Impact of Green Initiatives on the Financial Performance of Small and Medium Enterprises: The Case of Manufacturing Firm in Central Luzon

This study was conducted to propose the Green Economic Development Plan for Manufacturing S.M.E.s based on financial performance and operations thru Green Initiatives. The descriptive survey method used to gather data to determine the green initiative's implementation of small and medium (S.M.E.s) manufacturing enterprises. Green initiatives use as a basis for crafting a green economic development plan. Document analysis was also employed to obtain data from any available printed materials and records provided by the respondents. Such methods of gathering information used to validate data gathered from local and foreign-related literature. The observation also employed to survey the assets owned and validate any green initiatives practiced, including their implementation. The study's findings show that among the green initiatives implemented by SMMEs, which resulted in the reduction of total costs and expenses, were the proper disposal and segregation of waste materials, water management by recycling wastewater and using water-efficient equipment, natural resources, and raw materials management. SMMEs should encourage active participation and support of suppliers and customers in achieving G.E.D.'s objectives by developing incentive schemes. Furthermore, SMMEs should continue to benchmark with G.E.D. Practitioners are operating locally and abroad to adopt best greening strategies and regularly network with concerned government agencies for continuous updating on G.E.D. Initiatives that may benefit the firm. Further research may be conducted on green initiatives implemented by small and medium enterprises in other industry sectors.


Introduction
The Green Economy is the term used to refer to an economy that aims to promote economic development while preserving the environment. The business term for "green" is now widely used, although its origins lie more in the popular press than the scientific community (Baines, Tim, et al., 2012). It aims to strengthen sustainable development without compromising the environment. In this context, the business enterprise includes the workers or personnel whose business growth role is crucial for its sustainability. The Green Initiatives included in the 2017 Sustainability Report of S.M. Investments Corporation are the following: S.M. Prime organize activities and programs geared toward building resilient communities and businesses. Among the activities that include 'green financing' implemented by B.D.O. Bank, the bank launches US$150M green bonds. Through this program, S.M. raises awareness and financing for renewable energy and energy efficiency projects. As to infrastructures and roadworks, S.M. Prime ensures that disaster resilient features are incorporated in their housing development to reduce climate change on the building and road networks.
The physical environment may be affected by the business activities, and changes in the environment could also dictate changes in the latter's activities. Every business, directly and indirectly, impacts the environment (Nassani, Aldakhil, Abro, Zaman, & Kabbani, 2019;Ogega, 2017).
The challenge now for business enterprises is to balance the desire to create wealth and maintain a clean and sustainable environment. It can achieve by applying the theory of environmental economics. In their study, Waheed et al. (2020) emphasized that to pursue sustainability in all business operations is a notable challenge for firms to survive in today's competitive environment. Field and Field (2009) emphasized that economics focuses on how an economy and its institutions set up and how transforming and managing scarce resources to increase human wealth. Beredugo (2014) concluded a significant relationship between environmental costs and a firm's earning capacity. The environment-related costs considered by Beredugo (2014) in his study were "costs incurred in preventing, reducing and repairing damages to the environment and social cost incurred to recognize the organization's responsiveness to the society at large. Other business enterprises operate so that as business activities increase, waste from packaging materials also increases, as Skrabania (2018) discussed in the article on online shopping. This lucrative business is the current trend. There is now an increasing number of entrepreneurs engaging in this type of business that is good for the economy. On the other hand, as the business entity grows, wastes from packaging materials also increase. As more packaging materials are used, more trash could destroy the environment and be thrown into the landfill.
Other researchers also emphasized the importance of accounting for all costs, including Deegan (2013), who emphasized the importance of identifying resources used and measuring and communicating its costs. Product design and processes also entail costs as Tu and Huang (2015) enthused as they cited Tu (2005), who stated that the green concept is environment-oriented, which meant that environmental concerns carried the same weight as profitability product design and development process. In other words, the green concept is concerned with the environment and its impact on business activities, especially the business's earning capacity. The findings would be the basis for developing the Green Economic Development Plan to help organize programs, projects, or activities geared towards preserving the environment and reducing total costs and expenses. By implementing environmentally friendly initiatives, business enterprises would adapt to extreme weather conditions and stay competitive. A small number of firms have already made significant progress in responding to the environmental challenge (Marcus and Willig, 1997).
