This study investigates sustainability orientation (SO)—an organization’s readiness to address social and environmental issues while pursuing economic goals—as a resource-based strategy for small- and medium-sized enterprises (SMEs). Drawing on the resource-based view (RBV) and neo-institutional theory, we investigate how SO affects SME performance and performance variability across 318 firms in 59 Russian regions. Results show that SO enhances performance and stabilizes performance, indicating a rare and inimitable source of competitive advantage. However, these benefits are moderated by the presence of socially oriented NGOs—key institutional actors that promote and enforce sustainability norms. In regions with high socially oriented NGO density, performance gains from SO are reduced, while stability is reinforced. These findings highlight the dual role of institutional stakeholders in shaping the value of sustainability and offer insights into how SMEs navigate legitimacy and differentiation. We contribute to research on SME sustainability, RBV, neo-institutional theory, and stakeholder theory.