of their firm; thus, these responses were placed in the ‘others’ category.
The sample size (N 5 39) is suitable for applying different statistical techniques to analyze
and interpret the data. Table 2 shows the distribution of SME sectors.
Figure 2 displays the respondents’ percentage distribution according to their respective
firm size (number of employees). Figure 2 shows that 67% of the responses were received
from the firms with less than 100 employees. Therefore, 26 firms had less than 100 employees;
six firms had between 100 and 150 employees, three firms had between 151 and 175
employees, two firms had between 176 and 200 employees and the remaining two had greater
than 200 but less than 250 employees.

4. Findings and results

4.1 Data reliability and validity
The data were first checked for its validity and reliability such that subsequent tests could be
performed accurately. The analysis was done by performing a factor analysis in Smart PLS
3.0 to show the convergent and discriminant validity. SPSS does not give results for
composite reliability and average variance extracted, which are essential measures to check
the validity of the data; that is why SmartPLS was preferred. The data were exported as a
CSV file into SmartPLS, and factor analysis was performed after the construction of a
structural model.
Cronbach’s alpha can check the reliability, but for validity, two tests are needed to be
performed, which are convergent validity and discriminant validity. The results are

Type of industry Frequency Distribution (n 5 39)%

Food 6 15.4
Healthcare and pharmaceutical 7 17.9
Clothing and retail 11 28.2
Chemical, petroleum services 3 7.7
Automobile services 3 7.7
Small scale manufacturing 3 7.7 Table 2.
Services, banking, e-commerce 5 12.8 Frequency and
Others 1 2.6 distribution of firms
IJPPM 201-250
5%
176-200
5%
151-175
8%

100-150
15%
Less than 100
Figure 2. 67%
Percentage
distribution of
respondents according
to firm size

presented in Table 3. The Cronbach’s alpha has a threshold value of 0.7 beyond which the
model is highly reliable. As indicated in Table 3, the Cronbach’s alpha for the constructs
ranged from 0.714 to 0.881which substantiates the high reliability of the overall model.
Convergent validity is “the degree to which two or more items measuring the same variable
agree’’ (Thong, 2001, p. 150). Convergent validity can be measured by CR (composite
reliability) and AVE (average variance extracted) with a threshold value of 0.7 and 0.5.
Although the Cronbach’s alpha and composite reliability values were above the benchmark
values, the AVE of some variables was slightly below the threshold limit. After the removal of
a few items of these variables, another factor analysis was performed. The values for AVE
then met the benchmark values. The values for CR and AVE were found to be greater than the
cut-off level ranging from 0.801 to 0.908 for CR and 0.507 to 0.665 for AVE. This analysis
confirms the achievement of convergent validity.
Discriminant validity is defined as “the degree to which items differentiate between
variables” (Thong, 2001, p. 152). This means that items of one variable correlate more strongly
with elements of another variable rather than elements of the same variable. Thus, the
priority is to achieve a strong correlation within the items of the same variable. Further
testing can be done to check for discriminant validity; the range of values outlines this the
constructs lie in, i.e. they are neither too high (>1.0) nor too low (<0.10). In Table 4, all the
values lie in the defined range of 0.1–1.0, and it can be seen that the strongest correlation
exists between Six Sigma and lean with a value of 0.724. Therefore, the measurement model

Cronbach’s alpha Composite reliability Average variance extracted

(α) (CR) (AVE)

