Digitalisation and circular economy for sustainable management in Chilean small and medium-sized enterprises

Abstract

Purpose  This study aims to examine how Chilean manufacturing small and medium-sized enterprises (SMEs) integrate sustainability and digitalisation into their performance management systems and how these practices influence organisational performance and competitiveness.

Design/methodology/approach  A qualitative abductive approach was used, based on 15 case studies using semi-structured interviews with managers and sustainability professionals, complemented by document analysis and triangulation.

Findings  The results show that practices such as renewable energy adoption, recycling programmes and community partnerships generate measurable economic, social and environmental outcomes, and digitalisation and circular economy (CE) principles act as key enablers of sustainable performance.

Social implications  The study provides practical insights for SMEs to address sustainability challenges and contribute to the United Nations Sustainable Development Goals, particularly SDG 9 and SDG 12.

Originality/value  This research proposes a novel sustainable performance management model tailored to SMEs in emerging economies, integrating digitalisation and CE principles into performance management systems.

Sustainable performance; Circular economy; Management accounting; Digital transformation; Manufacturing SMEs

Digitalização e economia circular Para a gestão sustentável nas pequenas e médias empresas chilenas

Objetivo  Este estudo examina como as PMEs do setor manufatureiro chileno integram a sustentabilidade e a digitalização em seus sistemas de gestão de desempenho e como essas práticas influenciam o desempenho organizacional e a competitividade.

Metodologia  Foi empregada uma abordagem abduitiva qualitativa, baseada em 15 estudos de caso utilizando entrevistas semiestruturadas com gestores e profissionais de sustentabilidade, complementadas por análise documental e triangulação.

Resultados  Os resultados mostram que práticas como a adoção de energia renovável, programas de reciclagem e parcerias comunitárias geram resultados econômicos, sociais e ambientais mensuráveis, e que a digitalização e os princípios da economia circular actuam como facilitadores-chave do desempenho sustentável.

Implicações sociais  O estudo fornece insights práticos para que as PMEs enfrentem os desafios de sustentabilidade e contribuam para os Objetivos de Desenvolvimento Sustentável das Nações Unidas, particularmente o ODS 9 e o ODS 12.

Originalidade  Esta pesquisa propõe um novo modelo de Gestão de Desempenho Sustentável (SPM) adaptado às PMEs em economias emergentes, integrando a digitalização e os princípios da economia circular aos sistemas de gestão de desempenho.

Desempenho sustentável; Economia circular; Contabilidade de gestão; Transformação digital; PME do setor industrial

Introduction

Small and medium-sized enterprises (SMEs) play a key role in the global economy, contributing significantly to employment and gross domestic product (GDP). However, their ability to adopt sustainable practices remains limited because of financial, technological and regulatory barriers (de Andrade et al., 2025). In Chile, the manufacturing sector faces additional challenges, such as a lack of government incentives, restricted access to green finance (Ministry of Economy, Development and Tourism of Chile, 2024) and an organisational culture with little focus on sustainability. In spite of increasing pressure to reduce environmental impacts and improve social performance, there are still gaps in understanding the mechanisms that allow Chilean manufacturing SMEs to integrate sustainable strategies and improve their competitiveness (Peçanha and Ferreira, 2025). According to the National Institute of Statistics (INE, 2024), Chilean manufacturing SMEs represent approximately 11.5% of the industrial GDP and more than 20% of formal employment, underscoring their strategic relevance within the national economy. The importance of SMEs in emerging markets has been widely recognised in earlier literature, particularly their role in advancing sustainability even in contexts marked by institutional fragility and resource constraints (Jamali et al., 2008; Spence et al., 2007).

The literature identifies multiple benefits from adopting sustainable strategies, such as improvements in operational efficiency and competitiveness (Vagnoni et al., 2025). The triple bottom line (TBL) theory (Elkington, 1998) has established itself as a key framework for assessing business performance in three dimensions – economic, social and environmental. Complementarily, tools such as the Sustainability Balanced Scorecard (BSC) measure the impact of sustainability on strategic planning and decision-making. Nevertheless, significant gaps persist in the literature on sustainability in the Chilean manufacturing sector. Most studies focus on large companies or highly regulated markets, overlooking the reality of Chilean SMEs and their capacity to integrate sustainable practices into their management systems. Moreover, no standardised framework exists for assessing sustainability within performance management systems in these firms, hindering measurement and optimization. Another gap concerns the relationship between digitalisation and the circular economy (CE) in achieving sustainable performance. Digitalisation enables resource optimisation and process traceability (Aslam et al., 2025), while CE promotes the efficient use of materials, waste reduction and reintegration of by-products into the value chain, generating economic and environmental impacts (Wang and Mao, 2020). However, in Latin America, adoption remains constrained by market informality and limited fiscal incentives (Peçanha and Ferreira, 2025).