Through the Green Economic Development Program, an increased number of MSMEs become more aware of the importance of green initiatives to their businesses' financial well-being, increasing their capacity to bounce back in case of calamities brought about by climate change and global warming. Globally there is mounting pressure for firms to assess their impact on the environment and modify their behavior accordingly (Cassells & Lewis, 2011). When more business enterprises become more resilient economically, this would mean more secure employment for people at the regional and provincial levels, making a positive impact on the economy at the national level. This research study investigated the influence of green initiatives implemented by small and medium manufacturing enterprises. Careful analysis of the green initiatives and barriers done to understand any significant impacts of such business practices on the green practitioners' financial performance. The information obtained would be the basis for the crafting of the Green Economic Development Plan.

Methods
Purposive sampling is a technique use to select categories from the target population, and samples taken from among the small and medium manufacturing enterprise green practitioners registered in Nueva Ecija, Tarlac, Pampanga, and Bulacan. They had been operating for three (3) years or more. The firm's ownermanager or manager should have managed the business for at least two years.
The researcher chose respondents from the manufacturing industry involved in food processing because of the big number of establishments of this type that are operating and providing work for a greater number of employees compared to other industries as discussed in the 2016 Annual Survey of Philippine Business and Industry by the Philippine Statistics Authority. This type of business's economic situation and sustainability are crucial to maintaining a high rate of employment. The respondents in this study identified only as SME A, S.M.E. B, and so on until SME I, to keep the identity of the respondents as promised by the researcher when the interview was done because details of their financial information were gathered, including information on business practices and operations that were useful for analyzing and interpreting the data gathered. For purposes of clarity of discussion, the following information regarding the respondents shown: This part allowed the interviewee to shift the direction of the interview. In this way, the researcher could gather unanticipated information to supplement any data gathered through the questionnaire.
Issues and problems that challenged small and medium manufacturing enterprises (SMMEs) gathered from case studies and other research works, newspapers and magazines, books, and other reading materials, including sustainability reports, articles, and other written documents that were accessed on various websites. The information gathered was then examined. Past and present data were compared to understand better the economic conditions of SMMEs before and after implementation of green initiatives and to investigate how green initiatives were useful in improving the capacity of the SMMEs to adapt to extreme weather conditions. Survey questionnaires were developed as an instrument in gathering data. This can be validated for correctness and reliability. Pre survey was done to test whether or not respondents could understand questions in the survey questionnaires and that the questions would be interpreted correctly, or questions would not influence respondents in the way they responded.
In analyzing the impact of green initiatives on the respondents' financial performance, respondents were asked to show which of the various green initiatives reduced total expenses. As discussed previously, a reduction in total costs and expenses would result in higher net income, and an increase in net income also increase Owner's Equity. The frequency was used to assess how many of the respondents experienced a reduction in total expenses because of the implemented green initiatives. The decrease in total expenses was analyzed based on the estimated amount of reduction, and the respondents were requested to rate their choices from '1 to 4'. For example, a green initiative which was implemented and had a very significant impact on the financial performance of the business was rated at '4', which meant that there was more than 50% decrease in total expenses, Significant impact or rated '3' meant that there was 50% decrease in total expenses, those green initiatives that resulted in less than 50% decrease in total expenses were rated at '2' and the green initiative with no recorded impact on financial performance was rated at' 1'. No impact when green initiatives did not result in a decrease in the total expenses of the enterprise.

Impact of Green Initiatives on the Financial Performance of the Small and Medium Manufacturing Enterprises
All of the respondents used machines in their production activities. That is, the production process was fully automated. According to Karla Ximena Vargas-Berrones, Roberto Sarmiento & Garvan Whelan (2020), the outcome shows the green initiative followed by its overall production costs. Only one of the respondents depended on machines for all manufacturing processes, and 88.87% were son partial automation. The manufacturing enterprises with partial automation had total expenses falling at different ranges because they used different machines. In the manufacturing process, the types of expenses incurred in creating finished goods from raw materials were categorized into the cost of raw materials, direct labor, and manufacturing overhead. Ballada, W., and Ballada, S. (2018). Manufacturing overhead consisted of the cost of electricity and water consumed and workers' wages in the production area but not directly involved in creating products. Table 1 shows the respondents' total expenses as part of their operating costs, including electricity, water, and raw materials. Only 22.22% of the respondents declared an increase in investment due to the expansion made in their firm during the period from 2017 to 2019. However, they also said that there had been a decrease in total expenses due to green initiatives' implementation. Among the respondents, 66.67% declared a decrease in total expenses, which increased net revenue resulting in increased capital.
