The Role of Brand Image and Loyalty in Linking CSR to Sustainability: A Study of SMEs in Pakistan

Abstract

Corporate Social Responsibility (CSR) has emerged as a strategic imperative for businesses seeking to balance profitability with sustainable development goals. While extensive research has explored CSR’s impact on large corporations, limited empirical evidence exists on how CSR affects the sustainable performance of Small and Medium Enterprises (SMEs), particularly in developing countries like Pakistan. This study addresses this gap by examining the role of CSR in enhancing the sustainable performance of Pakistani SMEs, with a focus on the mediating effects of brand image and brand loyalty. Understanding these pathways is vital, as SMEs constitute a significant share of Pakistan’s economy and face distinct challenges in leveraging CSR for competitive and sustainable advantage. The study employed a quantitative, cross-sectional research design. Primary data were collected through a structured questionnaire from 400 SME managers across various sectors in Punjab, Pakistan. Established measurement scales were used to assess CSR, brand image, brand loyalty, and sustainable performance. Structural Equation Modeling (SEM) was conducted to test direct and indirect relationships among the constructs. The findings reveal that CSR has a statistically significant but relatively modest direct effect on sustainable performance. However, when mediated through brand image and brand loyalty, the impact of CSR on sustainability outcomes becomes notably stronger. Brand image emerged as a more influential mediator than brand loyalty, and a significant positive relationship was also found between brand image and brand loyalty. These results validate the theoretical framework based on Stakeholder Theory, suggesting that CSR creates value by enhancing stakeholder perceptions, which in turn foster customer loyalty and support long-term performance. This study contributes to the growing body of knowledge on CSR in SMEs and offers practical insights for managers and policymakers aiming to integrate responsible practices into core business strategies for sustainability-driven growth.