What do we know about the role of sustainable management in the context of innovativeness and firm performance?

• Innovativeness positively impacts both firm competitiveness and firm growth.

• Innovativeness positively affects sustainable management.

• Sustainable management positively influences firm growth but does not affect firm competitiveness.

• Sustainable management partly mediates the impact of innovativeness on firm growth.

Understanding the relationship between sustainable management, innovation and firm performance has become increasingly important in a complex and competitive environment. Companies face growing external pressures that require them to expand their knowledge base and adopt advanced managerial practices. In particular, the rising demand for sustainability has pushed firms to integrate environmental considerations into strategic decision-making. In response, organizations must implement innovations in products, services, or processes (Li-Ying et al., 2023). Continuous innovation enables firms to differentiate themselves, meet changing customer needs and maintain competitive advantage, while collaboration within innovation ecosystems supports joint value creation (Park et al., 2022). Investment in research and development (R&D) plays a crucial role in identifying trends and leveraging new technologies. It fosters creativity and adaptability while improving efficiency and reducing costs (Tavassoli and Karlsson, 2016). By optimizing processes and adopting advanced technologies, firms can enhance productivity and profitability while integrating environmental considerations (Hilden et al., 2014). Innovation also supports product differentiation and market competitiveness (Milesi et al., 2013). However, it requires supportive environments that encourage risk-taking, collaboration and continuous learning, as well as employee development and openness to diverse perspectives (Oborn et al., 2019).

At the same time, globalization and environmental regulations have made sustainable development (SD) a central concern. Organizations are expected to integrate economic, social and environmental dimensions to ensure long-term sustainability (United Nations General Assembly, 2015). Sustainable practices prevent resource depletion and environmental degradation, safeguarding future growth (Franze et al., 2024). Knowledge of SD supports compliance with regulations and the integration of environmental, social and governance (ESG) criteria, enhancing resilience and reputation (Sabauri and Kvatashidze, 2023). Firm performance, understood as the achievement of organizational goals, should therefore be assessed across multiple dimensions. This study focuses on firm competitiveness and firm growth (Chikán et al., 2022). Reducing environmental impact requires coordinated actions in energy, materials, technologies and management (Iritani et al., 2015; Smol et al., 2024). Green innovation has emerged as a key approach to addressing these challenges, driven by technological, organizational and regulatory factors (Thuyen and Bich, 2024). However, eco-innovation entails costs (Høgevold, 2011), raising questions about its effects on competitiveness and growth (Labella-Fernández et al., 2021). Although some studies report positive impacts of sustainable innovation on performance (Boons et al., 2013; Le and Ikram, 2022), findings remain mixed. Sustainable management is increasingly recognized as a strategic priority, particularly in SMEs facing regulatory and social pressures (Kannan and Gambetta, 2025), though such firms often face resource and capability constraints (Kumar et al., 2023).

In addition, knowledge management processes may be distorted by selective disclosure, manipulation or group bias (Merkl-Davies and Brennan, 2007; Flyverbom, 2016; Tenbrunsel and Messick, 2004). Teams may construct narratives that distort decision-making (Lackey, 2018; Kocher et al., 2017), leading to superficial sustainability practices. Understanding these mechanisms is important for analysing the links between innovation, sustainable management and performance. Despite growing research, most studies examine direct relationships between sustainable innovation and performance, overlooking the mediating role of sustainable management. This study addresses this gap by analysing how sustainable management mediates the relationship between innovativeness and firm performance, focusing on competitiveness and growth. Using structural equation modelling (SEM), the study examines data from 150 SMEs in the Polish furniture industry. The study contributes by focusing on low-tech industries and highlighting the mediating role of sustainable management. The findings show that sustainable management supports firm growth but does not directly enhance competitiveness, instead exerting a long-term, growth-oriented effect.