Lean 0.850 0.887 0.507

Six Sigma 0.881 0.905 0.547
Environmental 0.873 0.908 0.665
sustainability
Operational performance 0.826 0.869 0.526
Table 3. Business performance 0.714 0.801 0.508
Matrix of construct Environmental 0.870 0.906 0.599
reliability and validity performance
achieves discriminant validity. As the reliability and validity of the data are confirmed, Lean, Six
additional tests will be performed to answer the research question of this study. Sigma and
environment
4.2 Statistical test
This study is based on finding the impact of lean, Six Sigma and environmental sustainability
on SMEs’ operational, business and environmental performance in Pakistan. As such,
selecting a statistical test requires meeting some prerequisites. As mentioned above, since
this paper seeks to find a relationship between an independent and a dependent variable, a
correlation must be tested to prove or disprove it. There are various correlation techniques
based on what type of data is used, i.e. parametric or nonparametric data.
Spearman correlation technique has been used to test the hypothesis’s relationship since it
is a nonparametric test. There are two assumptions specific to the use of the Spearman
coefficient:
(1) The data must be an interval, ratio and ordinal-based.
(2) The variables must have a monotonic relation.
Both these assumptions are relevant as the data is ordinal (i.e. categories are ranked using a
Likert Scale). All independent variables have a positive linear relationship with the
corresponding dependent variable (Sullivan and Artino, 2013). This positive relationship has
been found in SPSS by checking the scatter diagrams of each independent variable with each
dependent variable, as shown in Figure 3.
4.2.1 Spearman correlation coefficient. The Spearman coefficient represented by Eqn (1) is
denoted by rs and is called Spearman’s Rho. Spearman coefficient is different from the
Pearson coefficient, such that it uses ordinal measure. To measure the coefficient, it is
important to rank data for the two variables, e.g. X and Y, either in the increasing or
decreasing order. Spearman’s coefficient is defined as
P D2
6
i
rs ¼ 1 – (1)
nðn2  1Þ

where rs 5 Spearman’s coefficient

Di 5 difference between the two variables.
n 5 total number of cases.
the ranks of the two variables is calculated (Di).
For each case i, the difference between P
These are squared and summed to produce Di2. The coefficient value ranges from 1 to þ1.

Business Environmental Environmental Operational Six

performance performance sustainability Lean performance sigma

Business (1)
performance
Environmental 0.302 (1)
performance
Environmental 0.516 0.718 (1)
sustainability Table 4.
Lean 0.471 0.671 0.643 (1) Latent variable
Operational 0.432 0.502 0.419 0.518 (1) correlations and
performance discriminant
Six Sigma 0.360 0.529 0.587 0.724 0.612 (1) validity (N 5 39)
IJPPM 5.00
2
R Linear = 0.215
5.00
2
R Linear = 0.057

4.50 4.50

Business_Performance
Quality_Performance

4.00 4.00

3.50 3.50

3.00 3.00

2.50 2.50
1.00 2.00 3.00 4.00 5.00 1.00 2.00 3.00 4.00 5.00
Six_Sigma Six_Sigma

2 2
R Linear = 0.268 R Linear = 0.090
5.00 5.00
Environmental_Performance

4.50

Business_Performance
4.00

4.00
3.00
3.50

2.00
3.00

1.00 2.50
1.00 2.00 3.00 4.00 5.00 1.00 2.00 3.00 4.00 5.00
Six_Sigma Lean
2
R Linear = 0.215 R2 Linear = 0.411
5.00 5.00

4.50
Environmental_Performance

4.00
Quality_Performance

4.00
3.00
3.50

2.00
3.00

2.50 1.00

1.00 2.00 3.00 4.00 5.00 1.00 2.00 3.00 4.00 5.00
Lean Lean
2 2
R Linear = 0.129 R Linear = 0.513
5.00 5.00

4.50
Environmental_Performance

4.00
Quality_Performance

4.00
3.00

3.50

Figure 3. 2.00
Scatter plots for lean, 3.00
Six sigma,
environmental 2.50
1.00
sustainability and firm 2.00 2.50 3.00 3.50 4.00 4.50 5.00
2.00 2.50 3.00 3.50 4.00 4.50 5.00
performance measures Sustainability
Sustainability
 2
5.00
R Linear = 0.143
Lean, Six
Sigma and
4.50
environment
Business_Performance
4.00

3.50

3.00

2.50
Figure 3.
2.00 2.50 3.00 3.50 4.00 4.50 5.00
Sustainability

A value of 1 shows a perfect negative relationship, while þ1 shows a perfect positive

relationship. A value of 0 indicates that there is no correlation between the ranks of the two
variables. The standard deviation is calculated by Eqn (2).
rffiffiffiffiffiffiffiffiffiffiffiffi
1  rs2
STD of rs ¼ (2)
n2
when n ≥ 10, rs is tested using T-statistics with df 5 n2. The null and alternative hypothesis
that is used for Spearman’s coefficient is:

