The Benefits of Implementing Environmental Initiatives:
Experiences from Malaysian SMEs
Nik Zam Nik-Wan
1
, Hatinah Abu Bakar
1
and Mustaffa Mohamed Zain
2
1
Universiti Teknologi MARA Kelantan, Bukit Ilmu, Machang, Kelantan, Malaysia
2
Universiti Teknologi MARA Selangor, Puncak Alam, Selangor, Malaysia
nikzam@kelantan.uitm.edu.my
Keywords: SMEs, Environmental Initiatives, Benefits.
Abstract: To address the lack of information on the practices of environmental improvements tailored to SMEs’ needs
particularly in Malaysia; this study shall first explore the availability of environmental friendly activities
practices by SMEs in Malaysia. Then the study will proceed further to investigate what the SMEs have
benefited, if any, from practicing environmental friendly activities. This study is exploratory in nature
applying qualitative approach where fourteen (14) Malaysian SMEs were interviewed to identify the
environmental initiatives practiced by them and the benefits they experienced from such practices. These
SMEs managed to engage in some environmental initiatives that had improved their environmental
performances. Most of the SMEs are ISO 14001 certified companies which put in place proper environmental
management system (EMS). However, those without the ISO 14001 certification managed to also practice
simple environmental initiatives yet beneficial to their businesses as well. Findings of this research could
attract other SMEs to also involve in environmental friendly practices and equally benefited from such
practices.
1 INTRODUCTION
Individually, SME may seem to have little impact on
the environment but their “collective footprint”
should be considered to be significant (Gunningham
2002, Redmond et al, 2008). It is believed that SMEs
caused up to 70% of the total global pollution (Hillary
2004). SMEs also said to be responsible for 70% to
98% of the world manufacturing pollution (Hussey &
Eagan 2007).
Unfortunately, SMEs are seems to be reluctant to
participate. Some SMEs think that environmental
initiatives will reduce company’s profit (Garay &
Font 2012) since they are unaware of many
financially attractive opportunities attached to
environmental improvement (Gunningham 2002). To
address the lack of information on the practices of
environmental improvements tailored to SMEs’
needs this study shall first explore the availability of
environmental friendly activities practices by SMEs
in Malaysia. Then the study will proceed to
investigate what the SMEs have benefited, if any,
from practising environmental friendly activities.
Having to know Malaysian SMEs’ involvement in
environmental initiatives and the possible benefits
experienced would positively encourage other SMEs
to follow their lead and enhance further the concept
of sustainable development.
2 LITERATURE REVIEW
2.1 SMEs and Environment
Overall, SMEs constitute more than 90% of
businesses worldwide (Aras & Crowther 2009,
Kusyk & Lozano 2007). Undeniable, SMEs play a
very important role in the economic growth
worldwide (Singh et al. 2008). In Malaysia, over 97%
of the total business establishments consisted of
SMEs that provide jobs for more than 5.6 million
workers equivalent to 56% of Malaysian total
employment. Unfortunately, the mushrooming
growth of SMEs, seem to create serious
environmental issues along the way. In fact, 70% to
98% of the world manufacturing pollution was
produced by SMEs.
508
Nik-Wan, N., Bakar, H. and Zain, M.
The Benefits of Implementing Environmental Initiatives: Experiences from Malaysian SMEs.
In Proceedings of the 2nd International Conference on Economic Education and Entrepreneurship (ICEEE 2017), pages 508-514
ISBN: 978-989-758-308-7
Copyright © 2017 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
2.2 Environmental Impacts and
Environmental Initiatives
SME’s individual environmental impacts might be
small but given the massive numbers of SMEs
nationwide their cumulative impacts would be highly
significant (Fox 2005). Moreover, with limited
resources, lacks of manpower and expertise have led
to lower compliance rates with environmental
regulations that contribute to greater environmental
impacts by SMEs further. Some SMEs are ignorance
and were not aware of their environmental impacts
(Seidel et al. 2008) and environmental issues are not
considered to be significant (Condon 2004).
Though, Baba’s (2004) also identified that the
companies did find ways to minimise their daily
environmental problems by practicing environmental
management elements. Unfortunately, SMEs
involvement in environmental initiatives that could
minimize their environmental impacts was not widely
spread. Seidel (2008) mentioned that there are SMEs
that hardly believed that sustainability will benefit
their companies. Conversely, Pimenova & Vorst
(2004) identified that 80% of the SMEs that engaged
in environmental initiatives would experience
improved corporate image, 27% had better
competitiveness and 20% enjoyed financial benefits.