Innovation has traditionally been associated with generating new revenue streams; however, recent research emphasizes that it should also be evaluated in terms of environmental and social outcomes (D’Adamo et al., 2023). As a result, innovation is increasingly assessed through its contribution to broader sustainability goals. Nevertheless, the relationship between innovation and SD is not always straightforward. Some studies indicate that innovation may diverge from sustainability principles, particularly in linear and highly competitive economic systems where efficiency and growth can come at the expense of environmental and social well-being (Keeler et al., 2019; Nenni et al., 2024). Despite these tensions, substantial evidence supports a positive relationship between innovation and sustainability. In this context, sustainable management plays a key role by aligning innovation processes with long-term environmental and societal objectives, enabling firms to balance economic performance with ecological responsibility.

To implement innovation sustainably, companies must foster organizational cultures that promote continuous improvement, creativity and adaptability. This involves investing in R&D, encouraging cross-functional collaboration and leveraging emerging technologies (Ozgit, 2022). Effective governance systems and monitoring mechanisms are essential to ensure that innovation aligns with sustainability strategies. Maintaining open communication with customers also helps firms better understand evolving needs and preferences, guiding innovation towards more relevant and responsible solutions. Similarly, supplier selection has become a critical aspect of sustainability, as evaluating suppliers based on environmental and social criteria improves the overall sustainability of value chains (Acerbi et al., 2023). Incorporating environmental considerations into innovation processes leads to eco-innovation, which focuses on reducing resource consumption, energy use and pollution (Smol et al., 2017). Eco-innovation is widely recognized as a strategic tool for achieving SD, as it generates economic, environmental and social benefits simultaneously (Park et al., 2017). Knowledge embedded in sustainable management practices supports long-term innovation by helping firms identify opportunities aligned with sustainability objectives. Green innovation, in particular, has emerged as a key approach to addressing global environmental challenges, driven by technological, regulatory and market factors (Thuyen and Bich, 2024).

An important contemporary perspective involves sustainability-oriented innovation systems, which integrate multiple elements to support the development and implementation of innovations aimed at achieving sustainability goals (Manzoor et al., 2023). These systems enable firms to adapt strategies, create sustainable value and respond effectively to global challenges (Rocha et al., 2022; Testa et al., 2022). Moreover, sustainability-oriented innovation enhances stakeholder relationships, as the value derived from sustainable practices increases customer satisfaction and loyalty (Marín-García et al., 2025). Integrating sustainability into core strategies also strengthens reputation and brand equity, particularly as consumers increasingly favour socially responsible companies (Al Owais, 2024; Marín-García et al., 2025). Within the broader context of green transformation, innovation must address environmental and social challenges alongside economic objectives. This reflects the principles of SD (United Nations General Assembly, 2015), which gained prominence with the *Our Common Future* report (Brundtland, 1987a) and were later operationalized through the 17 Sustainable Development Goals (SDGs) (Intergovernmental Panel on Climate Change, 2018). These frameworks have driven the adoption of policies and strategies promoting sustainable behaviour among organizations and individuals (Abrahamse and Matthies, 2018; Abrahamse et al., 2005; Burger et al., 2015; Steg and Vlek, 2009).

In small and medium-sized enterprises (SMEs), green innovation often focuses on practical measures such as energy efficiency, water conservation, resource recovery, digitalization and improvements in working conditions (Vieira et al., 2025; Solovida et al., 2025; Arsawan et al., 2024; Mrad and Belgaroui, 2025; Wicaksari et al., 2024). These initiatives align ESG principles and demonstrate how sustainability can be operationalized in business practice. A key dimension of this transition is the circular economy (CE), which emphasizes efficient resource use and waste valorisation. The European Commission highlights the importance of CE in addressing resource scarcity and supply risks (Hool et al., 2024). Implementing CE requires collaboration among businesses, policymakers and society, as well as the development of new business models focused on resource efficiency and waste reduction (Tsironis and Tsagarakis, 2023). Examples include industrial symbiosis, material reuse, energy-efficient technologies and pollution reduction (Buda and Ricz, 2023; Ramm and Smol, 2024).

