Driving SME Sustainability via the Influence of Green Capital, HRM, and Leadership

This study addresses the critical gap in understanding how internal green capabilities and practices drive environmental sustainability in small and medium-sized enterprises (SMEs), particularly within the context of a developing economy. While prior studies have explored green intellectual capital (GIC), green human resource management (GHRM), and green innovation separately, their combined effects and mechanisms have been underexplored. Grounded in the Resource-Based View (RBV), this research examines how GIC and GHRM influence environmental performance, considering green innovation as a mediating factor and green transformational leadership as a moderating factor. Data were collected through a structured questionnaire from 329 manufacturing SMEs in major industrial regions of Pakistan and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings demonstrate that GIC and GHRM significantly enhance environmental performance both directly and indirectly via green innovation, while green transformational leadership strengthens the effect of GHRM on innovation. These results provide practical insights for managers and policymakers in developing countries to implement integrated green strategies and leadership development to achieve sustainability targets. Given its focus on Pakistani SMEs, the generalizability of the findings may be limited, suggesting directions for future research in other cultural and economic settings.