Meanwhile Peter & Turner (2012) identified among
the benefit from improving environmental
performance are better image among customers, cost
reductions, increased efficiency, cleaner working
environment, waste minimisation and helps the
company sell products.
3 METHODS
This study applied qualitative approach to identify
knowledgeable and experienced SMEs with
environmental initiatives and environmental
reporting in practice. Letters were sent to 1,340 SMEs
listed in the Federation of Malaysian Manufacturers
(FMM) directory and 75 (5.59%) SMEs returned the
surveys and it was considered to be acceptable
because there were some variations and similarities in
term of states and industries. Most of the respondents
had provided necessary information to move on
further to the rich data collection process. From a
sample of 75 surveys, non-probability purposive
sampling and theoretical sampling was used to
identify the SMEs that could be considered to have
experiences in environmental practices for further
interviews. The SMEs were contacted and 14 SMEs
agreed to participate. The data collection process of
this study includes (1) interviews, (2) observations
and (3) content analysis of documents to identify the
environmental initiatives practiced by them and the
benefits they experienced from such practices.
All the interviews, except for one, were audio-
recorded with permission of the participants. Audio-
recording was considered to be beneficial for the
interviews processes because researcher can focus on
conducting the interview smoothly as well as
discussing and probing issues brought about at that
time and not being disrupted by details note taking
process (Hoda et al. 2012).
The audio-recorded interviews were transcribed
verb-a-tim in the original language of conduct within
two weeks of the interviews sessions. To conserve the
interviewees true meaning and expression as well as
to avoid possibility of the researcher turning the
originality of the interviews into own words which
might be influenced by the overall process and lead
to biasness, the Bahasa Malaysia or mix of both
languages were not translated prior to the analysis
process. Instead, the original transcriptions either in
English, Bahasa Malaysia or mix of both were used
during the content analysis process.
4 RESULTS AND DISCUSSION
This study involved SMEs located in almost all the
states in East Malaysia.
Table 1: SMEs-Summary of participants profiles.
3 SIZE ISO
14001
INDUSTRY
SME1:M1 Medium Basic metal
SME2:P1M2 Small Rubber and
plastics
SME3:F1 Small Food and
beverage
SME4:N1 Medium Other non-
metallic
mineral
products
SME5:C1 Small Chemicals
SME6:M3E1 Small Basic metal
SME7:E2 Small Electrical
Machinery and
apparatus
The Benefits of Implementing Environmental Initiatives: Experiences from Malaysian SMEs
509
SME8:C2 Small Chemicals
SME9:F2 Medium X Food and
beverage
SME10:P2 Medium X Rubber and
plastics
SME11:N2 Medium X Wood
SME12:M4 Small Basic metal
SME13:E3 Small Electrical
Machinery and
apparatus
SME14:N3 Medium Other non-
metallic
mineral
products
4.1 Environmental Initiatives by the
SMEs
4.1.1 Complying to Rules and Regulations
All manufacturing premises have to comply with the
set of environmental rules and regulations stated in
Environmental Quality Act 1974 (Act 127) and
Subsidiaries Legislation. The company will be
compounded if it commits any offense as mentioned
under the Act. As such, several environmental
initiatives practiced by the SMEs such as proper
handling of scheduled waste, installation of wasted
water treatment facilities and monitoring gas
emission are considered as act of complying with
rules and regulations as imposed by the
Environmental Quality Act 1974.
4.1.2 Obtaining ISO 14001 Certifications
Eleven (11) of the SMEs managed to obtain ISO
14001 certifications. Obtaining ISO 14001’s
certification is considered a significant environmental
initiative because it is not mandatorily required by the
environmental rules and regulations. Furthermore a
company cannot simply state that it possess ISO
certification without any supporting documentations
and approval from the International Organization for
Standardizations. Despite having limited financial
resources, manpower, lack of time and other
unspecified limitations as compared to its larger
counterpart, the SMEs had made financial
commitment to obtain as well as to maintain this
international accreditation.
4.1.3 Recycle and Reuse
Recycle and reuse are among the environmental
friendly activities implemented by most of the
participants’ SMEs. However, the items recycled and
reused and the way it was done are different between
one SME to another. Among the activities done by the
SMEs are given in Table 2 below.
Table 2: The activities by the SMEs.
SME Activities
SME2:
P1M2
[1] Cartridges were kept in one place for
suppliers to collect them backs
(Observation)
[2] Information provided during the
interview session was written at the back of
used papers (recycle papers). (Observation)
[3]General waste such as papers, carton
boxes and cans were either sold or given
away to contractors or collectors.
(Interview)
SME3:
F1
[1] General wastes such as aluminium,
papers and carton boxes were sold.