Business model innovation focused on sustainability and circularity is increasingly recognized as a source of competitive advantage, particularly for SMEs (Pieroni et al., 2019; Joy-Camacho and Thornhill, 2024). However, research in this area remains fragmented, and the relationships between circular and sustainable business models are not yet fully understood (Diaz Lopez et al., 2019; Foss and Saebi, 2017; Lüdeke-Freund and Dembek, 2017; Geissdoerfer et al., 2017a). Despite the availability of various sustainable solutions (Demirel et al., 2024), their impact on firm performance remains unclear. Firm performance is a multidimensional construct influenced by numerous factors (Kusa et al., 2024a), and this study focuses on two key dimensions: firm competitiveness and firm growth. In conclusion, sustainable innovation requires an integrated approach that aligns economic, environmental and social objectives. Sustainable management plays a central role by guiding innovation towards responsible and value-creating outcomes. It not only reduces risks and costs but also creates opportunities for growth and long-term competitiveness, enabling firms to remain resilient in a dynamic environment.

Innovativeness is a broad concept that can be analysed from multiple organizational perspectives. In recent years, pro-environmental innovations (eco-innovations) have gained prominence, aiming to introduce new products and processes while reducing environmental impact (Smol et al., 2017). Their development is driven by stricter regulations and growing pro-environmental expectations among consumers and suppliers. Guidelines for implementing sustainable innovation are reflected in European and national policies (Smol, 2022), aligned with the global adoption of SD and the 17 SDGs (Ali et al., 2023). Innovation plays a key role in achieving SDGs, particularly in improving resource, energy and human capital efficiency. Public funding, such as the EU Framework Programme, supports these efforts across the full innovation value chain Nepelski and Van Roy, (2021).

Consumer trends further reinforce sustainable innovation. Research highlights the importance of pro-environmental behaviours (PEBs) and the factors influencing them (Bamberg and Moser, 2007; Gleim et al., 2013; Huttel et al., 2018; Kapoor et al., 2014; Lange and Dewitte, 2019; Steg and Vlek, 2009). These include environmental concern, perceived consumer effectiveness and innovation (Carfora et al., 2017; Laroche et al., 2001; Alzubaidi et al., 2021). As a result, firms increasingly invest in green technologies and sustainable production processes (Marcon et al., 2017; Pickett-Baker and Ozaki, 2008). Supplier selection also plays a role, as sustainability-oriented evaluation improves overall product sustainability (Acerbi et al., 2023). Focusing on sustainability enables firms to identify innovation opportunities aligned with environmental and social goals. Green innovation is particularly relevant for addressing global environmental challenges, driven by technological, regulatory and market factors (Thuyen and Bich, 2024). Despite extensive research, further investigation into PEBs is still needed (Alzubaidi et al., 2021). Therefore, we hypothesize the following:

Innovativeness is a key driver of firm performance, a multidimensional concept shaped by internal and external factors (Kusa et al., 2024a). It includes financial, operational and competitive outcomes, influenced by interactions with customer portfolios, internationalization and learning capacity (Falcone et al., 2024; Freixanet and Federo, 2022). The innovation– performance relationship spans financial, market and operational dimensions (Egwu et al., 2019), with innovative firms typically achieving stronger results. Innovation includes not only products but also processes and organizational practices, though empirical findings remain context dependent. Different innovation dimensions – process, market and supply chain – jointly influence performance. Technological orientation predicts outcomes, with innovation acting as a mediator (Yousaf et al., 2021). This positive relationship is widely confirmed, including in family firms (Hatak et al., 2016). Marketing effectiveness and customer interaction further mediate this link (Alpay et al., 2012; Groza et al., 2021). Organizational learning and customer orientation also strengthen innovation and performance (Ho, 2012, 2014). Overall, innovation drives growth and competitive advantage (Dibrell et al., 2014). Thus, we propose:

