Green Business Strategy: Comparative Implementation Study among SMEs in Indonesia and Malaysia for Competitiveness

Abstract

The urgency of climate change has driven businesses worldwide to adopt sustainable practices aimed at minimizing environmental impact and ensuring long-term competitiveness. The Green Business Strategy has emerged as an effective framework by integrating environmental considerations into corporate policies and operations. This study sets out three main objectives: first, to examine the theoretical foundations of the Green Business Strategy and related concepts such as environmental orientation, environmental performance, and managerial awareness; second, to evaluate the extent of government policy support and SME adoption in Indonesia and Malaysia; and third, to propose strategic recommendations for enhancing the competitiveness of SMEs through sustainable business practices. This study presents a comparative analysis of Green Business Strategy implementation among SMEs in Indonesia and Malaysia. By examining policy frameworks, institutional support, environmental orientation, environmental performance, and managerial awareness, the study identifies the opportunities and barriers faced by SMEs. A comparative literature-based approach is employed, utilizing sources from 2019 to 2025. The findings indicate that Indonesia has a very large SME sector and is gradually strengthening its sustainability regulations, such as the Carbon Economic Value regulation and the IDX carbon trading platform. However, implementation remains fragmented due to weak institutional coordination and financial constraints. In contrast, Malaysia benefits from more established institutional support, including the National Green Economy Policy and the Green Technology Financing Scheme, which provide SMEs with clearer pathways for adopting green business practices. The study reveals that Green Business Strategy adoption enhances operational efficiency, stakeholder trust, and competitive advantage. Policy recommendations include the need for stronger financial instruments and more streamlined regulatory processes, while managerial implications highlight the importance of leadership and environmental awareness. Ultimately, adopting green business strategies is not only a social responsibility but also a strategic imperative for SMEs to remain competitive in an increasingly sustainability-driven global market.