Managerial environmental awareness as a contextual mechanism in advancing SME sustainability

Abstract

Small and medium-sized enterprises (SMEs) are increasingly required to adopt sustainable business practices; however, many SMEs still face challenges in integrating environmental strategies into their operational activities due to limited resources and adaptive capabilities. This study examines the effects of green innovation, dynamic capabilities, and organizational culture on business sustainability among SMEs in Denpasar City, Indonesia, while investigating the moderating role of managerial environmental awareness in these relationships. A quantitative research approach was employed using probability sampling. Data were collected through questionnaires distributed to SMEs in Denpasar City, resulting in 400 valid responses from 500 distributed questionnaires. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that green innovation, dynamic capabilities, and organizational culture positively and significantly influence business sustainability. These results indicate that environmentally oriented innovation, organizational adaptability, and sustainability-supportive culture contribute to enhancing SMEs’ economic, social, and environmental performance. Furthermore, managerial environmental awareness strengthens the relationship between green innovation and business sustainability. However, managerial environmental awareness weakens the effect of dynamic capabilities on business sustainability and does not significantly moderate the relationship between organizational culture and sustainability.