Growing environmental awareness has transformed sustainability into a strategic factor influencing firm performance (Ammer et al., 2020; Larran Jorge et al., 2015; Nogueira et al., 2023; Ali et al., 2021). Sustainable strategies are increasingly seen as a foundation for long-term competitiveness. For example, environmental practices have been shown to improve multiple performance dimensions, including financial, market and operational outcomes (Nogueira et al., 2023). Similarly, investments in ESG practices are often associated with improved firm value, performance and shareholder returns (Kim et al., 2015; Wen et al., 2022; Ademi and Klungseth, 2022; Al Amosh et al., 2023; Pu, 2022; Lueg and Pesheva, 2021). These findings suggest that sustainability can create both economic and reputational benefits. However, the literature remains inconclusive. Some studies report negative or insignificant relationships between ESG practices and firm performance, highlighting the costs associated with sustainability initiatives (Ali et al., 2021; Schuler and Cording, 2006; Duque-Grisales and Aguilera-Caracuel, 2021; Semenova and Hassel, 2008; Richardson and Welker, 2001; Garcia-Castro et al., 2010; Li et al., 2018; Teng et al., 2021). These conflicting results indicate that the sustainability–performance relationship is complex and context-dependent.

Given these mixed findings, further research is needed. Therefore, we propose:

Innovativeness, sustainable management and firm performance are interrelated and mutually reinforcing. While prior research has examined these relationships separately, limited attention has been given to the potential mediating role of sustainable management. Existing studies suggest that these relationships may involve complex mechanisms, including mediation effects (Adomako, and Tran, 2022). Although many studies highlight the positive impact of proactive environmental strategies on firm performance (Nguyen and Adomako, 2021; Ševčíková and Knoškováthere, 2021; Nogueira et al., 2023; Elkington, 2013; Olkowicz and Grzegorzewska, 2014; Iraldo et al., 2020; Adomako et al., 2021; Shu et al., 2020), others report inconsistent or even negative effects (López-Gamero and Molina-Azorín, 2016; Porter and van der Linde, 1995). These inconsistencies highlight the need to explore indirect relationships. Testing mediation effects can help explain how innovation translates into performance outcomes through sustainability practices. Sustainable management may act as a mechanism that channels innovative capabilities into improved competitiveness and growth. Therefore, we propose:

The proposed hypotheses are presented in the theoretical model in Figure 1.

The research sample included 150 SMEs from the Polish furniture industry, selected for its economic relevance, innovation potential and environmental challenges. Poland was the second-largest furniture exporter globally and the European leader in 2022, employing over 200,000 people across 32,000 firms, with exports of US$15.35bn and 5.7% annual growth (Polish Investment and Trade Agency PAIH, 2024). The sector also shows strong innovation dynamics, with investments in automation, robotics and digitalization (Kurier Drzewny, 2022; DREMA 2025; Lectra and B + R Studio, 2019), alongside practices such as Lean Manufacturing and recycling (Melaco, 2025). At the same time, it faces environmental pressures, including high energy costs, resource scarcity, CO₂ reduction requirements, ESG reporting and CE transition (Bednarz-Łuczewska, 2024; Knauf Industries, 2024; Polish Investment and Trade Agency PAIH, 2024). The sample was randomly selected from a Dun & Bradstreet database, and data were collected between August and October 2022 through structured interviews (PAPI and CAPI) with owners or managers. Firms varied in size and age, ensuring diversity. Although non-response bias cannot be excluded, no systematic distortions were observed. A post hoc power analysis using G*Power (Faul et al., 2007; Memon et al., 2020) confirmed sample adequacy, with statistical power of 0.99 (α = 0.05; f² = 0.15), exceeding the recommended 0.80 threshold (Cohen, 1988).