This study aims to answer the following research question:

RQ1.

How do Chilean manufacturing SMEs integrate sustainable strategies into their operational and strategic management, and what impact do these practices have on organisational performance and sustainability?

Based on this question, the objective is to analyse the incorporation of sustainable strategies in these companies, identifying the main barriers and facilitators and proposing a sustainable performance management (SPM) model adapted to their context.

The study addresses these research gaps through a detailed empirical analysis of barriers and opportunities for sustainability in Chilean manufacturing SMEs, exploring the impact of digitalisation and the CE on their organisational performance. Unlike previous studies, this work develops a structured model to assess and optimise the adoption of sustainable strategies, providing empirical evidence on their feasibility and effectiveness (Sánchez et al., 2025). It contributes to the literature on sustainability in manufacturing SMEs by integrating the TBL framework with CE and digitalisation strategies. Unlike earlier research focused on large companies or highly regulated sectors, this paper offers an in-depth analysis of the Chilean manufacturing context, addressing its specific challenges while introducing a SPM model that enables the operationalisation of sustainability within business management.

This study makes a theoretical contribution by extending the SPM literature through the development of a context-sensitive SPM model tailored to manufacturing SMEs in emerging economies. By integrating digitalisation and CE principles within performance management systems, the study advances existing sustainability frameworks by demonstrating how they can be operationalised under conditions of resource constraints and institutional fragility.

This article develops the theoretical framework and reviews the literature on sustainability in manufacturing SMEs, followed by the presentation of the methodology. It then reports the empirical findings, discusses the results and concludes with implications and recommendations for future research.

Literature review and theoretical foundations

This section examines the theoretical foundations underpinning the integration of sustainability into business management, addressing its conceptual evolution and the main tools developed to assess its impact. The theoretical background defining the relationship between sustainability and competitiveness is discussed, highlighting key models for application at the organisational level. Recent research emphasises that management control systems and strategic performance tools play a decisive role in operationalising sustainability (Jones et al., 2023; Sassanelli and Terzi, 2023). In particular, the SPM approach provides a mechanism to align economic, social and environmental objectives while adapting to institutional contexts (Pham and Vu, 2023). These theoretical insights form the basis for the methodological framework adopted in this study, which empirically explores how Chilean manufacturing SMEs integrate digitalisation and CE practices to enhance sustainable performance.

Theoretical foundations

Corporate sustainability has become a central paradigm in contemporary management research, promoting the integration of economic, social and environmental criteria in decision-making (Broccardo et al., 2024; Nartey and van der Poll, 2021). Within this paradigm, the TBL framework (Elkington, 1998) remains a cornerstone for evaluating organisational performance across three interdependent dimensions: economic profitability, social equity and environmental stewardship. Applying TBL in SMEs requires contextual adaptation through cost-efficient indicators and simplified reporting mechanisms that capture sustainability impacts in resource-constrained environments (Costa Melo et al., 2023; Vagnoni et al., 2025). This enables smaller firms to translate sustainability goals into measurable managerial practices.

To operationalise TBL, several performance measurement tools have been developed, most notably the Sustainable Balanced Scorecard (SBSC). Derived from the traditional BSC, this model extends financial assessment to include environmental and social indicators, providing a holistic perspective of organizational impact. Its application in emerging markets has proven effective for resource-constrained SMEs, facilitating strategic decision-making and improving operational sustainability (Ibrahim et al., 2023). Sustainability is thus recognised as a driver of competitiveness and long-term value creation, contributing not only to reducing negative impacts but also to resource optimisation, efficiency and innovation. Measuring sustainable performance is essential to evaluate the effectiveness of business strategies and adjust operations based on tangible results across economic, social and environmental dimensions.

Literature review

Latin American SMEs face structural barriers to implementing sustainability strategies, such as scarce financial incentives, limited availability of green technologies and a lack of specific regulations for small firms (de Andrade et al., 2025). While regulation can encourage sustainability, it may also increase costs that affect viability (Gunarathne et al., 2021). In Chile, few studies quantify the impact of sustainability on competitiveness and profitability, and the interaction between digitalisation and CE remains underexplored. Within the TBL paradigm, CE promotes waste reduction, material recycling and resource reuse (Bag et al., 2022; Khanra et al., 2022). Its adoption improves operational efficiency and reduces costs (Wang and Mao, 2020), yet implementation in Latin America continues to face challenges associated with market informality and the lack of fiscal incentives (Akash et al., 2025; Peçanha and Ferreira, 2025).

