DRIVING SUSTAINABLE PERFORMANCE THROUGH GREEN INNOVATION: THE STRATEGIC ROLE OF GREEN HUMAN RESOURCE MANAGEMENT IN SMES

Abstract

Sustainability issues have emerged as a central concern in the global business transformation. In Indonesia, including among Small and Medium-sized Enterprises (SMEs), which often face resource constraints and environmental pressures. This study investigates the strategic role of Green Human Resource Management (GHRM) in driving Green Sustainable Performance (GSP) through the mediating effect of Green Innovation (GI) within the context of SMEs in Tanjung Balai, Indonesia, while taking into account resource limitations and local characteristics in coastal areas. Adopting an explanatory quantitative approach, data were collected from 200 SMEs meeting specific criteria through a hybrid survey method and analyzed using Structural Equation Modeling-Partial Least Squares (SEM-PLS). The findings reveal that GHRM has a significant impact on GI (β=0.828) and GSP (β=0.446), while GI also significantly influences GSP (β=0.417), with GI partially mediating the relationship between GHRM and GSP (β=0.345). These results underscore that GHRM practices serve as a dominant catalyst in fostering innovation that promotes sustainability within the SME sector. The study offers policy implications, including the formulation of SME-friendly adaptive regulations, the development of localized GHRM training programs, the provision of green incentives, and the establishment of collaborative innovation networks.