The study analysed four constructs: innovativeness (IN), sustainable management (SUSM) and two performance dimensions – firm competitiveness (FC) and firm growth (FG). All variables were measured using multi-item indices on a seven-point Likert scale. Innovativeness captured firms’ tendencies to introduce new products, adopt technologies and implement creative solutions (Kusa et al., 2024b; Hughes and Morgan, 2007). Sustainable management reflected engagement in pro-environmental practices such as resource reduction, recycling, eco-efficient technologies and alignment with sustainability and CE principles (Kusa et al., 2023; Conway, 2018; Elkington, 2013). Firm performance was assessed through competitiveness (e.g. market position, customer satisfaction) and growth (e.g. sales, expansion), based on established scales (Hughes and Morgan, 2007; Kusa et al., 2024a; Suder et al., 2025b). Both dimensions are widely used in entrepreneurship research (Suder, 2025a). All measures met reliability and validity standards. However, the use of perceptual, self-reported data may limit generalizability, despite ensuring consistency and comparability.

Due to the exploratory nature of the study and the non-normality of the analysed variables, the PLS-SEM (partial least squares – structural equation modelling) method was used for analysis. This method allows for the verification of models that include mediating effects (Nitzl et al., 2016; Cepeda-Carrión et al., 2017; Kusa et al., 2024a; Suder et al., 2024), and the variables in these models are treated as latent constructs (Hair et al., 2022). The study used SmartPLS software (Version 4.1.0.3) (Ringle et al., 2022).

SEM was conducted in two phases following the guidelines that were provided by Hair et al. (2022). The first phase involved verifying the measurement model, which assessed the accuracy of the constructs. In the second phase, the structural model was used to test the specific research hypotheses.

The measurement model aimed to assess whether the considered constructs were accurately measured using the selected indicators (Klarner et al., 2013). Therefore, the first step in verifying the model was to conduct a factor analysis, which allowed for evaluations of each indicator’s contribution for building the construct and the collinearity of the applied items. The results of this analysis (including the outer loadings and VIF indicators) are provided in Table 1. In addition, the basic statistics for the used indicators are also included.

The minimum acceptable value for outer loadings was 0.5, with an expected threshold above 0.7 (Hair et al., 2022). Most indicators exceeded 0.7, while only two were within the acceptable 0.5–0.7 range, so all were retained for further analysis. Collinearity was also assessed, with all VIF values below 3.3, indicating no issues (Diamantopoulos and Winklhofer, 2001). The measurement model was further evaluated for reliability and validity (Campbell and Fiske, 1959). Following Hair et al. (2022), all measures met recommended thresholds: Cronbach’s alpha, reliability and composite reliability ranged from 0.7 to 0.95 and AVE exceeded 0.5. Discriminant validity was confirmed using the Fornell-Larcker criterion (Fornell and Larcker, 1981), as AVE square roots exceeded inter-construct correlations and the HTMT ratio was below 0.85 (Henseler et al., 2015), confirming construct validity. Table 2. Reliability and validity metrics of constructs:

To assess the model fit, we additionally calculated the standardized root mean square residual (SRMR), which was in line with the guidelines provided by Henseler et al. (2015). An SRMR value that is below 0.10 indicates a good fit, with a more conservative threshold falling below 0.08 (as per Hu and Bentler, 1999). In our analysis, the SRMRs were found to be 0.087 (Model 1 with FC) and 0.084 (Model 2 with FG), thus signifying that the model achieved an acceptable fit.

Bootstrapping was used to assess the significance of path coefficients in the measurement model (Lee et al., 2011), with results presented in Figure 2 and Table 3. These were supplemented with explanatory captions to improve interpretation, especially for readers less familiar with SEM. Both direct and indirect effects were analysed. Firm age and size (number of employees) were included as control variables, but neither showed significant effects nor altered the main structural relationships.