Aluminium as the defected and normal loss
of the raw materials and it contributed to a
significant amount of income. (Interview)
SME4:
N1
[1] Reuse the treated oil which was
previously being its scheduled waste.
(Interview)
[2] Premix which arises from the quarry
operation was sold for other usages or
freely provided to the local community,
schools, police stations, mosques as part of
the co’s CSR.
SME6:
M3E1
[1] Hire contractors to do the segregation of
papers, newspaper, magazines to be
recycled. (Interview)
SME9:
F2
[1] Recycling bins are provided for general
waste in the factory areas including at the
entrance of the company (Observation)
[1] Formed a recycle team / group
(Interview)
[2] Provide containers to administrative
staff to dispose their papers which will be
ICEEE 2017 - 2nd International Conference on Economic Education and Entrepreneurship
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SME
10 :P2
segregated later by the recycle team
(Interview)
[3] Collect and use rain water when it is
necessary (Interview and Observation)
[4] Reuse the raw material by reprocessing
and add it back into the production
(Interview)
SME
12:M4
[1] Recycle paper (interview)
[2] Each staff is provided with garbage bin.
They need to recycle their owned waste and
the co can monitor paper usage. (Interview)
SME
13:E3
[1] Reuse papers and carton boxes
(Interview)
[2] Recycle raw material (Interview)
4.1.4 Waste Management
Other than scheduled waste, the SMEs also produce
other wastes commonly known as general waste such
as papers, carton boxes, plastics and cans. The SMEs
also produced waste from the production processes
mostly related to its raw materials or defected items.
Apart from recycling and reusing these wastes where
necessary, the SMEs are also aware of the need for
them to engage in activities that would manage their
wastes efficiently. Waste management could reduce
the amount of waste generated from operational
procedure which could also lead to cost saving.
In managing its waste, SME11:N2 managed to
increase the recovery from saw timber to log from
50% to 80% when the wastage is re-use to produce
other commercial products. Meanwhile, SME5:C1
changed its existing fax machine to the new one that
can be used efficiently to control paper consumption.
They also reviewed back the company’s existing
practices that have been followed year after year and
noticed elements of redundancy. The used of printing
paper could be reduced with the existence of
computers and similar equipment.
When SME10:P2 and SME12:M4 provided
containers or garbage bins for their employees, it
indirectly projected an indication that employees’
effectiveness in managing their waste would be
monitored.
4.1.5 Reducing Energy Consumption
Another reducing effort practiced by the SMEs that
would give impact on the environment is reducing the
energy consumption which mainly focused on
minimizing the use of electricity. The opportunity to
interview the manager of SME5:C1 who happened to
be one of the owners of the company provided
valuable information on the environmental initiatives
practiced by the company. To cut the consumption of
electricity, SME5:C1 have changed their old air
conditioners into inverter technology that saves
energy usage. Being aware of its financial limitations,
SME5:C1 changed the air conditioners one by one
gradually. Even though invertor technology is
slightly expensive than the conventional system,
SME5:C1 experienced cost saving sometimes later.
As owner-manager he managed to impose ‘fine-
system’ for irresponsible staffs who forgot to switch
off the air conditioner. To ensure the success of the
system, owners-managers including him have to pay
fine as well if they too forgot to switch off the air
conditioners. During the interview session the
researcher observed the existence of small stickers
near the switches, reminding users to switch off either
air conditioners or lights.
SME8:C2 also focused on air conditioners to
reduce its energy consumption. Among the
company’s strategies are to switch off air conditioners
in the production area during lunch time. SME8:C2
took the opportunity to follow the government
suggestion to set the temperature of the air
conditioners at the minimum 24
o
Celsius. It was
observed during the factory visit that the company
had installed indicator lights for air conditioners and
ovens in the production area to notify the usage of
those equipment either they are switched on or off.
So, the responsibility falls on everybody that used the
facilities.
Likewise, SME10:P2 practiced reduction of
energy consumption at all levels. The company uses
transparent roofs in the factory from 8.00 a.m. to
3.00p.m to reduce electricity usage. The existence of
this initiative was observed during the factory visit.
The workers are also reminded to switch off the
machines accordingly and the air conditioners will be
switched off during raining days and the windows
will be opened instead.
4.1.6 Trees Planting
Trees planting refers to all the related activities
involving planting trees and plants to maintain the
green nature of the earth. Upon entering the
administration department of SME2:P1M2, plants in
small pots are located on most of the staffs’ office
tables while the bigger plants are located at the
corners of the office areas. Trees and plants are also
planted around the factory area. The researcher was
told that even the owner of the company himself came
over the factory site during weekends to plant trees in
the early years of operations.
