The role of Green Business Strategy in mediating the relationship between environmental orientation and SMEs

Background: This study examines the influence of Green Business Strategy on the performance of small and medium enterprises (SMEs) with a particular focus on its mediating role in the relationship between strategic orientation and performance, as well as its implications for long-term sustainability. Aim: This study seeks to provide empirical evidence on the strategic role of green business as a mediating factor in the relationship between environmental orientation and the performance of SMEs. Setting: The continuously evolving competitive landscape in the digital era has made the ability to generate innovative ideas a crucial aspect for SMEs. Therefore, understanding the role of Green Business Strategy as a mediator in the relationship between environmental orientation and SME performance has become increasingly important. Methods: This study examines 103 SME participants in East Java, Indonesia, employing a quantitative research approach. Data were collected through a semi-structured questionnaire. Mediation analysis and t-tests were conducted using SmartPLS 3.0 to trace relationships within the dataset. Results: The empirical findings indicate that Green Business Strategy serves as a mediating factor in the relationship between environmental orientation and SME performance in East Java, Indonesia. Conclusion: The study on SMEs in East Java is limited by data availability. A comparative analysis with publicly traded firms and longitudinal data could strengthen findings. Future research should include SMEs from both Asian and European contexts for more comprehensive policy implications. Contribution: The study suggests that SMEs can adopt a Green Business Strategy encompassing environmental orientation, environmental performance, top management environmental awareness and SME performance to achieve long-term sustainability and enhanced business.