Digitalisation is increasingly recognised as an enabler of sustainability. It optimises resource management and enhances process traceability, facilitating compliance with environmental standards (Aslam et al., 2025; Al-Kahtib et al., 2025; Harikannan and Vinodh, 2024; Ijaz et al., 2025; Javaid et al., 2022; Khan et al., 2021; Massaro et al., 2021). In Chile, digital platforms have reduced environmental impact in SMEs by allowing real-time monitoring of energy and material consumption (Feng and Gao, 2020; Govardhan et al., 2025; Lakshan et al., 2021; Salume et al., 2024). In spite of these advances, cultural and organisational barriers remain, and the effectiveness of public policies promoting sustainable practices requires further analysis.

Building on the TBL framework (Flore and Stoelhorst, 2022; Hristov and Appolloni, 2021; Jørgensen et al., 2022; Kumar et al., 2021), this study examines how its principles can be applied within the Chilean manufacturing context, where institutional fragility and limited green finance constrain managerial decisions. By empirically identifying factors that balance competitiveness with social and environmental value, the paper extends TBL from a conceptual tool to a performance management mechanism for SMEs in emerging economies. This adaptation responds to the need for actionable frameworks linking sustainability metrics with managerial practices (Hansen and Schaltegger, 2016; Broccardo et al., 2024). However, Chile’s regulatory environment remains fragmented and less adaptable to SME realities, creating difficulties for effective implementation of frameworks such as TBL and SBSC (Jones et al., 2023). Their success depends on institutional support and incentives, often lacking in the Chilean context (Sassanelli and Terzi, 2023). Consequently, the SPM framework must be adjusted to local conditions, reinforcing the need for adaptable tools that enhance resilience and CE adoption (Pham and Vu, 2023).

Recent studies have increasingly emphasised the role of SPM systems in operationalising sustainability within SMEs, particularly in emerging economies. This stream of research highlights how digitalisation and CE practices function as key enablers for translating sustainability strategies into measurable economic, social and environmental outcomes (Jones et al., 2023; Sassanelli and Terzi, 2023; Broccardo et al., 2024; Vagnoni et al., 2025).

Sustainability in small and medium-sized enterprises and its implementation barriers

SMEs in Latin America face persistent barriers to adopting sustainable strategies, such as a lack of financing, limited access to green technologies and insufficient regulation (Alkandi et al., 2025; de Andrade et al., 2025; Das et al., 2020). In Chile, restricted access to green finance and weak government incentives hinder the transition to sustainable models.

Additionally, limited sustainability training and a culture that does not prioritise environmental responsibility restrict adoption. Many SMEs perceive sustainability as an additional cost rather than a long-term investment, discouraging its implementation (Broccardo et al., 2024).

Regulatory pressure may encourage sustainability; however, in emerging markets, such pressure can also generate costs that affect viability. In the Chilean manufacturing sector, rigid regulations do not always translate into effective incentives, creating a gap between policy and practice (Jiang et al., 2020; Liao and Liu, 2021). This misalignment between public policies and sectoral needs limits sustainability integration into business management (Peçanha and Ferreira, 2025). Comparative analyses across industrial sectors could clarify how barriers and enablers of sustainability vary, enabling more effective policy design and sectoral strategies.

Digitalisation as a driver of sustainability

Digitalisation and collaborative management have gained prominence as enablers of sustainable performance. The collaborative economy seeks to optimise resource use and minimise waste through eco-design, material reuse and industrial symbiosis (Wang and Mao, 2020). These strategies enhance efficiency and reduce costs, reinforcing cooperation and resource sharing across value chains (Ioannidis et al., 2021; Kazancoglu et al., 2021).

Emerging technologies such as the Internet of Things (IoT), big data and artificial intelligence improve traceability, resource management and waste minimisation (Aslam et al., 2025). In Chile, digitalisation has enhanced energy efficiency and reduced environmental impact in manufacturing, although adoption varies with firm size, infrastructure and digital literacy (Peçanha and Ferreira, 2025).

Models for sustainable performance management in small and medium-sized enterprises

Although interest in corporate sustainability has grown, limited research examines its integration within performance management systems for manufacturing SMEs. Most existing models are designed for large corporations and require adaptation for smaller firms. Combining strategic outsourcing with collaborative supply chain management can enhance sustainability and efficiency (Arda et al., 2018). Collaboration with sustainable suppliers and adherence to CE principles have improved competitiveness (Gao et al., 2024).

