Sustainability as strategy: how environmental sustainability orientation, CSR and green leadership drive firm performance via innovation in SMEs

Purpose Environmental challenges such as climate change and resource scarcity have placed considerable pressure on small and medium-sized enterprises (SMEs) to embrace sustainable practices. This study examines the impact of Environmental Sustainability Orientation (ESO), Corporate Social Responsibility (CSR), and Green Transformational Leadership (GTL) on firm performance (FP) through Green Innovation (GI) in SMEs of United Arab Emirates (UAE). Design/methodology/approach The analysis is based on 424 observations and employs Partial Least Squares–Structural Equation Modeling (PLS-SEM) to explore the interrelationships among the examined constructs, thereby providing insights into their combined effects on firm performance. Findings The results reveal that CSR robustly fosters green innovation and subsequently improves firm performance. Moreover, GTL exerts both a direct influence on performance and an indirect influence via innovation. ESO predominantly contributes to promoting green innovation and boosting firm performance. Originality/value By integrating Natural Resource-Based View (NRBV) and Stakeholder Theory, the study underscores how sustainable practices can provide a competitive advantage. It offers practical insights for SME leaders, stressing the importance of embedding sustainability into core strategies to drive long-term performance and competitiveness in dynamic markets like the UAE.