H 0 : ρs ¼ 0
H 1 : ρs ≠ 0

where,
[ρ 5 Rho]
The null hypothesis shows that there is no correlation between the ranks of the two
variables, while the alternative hypothesis shows a positive relationship. The T-statistics
value used to test this hypothesis is shown in Eqn (3)
sffiffiffiffiffiffiffiffiffiffiffiffi
n2
t ¼ rs (3)
1  rs2

The R2 value indicates how fit the data points are to the line of best fit. As evident from the
figures, the general trend is a positive linear trend. The data points for Lean, Six Sigma and
environmental sustainability on the x-axis and environmental performance on the y-axis
represent a close fit to the regression line. The R2 values for these variables are thus closer to
1, whereas, for other variables, these are closer to 0 due to a broad spread of data indicating a
weak correlation.
By testing for the Spearman’s Rho, it was found that three out of nine hypotheses were
significant, whereas the remaining six hypotheses were not significant, as shown in Table 5.
Lean (ρ 5 0.652, p < 0.05), Six Sigma (ρ 5 0.541, p < 0.05) and environmental sustainability
(ρ 5 0.681, p < 0.05) were found to have a positive relationship with environmental
performance of SMEs in Pakistan. However, no positive relationship was found with
operational and business performance. A positive value for the Spearman’s coefficient does
not necessarily mean that the relationship is significant. The scale in Table 6 determines the
positivity of the correlation between the two variables. In this table, it can be seen that there is
IJPPM Hypothesis testing
Spearman’s Sig
Hypothesis Relationship Sign rho (ρ) (2 tailed) Result

H1 Lean → operational performance  0.298 0.065 Not

Supported
H2 Lean → business performance  0.208 0.203 Not
Supported
H3 Lean → environmental performance þ 0.652** 0.000 Supported
H4 Six Sigma → operational performance  0.293 0.071 Not
Supported
H5 Six Sigma → business performance  0.195 0.235 Not
Supported
H6 Six Sigma → environmental performance þ 0.514** 0.001 Supported
H7 Environmental  0.229 0.161 Not
sustainability → operational performance Supported
H8 Environmental sustainability → business  0.225 0.169 Not
performance Supported
H9 Environmental þ 0.681** 0.000 Supported
Table 5. sustainability → environmental
Spearman’s two-tailed performance
correlation (N 5 39) Note(s): ** Correlation significant at 0.01 level

Correlation size Relationship of correlation

0.00–0.19 Very weak relationship

Table 6. 0.20–0.39 Weak relationship
Interpretation of the 0.40–0.59 Moderate relationship
relationship of 0.60–0.79 Strong relationship
correlation with size 0.80–1.0 Very strong relationship

Correlation type Correlation coefficient value The direction of the two variables

Positive correlation 0 to 1 X increases Y increases

X decreases Y decreases
Table 7. Negative correlation 1 to 0 X increases Y decreases
Correlation direction X decreases Y increases

a fragile relationship for the coefficient value ranging from 0.00 to 0.19, and a very strong
relationship exists for values ranging from 0.80 to 1.00. Table 7 represents the monotonic
relationship of two variables in Spearman’s correlation test.

