Does Green Transformational Leadership Lead to Perceived ESG Performance? A Dynamic Capabilities Perspective on Sustainability in Turkish SMEs

Green transformational leadership is a sustainability-oriented approach with a focus on implementing green strategies among employees and the organization to improve environmental performance. The current study examines the effects of green transformational leadership on perceived ESG performance among employees of Turkish SMEs. In this respect, the indirect effects of green innovation capability as a mediating element and strategic renewal as a moderating factor are also investigated. A total of 256 SME employees from Istanbul, Ankara, and Antalya were gathered through purposive and convenience sampling methods and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results suggest that green transformational leadership positively influences employees’ perceptions of ESG. This is because such a leadership style fosters the innovation capabilities of the enterprise, which in turn contributes to the formation of positive perceptions among employees. The results also show that the positive leadership–perceived ESG link is stronger as strategic renewal increases. Using the premises of Dynamic Capabilities Theory and the Resource-Based View model, the findings offer insight into how leadership activates and directs organizational capabilities, which enable green transformation and, thus, improve ESG performance. The current findings are relevant to academic and leadership practices within a green context. However, the findings are subject to the limitations inherent in self-reported survey designs, which restrict causal inference and generalizability. However, in terms of the theories used, this study contributes by showing how green leadership yields ESG outcomes through capability-based and renewal-based mechanisms rather than managerial influence alone.