However, financial sustainability models remain underexplored in SMEs. Recent studies suggest that adopting such models can optimise financial resources and improve long-term sustainability (Luzpa et al., 2023). This study contributes by proposing an SPM model specifically adapted to Chilean manufacturing SMEs, integrating technological innovation, collaborative management and CE strategies. This framework enables the assessment and optimisation of sustainable practices, offering practical tools to enhance environmental, social and economic performance.

Methodology

Research design and abductive logic

This study uses a qualitative case study approach grounded in abductive logic (Conaty, 2021), complemented by triangulation of secondary data to validate interview findings. The design aligns directly with the research question, ensuring that data collection and analysis examine how Chilean manufacturing SMEs integrate sustainable and digital practices into performance management.

Abductive reasoning is particularly suitable for management accounting research (Taylor, 2018) as it promotes an iterative process through which theory and data interact to generate new insights. Unlike purely inductive or deductive approaches, abduction enables innovative theoretical connections based on anomalies observed during fieldwork. Following Conaty (2021) and Dubois and Gadde (2014), the process involves cycles of observation, conceptualisation and theorisation, allowing continuous refinement of emerging explanations. Figure 1 summarises this iterative logic.

Figure 1.
The abductive research process

To ensure methodological rigour, the study follows established qualitative research principles (Gioia et al., 2013) and combines thematic analysis with grounded theory elements (Charmaz, 2006). Triangulation was applied at multiple levels – source, methodological and researcher triangulation (Denzin and Lincoln, 2011) – to improve the reliability and validity of findings. Primary and secondary data were compared to confirm information consistency, and theoretical adjustment sessions were conducted to resolve discrepancies. This process strengthened internal validity and ensured a coherent connection between data and theory.

Development and validation of the interview questionnaire

The semi-structured interview questionnaire was developed according to best practices in qualitative research (Kvale, 2008) and underwent a three-stage validation process: peer review, pilot testing and iterative revision based on feedback. The instrument included 52 open-ended questions grouped into four categories: personal data, company information, performance management systems and sustainability strategies. Particular attention was given to strategic outsourcing decisions and the BSC as a performance evaluation tool (Frezatti et al., 2010).

Cognitive testing ensured clarity and eliminated ambiguities. Seven key questions (32, 36, 42, 44, 47, 48 and 51) specifically addressed sustainability, while the remaining items explored management control systems. Control questions were included to test the internal consistency of responses. Flexibility was maintained to allow in-depth exploration of emerging themes (Bryman, 2016). This rigorous design ensured that the data collected were accurate, clear and representative of organisational realities, providing a reliable foundation for the subsequent analysis.

Data collection and participant validation

The empirical fieldwork involved 15 Chilean manufacturing companies selected for their industrial relevance, based on the Chilean National Institute of Statistics classification (Instituto Nacional de Estadísticas de Chile, 2024). Inclusion criteria focused on SMEs with 10–200 employees operating in subsectors C10–C33, ensuring variation in firm size, geographical region and technological maturity. The purposive sampling strategy incorporated professional networks, academic contacts and industry associations to capture a diverse range of experiences.

Data were collected through semi-structured interviews conducted via Zoom, and recorded and transcribed using Trint, with manual verification to minimise errors. A standardised interview protocol ensured comparability of responses. Secondary data sources – corporate websites, industry reports and financial records – were used to triangulate information (Maxwell, 2005). Selection criteria for secondary documents prioritised recent, verifiable sources from recognised institutions.

Each interview was transcribed verbatim and verified by both the research team and participants to ensure accuracy and contextual integrity. Anonymised summaries were returned to participants for validation prior to final analysis, reducing interpretation bias and improving credibility (Lincoln and Guba, 1985). To mitigate potential social desirability bias, interviews were confidential and respondents were assured anonymity. Control questions helped detect inconsistencies. These safeguards enhanced trustworthiness and reliability, while the sample’s diversity captured the heterogeneity of sustainability and digitalisation practices across Chilean SMEs.

Data analysis and triangulation

Qualitative analysis followed a three-stage coding process – open, axial and category development (Charmaz, 2006). Constant comparison between emerging categories and theoretical constructs enabled progressive refinement of findings. Themes derived from the coding process were systematically linked to the research objectives, ensuring alignment between sustainability dimensions, digitalisation drivers and managerial practices. NVivo software supported data management, providing traceability and replicability of analytical decisions.

Participant verification allowed interviewees to review summarised findings and confirm interpretive accuracy (Creswell and Plano, 2011). Researcher triangulation was applied with multiple members of the research team independently analysing subsets of data to validate the coherence of themes. NVivo facilitated collaborative coding by grouping key ideas and identifying conceptual relationships. Review sessions among researchers validated thematic connections, ensuring that conclusions reflected the evidence collected.

