Do Retail Companies in Indonesia Contribute to Sustainable Development Goals (SDGs) by Their Working Capital?
Authors: Hersugondo  , Wahyudi Sugeng , Laksana Rio Dhani 
Published: January 2025

Introduction: Effective working capital management is crucial for retailers to sustain growth and invest in sustainability initiatives. By optimizing inventory, receivables, and payables, retailers can free up cash to fund sustainability projects. A company's everyday operations depend on working capital since it pays for staff salaries, inventory purchases, and other operating expenses. Although higher sales typically require more working capital, profitability only occurs when revenues exceed operating costs. Efficient working capital management can lead to better resource utilization, reducing waste and improving sustainability.

Objective: The study aims to examine the correlation between resource sustainability and working capital in firms listed on the Indonesia Stock Exchange (IDX), with a particular emphasis on the retailer subsector. The goal of the study is to ascertain if these businesses' profitability is influenced by their working capital levels in order to offer guidance for potential investments in this industry and contribute to Sustainable Development Goals (SDGs).

Theoretical Framework: The key ideas in this subject are working capital, which is the capacity of the business to make money by managing its current assets and obligations to assure liquidity, and profitability. Proper management of working capital can lead to higher economic productivity through efficient use of resources and technological upgrades. This supports SDG Target 8.2, which aims to achieve higher levels of economic productivity through diversification, technological upgrading, and innovation.

Method: This study uses a quantitative method, utilizing numerical data to analyze the relationship between working capital and profitability. The research object is companies in the Retail Trade Sub-Sector listed on the Indonesia Stock Exchange (IDX). The sample consists of 11 companies that meet the criteria. Data processing techniques involve the linearity test, correlation coefficient, and simple regression using SPSS version 23 to analyze the effect of working capital on profit.

Results and Discussion: The study's findings indicate that working capital and profitability have a low but positive link, with a correlation coefficient (r) of 0.420. This shows that working capital influences just 17.6% of profitability, with other factors accounting for the other 82.4%. According to the study's findings, working capital significantly affects profitability, but not very much. By ensuring businesses have the liquidity to invest in sustainable practices and innovations, working capital management contributes to sustained, inclusive, and sustainable economic growth, as outlined in SDG Target.

Research Implications: The research implications suggest that while working capital of resource sustainability management positively influences profitability, its impact is relatively small, accounting for only 17.6% of profitability variation. This suggests that companies should concentrate on other important aspects in addition to working capital optimization in order to increase earnings. To increase profitability, managers and investors should take a wider variety of financial tactics into account, especially in industries where working capital has a minor impact on financial performance. In line with SDG 12 (Responsible Consumption and Production), effective working capital management may improve sustainability, reduce waste, and make better use of available resources.

Originality/Value: offers insights into how working capital influences profitability in a specific market segment, providing useful data for investors and business managers. Additionally, the study's quantitative approach and focus on current data from 2023 provide up-to-date and relevant findings for financial decision-making.