The Influence of Sustainability-Driven Budgeting on Operational Efficiency and Competitive Advantage

Global pressure for sustainable business practices has encouraged firms to integrate sustainability principles into their budgeting systems as part of strategic management. Sustainability-driven budgeting is increasingly viewed not merely as a compliance mechanism, but as a potential driver of operational efficiency and competitive advantage. This study aims to examine the effect of sustainability-driven budgeting on operational efficiency and competitive advantage, as well as to test the mediating role of operational efficiency in this relationship. A quantitative explanatory survey design was employed. Data were collected from 210 managerial respondents directly involved in budgeting and strategic decision-making processes and analyzed using Partial Least Squares Structural Equation Modeling. The results reveal that sustainability-driven budgeting has a positive and significant effect on operational efficiency. Operational efficiency, in turn, significantly influences competitive advantage. Mediation analysis confirms that operational efficiency partially mediates the relationship between sustainability-driven budgeting and competitive advantage. These findings indicate that sustainability-oriented budgeting practices can generate strategic value by enhancing internal efficiency while strengthening firms’ long-term competitive positioning. This study contributes to the literature on business sustainability by highlighting budgeting as a core managerial mechanism and offers practical insights for managers in designing performance-oriented and sustainability-based budgeting policies.