The results enabled the verification of the research hypotheses (Table 3). Innovativeness (IN) had a significant positive effect on sustainable management (SUSM) (β₁ = 0.433), supporting Hypothesis H1 and indicating that sustainable management is driven by innovative behaviour. Innovativeness also directly influenced firm performance. The relationships IN→FC (β_2FC = 0.399) and IN→FG (β_2FG = 0.537) were statistically significant (p < 0.05), confirming Hypotheses H2a and H2b. The role of SUSM varied depending on the performance dimension. It positively affected firm growth (FG) (β_3FG = 0.142; p < 0.05) but not firm competitiveness (FC) (β_3FC = 0.076; p > 0.05). Thus, Hypothesis H3b was supported, while H3a was not. This suggests that sustainable management contributes to growth but does not create competitive advantage.

Regarding mediation (H4), SUSM partially mediated the relationship between IN and FG (β_4FG = 0.061; p < 0.05), supporting H4b. However, no significant mediation was found for competitiveness (β_4FC = 0.033), so H4a was rejected. Model predictive power was assessed using R² and f² coefficients (Table 4).

The values of the determination coefficient presented in Table 4 indicate that the IN variable explained more than 18% of the variance in the SUSM construct, which is acceptable in the context of social science research (Falk and Miller, 1992). The determination coefficient for FC was also moderate; IN and SUSM together explained slightly above 19% of the variance in FC. In the case of FG, the R² value was much higher, exceeding 37%, which can be considered a medium level of explained variance. After assessing the effect size, understood as the change in R² when a specific exogenous construct was omitted (Cohen, 1988), the interpretation of the f² coefficient values led to the following conclusions. For the IN→SUSM relationship, a medium effect size was obtained, as f² was greater than the 0.15 threshold but below 0.35. The effect size for the IN→FC relationship was also medium. Conversely, the f² value for the IN→FG relationship (0.375) indicated a large effect size, highlighting the significant role of IN in shaping FG. Based on the f² results obtained for the impact of SUSM on the considered types of performance, the effect size was small but significant in the case of FG (f² > 0.02), whereas no meaningful effect of SUSM was noted for FC (f² < 0.02). This means that SUSM could be omitted from Model 1, whereas it should be retained in Model 2, even though its effect size was relatively small.

Cultural differences in sustainability perceptions also represent a limitation, as attitudes may vary across regions, influencing implementation and outcomes. Future cross-cultural research could improve the applicability of results. The study also points to the need for robust yet flexible measurement tools. While the findings support the development of a general framework for sustainable management, such frameworks should account for contextual differences. Moreover, the knowledge-based operationalization of sustainable management may yield different results under alternative approaches, suggesting the need for more standardized scales.

Methodologically, the use of perceptual, self-reported data may introduce bias. Future studies could incorporate objective indicators or multi-source data. The cross-sectional design and use of a single informant also limit causal inference. Future research should adopt longitudinal approaches and extend analysis to other industries, incorporating factors such as organizational culture or digital maturity.

This section discusses the findings in relation to prior literature, focusing on the role of sustainable management in shaping firm performance. The results extend research on innovativeness and performance (Alpay et al., 2012; Hatak et al., 2016; Yousaf et al., 2021) by showing that, in small manufacturing firms, innovation effects emerge gradually through business model adjustments rather than immediately. This delayed impact aligns with studies indicating that business model innovation affects performance through complementary and substitutive interactions (Menter et al., 2023). In SMEs, where resource constraints are common, innovation investments typically produce outcomes over time. The findings also highlight the importance of innovation strategy diversity. Firms may adopt simple approaches focused on a single type of innovation or more complex strategies combining multiple types (Tavassoli and Karlsson, 2016). Prior research shows that complex strategies lead to higher productivity, particularly when supported by sufficient resources. This study suggests that such complexity increases the likelihood that innovativeness translates into firm growth, especially when supported by sustainable management practices that help structure innovation processes. This is particularly relevant in regulatory contexts where sustainability knowledge is increasingly required (COM No. 640, 2019).

