The Effects of Internal and External Environment on SMEs

Empowerment-based Environmental Management

Rita Syntia

, Miswar Budi Mulya

Doctoral Study Program Of Natural Resource Management And Environment, Universitas Sumatera Utara, Medan,

Indonesia

Graduate School Doctorate of Natural Resources and Environmental Management, Universitas Sumatera Utara

Medan, Indonesia

Keywords: Internal Environment, External Environment, Empowerment, Environmental Management, SMEs.

Abstract: This research aims to look at the effects of (1) internal environment on the empowerment of SMEs-based

environmental management (2) external environment on the empowerment of SMEs-based environmental

management. This research is quantitative descriptive research, and it is explanatory research. Population

research is target population, 965 business engaged in the industry of producing waste in the production

process in Aceh Tamiang. The number of samples used is 300, randomly selected respondents. Technique

of data analysis is Structural Equation Modelling (SEM) with software AMOS. Research results show (1)

internal environment effects significantly on the empowerment of SMEs-based environmental management

(2) external environment effects significantly on the empowerment of SMEs-based environmental

management.

1 INTRODUCTION

Empowerment of SMEs-based environmental

management becomes very important in the

development of technology as part of the

development of globalization perceived by today's

society especially in Aceh Tamiang. SMEs in Aceh

Tamiang experiences rapid enough growth that is

nearly 75,000 business unit, having production of

processed foods and souvenirs of Aceh Tamiang.

Its growth ranges from 2012-2015 to reach

15.77% annually (Hariyanto, 2017).Even the

number of known perpetrators of SMEs in Aceh

Tamiang reach 3,258 units (Disperindag Aceh

Tamiang, 2017). Two of the biggest existing SMEs

sector in Aceh Tamiang, are industrial and trade

sectors. But none of the existing efforts in Aceh

Tamianghas environmental permits where there are

indications that Aceh Tamiang does not yet have the

coaching efforts through empowerment of SMEs-

based environmental management and no one

business in Aceh Tamianggetsinto eco-friendly

business. Empowerment-based environmental

management has not been implemented consistently;

the government does not yet have a special

rulesabout the empowerment of SMEs-based

environmental management.

The growth of SMEs increases while enhancing

the activity of the fulfilment of the needs of the

public becomes a cause of environmental damage

due to the use of natural resources in the process of

fulfilling human needs. The efforts of the

Government together with the community are not

optimal for preventing damage and people feel the

impact directly due to the increased activity of

SMEs in Aceh Tamiang.

The level of understanding and knowledge is low

as the impact of the low level of education of the

businessmen and lack of experience, not ready for

the change or adaptation of technology leading to

great opportunities for the increased environmental

damage in Aceh Tamiang. Even the gap between

government policy and institutions of the central and

regional levels of policy hampers the coaching

programs against perpetrators of SMEs.

Bank Indonesia (Bank Indonesia,2012), mentions

that there have been many efforts done to overcome

damage to the environment through education to the

businessmen about the importance of maintaining

environmental sustainability while running a

business, by providing information on the positive

Syntia, R. and Mulya, M.

The Effects of Internal and External Environment on SMEs Empowerment-based Environmental Management.

DOI: 10.5220/0008891106030608

In Proceedings of the 7th International Conference on Multidisciplinary Research (ICMR 2018) - , pages 603-608

ISBN: 978-989-758-437-4

603

impact, running a business by friendly environment,

granting incentives (exemption of import duty, tax

deductions for the costs of processing the waste, and

compost subsidies), andease of loan funds. But the

effort has not been successful because of the

awareness and willingness of the businessmen to run

business by friendly environment is still low due to

internal and external challenges.

Therefore it takes strategy to revamp the SMEs

Aceh Taming into eco-friendly efforts through

policy management of natural resources and the

environment, with emphasis on the green economy

in Aceh Tamiang. The effort required is the right

business model for each group based on the potential

economics/natural resources in the area of Aceh

Tamiang with attention to the environmental

challenges of internal and external environment

faced by SMEs in Aceh Tamiang Regency.