Secondary quantitative data – such as energy consumption, waste indicators and compliance reports – were also cross-referenced with qualitative findings to enhance theoretical grounding. The combination of abductive logic, triangulation and participant validation ensured transparency, reproducibility and adherence to ethical standards consistent with COPE and RAE guidelines.

Findings

The data were coded and analysed using NVivo through open and axial procedures, identifying recurring themes and patterns related to sustainable practices, barriers and enablers across the 15 SMEs. A total of 64 thematic nodes were grouped into three dimensions: environmental, social and operational. The results summarise these findings through descriptive statistics and illustrative quotes. This section presents the sustainability practices adopted by Chilean manufacturing SMEs, the main drivers, barriers and strategies supporting their implementation.

Barriers and challenges in the sustainable management of Chilean manufacturing firms

Sustainability emerged as a central element of business management among the interviewed firms. NVivo analysis showed that 10 of 15 companies used renewable energy – mainly solar panels – 7 had recycling programmes, 5 offered formal sustainability training and 8 maintained partnerships with non-profits or community organisations. These practices were more common in regulated sub-sectors such as food and chemicals, while others displayed fewer initiatives because of limited incentives or awareness.

Table 1 summarises the main sustainable practices, their motivational factors and barriers, showing how cost, regulation and technical capacity shape implementation levels.

Table 1.
Application of sustainability

Sustainable practices	Motivational factors	Barriers
Solar energy	Carbon footprint reduction; environmental conservation	High installation cost; legal obligations; lack of technical knowledge
Internal recycling programme	Social responsibility; environmental benefits; improved image	Lack of prioritisation; operational risks; additional costs
Sustainability training	Regulatory compliance; product quality; cost reduction	Associated costs; lack of time; resistance to change

To illustrate the extent of adoption, Table 2 presents the number of SMEs reporting each activity, grouped by area of action – energy, waste management, training and inclusion, social collaboration and materials.

Table 2.
Prevalence of sustainable practices among the 15 SMEs

Category	Practice	No. of SMEs
Energy	Use of renewable energy (solar panels)	10
Waste management	Recycling programmes	7
Training and inclusion	Sustainability training programmes	5
Social collaboration	Partnerships with non-profit/community organisations	8
Materials	Use of recycled or eco-friendly inputs	6

The identification of barriers revealed the need for innovative strategies to strengthen sustainability integration, particularly in unregulated sectors. Complementarily, Table 3 summarises the frequency with which participants mentioned barriers and facilitators. The most recurrent obstacles were the lack of incentives, limited access to green finance and insufficient training, while the main enablers included digital technologies, external partnerships and supply chain collaboration. These findings highlight heterogeneous levels of engagement and the need for mechanisms that foster broader adoption of sustainable practices within Chilean manufacturing SMEs.

Table 3.
Frequency of barriers and facilitators mentioned in interviews

Factor type	Code/concept	Frequency (No. of mentions)
Barrier	Lack of incentives	11
Barrier	Limited access to green finance	9
Barrier	Lack of training	7
Facilitator	Digital technologies	10
Facilitator	External partnerships	8
Facilitator	Supply chain collaboration	6

Strategies for the successful incorporation of sustainability into business management in Chile: opportunities and solutions

To achieve sustainability, companies must strategically integrate it into their management processes. Organisations that prioritise sustainability improve efficiency, reduce costs and strengthen their reputation.

Interviewee 14 noted:

If regulatory compliance is like a 500-page tome, we adhere to a prescribed code and receive annual training to ensure understanding. Our protocols extend to interactions with customers and suppliers and encompass delineated restrictions. Despite the occasional complexities, [the firm’s] ethics preclude giving gifts or inviting clients to dinner, as such actions are considered potential conduits for corruption.

This testimony highlights a strong commitment to compliance and ethics, consciously avoiding actions that could be seen as corruption, even when this may represent a competitive disadvantage compared with firms that still use such incentives. Figure 2 summarises this approach to regulatory compliance among the interviewed SMEs.

Figure 2.
Regulatory compliance

Another relevant aspect is inclusion and diversity in the workplace. Interviewee 14 stated:

Our company prohibits any kind of discrimination based on sexual orientation, race, or religion. We promote cultural respect between employees and customers to achieve an inclusive environment.

Interviewee 13 explained partnerships with Reforestemos Foundation and Yo Reciclo Foundation to reduce environmental impacts. Interviewee 8 defined sustainability as: “the conscious use of resources to ensure their long-term viability” and described weekly sustainability meetings, collaboration with social organisations, a complaints channel and biannual management reviews to foster transparency.

