Effect of sustainability practices on business performance of manufacturing firms in Nairobi, Kenya

Abstract

Circular economy practices, which focus on reducing waste and enhancing resource efficiency. The shift from a traditional linear economy to a circular economy, where waste is minimized and materials are reused or recycled, has been recognized as essential for achieving sustainability goals. In Kenya, this transition is crucial, as industries can leverage circular practices to reduce energy consumption and mitigate environmental impacts. However, the adoption of these practices in the manufacturing sector remains limited. Therefore, the current study sought to determine the effect of sustainability practices on the business performance of manufacturing firms regulated by the Kenya Association of Manufacturers in Nairobi County, Kenya. The specific objectives that guided this study are to identify how Sustainable Material Sourcing, Waste Reduction, Energy Efficiency, and Lean Manufacturing currently implemented by manufacturing firms in Nairobi influence their business performance. This study explored the applicability of established theories like Institutional Theory and Resource-Based Theory to the field of sustainable manufacturing. This study adopted the positivist research philosophy and employed a descriptive research design. This research utilized primary data and secondary data. Data collection was undertaken in one month, starting from 20th January to 20th February. The study targets 439 manufacturing firms regulated by the Kenya Association of Manufacturers in Nairobi County, Kenya, which groups the firms into 12 productive sectors. A sample size of 136 manufacturing firms. The respondent of the study comprised one production manager from each manufacturing firm. This study employed a quantitative approach to analyze the collected data. Subsequently, collected data was analysed using statistical tools, which included software SPSS v27 software. Descriptive statistics, including Mean and standard deviations, were used in analyzing the data. Inferential statistics will also be conducted using binary logit linear regression analysis and correlation analysis. The correlation analysis suggests that each of the factors (Sustainable Material Sourcing, Waste Reduction, Energy Efficiency, and Lean Manufacturing) has a strong and statistically significant positive relationship with Business Performance. This implies that companies focusing on these factors are likely to see better business performance outcomes. The binary logit regression analysis confirmed that all independent variables (Sustainable Material Sourcing, Waste Reduction, Energy Efficiency, and Lean Manufacturing) were statistically significant predictors of business performance. The study concluded that sustainable material sourcing, waste reduction, energy efficiency, and lean manufacturing all contribute positively and significantly to the business performance of manufacturing firms in Nairobi. The study recommended that future studies investigate the long-term effects of sustainable manufacturing practices on business performance across different industries. This would provide a clearer picture of the sustained impact of sustainability over time. Additionally, further studies should explore the role of leadership in driving sustainability practices within family-owned or small-to-medium-sized enterprises (SMEs), especially in developing economies, where such firms are more prevalent. This research had potential benefits for several stakeholders, which include the academic fraternity, policymakers, and manufacturers in Kenya.