Abstract
In pursuit of Vietnam’s net-zero emissions target by 2050, decarbonization has become vital to the sustainable development of small and medium enterprises (SMEs). Despite their economic significance, many Vietnamese SMEs face persistent challenges such as limited access to green finance, technological constraints, and insufficient policy and institutional support. This study adopts a quantitative approach utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM) to assess the effects of decarbonization on SMEs’ sustainable development across economic, environmental, and social dimensions. Data were collected from 430 respondents across diverse sectors and regions in Vietnam, with analysis conducted using SmartPLS software. The findings indicate that decarbonization plays a crucial role in improving overall business performance and exerts an even more pronounced direct effect on sustainable development. In addition, business performance serves as a mediating factor linking decarbonization initiatives to sustainability outcomes. Although the research has not addressed different decarbonization strategies, its findings underscore the pivotal impacts of emission reduction in supporting SME sustainability and offer valuable implications. The insights are particularly relevant not only for Vietnam but also for other countries in the region in the process of moving towards a net-zero emission target, where SMEs also play an important role in economic development but still face many similar barriers.