2 THEORY

2.1 Internal Environment

The internal environment is where managers work

on the culture of the company, production of

technology, organizational structure, and physical

facilities (Purwanti and Fattah, 2011). (Margaretta,

2012) The internal environment of the company is

declaring the forces that exist within the

organization itself and have properties that can be

controlled by management. Furthermore, Hubeis and

Najib (Hubeis and Najib, 2014)also mention that the

internal environment is the environmental

organizations that are in a normal organization that

has direct implications and special in a company.

According to the company's own mind-set it is a

collection of various kinds of resources, capabilities,

and competencies that will be used to establish a

market position. Thus, the internal environment

analysis include analysis of the resources, capability,

and competence owned by the company.

2.2 External Environment

The external environment is instrumental in

influencing managerial decision making, processes

and organizational structure. The external

environment is important to always be monitored

and analysed. Analysis of the external environment

is difficult because of the extreme complexity and

intertwining. (Dewi, 2005). The external

environment is the outside force that could

potentially affect the performance of the

organization (Astuti, 2011).

The external environment is composed of several

elements outside the organization, which cannot be

controlled and known by managers. This

environment affect the manager when making

decisions. There are two types of external

environment i.e. micro and macro environments.

External micro environment is an environment that

has a direct influence on the activities of

management of providers, competitors,

subscriptions, banking institutions and and others.

External macro environment is an environment that

has no direct influence, such as economic

conditions, changes in technology, politics, and

social matters. (Handoko, 2011).

2.3 Empowerment of SMEs-Based

Environmental Management

This is a discussion of the empowerment of the

individual, group or community in an attempt to take

control of their lives by trying to shape the future in

accordance with their wishes. Empowerment of

directing someone to decide to do in addressing a

question in his life is fully realized and controlled to

achieve the future.

Conceptually meaningful empowerment of the

powers are interpreted as granting authority

(Suharto, 2008 in Rinawati, 2010). Empowerment

also means an effort to encourage individuals to

have responsibility against efforts to improve

themselves and the way they are in completing the

work and contributing to get the objectives

(Makmur, 2008 in Rinawati, 2010).

Environmental management is the activity of

planning, organizing, and moving the human

resources as well as other resources to achieve the

objectives of environmental policy that has been set.

Environmental management consists of some

aspects of management functions that determine and

carry on the implementation of environmental policy

(ISO 14001 by Sturm, 1998). Environmental

management practices are conducted in a systematic,

procedural and repeatedly referred to as

environmental management system. Sturm (1998)

mentions that the ISO 14001 environmental

management system serves as part of the

management system,functioningto keep and achieve

environmental policy objectives. Environmental

management system also has a key element, that is

the statement of environmental policy and part of a

broader management system in a company.

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604

2.4 Research Objectives

This research aims to:

1. Find out and analyze the effects of internal

environment on the empowerment of SMEs-

based environmental management.

2. Find out and analyse the effects of external

environment on the empowerment of SMEs-

based environmental management.

2.5 Hypothesis

The hypotheses of this research are:

1. The internal environmental effects significantly

to the empowerment of SMEs-based

environmental management.

2. The external environmental effects

significantly to the empowerment of SMEs-

based environmental management.

3 RESEARCH METHODS

This research is a descriptive and quantitative

explanatory research. The population of the research

is the target population i.e. 965 SMEs engaged in the

industry producing waste in the production process.

Sample researches as many as 300 respondents

according to the number of samples that are most fit

for maximum likelihood analysis in Structural

Equation Modelling (SEM) are chosen by random

sampling technique.

Data analysis techniques used in this research is

descriptive statistics analysis and Structural

Equation Modelling (SEM) with software SPSS and

AMOS. Data collection techniques used are (1)

interview (2) documentation and (3) questionnaire.

4 RESULTS AND DISCUSSION

4.1 Descriptive Statistics

Results of the study show that 60% of business doers

in Aceh Tamiangare women entrepreneurs

housewivesspendingtheir time in the house so they

are running a business while taking care of families

and households and the remaining 40% aremale

businessmen. Other data show that 60% are

businessmen who are in the age of productive i.e.

