Artificial intelligence for sustainable development through green innovation and ESG performance in small and medium enterprises in Saudi Arabia

Organizations seeking to improve their environmental, social, and governance (ESG) performance face increasing complexity when integrating sustainability into operations, yet traditional approaches often prove inadequate against these multidimensional pressures. Although artificial intelligence (AI) has emerged as a transformative solution in this context, the impact of AI on ESG outcomes remains largely unexplored, especially in emerging economies. This study investigates how AI influences ESG performance, proposing green innovation (GI) as a mediating mechanism and technological turbulence (TT) as a potential moderator. Grounded in stakeholder theory and the resource-based view, the proposed model was tested using survey data from 277 SMEs in Saudi Arabia. The findings indicate that AI adoption significantly enhances ESG performance both directly and indirectly through GI. Contrary to expectations, TT does not moderate the AI–ESG relationship, suggesting that AI’s positive effects remain robust even in dynamic technological environments. This study presents a novel, integrated framework linking AI, GI, TT, and ESG performance, providing empirical evidence from a relatively underexplored context. The results offer insights into how AI translates into tangible sustainability benefits and deliver operational frameworks for executives and policymakers striving to utilize digital transformation for sustainability-oriented development.