The study confirms the positive relationship between innovativeness and sustainable management, consistent with previous research (Thuyen and Bich, 2024; Ozgit, 2022). Innovation capabilities provide the foundation for implementing sustainability practices. For instance, environmental design in furniture production can reduce resource use and waste (Iritani et al., 2015), improving efficiency and lowering costs. This supports the observed positive effect of sustainable management on firm growth. Similar findings indicate that sustainable design enhances profitability and corporate image (Ševčíková and Knoškováthere, 2021), while evidence from Norway confirms financial benefits from environmentally friendly practices (Høgevold, 2011). However, implementing sustainable innovation also involves challenges. A key issue is the gap between consumers’ positive attitudes towards sustainability and their actual purchasing behaviour (Ševčíková and Knoškováthere, 2021), which limits the short-term market impact of sustainable products.

A central finding is that the impact of sustainable management on performance is not uniform. While it positively affects firm growth, it does not directly influence competitiveness. This suggests that treating performance as a single construct may obscure important differences. Sustainable practices – such as improving stakeholder relations or environmental performance – create long-term value and organizational stability, but their competitive effects are indirect and less visible in the short term, especially in low-tech sectors where advantages are often cost-based. This aligns with studies showing that environmental practices do not necessarily lead to immediate competitiveness gains (AlKhars et al., 2024), although long-term benefits are possible. Other research highlights positive effects such as increased market share through eco-labelling (Iraldo et al., 2020) or improved competitiveness in firms adopting sustainable design (Olkowicz and Grzegorzewska, 2014). Inconsistencies may also stem from traditional measurement approaches that overlook intangible benefits such as reputation and resilience (Nege and Abegaz, 2024; Oduro and Haylemariam, 2025). Finally, the study identifies a mediating role of sustainable management between innovativeness and firm growth. This suggests a sequential process in which innovation is stabilized and translated into growth through sustainability practices. Sustainable management thus acts as both an outcome and an enabling mechanism of innovation. Although not the primary driver of growth, it remains strategically important, particularly in contexts shaped by regulation and stakeholder expectations.

The present study examined the role of knowledge-based sustainable management in the relationship between innovation and firm performance. The findings show that the impact of sustainable management varies depending on the performance dimension. While it does not directly enhance firm competitiveness, it positively influences firm growth and partially mediates the relationship between innovativeness and growth. These results highlight the differentiated role of sustainability and its indirect contribution to transforming innovation into long-term development outcomes. Insights from traditional, low-tech sectors – often constrained by limited innovation capacity – are particularly valuable. In such contexts, sustainable management supports growth by improving resource efficiency, fostering innovation and creating long-term value. Sustainable practices help reduce costs, optimize processes and improve energy efficiency. Furthermore, integrating sustainability into business strategies enhances corporate reputation, strengthening customer trust and investor confidence, which ultimately contributes to revenue growth.

However, sustainable management does not directly increase competitiveness. Competitive advantage is typically based on unique, firm-specific resources such as innovation, cost leadership, or service quality. In contrast, sustainable practices are often standardized and widely adopted, limiting their differentiating potential. As a result, sustainability contributes more to long-term stability and development than to immediate competitive positioning. These findings have theoretical implications. They suggest extending frameworks such as the resource-based view (Barney, 1991) and stakeholder theory (Freeman, 1984) by incorporating sustainability as a core element of value creation. Sustainable management may not constitute a unique resource, but it enhances the effectiveness of other capabilities, particularly innovativeness. From a dynamic capabilities perspective (Teece et al., 1997), it supports firms in adapting and reconfiguring resources in changing environments. The mediating role of sustainable management also extends Schumpeter’s (1911) theory by integrating environmental and social dimensions into innovation-driven growth.

The results are consistent with SD theory (Brundtland, 1987a) and the Triple Bottom Line concept (Elkington, 1997), emphasizing the balance between economic, environmental and social goals. Innovation primarily drives economic performance, while sustainable management reinforces environmental and social dimensions, together supporting long-term business development. Similarly, the findings align with Stakeholder Theory (Freeman, 1984), showing that addressing stakeholder needs contributes to firm growth through responsible practices and efficient resource use. From a practical perspective, the study offers implications for policymakers and entrepreneurs. Policymakers should recognize that sustainable management enhances firm growth mainly by reinforcing innovation rather than acting as an independent source of competitiveness. Therefore, policies should support the integration of sustainability into innovation processes through incentives, subsidies and regulatory frameworks. Promoting transparency, education, and consumer awareness can further strengthen the effectiveness of sustainability initiatives.

