Green HRM, Transformational Leadership, and Sustainability Performance in Emerging Market SMEs: The Mediating Role of Pro-environmental Behavior and Circular Economy

Abstract

Study examined the impact of Green Human Resource Management (GHRM) and transformational leadership on sustainability performance in SMEs in the manufacturing sector of emerging markets, focusing on the mediating roles of pro-environmental behavior and circular economic practices. The research was grounded in Resource-Based View (RBV) and Social Learning Theory, which explained how organizational capabilities and behavioral learning influenced sustainability outcomes. Quantitative, cross-sectional survey design was employed, and data were collected from SME employees using a structured questionnaire. SPSS v28 and Smart PLS v4 were utilized for descriptive analysis, reliability testing, and Structural Equation Modeling (SEM). The results revealed that GHRM (β = 0.31, p < 0.001) and transformational leadership (β = 0.34, p < 0.001) significantly enhanced sustainability performance. Pro-environmental behavior (β = 0.29, p < 0.001) and circular economy (β = 0.27, p < 0.001) were significant mediators, translating organizational strategies into tangible outcomes. The model explained 71% of variance in sustainability performance (R² = 0.71), demonstrating strong explanatory power. Findings highlighted that SMEs could improve environmental, social, and economic outcomes by integrating green HR practices with leadership strategies while promoting employee environmental behavior and circular economy initiatives. This study contributed a theoretically grounded framework combining organizational, behavioral, and strategic perspectives, offering practical implications for managers and policymakers to achieve sustainability in resource-constrained environments.