Global warming, through rising greenhouse gas emissions, is not only impacting on human populations and ecosystems; it is also causing negative impacts on economic development. Commercial activities of businesses are contributing to global warming through unethical social behaviours, so businesses have a role to play by adopting environmental friendly practices in their actions and strategies, so as to reduce their impact on ecosystems. Also, successful businesses to be sustainable need to consider the social concerns within their local communities. Socially friendly businesses attempt to increase human capital through skill improvement and contribute to social capital in a way that community and social groups respect their social responsibility and support them. Sustainability adoption refers to the actual implementation of sustainable practices in currently operating businesses. Such adoption in terms of ecology and community has been commonly accepted as a requirement for large businesses under the rubric of corporate social responsibility. Small and medium sized enterprises (SMEs) have not been scrutinised anywhere near to the same level in terms of their attention to sustainability adoption in their business mission and strategies. Owner/managers of SMEs are no more exempt from environmental and social ethics than anyone else in society. Furthermore, SMEs are significant regional development agents contributing to the increased productivity and an improved quality of local life. Especially in Regional Australia where SMEs constitute approximately 95% of businesses in services and industry sectors, so for Regional Australian SMEs to adopt sustainability and regional economic strategies at the same time, enables local communities to benefit from sustainable development, innovation and economic development in their regions. In the SME literature, there is a lack of appreciation of the sustainability issue and its connection with its local community. Bringing together the relevant literature, this research develops a sustainability assessment framework for SMEs by determining the internal and external drivers and inhibitors affecting the adoption of social and environmental friendly practices in SMEs within the regional context. This framework can be used as a basis for application in regional development. It will also be a valuable tool for evaluation and monitoring of strategies for sustainability adoption. To gain a deep understanding of sustainability adoption by regional SMEs, this research investigates social and environmental practices adopted by regional SMEs in order to respond to the sustainability challenge. This research explores factors affecting the sustainability adoption by regional SMEs. Also the research undertaken seeks to identify whether some demographic variables (i.e. business size, business category, business age, owners/managers experience and educational level) have any significant impact on the adoption of social and environmental practices. This quantitative research has a response rate of 28.77% and stands on pre-test, a pilot study and the main study. It draws on the response of 233 SME owner/managers within the regional city of Ballarat. The research uses descriptive statistics, Exploratory Factor Analysis (EFA), analysis of variance (ANOVA), and logistic regression and is guided by the conceptual framework. The results show that the SMEs are actively engaged in employee support and they tend to be close to the local community while lacking environmental practices. However, despite being active in the areas of recycling, energy efficiency, and using environmentally friendly products, these SMEs showed an inability to grasp the strategic importance of overall environmentally sustainable policy and practice. Moreover, findings reveal that business size and owner/managers" education have significant positive effects on the adoption of socially responsible practices. The results of this research contribute significantly to understanding of sustainability adoption by SMEs in a regional context. This research is one of the first empirical studies undertaken to investigate the factors affecting the sustainability adoption by regional SMEs in Australia. Thus, this research builds a platform for future research in relation to understanding better the factors that are barriers to adoption of sustainable practices outside major metropolitan regions, and a theoretical framework to guide such future research. The findings of this research highlight significant implications for both theory and practice in the context of a non-metropolitan urban setting. These implications include addressing practices in a way that brings business operators together to network and collaborate with the communities in the region.