Green creativity leads to eco-friendly behavior and improves organizational performance. Creativity enhances the effectiveness of environmental management systems by implementing eco-friendly policies and procedures (Cheng, 2019; Song et al., 2020). According to the practical findings, the team’s creativity is crucial when adopting green marketing strategies. Green marketing tactics and combinations improve performance and give businesses a competitive edge (Jia et al., 2018). The argument is that companies should foster creativity as part of their focus on managing environmental systems and developing novel solutions to any problems that arise (Dangelico et al., 2017). Innovative green practices encourage businesses to make eco-friendly investments, eco-planning decisions, and investment recoveries that benefit both the environment and businesses. EP requires researchers to overlook the essential component of success, which is green innovation, while concentrating on other organizational capabilities. The strategic management of the environment requires organizations to be open to change, to respect the environment when developing new products, processes, and technologies, and to change how existing strategies are implemented (Darvishmotevali et al., 2020). Firms should prioritize creativity in order to oversee innovative performance. To fulfill expectations, social needs, and environmental goals, managers should focus on developing products and processes that augment product performance. Innovative solutions and procedures can make new products/services more profitable (Chen et al., 2016). Creativity cultivates an environment conducive to increasing environmental commitments and reducing environmental damage (Aeknarajindawat and Jermsittiparsert, 2019; Song et al., 2020). We, therefore, proposed the subsequent:

Employees with GK are better able to understand the ecosystem, show concern about any negative effects their operations may have on the environment, and appreciate the system of shared responsibility for sustainable development (Martinez-Martinez et al., 2019). Law et al. (2017), Mohiuddin et al. (2018) and Wang et al. (2018) argue that green information influences managers’ and customers’ decisions. As green initiatives become more widespread, organizations increasingly recognize “knowledge” as a driving force. The relationship between knowledge and conduct is well supported by prior research (Berchicci et al., 2019). Managers’ expertise is also essential for implementing green marketing and creating environmental initiatives (Chan et al., 2020). Further research domains need a wide and concrete approach to examine businesses’ experience regarding their key stakeholders’ participation in eco-friendly organizational practices (Tang et al., 2018).

In order to improve organizational performance and transform businesses into environmentally sustainable ones, it is essential to understand environmental issues and solutions accurately, thoroughly, and promptly (Mohiuddin et al., 2018; Chan et al., 2020). Environmental expertise is used to formulate internal environmental protection policies. A successful green staff training program depends heavily on the support and expertise of senior management in order to be adopted and implemented successfully for employees (Kim et al., 2019). An environmentally aware management team is crucial to developing, embracing, and implementing green marketing strategies. Further, managers’ ecological expertise helps them approach challenges more creatively and environmentally friendly (Saeed et al., 2019). In the present environmental age, companies require to develop an environmental management attitude to motivate their green innovations (Chen et al., 2014). Thus, we hypothesize as

Creative thinking is the process of conceiving new and valuable products, ideas, or services. GC is creating new, practical, and beneficial concepts that lead to environmentally sustainable procedures, products, services, and practices (Li et al., 2020). All green activities and initiatives are based on green ingenuity (Chen et al., 2016). Innovation and production of green products all begin with green creativity (Chen et al., 2016; Tuan, 2020). GC is essential in the environmental management system because any novel concept requires it. In an integrated environmental management system, no concept is retained that lacks innovation (Ogbeibu et al., 2020). A key component of the environmental management system is the need to approach routine tasks creatively and innovatively. In this respect, the foundation for any green practice or initiative can be considered green creativity in environmental management systems (Ogbeibu et al., 2020). Some individuals are naturally creative, and others necessitate a learning process to obtain knowledge that will lead to creativity (Cheng, 2019). Numerous studies have examined the relative importance of information for creative thinking. Creative notions may occasionally be made more valuable by the type of knowledge they are based on. There are also a variety of knowledge frameworks available to support the development of creative solutions and original ideas (Cheng, 2019). Albort-Morant et al. (2016) also relate this idea to improving the organization’s green and creative cultures. Organizations adopt green initiatives for various reasons, which can be divided into macro and micro forces. Organizational green culture, managerial characteristics, values, and property status are micro-factors, while regulatory pressure, stakeholder demands, and changes in customer preferences are macro-factors (Jia et al., 2018).

Moreover, management’s awareness and interest in environmental issues influence organizational inventiveness about environmental issues, which leads to proactive environmental practices (Jia et al., 2018; Liao and Chen, 2018). As a result, the managers’ failure to utilize their knowledge will not negatively impact the group’s success. By adding knowledge to intelligent reasoning, any concept may become more distinctive and new (Sung and Choi, 2012; Cheng, 2019). As a result,

Using the strategic leadership theory, Chen and Chang (2013) assert that environmental and social responsibility success depends on the degree of transformational leadership within the organization. According to Chen et al. (2014), leadership that promotes green transformation involves motivating employees to achieve environmental objectives. A green transformational leader establishes an environment where the organization adheres to high environmental standards. Transformative leaders support their followers while inspiring them to view things differently. In addition, GTL leads to better performance in green product development by articulating a larger perspective of the environment, establishing environmental standards, and motivating followers with environmental standards and goals (Jia et al., 2018). Studies have identified several challenges to adopting and using green marketing methods. In order to implement green practices effectively, intermediate problems like the lack of expert advice, maintenance costs and increasing implementation, and management’s unwillingness to share information about green practices and skills must be highlighted (Singh et al., 2020) must be addressed. Transformational green leaders encourage creative solutions to environmental problems and support corporate innovation. Transformational leadership benefits EP and inventive performance (Yang and Yang, 2019). The environmental sustainability in the service industry is impacted by GTL (Çop et al., 2021). This led to the formulation of a study.