The discussion that follows is about the impact of green initiatives on the financial performance of enterprises. As previously discussed, green initiatives are of different types; some involve savings on materials, water and electricity conservation, prevention of pollution, etc. Various researchers had studied the impact of green initiatives on the financial performance of business enterprises. Rowlands (2019) stated that there was increasing demand worldwide for eco-friendly products sold in eco-friendly packaging. According to Rowlands (2019), eco-friendly packaging was sustainable, recyclable, reduces carbon footprint, and would entail lower shipping costs; hence, the business enterprise would earn more from the sale of eco-friendly Small and Medium Enterprises Electricity Water Supplies and Materials SME A P1,200,000 P36,000 P500,000 SME B P288,000 P50,000 P450,000 SME C P400,000 P40,000 P100,000 SME D P500,000 P80,000 P180,000 SME E P500,000 P50,000 P100,000 SME F P215,000 P36,000 P325,000 SME G P150,000 P26,000 P420,000 SME H P144,000 P21,000 P75,000 SME I P125,000 P60,000 P250,000 products. Vachon, S. and Klassen, R. (2008) emphasized the benefits of collaborative green practices with suppliers and consumers. Accordingly, suppliers are expecting to supply raw materials produced by green manufacturing processes. Many consumers preferred to buy goods produced using eco-friendly processes and distributed packaging that did not harm the environment.
Based on data gathered and analyzed by the researcher, green practices implemented by the selected small and medium manufacturing enterprises affected the S.M.E.s' financial performance, including some educational; institutions. Peris et al. (2020) emphasized that Academic and business interest in sustainability and green practice has grown considerably. Green initiatives such as those implemented in terms of 1. electricity conservation; 2. water conservation; 3. proper materials management; 4. proper waste management which included pollution prevention and recycling and upcycling of scrap materials; and 5. reduction of packaging materials impact the financial performance of a business enterprise more than any other type of green initiative does, hence, for discussion purposes, green initiatives are group as such.
Some of the S.M.E.s' green initiatives to conserve electricity and reduce total expenses can be seen in the following table. Also shown are the computations of the impact the green initiatives had on S.M.E.s' financial performance using the tool for quick potential savings estimation provided by ProGED (Promotion for Green Economic Development). The tool base on an electricity rate of P10.50 per kilowatt-hour and for a period of the basic daily 8-hour work.
In conserving electricity, some of the strategies used were scheduling the time of switching on and switching off air conditioning units. The temperature was to be fixed at 25℃, changing fluorescent bulbs to L.E.D. Bulbs, and so on. The data on the number of air conditioning units used, air conditioning unit temperatures maintained, and the number of L.E.D. Bulbs used were gathered through the interview and ocular inspection of the building to validate the respondent's information.
The electricity-saving scheme of scheduling the switching on and switching off the air conditioning units used in rooms pied only on 8 hours. Air conditioning units were switched on only at 9:00 a.m. and switched off at 4:00 p.m. Air conditioning before 9:00 a.m. and after 4:00 p.m. may not be necessary because rooms would be cooler by then.
The scheme did not include areas where a particularly lower temperature must be maintained to keep devices and machines in optimum operating capacity. Table 2 shows the computation of savings on electricity consumption obtained from scheduling the switching on and switching off air conditioning units. Another green initiative implemented to reduce electricity consumption was setting the temperature at 25℃ instead of the usual 18℃. The actual kilowatt used per unit was 25kw at an estimated number of hours used of 300 hours per month. The estimated monthly savings from on electricity under this scheme was P2,100. Table 3 shows savings on electricity by controlling the temperature of air conditioning units used. The table shows the total savings from electricity, assuming all air conditioning units were used all at the same time for 300 hours a month. The estimated total savings on electricity consumption by setting the temperature at 25℃ was 2,100 kilowatts per month per unit. The total estimated savings on electricity per month computed by multiplying the number of units used by the kilowatt savings of 2,100 and the rate per kilowatt-hour of P10.50. The greater number of air conditioning units used, the more the savings would be when temperatures fix at 25℃.