Together, these accounts demonstrate a consistent commitment to sustainability, inclusion and ethical conduct, while revealing that significant challenges persist before such principles become fully embedded in daily management practices.

Improving the sustainable performance of Chilean manufacturing companies

Sustainable management is a key driver of competitiveness in the manufacturing sector, requiring innovative practices across social, environmental and technical domains that promote sustainable development, optimise efficiency and strengthen resilience.

Figure 3 presents the proposed SPM model, developed through abductive analysis. The framework integrates six key performance indicators (KPIs) across environmental and social dimensions: KPI1 – reduction in waste generation; KPI2 – decrease in energy consumption; KPI3 – increase in recycled materials; KPI4 – compliance with labour inclusion of people with disabilities; KPI5 – proportion of workers trained; and KPI6 – number of social impact activities.

Figure 3.
Sustainable performance management (SPM) model synthesising empirical findings

As shown in Table 4, each KPI is linked to a specific objective (O1–O6), providing SMEs with a practical and adaptable structure for assessing and improving sustainable performance.

Table 4.
Key performance indicators (KPIs) and objectives in the SPM model

KPI	Description	Objectives (O)
KPI1	Reduction in waste generation	O1
KPI2	Decrease in energy consumption	O2 and O4
KPI3	Increase in recycled materials	O3 and O5
KPI4	Labour inclusion compliance	O2 and O4
KPI5	Workers trained	O3 and O5
KPI6	Social impact activities	O6

The SPM model allows dynamic and flexible assessment, where new observations or detected anomalies can trigger theoretical refinements, consistent with the abductive approach (Conaty, 2021). This adaptive capacity ensures that sustainability strategies remain relevant and effective in changing business contexts. The model’s robustness was validated through triangulation of interviews, company documents and industry reports, confirming that the framework is both theoretically grounded and empirically applicable to real business settings.

Environmental management and corporate social responsibility

Corporate social responsibility (CSR) is a central pillar of sustainability in manufacturing companies, showing their commitment to environmental and social accountability. Interviewee 2 explained:

The company delivers products in 20-litre buckets, which represents a significant use of packaging. The company is dedicated to meticulously managing packaging throughout the delivery process until final disposal, exemplifying environmental stewardship.

The use of renewable energy and recycling programmes has become essential to reduce emissions and industrial waste, strengthening responsible production and sustainable value creation in the sector.

Waste management and cooperation with specialised companies

Efficient waste management is crucial to reducing environmental impact and optimising resource use in manufacturing SMEs. Interviewee 1 stated:

My company handles polluting products such as polystyrene. The company looks for positive options to recycle and reuse products, which demonstrates its proactive commitment to waste management and reduction of environmental impact.

This reflects growing organisational awareness of environmental responsibility and circular practices. Collaboration with specialised waste-disposal companies ensures regulatory compliance and strengthens sustainability across the value chain, supporting the sector’s transition towards more resource-efficient operations.

Benefits of sustainable management

Sustainable practices generate environmental, economic and reputational benefits in the manufacturing sector. Interviewee 1 stated:

The company has replaced unsustainable materials with environmentally friendly alternatives, such as soy protein capsules and aluminium capsules. This not only reduces the environmental impact but also translates into long-term economic benefits.

Partnerships with organisations such as the Reforesta Foundation support reforestation and reinforce corporate image. Overall, sustainable management enhances competitiveness and reputation, confirming sustainability as a strategic driver of long-term success.

Inclusion and diversity in the workplace

Inclusion in the workplace is a core component of CSR, with social and organisational implications. Interviewee 14 explained:

Diversity training is presented as a key tool to improve understanding and sensitivity to diversity in the workplace. Mention is also made of the Inclusion Act, which obliges institutions to consider diversity and inclusion as fundamental aspects of their policies and practices.

Interviewee 2 added: “There is a need for specific training programmes for new employees joining the company to improve production and reinforce the necessary skills”.

The use of recyclable materials such as glass was also emphasised: “Glass can be recycled indefinitely without losing its properties, and its recycling contributes to reducing pollution”.

Promoting inclusion and diversity creates tangible social and business benefits, reinforcing the connection between CSR, employee development and environmental responsibility.

Donations and social responsibility

Corporate donations are an important instrument of CSR, allowing companies to contribute to social and environmental well-being while strengthening ethical and community engagement. Interviewee 2 noted:

The donations made by the company to various organisations, such as the Santiago Municipal Theatre and the Food Network, demonstrate a commitment to corporate social responsibility. These actions, together with tax incentives, have allowed us to optimise resources and reduce waste.