5. Discussion
This study’s focus was to examine the impact of lean, Six Sigma, environmental
sustainability on firm performance (measured in terms of operational, business and
environmental performance). The intention was to observe which strategy can positively
impact SMEs’ firm performance in Pakistan. This research revealed that the three strategies
had a positive impact on only the environmental performance of SMEs. The three strategies
do not impact the business and operational performance of the firms in the Pakistani context. Lean, Six
This section will justify the reasons considering some internal and external factors that may Sigma and
not allow SMEs to achieve operational efficiency. The positive relationship with
environmental performance will also be interpreted.
environment
According to H1 and H2, which reflect a positive relationship of lean with operational
performance and business performance, our findings indicate a p-value greater than 0.05,
which negates these relations and does not support these hypotheses. Ngo (2010) suggests
that lean practices, such as just-in-time (JIT), are more likely to improve operational
performance. However, there is a lack of implementation of JIT in SMEs in Pakistan
(Dasanayaka, 2011), which can explain the negative relation of lean with operational
performance. In the JIT approach, quality is the responsibility of the supplier, and in
Pakistan, SMEs are the major suppliers of large manufacturing industries. Manufacturing
companies usually have to place orders for supplies and raw materials well before the time
due to no concept of JIT, therefore, it is plausible to state that the operational performance of
the small businesses suffers. This study found that 78% of the small businesses know about
the JIT concept, yet the implementation is only around 2%. The technique is imperative for
cost reduction in business, and the nonadoption of this technique can be linked to the high
costs of doing business in Pakistan. There are insufficient training resources that can be on
the part of the companies themselves or the government in promoting the adoption of the
required standards and mechanisms (such as that of approaches based on Kaizen, 5S
or TQM).
From this research, it is evident that there is a weak correlation between lean and business
performance. This is not true in developed countries as studies suggest that the
implementation of Lean exhibits superior results on SMEs’ business performance (Ngo,
2010). Business performance is a combination of market and financial performance, including
sales, market share, profits, return on assets and operating income. A study by Matt and
Rauch (2013) suggests that SMEs try to adopt traditional purchasing methods such as bulk
ordering. In this way, they tend to assume gaining better business efficiency while, on the
contrary, losing their market advantage of achieving flexibility. This is also true in Pakistan
as most of the purchasing is done based on large lot sizing. Managers in Pakistan have
technical expertise but not managerial expertise to run their businesses using lean
techniques.
From the results of H3 (p-value < 0.05), it has been found that those SMEs implementing
lean have experienced greater environmental performance than operational and business
performance; thus, this supports H3. Shrivastava (1995) argue that although there are many
techniques to use, such as total quality management and that application of lean elements in
the business is more likely to yield better environmental performance. Lean is aimed to reduce
all kinds of waste which impact the environment positively. In Pakistani SMEs, the utilization
of lean elements concerning operational processes can serve as an efficiency-driven
mechanism that further serves the purpose of reducing cost-based and byproduct overheads.
The reduction of such unnecessary procedures and products can be cited as a significant
contribution toward enhancing the firm’s environmental performance.
Six Sigma was found to have no impact on Pakistani SMEs’ operational and business
performance (p-value > 0.05), as such H4 and H5 are not supported. Six Sigma is considered as
a more formal approach than lean. It requires large-scale investments in financial and human
resources. While large organizations have greater capabilities to invest in Six Sigma
approaches, small-scale businesses have limited affordability and investments. SMEs, which
implemented Six Sigma, reported no quality improvements; thus, it can be said that Six
Sigma is not the ideal choice for SMEs to gain superior operational performance. It may also
be argued that Six Sigma programs are pervasive such as yellow, green, black and master
black belt, and there is hardly any concept of such roles, especially in small-scale businesses.
IJPPM Operational performance is measured by the quality of the product itself, variation in
processes, customer satisfaction, cycle time and other measures. Most of the SMEs in
Pakistan have up to three sigma performance levels as there is a considerable variation
in product quality, defects and other elements. With a very limited to no application of Six
Sigma, it is plausible to state that no such improvements exist in small firms’ business
performance.
Six Sigma has been found to positively affect environmental performance with a p-value
greater than 0.05 as H6 is supported. Six Sigma, with its main aim of quality improvement,
can be modified with green objectives. In such a way, the main priority is achieved, and
environmental performance is also improved. Lean and Six sigma can be combined and can