35-55 year and the rest of the business doers have

already entered a period of pension that is above 55

years of age who areretiredas employees.Then92%

of respondents areentrepreneurshaving a high school

education while the remaining 8% are businessmen

having a bachelor and diploma degree, so they have

lower level of knowledge and understanding about

business management correctly especially the

management effort-based environmental

management.

This indicates that the majority of the

perpetrators of the SMEC have little knowledge

about the environmental management system to

manage or develop businesses. Their knowledge is

only limited on the method of processing resources

or raw materials to be refined or producedto be sold,

while knowledge about managing businesses is also

done on the financial management in a simple way

and not knowing about managing business to be an

environmental and friendly business.

Other criteria showthere are 78% of household

industry trade and the remaining 5% of business is

manufacturing. Other data show that the industry is

run in household businesses. It also indicates that the

food business is indeed becoming a mainstream

businessmendonating to the waste industry in Aceh

Tamiang Regency. The food business is also

considered the most easy and quick to run and does

not require business or production process too long.

But businessmen often forget to maintain

environmental sustainability around the effort

because food processing residual waste disposal are

not well managed.

There are 88% businessmen with a small asset

under 50 million and the remaining 12% represents

the business of the middle class to the top. Almost

all of the respondents i.e. 94% have never followed

the construction of the SMEs-based environmental

management. Then there is the 33% stating not

doing business with environmental management

system as they find out that managing businesses

with environmental management system is too

difficult.

4.2 Result of Data Analysis

Full Model Analysis shows that:

The Effects of Internal and External Environment on SMEs Empowerment-based Environmental Management

605

Figure 1: Full Model Analysis.

After it is tested in line with the criteria of the

Goodness model of Fit with the following:

Table 1: The goodness of Fit Index Model.

No Goodness

of Fit

Index

Cut-off

Value

Results

Analysis

Evaluation

Model

– Chi-

square

Expected

to be

small

393,068 Good fit

2 probability

≥0.05 or

not equal

to zero

0,006

Marginal

fit

CMIN /

<2,00 1,209 Good Fit

4 RMSEA ≤0.08 0,026 Good Fit

5 GFI ≥0.90 0,915 Good Fit

6 AGFI ≥0.90 0,886 Good Fit

7 TLI ≥0.90 0,973 Good Fit

8 CFI ≥0.90 0,979 Good Fit

The data in Table 1 show that this research has

fit model or good models. Further analysis of the

data areproduced to answer the research hypothesis,

they are:

Table 2: Output Regression Weight.

Relationship between

Variables

Est P Results

Internal

environm

ent

→

Empower

ment of

SMEs-

based

environme

ntal

manageme

0,52

0,00

Signific

ant

External

environm

ent

→

Empower

ment of

SMEs-

based

environme

ntal

manageme

0,33

0,00

Signific

ant

The data in Table 2 can be used to answer this

research hypothesis:

a. H1: Internal environment influencing positively

and significantly to the empowerment of SMEs-

based environmental management Hypothesis

is accepted.

b. H2: External environment influencing positively

and significantly to the empowerment of SMEs-

based environmental management Hypothesis

is accepted.

Results of the study prove that internal

environmental effect is significant with p value

(0.006) and value estimation (0.522); while the

external environment also has significant value for p

(0.001) with the value estimation (0.336). Internal

environment is proved to be able to deliver a strong

impact in the real and capability of supporting the

empowerment of SMEs-based environmental

management. The internal environment is the most

powerful factor in giving effect on the success of the

empowerment of SMEs-based environmental

management in Aceh Tamiang.

Internal environment consisting of demographics

(i.e., age, education and income), human resources

(consist of business owners and employees), culture,

management of business/management, and

marketing is a factor entirely derived from the

environment internal, able to support the success of

empowerment of SMEs-based environmental

management in Aceh Tamiang.

The existence of lower educational and income

need the attention of the Government of Aceh

Tamiangby giving guidance of the empowerment of

SMEs-based environmental management. It requires

a good understanding and implementation of the

business owners and the employees in order to

manage the business with good business

management system that is environmentally friendly

in accordance with ISO 14001.