These initiatives show how philanthropy aligns financial efficiency with broader social goals. Overall, sustainable management strengthens competitiveness, reduces costs and promotes social commitment among manufacturing SMEs.

Synthesis of findings and sustainable performance management model

Taken together, the findings presented in Sections 4.3–4.8 provide an integrated understanding of how sustainability and digitalisation are operationalised within Chilean manufacturing SMEs. While Section 4.3 highlights the core dimensions of SPM, the subsequent sections (4.4–4.8) extend these insights by detailing the organisational practices, enabling mechanisms and contextual factors that shape their implementation.

Figure 3 synthesises these empirical findings into the SPM model, which integrates all identified dimensions and relationships across the results section. The model, therefore, represents the cumulative outcome of the empirical analysis, rather than a partial representation of isolated findings, and serves as a comprehensive framework linking sustainability practices, digitalisation, CE principles and performance outcomes in SMEs.

Discussion and conclusions

Discussion

The SPM model presented in Figure 3 provides an integrated framework for interpreting the empirical findings of this study. By synthesising the results reported across Sections 4.3–4.9, the model illustrates how sustainability and digitalisation are operationalised within Chilean manufacturing SMEs through organisational practices, enabling mechanisms and measurable performance outcomes.

The findings confirm that integrating sustainable practices into performance management systems generates tangible economic, environmental and social outcomes, supporting the core assumptions of the TBL and CE frameworks (Mio et al., 2022). In particular, the SPM model demonstrates how digitalisation and CE initiatives translate abstract sustainability principles into concrete managerial practices, enhancing efficiency, competitiveness and resilience in resource-constrained contexts.

Empirical evidence shows how renewable energy adoption, digitalisation and CE initiatives transform theoretical sustainability dimensions into measurable managerial performance. This link between theory and practice demonstrates that sustainability operates not only as a normative ideal but also as a strategic orientation enhancing performance in resource-constrained contexts (Aslam et al., 2025; Peçanha and Ferreira, 2025). The study extends previous research by showing that strategic outsourcing and collaborative management facilitate sustainability adoption, improving competitiveness, innovation capacity and reputation (Chan, 2021).

Unlike studies attributing sustainability gaps mainly to funding shortages (Peçanha and Ferreira, 2025), results reveal that collaboration with suppliers and customers provides access to efficient technologies, reduces operational costs and limits dependence on external financing (Mahmoudi et al., 2021). A central contribution is the Environmental and Social Management System (ESMS), which adapts sustainability tools to Chilean SMEs. In contrast to models such as the SBSC (Hansen and Schaltegger, 2016), the ESMS offers a flexible framework integrating environmental and social indicators into strategic decisions, promoting the institutionalisation of sustainability across organisational contexts. Although barriers such as resistance to change and limited financial resources persist (Majeed et al., 2025), digitalisation, automation and collaborative management mitigate these constraints by improving stakeholder coordination and reducing implementation costs (Aslam et al., 2025).

At the sectoral level, sustainability advances faster in industries under stricter regulations – automotive, electronics and chemicals – whereas less-regulated sectors such as textiles or basic manufacturing face greater difficulty adopting cleaner production and certifications (Zhang et al., 2021; Broccardo et al., 2024). This divergence underscores the need for stronger institutional frameworks and regulatory incentives to ensure an equitable transition. Compared with regions such as the European Union or North America, where incentives and policy alignment have accelerated sustainability, Chile still faces limited access to green finance, weak environmental enforcement and low institutional capacity for innovation (Zhang et al., 2021; Broccardo et al., 2024). Nevertheless, digitalisation and CE have become key enablers – similar to Brazil and Mexico – enhancing efficiency, competitiveness and supply chain collaboration (Peçanha and Ferreira, 2025).

Another relevant aspect is the perception of environmental certifications. While international research associates them with reputation and global-market access (Marrucci and Daddi, 2021), Chilean SMEs often view their costs as outweighing short-term benefits, discouraging adoption. This reflects a broader absence of policies incentivising or subsidising certification. Managerially, the study highlights the importance of a holistic approach through the ESMS, which improves efficiency and embeds sustainability metrics into decision-making. Training and capacity building also emerge as critical to advancing responsible business models capable of balancing economic performance with social and environmental value creation.

From a socio-institutional perspective, the research interprets how Chilean SMEs pursue sustainability amid regulatory asymmetries, unequal green-finance access and weak enforcement – persistent challenges in Latin America. Policy recommendations include strengthening financial incentives for clean technologies, improving SME access to credit for sustainability transitions, and simplifying certification procedures. Evidence from Germany and Sweden shows that policy frameworks combining financial, technical and educational instruments accelerate sustainable transformation (Duque et al., 2020). Implementing similar integrated approaches in Chile could reduce structural asymmetries and foster a more inclusive, sustainable industrial development model.