function holistically with an environmental focus to improve the business and enhance the
environmental performance of an organization. In this way, business processes will be
designed with a concern for the environment (Ruben et al., 2018). In Pakistan, those firms that
implement the Six Sigma techniques are more likely to reduce variation in their processes and
reduce defects of products. This results in fewer defective products leading to reduced
scrapping. This improves the environmental performance of such firms. This can be seen in
the health sector, where medical instruments are manufactured with a lot of precision, and
there are very few defective instruments.
According to H7 and H8, a positive relationship could not be found between
environmental sustainability and either of operational and business performance. Our
findings indicate a p-value greater than 0.05, which suggests that Pakistani SMEs adopting
environmentally sustainable practices have little to no effect on the quality of the products
and their market and financial position. As mentioned by (Mahmood et al., 2017), not even a
single sustainability report has been published by any Pakistani SME in the Global Reporting
Initiative GRI database. The study also highlighted various reasons for nonreporting, such as
lack of awareness regarding sustainability, lack of training and skills, lack of government
regulation and sustainability infrastructure, lack of pressure for sustainability reporting and
lack of resources. Due to all these reasons, SMEs do not find it necessary to integrate
environmentally sustainable practices as they are unaware of the potential benefits.
In contrast to our findings, prior research has found a positive relationship between
environmental sustainability and business performance. It increases the marketability of the
products and meets customer expectations; hence it also enhances the business performance
(Wilson, 2010). It can also be viewed that SMEs in Pakistan may not be implementing
environmental sustainability practices for their business and product quality improvement
but instead for environmental performance. A key point under consideration is the size of the
firm implementing environmental sustainability. A small business is more likely to focus on
its core business functions rather than environmental sustainability. However, large firms,
due to greater access to resources and economies of scale, dedicate specialized teams to adopt
these practices to create synergy with their core business functions. There is no existence of
any regulatory bodies in Pakistan to enforce sustainable practices on SMEs. Therefore, this
can be considered as a factor that reflects no improvement in the firm performance, and it can
be argued that environmental sustainability at its own is not a factor for improving firm
performance.
Our findings indicate a positive correlation between environmental sustainability and
environmental performance (p value < 0.05), as such H9 is supported. By implementing
environmental sustainability–driven practices (such as utilizing renewable energy or
recyclable products), Pakistani SMEs harness the efficiency gains and reduce unnecessary
byproducts. This development is similar to Singhal and Rogers (2012) findings in that
sustainable practices such as eco-design have a positive impact on economic performance,
competitive advantage and environmental performance. The study of L
opez-Gamero et al.
(2009) also indicate that environmental sustainability improves organizational
environmental performance by lowering pollution design for the use of raw materials Lean, Six
decreases the amount of toxic emission in production processes. The same can be related to Sigma and
the SMEs in Pakistan, which specifically adopt sustainable practices (solar energy). This is
done to lower emissions not only in the production stages but also in the dumping processes,
environment
which ameliorates the firms’ environmental performance.
Overall, the study results provide the practitioners and decision-makers with useful
insights while also contributing to the theoretical body of knowledge. From a practical point
of view, the results urge practitioners to integrate lean, Six Sigma and environmental
sustainability practices to leverage SMEs’ environmental performance. There has been a
significant rise in the level of air and water pollution due to SMEs’ unsustainable practices in
Punjab. The Air Quality Index (AQI) of Lahore worsened in the past year, reaching 447 which
is hazardous for human health [3]. Other cities of Punjab have also witnessed a rise in AQI,
majorly due to industrial activities. Moreover, the Punjab region faces a scarcity of clean
water due to industrial wastewater contamination, causing severe health and environmental
impacts. Due to the increased environmental burdens and pressure from external
stakeholders, it is becoming increasingly important for SMEs to formulate strategies for
addressing these issues. While facing these challenges, top management and decision-makers
must incorporate lean, Six Sigma and environmental sustainability practices to improve
environmental performance. Since lean and Six Sigma focus on waste elimination,
practitioners must focus on developing a framework for its implementation in SMEs.
International standards and certifications, such as ISO 14000 compliance, can help in the
adoption of globally accepted measures for environmental impact reduction.
Moreover, practitioners also must work on the development of environmental