For entrepreneurs, the findings highlight the importance of combining innovation and sustainability in business strategies. Innovation should be treated as the main driver of competitiveness, while sustainable management supports long-term growth and resilience. Managers are encouraged to invest in R&D, foster creativity, and implement environmentally responsible practices. These actions improve efficiency, strengthen corporate image and enhance stakeholder relationships. At the same time, firms should address the gap between positive consumer attitudes towards sustainability and actual purchasing behaviour by using effective communication and marketing strategies. Sustainable practices also contribute to operational efficiency and cost reduction. Measures such as reducing energy and material consumption, minimizing waste and adopting CE principles can improve profitability while supporting environmental goals. Compliance with environmental regulations reduces legal and financial risks, making sustainability a strategic necessity. Firms should therefore develop tailored sustainability and CE strategies aligned with policy frameworks such as COM no. 640 (2019), COM no. 98 (2020) and Directive (EU) 2022 / 2464.

Examples from the Polish furniture sector illustrate these practices. Companies such as Melaco Ltd., Ergo Store and VOX implement sustainability through certified materials, recycling systems, eco-design, renewable energy and digital production management. They also invest in supplier audits, education, and collaboration with research institutions, demonstrating how sustainability can be integrated into core business activities (Melaco, 2025; Ergo Store, 2024; Śliwińska-Wachowiak, 2025; Inventity, 2025). Despite these benefits, sustainable management alone does not guarantee competitive advantage. Firms must combine it with other strategic factors such as innovation, pricing, and marketing. Thus, SMEs should view sustainability as an investment in long-term resilience, reputation and growth. Public policies and educational initiatives can further support this integration by facilitating knowledge transfer and skill development.

In conclusion, innovation and sustainable management play complementary roles in shaping firm performance. Innovation drives competitiveness, while sustainable management supports growth and mediates the impact of innovation. Their integration is essential for achieving long-term success in a dynamic business environment.

The findings of this study are subject to several limitations related to the sample and methodology. Firstly, the research focuses on a single industry and country, which may limit the generalizability of the results. The specific characteristics of the Polish furniture sector should therefore be considered when interpreting the findings. Differences across countries and industries – such as cultural norms, regulatory frameworks, resource availability or technological advancement – may significantly affect the implementation of sustainable management. This highlights the need for future studies to replicate the research in different contexts to identify both general patterns and context-specific dynamics. Although random sampling was applied, the data set includes only participating firms, so non-response bias cannot be excluded. In addition, the relatively small sample size may limit statistical power and reduce the precision of estimates.

Cultural differences in sustainability perceptions also represent an important limitation. Attitudes towards sustainable practices may vary across regions, influencing both implementation and outcomes. Future cross-cultural studies could provide deeper insights and improve the applicability of results. The study also underscores the need for measurement tools that are both robust and adaptable. While the findings support the development of a general framework for sustainable management, such frameworks should remain flexible enough to account for contextual differences. Moreover, the operationalization of sustainable management in this study is based on knowledge-driven practices; alternative approaches may lead to different results, indicating the need for more standardized measurement scales. Methodologically, the use of perceptual, self-reported data may introduce biases, including social desirability effects. Future research could address this by incorporating objective indicators or multi-source data. The use of a single informant per firm and a cross-sectional design also limits causal inference and raises the possibility of common method variance.

Future research should therefore adopt longitudinal designs to better capture causal relationships and dynamic changes over time. Expanding analyses to other industries – especially those with high environmental impact – and including contextual factors such as organizational culture, digital maturity or ownership structure would contribute to more comprehensive models of sustainable management and firm performance.