Another green initiative implemented by the small and medium enterprise respondents impacted their financial performance was changing the lighting systems from standard bulbs to L.E.D. Bulbs. Nguyen et al., (2020) on their study shows that customer green innovation taxonomies influence differently on environmental measures, costs, and financial performance.  Table 4 shows the computation of savings on the electricity consumption of small and medium enterprises. The estimated number of kilowatt savings for 110 units is 660 or 6-kilowatt savings per one L.E.D. Bulb. The total estimated kilowatt savings per month is multiplied by the kilowatt rate of P10.50 to compute the estimated savings in electricity consumption per month due to the green initiative of changing ordinary bulbs with more electricity-efficient L.E.D. Bulbs. This is base on the tool for quick potential savings estimation as provided by ProGED (Promotion for Green Economic Development).
Most respondents' total water bill did not involve large amounts. Any effect of the reduction in water expenses was not that significant, except for 22.22% of respondents whose manufacturing processes involved lots of water usage for cleaning up the work area. Hence, they said that any reduction in the total water expenses resulting from using wastewater for non-potable purposes had a significant effect on the firms' financial performance. About 44.44% said that the green initiatives resulted in at least a 50% decrease in total expenses. Regarding using dual-flush converters, 33.33% of the respondents' total expenses were reduced only significantly, which is at least a 50% decrease in total expenses. To install an automatic shut-off or low-flow nozzle, 66.67% reported a very insignificant effect on total expenses. Table 5 shows the savings on water conservation that impacted the financial performance of the manufacturing enterprises. As previously discussed, proper waste disposal was considered by a majority of the respondents as important.
Those who considered that proper disposal of waste materials did not impact their financial performance had a large amount of bulky trash every day of their operations. Most industrial assets use a significant amount of energy and create waste (Dal Pont et al., 2014). These were put in sacks stacked on an empty land outside of the business enterprise's production area.
Regular maintenance of machinery and equipment was observed by 55.55% of the respondents because they knew that a large amount of the operating costs could be used for the repairs and maintenance of machinery and equipment. They also added that the operations would be significantly affected when machinery shut down. Hence, the green initiative was reported by 55.55% of the respondents as resulting in a 50% decrease in the total expenses. The same green initiative was reported by 22.22% of the respondents as an item that resulted in less than 50% decrease in total expenses. The remaining 22.22% did not report any reduction in financial performance.

Small and Medium Enterprises
Estimated water consumption per month before green initiatives Estimated water consumption per month after green initiatives Estimated Savings on Water Consumption per month (1) (2) (4) SME A P3,000 P2,250 P750 SME B 3,000 2,000 P1,000 SME C 10,000 4,000 P6,000 SME D 10,000 8,000 P2,000 SME E 20,000 18,000 P2,000 SME F 3,000 2,400 P600 SME G 3,000 2,400 P600 SME H 1,800 500 P1,300 SME I 6,000 2,000 P4,000 Putting up posters as a reminder to employees to help prevent pollution resulted in a more than 50% decrease in total expenses, reported by 33.33% of the respondents. However, the same percentage said that the green initiative did not affect their firms' financial performance, and the same number of respondents reported less than 50% decrease in total expenses.
Upcycling of scrap raw materials could reduce the trash in the buildings and surroundings of the business enterprises; however, only 33.33% of the respondents reported that upcycling and converting scrap materials into valuable goods significantly reduced the total expenses of the firm. About 44.44% reported that upcycling raw materials did not affect financial performance, and 55.55% reported that converting scrap materials into usable items did not affect their firm's financial performance. Upcycling old magazines and newspapers were reported by 11.11% of the respondents as not affecting the financial performance, 22.22% reported that this green initiative resulted in less than a 50% decrease in the total expenses.
According to the respondents, the recycling paper was beneficial to business enterprises, and it was a green initiative that was easy to implement. However, some respondents did not want to implement this because they did not want confidential information to be accidentally exposed.