management systems (EMS) to monitor and control hazardous processes. To increase the
awareness and expertise of SMEs regarding the three management styles, training of
employees and staff and providing incentives to adopt these practices can also prove to be a
vital initiative. Additionally, the government regulations regarding the quality and
sustainability practices must not allow for any relaxation, resulting in poor product
quality and hazardous emissions. Government pressure and strict regulations on quality and
environmental impacts will force SMEs to incorporate these practices to leverage firm
environmental performance. SMEs possess limited financial capabilities to integrate these
practices in their businesses, which is why SME financing and taxation must be revisited and
modified to provide certain financial relief to SMEs to successfully implement these practices
to reduce environmental burdens and subsequently enhance environmental performance. All
these measures have been recommended to give practitioners and top managers direction to
enable SMEs to integrate these practices to leverage firm performance and gain a competitive
advantage by creating a better image.
The research also contributed to the theoretical body of knowledge. This study is the first-
ever study in the context of a developing country, Pakistan, where firm performance has been
gauged through the implementation of three management styles, i.e. lean, Six Sigma and
environmental sustainability. The results of the study are novel since there was no
association found between the three management styles and the firm’s operational and
business performance. In contrast, previous literature supports the positive influence of these
management styles on firms’ business and operational performance. Moreover, the study
found these management styles to be effective in leveraging SMEs’ environmental
performance while also providing some recommendations to practitioners for
incorporating these styles within the Pakistani SMEs. For developing markets, it can
serve as a benchmark research study to be used by other developing countries for a
comparative analysis of how these management styles differently influence business,
operational and environmental performance of SMEs.
IJPPM 6. Conclusions
This paper sought to determine the influence of lean, Six Sigma and environmental
sustainability on SMEs’ performance in Pakistan. This research shows that the implementation
of lean, Six Sigma and environmental sustainability improves SMEs’ environmental
performance. Still, it does not exhibit a positive relationship with operational and business
performance. SMEs serve a vital role in industrial economies worldwide as they are catalysts of
economic and welfare development along with aiding innovative developments within these
economies. Due to rapid globalization and increased competition levels, SMEs have to refocus
and reconfigure their management strategies. This is necessary to maintain and exceed their
present economic and competitive performance while maintaining similar or lower overheads.
The implementation of lean, Six Sigma and environmental sustainability techniques is a proper
means of proceeding toward this goal. However, the implementation of these standards is not
widespread in Pakistan due to the large investments involved and uncertainty over their
subsequent benefits. There is a potential for further research to be conducted, especially
regarding how lean, Six Sigma and environmental sustainability can be implemented in the
competitiveness of the present business ecosystem. The existing literature in this area is
primarily exploratory rather than explanatory of constituent elements. This study provides
some policy recommendations to top managers and policymakers, which can aid future studies
to develop a comprehensive framework for determining how these practices can be successfully
implemented in SMEs to enhance firm performance.

6.1 Limitations and future recommendations

There are some limitations to our study. The results of this study need to be validated in
terms of large-sized organizations. This study was cross-sectional and examined the
relationship at a particular time. A longitudinal study should be conducted to investigate
these relationships in detail over a while. The research can be generalized to other areas such
as South Asia targeting different areas of the economy, such as the service industry. A mixed
methodology approach can be adopted, such as define, measure, analyze, improve and control
(DMAIC), which is one of the core elements of Six Sigma. Most of the study related to this area
has been conducted using a qualitative approach. A quantitative approach is better suited to
provide scientific evidence to theory. The relationship of lean, Six Sigma and environmental
sustainability can be measured with different elements of firm performance: operations,
economic, financial, etc. Since the focus of the research was an empirical investigation of the
extent of implementation of quality and sustainability practices in SMEs, future research
studies must focus on the implementation perspective by determining drivers and barriers to
implementing these practices.
Notes
1. https://smeda.org/index.php?option5com_fsf&view5faq&catid53&faqid548
2. The Organization for Economic Co-operation and Development (OECD) constitutes 30 countries. The
members.
3. https://www.dawn.com/news/1516450

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Corresponding author
Yousaf Ali can be contacted at: [email protected]

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