The Benefits of Implementing Environmental Initiatives: Experiences from Malaysian SMEs
511
As for SME4:N1, in which the operation is mostly
outdoor and associated with loud noise, the company
planted trees to absorb the sound as well as to reduce
the vibration effects from the explosion. Trees are
planted surrounding the quarry area. Meanwhile,
SME13:E3 also promotes employees’ involvement in
planting trees and plants. However, for SME11:N2
green efforts related to planting and cutting off trees
are considered a very crucial issue since it operates in
logging industry. Unlike other SMEs, SME11:N2’s
operation requires the company to cut trees rather
than planting them. In order to sustain in the industry,
the company could not avoid cutting down trees. As
such the focus is to minimise the environmental
impacts since it is impossible to achieve zero impact
in timber logging industry.
4.1.7 Develop Employees’ Environmental
Awareness
Some of the SMEs also took the initiatives to create
environmental awareness among their employees.
SME6: M3E1 organised yearly campaign internally
where the campaign lasts about two months each
time. SME6:M3E1 also require their employees to
take turn to recite the company’s Environmental
Policy in the company’s morning assemblies.
Likewise, SME8:C2 provided proper training
programs for its employees along with frequent
meetings and reminders to ensure that no energy is
wasted. Moreover, SME8:C2 encourages its
employees to voice suggestions on production,
welfare as well as environment by providing
suggestion box.
On the other hand, SME10:P2 prefers to
constantly create environmental awareness using
non-verbal communications. Posters, stickers and
memos are posted and pasted around their work areas
as reminders to ensure environmental friendly
practices. The company pasted ‘saving resources’
stickers to create awareness almost anywhere
including the company’s washrooms so that the
workers get used to those practices. As for water
consumption, stickers are pasted near the taps. The
stickers ‘Tutup Bila Tidak Digunakan’ (Switch off
When Not in Used) were pasted near the switches in
the effort to save electricity. Meanwhile, SME14:N3
also applied non-verbal communication but the
prominence is more on pictures rather than words.
Pictures of people starving were pasted at the
cafeteria to remind its workers not to waste foods.
4.1.8 Influencing Customers and Suppliers
Apart from engaging in environmental initiatives for
the company, several SMEs also make some efforts
to assist as well as guide their suppliers to get
involved in environmental friendly initiatives.
SME5:C1 encouraged its customers to have a big
consumption area to enable the company to send the
material in bulk. Bulk purchasing has led to less
deliveries causing reduction in fuel usage. SME5:C1
also assist its suppliers to increase material ordering
so that photocopying of purchase order could be
reduced.
Meanwhile, SME1:M1 issued the company’s
environmental policy to the suppliers for them to be
in-line with the company’s requirements. On the
other hand, SME3:F1 took some action upon
suppliers or contractors who act disobediently against
good environmental practices. The company
instructed them to follow the company's ISO
requirement where necessary and if they fail or
unwilling to do so, the company will resort to switch
to other suppliers.
4.1.9 Operations Related Activities
There are SMEs that have engaged in more
environmental initiatives as compared to others
because their industries are more environmental
sensitive. SME4:N1 which operates as quarry have
many direct environmental impacts inherent in the
industry which may cause all sort of pollutions such
as air and noise pollution. Due to that the company
are willing to spend thousands of Ringgit to use
amulet explosion that lower down the noise even
though the noise lasts for a short period of time only.
Furthermore, instead of using lorries which are
considered to be a way much cheaper alternative,
SME4:N1 decided to use conveyor belt to transport
the raw material to stock pile which could minimise
environmental impacts due to dust. In events where
the use of lorries are still necessary, then their loads
will be monitored to prevent overloading which may
cause further environmental impacts.
Likewise, for SME11:N2, it is unavoidable that its
logging activities are closely related to the
environmental impacts. As such, to minimize the
environmental impacts caused by the company’s
operational activities, SME11:N2 managed its
logging activities systematically and in a well-
planned manner. The company adopted sustainable
development in managing its logging activities with
30 years cutting cycle and the trees are cut according
to the quota set by the Forestry Council. Pre-felling
survey was conducted prior to logging activities to
identify ‘had batas tebangan (HBT)’; the cutting limit
in which the diameter of the trees allowable for
cutting is identified. Under sustainable development
system, SME11:N2 also had a system to replant those
trees systematically so that new timber will be ready
after the 30 years cutting cycle.
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4.2 Benefits of Practicing
Environmental Friendly Activities
Even though implementing environmental initiatives
such as obtaining ISO 14001 certification, installing
waste water treatment and other environmental
friendly facilities and documents involved significant
amount of investment, the SMEs seem to agree that it
will provide some benefits in the long run. Waste
management could reduce the amount of waste
generated from operational procedure which could
also lead to cost saving. Therefore, cost savings is
among the benefits that the SMEs had experienced
when they implemented the environmental initiatives.