Theoretical implications

This study advances the theoretical development of sustainable management accounting by proposing an SPM model adapted to SMEs in emerging economies. Building on the TBL (Elkington, 1998) and CE frameworks (Broccardo et al., 2024), it demonstrates how sustainability can be operationalised through control systems integrating environmental and social dimensions into financial decision-making. By incorporating quantifiable KPIs on waste reduction, energy efficiency, labour inclusion and social engagement, the model contributes to performance-management literature by translating normative sustainability principles into measurable practices. Extending TBL and CE theories to SME contexts helps explain how firms in resource-constrained environments embed sustainability without the capacities of large corporations, aligning with calls for contextualised approaches in non-Western settings (Aslam et al., 2025).

The study also consolidates abductive reasoning within management accounting, showing how iterative interaction between theory and empirical observation refines conceptual frameworks (Conaty, 2021; Dubois and Gadde, 2014). Findings reveal that sustainability-oriented control systems not only assess performance but also influence organisational behaviour, creating feedback loops that foster learning and strategic adaptation. The proposed SPM model bridges theoretical abstraction and managerial practice, expanding management-control literature through qualitative evidence from SMEs facing institutional and resource asymmetries. This supports theory development in sustainability accounting based on contextually grounded research for emerging economies.

Social and practical implications

The findings offer practical strategies for SMEs in Chile and other Global South countries facing structural challenges such as weak regulation, limited green finance and informality. The proposed model serves as a roadmap for adopting feasible, cost-effective sustainability practices and highlights the value of collaboration, government support and digital tools in overcoming systemic barriers. These insights can inform public policy, capacity-building programmes and international cooperation for sustainable industrial transformation in Latin America, Africa and Southeast Asia.

Aligned with the United Nations 2030 Agenda, the study contributes to SDG 9 (Industry, Innovation and Infrastructure) and SDG 12 (Responsible Consumption and Production). The SPM model provides context-specific tools for SMEs to integrate circular-economy principles, digitalisation and collaboration, reducing environmental impact and enhancing competitiveness in emerging markets.

Study limitations and future research directions

As in all qualitative studies, this research has limitations. Findings are based on a purposive sample of 15 Chilean manufacturing SMEs, which restricts generalisation to other sectors or larger firms. The goal was to provide in-depth insights into sustainability practices within a specific context rather than statistical representativeness.

The cross-sectional design limits observation of changes over time and prevents establishing causal relationships. A possible source of bias is social desirability during interviews, as participants may have portrayed their organisations positively when discussing environmental or social actions. To mitigate this, interviews were anonymised, confidentiality was guaranteed and participants verified transcript summaries to confirm accuracy, enhancing credibility and trustworthiness.

Future research could quantify the impact of digitalisation and CE strategies on SME financial sustainability and compare sectors under different regulatory intensities. Testing the proposed SPM model in other Latin American countries such as Argentina, Colombia and Mexico would improve generalisability. Longitudinal studies could track the evolution of sustainability practices and regulatory responses, while incorporating financial indicators – such as ROI or cost savings – would strengthen evidence of the business case for sustainability.

Conclusion

This study demonstrates that sustainability and strategic outsourcing enhance the performance of Chilean manufacturing SMEs through cost optimisation and operational efficiency. Industries under stricter regulations progress faster in adopting sustainable practices, whereas less regulated sectors face greater structural barriers.

Limited financial and technological resources remain key obstacles, yet collaborative supply chain management helps mitigate these constraints by enabling access to efficient technologies. Sustainable performance measurement systems are also crucial for competitiveness in manufacturing (Azadnia et al., 2022). Light industries, however, encounter more difficulties adopting clean technologies than high-tech sectors with greater access to green finance (Peçanha and Ferreira, 2025).

Governments and institutions should design financial and regulatory incentives to foster environmental management systems and cleaner production.

Data availability

The entire dataset supporting the findings of this study is available upon request from the corresponding author.

The authors would like to thank the participating companies for their collaboration and willingness to share key information for this research. They also acknowledge the support of the institutions and colleagues who contributed to the development and review of the study.

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Further reading

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Data availability

The entire dataset supporting the findings of this study is available upon request from the corresponding author.

Edited by

• ASSOCIATE EDITOR:
  Shuja Iqbal

Publication Dates

• Publication in this collection
  17 July 2026
• Date of issue
  2026

History

• Received
  26 May 2025
• Accepted
  27 Jan 2026