Recycling containers as rubbish bins and recycling paper were green initiatives reported by 55.55% of respondents, resulting in more than 50% decrease in total expenses. Instead of buying new bins to be used to keep trash, they used recycled containers. Much was saved by recycling papers for printing documents; however, 11.11% of the respondents said that this green initiative is not to implement in his firm; hence, there was no effect of such an item on his financial performance. About 22.22% of the respondents reported that green initiatives resulted in less than a 50% decrease in total expenses. Only 33.33% of the respondents who used recycled materials as decorations reported a 50% decrease in total expenses, the same percentage reported less than 50% decrease in total expenses, 22.22% of the respondents reported a 50% decrease in total expenses, and only one respondent reported that the green initiative did not affect the financial performance.
Membership in organizations and clubs and participating in social activities were reported by 22.22% of the respondents as a green initiative that significantly affects their financial performance. Of the enterprises that organized pro-environment activities, 44.44% reported more than a 50% decrease in total expenses because some said they could share in the costs and expenses with other organization members or get funding from clubs and organizations had a membership. To participate in social activities and promote environmental protection, 55.55% reported that the green initiative did not affect. These were the same people who did not have membership in any organization or club that advocate environmental protection.
At the interview time, some respondents were still thinking of various ways of redesigning their packaging. The packaging materials they were using were still sufficient and ensured of products' safety ducts while in transit.
Some respondents spent much on packaging materials to ensure that their products reached the customers in good condition. However, with packaging that required a lot of paper and plastic, more trash would be left around, which could be detrimental to the environment. That is why recycling is important in green manufacturing. The importance of industrial recycling and remanufacturing is growing due to increasing environmental and economic pressures (Eguia, Ignacio, et al., 2011) Only 22.22% of the respondents reported a very significant decrease in the total expenses due to reducing packaging materials used; 33.33% of the respondents reported a significant decrease in total expenses, and the same percentage of respondents reported that the green initiative did not affect the financial performance of the firm. The respondents who reported that there was only a significant decrease in total expenses was only 11.11%. As to redesigning packaging, 33.33% of respondents reported a significant impact on financial performance because they did not have to spend too much on packaging materials. The same percentage reported that the green initiative did not affect their financial performance. Respondents who reported that the green initiative resulted only in less than 50% decrease in total expenses was 11.11%, and 33.33% of the respondents reported a 50% decrease in total expenses. Vachon, S. and Klassen, R. (2008) concluded that when business enterprises would like to achieve environmental sustainability by reducing pollution and other environmental impacts, they can work together with their suppliers for eco-friendly manufacturing processes and customers for eco-friendly product packaging. As discussed previously, purchasing recycled materials and purchasing from suppliers who supported environmental protection advocacy were among the green initiatives that were considered those that could impact the financial performance. This is where cooperation and coordination with the suppliers of raw materials and the small and medium enterprises are needed most.
Only 33.33% of the respondents reported that purchasing from suppliers that advocate a green economy resulted in more than 50% decrease in total expenses, but 44.44% of the respondents reported the same significant effect on financial performance due to purchasing recycled materials. According to these respondents, recycled materials were cheaper than those who were not recycled. Still, they were quick to emphasize that the recycled materials did not reduce their products' quality. About 55.55% of the respondents experienced that recycled materials' purchase did not affect their financial performance. Only 44.44% of the respondents said the same about the effect of purchasing from and supporting suppliers that advocate a green economy. Only 11.11% of the respondents reported that the green initiatives resulted in a 50% decrease in total expenses; the same percentage reported the same effect of purchasing from and supporting suppliers who advocate a green economy.

Proposed Green Economic Development Plan
Through the Department of Trade and Industry or D.T.I. spearheaded the green economic development project that aims to enhance the competitiveness of Micro, Small and Medium Enterprises (MSMEs). This is done by helping them adopt climate-smart, environmentally friendly, and inclusive strategies and measures by placing with the Green Value Chain (G.V.C) approach to identify hotspots for greening" (ProGED 2019).
Based on the study results, the following Proposed Green Economic Development (G.E.D.) Plan was prepared and recommended for small and medium enterprises to use. With the support of the government through the D.T.I., the SMMEs will become more resilient and competitive. As the corporate business world is going global, the business is experiencing a shift from a traditional financial structure to a modern capacity-based economy ready to explore the business's green economic facets (Shoeb Ahmad, 2015).