SME 2 : I do not know what they will do [with the
printer cartridges] Yes, we should reduce our
problem. Whenever the suppliers come to service the
equipment so we gave them. Otherwise, I have to pay
another scheduled waste for sent to Kualiti Alam,
then I have to pay money also.
(Original Transcript: SME2: pg. 3-4/line70-73)
SME 4 : For example, for waste management. We can
see the improvement as compared to before when we
produced waste without control. Now the waste is
reduced. For example, let say 100 tonnes for one
month, if we can reduced the waste by 30 tonnes per
month is good enough. Previously the 30 tonnes was
wasted away but now we can use it as raw material.
We maximised and used whatever raw material that
we have.
(Translated and paraphrased: SME4: pg79/line1821-
1826)
SME 4 : … we can save the usage of fuel, transformed
the benefits into cost saving. For a certain production
target, we should target fuel usage per tonnes. We can
reduced certain amount of fuel in long run. May in
the next 5 years, the next 10 years,
(Translated and pharaprased: SME4: pg79/line1853-
1855)
SME 5 :“And also at one time, there have been
chemical leaking. Where leak out Saturday morning
when we were not working. Until morning when we
came back we saw the whole warehouse was flooded
with acid, all metal stuffs being corroded, our wiring
all gone, so for two days we couldn’t work…
So, after the incident, no more talking about cost
saving in term of chemicals, no more. The cost, yes
the cost of packing is expensive but the cost of
repaired and clean-up is more because we have to
change the wiring. The instruments we have to
change all the instruments.”
(Original Transcript: SME5: pg. 121/line2869-2874)
Apart from having a cost savings experience, the
SMEs or its employees also managed to earn some
additional cash when they engaged in recycling
activities.
SME 2 :Employees of the factory do recycle items
such as boxes and tins to earn cash for own wellbeing,
not much but as least the rubbish/garbage is not go to
waste and become somebody else income.
(Pharaprased: SME2: pg5/line109-110)
SME3 also sold their waste papers, carton boxes
and earn some cash. Consequently, SME3 which
produced cans drink had significant amount of
aluminium waste which it classified as general waste
sold for significant amount of money. Likewise, the
premix waste which is derived from the untreated raw
material of SME4 could also be sold. Even though the
cash collected from the disposal of those waste varies
in the amounts but it still provide some cash
contribution either to an individual or the SME.
Additionally, SME1 mentioned that after the
company obtained ISO 14001 certification the
benefits were materialized when the company
continues to operate in safer and less hazardous
environment. SME1 also noticed that the company
received more customers which led to increase in
sales. SME5 also received additional credits from its
customers when it obtained ISO 14001 certification.
Their customers are more willing to cooperate with
them when the customers knew that SME5 is ISO
14001 certified company. Most of the SMEs’
customers are in favour of ISO 14001’s certification
as well.
The SMEs also stated that they had improved
relationship with their stakeholders. They received
lesser complaints from the surrounding society when
they are concerned about the environment. SME4
willingness to use amulet explosion for its quarry
activity had reduced the explosion effect to the
environment as well as to the surrounding society.
Meanwhile with ISO 14001’s certification enable the
SMEs to respond to complaints or environmental
inspectors confidently since they knew that the
company already took all the necessary precaution
and it was supported by proper documents.
Definitely, with ISO 14001 certification they are
more confident to meet new customers and face the
regulators.
The Benefits of Implementing Environmental Initiatives: Experiences from Malaysian SMEs
513
5 CONCLUSIONS
Despite their smaller sizes with limited resources
these SMEs managed to implement some
environmental initiatives that had improved their
environmental performances. There are several
environmental initiatives practiced by the SMEs in
this study which could provide guidance for other
SMEs to implement it as well. Benefits of engaging
in environmental initiatives discovered in this study
could attract other SMEs to also involve in
environmental friendly practices and equally
benefited from such practices and at the same time
participated in reducing global environmental
impacts as well.
Accordingly there are more than 500,000 SMEs in
Malaysia but the focus of this study is limited to the
SMEs that are registered as member of Federation of
Malaysian Manufacturers (FMM). Difficulty in
obtaining a complete directory for SMEs that would
include their contacts information and all other
necessary details had limits the utilisation of a more
representable sampling frame. However
generalisation of the findings was not the focus of this
study as well. Instead the richness of the information
was seems to be more significant and valuable to the
body of knowledge.
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