Environmental management requires full

engagement of the business so that the Government

must actively provide training and guidance also

mentoring entrepreneurs in managingtheir business

well appropriately with environmental management

in friendly efforts.

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606

The research is supported by theSutrisno and

Lestari (Sutrisno and Lestari, 2006) and Afifah

(Afifah, 2012)that explains that one of the biggest

challenges of SMEs is the human resources having

limitations in knowledge and skills, making them

difficult to work professionally. Therefore the SMEs

empowerment-based environmental management

continues to provide mentoring to entrepreneurs to

successfully become an environmentally friendly

business. The Government even has begun to

invigorate the ISO 14001 thus requiring intelligent

human resources and skill for the sake of continuity

of effort into a business-friendly environment.

Hillary (Hillary, 2000) and Purwanto (Purwanto,

2002)mention that in practice companies that

practice environmentally friendly businesses

according to ISO 14001 as well, get a positive

response from employees, an increase in the

motivation of work due to safety and security work,

and trusted employees towards the company or its

management efforts are increased, then the image of

the business is for the betterment of the community

and employees.

The external environment is also provedgiving

strong influence and success in the real

empowerment of SMEs-based environmental

management in Aceh Tamiang. The external

environment has a big rolein running a program of

empowering SMEs-based environmental

management although not as big as the role of the

internal environment.

The external environment consists of

government regulation, eco-friendly empowerment

program, competitors, customers, and the factor of

globalization gaining positive feedback from the

community of businessmen in Aceh Tamiangas they

state they would support the government of Aceh

Tamiang to manage

environmentallyfriendlybusinesses. Globalization is

an external environmental factor having a role to

help the empowerment of SMEs based

environmental management. Globalization is closely

related with the changes and progress brought about

by technology. Times make human beings

especially the businessmen forget to keep the

surrounding environment particularly concerning

waste treatment well as the focus only goes on the

process of producing a product that fits the needs

and demands of consumers but neglecting the

safeguarding of the environment in order to keep the

sustainability of nature and man in the future.

Results of the survey show that therespondents

agree to continue and meet the standards, design and

quality of the product in order to be accepted to the

world market with the utilization of technology and

environment i.e. selecting materials and good energy

appropriately as part of empowerment of SMEs

based environmental management in Aceh Tamiang.

The perpetrators of the SMEs hope the program of

empowering is implemented continuously to the

perpetrators in the attempt to manage the business of

environmental management friendly so that this

helps to minimize the risk of the business in the

form of waste and environmental destruction which

threatens the sustainability of businesses and future

generations.

Competitors are essential to support the success

of the eco-friendly business; it is competition in

innovation and the application of a mutual attempt to

absorb the technology for processing natural

resources without damaging the environment to

obtain industry-based ecology.

The research is supported by theWilliams and

SchaeferAnja (Williams and SchaeferAnja,

2012)statingthat environmental and social issues

become one of the constraints that impede

development of business so we need the

involvement of all parties especially the

perpetrators’ attempt to implement policies to

develop the business.But another obstacle is the

huge cost of empowerment and a skilled workforce.

So businessmen should focus on personal values and

directly get involved in environmental protection so

that the business will survive and support sustainable

development for the community.

5 CONCLUSSION

The conclusions obtained in this research are the

internal environment and external environment are

equally able to affect significantly on the success of

empowerment-based environmental management in

Aceh Tamiang. The internal environment is the most

powerful factor in affecting the empowerment-based

environmental management in Aceh Tamiang, i.e.

the human resources must be able to run the business

with an environmental management system. Human

resources are capable of changing the usual business

into eco-friendly business or business-based ecology

by running ISO 14001 in business management.

ACKNOWLEDGEMENTS

The research is carried out using my own costs for

the completion of doctoral studies in the course of

The Effects of Internal and External Environment on SMEs Empowerment-based Environmental Management

607

enforcement of environmental resources at

Universitas Sumatera Utara. I say many thanks to

my supervisor that provide many directions and

guidance in the completion of this research until

becominga good research output. The research is my

own opinion and I am grateful for any constructive

criticism.

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