A transformational leader demonstrates innovative and creative conduct, which plays a role model for creativity in the workplace. Innovative ideas and innovative outcomes are fundamentally influenced by transformational leaders (Mittal and Dhar, 2016). In environmental management, the four features of transformational leadership- intellectual stimulation, charisma, individual consideration, and inspiring motivation- substantially impact how people behave within a company (Mi et al., 2019). When transformational leadership stimulates followers’ intellectual processes, they are able to use information research to generate constructive solutions to problems. By considering each member’s specific needs, managers can provide coaching and guidance that fosters the group’s creativity. Transformational leadership creates an environment where a clear vision is given to the team, igniting and fostering a culture of creativity (Mittal and Dhar, 2016). The followers of transformational leaders with an inspiring drive to protect the environment receive adequate inspiration, encouragement, and enthusiasm to support their initiatives (Adıgüzel, 2019), the effectiveness and creativity of the leader (Jia et al., 2018), readiness to meet customer demands and environmental regulations (Liao and Tsai, 2019), and leadership to take in employees and the creation of a green culture are all mentioned in the literature that is currently available (Song and Yu, 2018). In order for an organization to be creative, leaders need to demonstrate traits that encourage creativity within it. Organizations that want to foster creativity should practice transformational leadership. In addition, Jia et al. (2018) found that transformational leadership impacts and signifies employee creativity. Consequently, this research recommends the resulting hypothesis:

In some studies, environmental and green management expertise fosters creative culture, influencing employees’ work creativity (Darvishmotevali et al., 2020). Employees who engage in green innovation approach environmental issues uniquely and creatively (Tuan, 2020). Furthermore, when GTL is spread throughout the organization, green innovations significantly impact green practices (Mittal and Dhar, 2016). In addition to the earlier discussion of the relationship between GTL, GK, and EP, green creativity is hypothesized to act as a mediator.

Figure 1 presents the theoretical model derived from the relationships established above and underpinned the theories for specifying the interlinked philosophies.

About 3.3 million Pakistani small medium companies exist, and their involvement to GDP is generative. In numerous sectors, roughly 78% of the labor force is engaged in non-agricultural work, with the continuing 22% establishing the commercial workforce (Shah and Syed, 2018). The Small and Medium Enterprises Development Authority (SMEDA) is an independent consultant in Pakistan that screens and delivers to SMEs a helpful support. Furthermore, SMEDA has documented various SMEs and characterized their facilities (SMEDA, 2020).

A survey was conducted in multiple cities of Pakistan, including Karachi, Lahore, Islamabad, and Quetta, to gather information from small and medium-sized businesses. Using a self-administered questionnaire, data were collected from sample fields to ensure a typical sample. Representatives who have taken a proactive role in implementing green exercises were followed for data. In order to gather the information, surveyors are used. There are as numerous outlooks on whether or not purposive sampling is simple and straightforward as there are on how difficult it is. Purposive sampling is justified by the need to better align the sample with the research goals and objectives, enhancing the validity of the findings and the study’s rigorousness and delivers authenticity in the data results. Reliability, credibility, transferability, and verifiable are the four components of this notion that have been previously reported by many scholars (Campbell et al., 2020).

Hence, the study pursued “purposive sampling” recognized as judgmental, careful, or particular sampling, is a type of non-probability method where scholars depend on judgment when selecting participants of the population to take part in survey sampling (Vehovar et al., 2016).

Cochran (1977) suggested that when the population is unknown, there is an adequate method to identify the sample from the unknown population using a following formula. Also suggested by prior scholars in the context of developing countries (Qalati et al., 2021a).

Researchers explained the study’s purpose to each respondent before asking them to complete the questionnaire, as instructed by the investigators. Following their agreement, a questionnaire was filled out.

A total of 400 representatives from 84 of the chosen companies participated in the survey. The total number of valid responses examined was 400. In Table 1, 70% of respondents hold a bachelor’s degree, followed by 20% with a master’s, 5% with a doctorate, and 5% with other professional degrees. Among the respondents, 15% were female, while 85% were male. Age, 25–35, 46–45, and above 46 were 30, 50, and 20%, respectively.

The study included enterprise representatives as respondents. We examined the responses from frontline to senior managers. There was a 16% executive ratio, followed by a 15% frontline manager ratio and a 30% middle manager ratio, holding supervisory designations at 24% and bottom-line (operational) managers at 15%. In the survey, 46% of respondents had more than 15 years of experience, 10–14 25% and less than ten 29% were from small enterprises.

Furthermore, distributed industry services, the study targeted manufacturing 30%, trading 45%, and mixed services (education, healthcare, trainings, and etc.) 25% involved for study purpose.

Measurements of fundamental constructs were based on instruments from earlier surveys. Measures included a variety of components. EP as a dependent construct measured having three statements that were adjusted from Chiou et al. (2011). Two independent constructs GTL and GK were assessed by six and four questions modified and used from the work of Chen et al. (2014), and Subramanian et al. (2016), separately. GC measurement used six statements acquired and modified from Chen et al. (2014). Likert scale based on 5-ranks (one represents strongly disagree to five shows strongly agree) was used for independent and mediating constructs. Details of the items are given in Appendix. The tool’s validity was evaluated by five experts, including two human resource managers from the sample companies and three university professors having expertise in it. As a result of their advice, a few minor adjustments have been made. The questionnaire was piloted with 45 participants to ensure it was clear and feedback was collected. Changes did not need to be made to the questionnaires. Reliability analysis was also performed on the scales utilized in the study to assess their internal consistency.

We included small and medium-sized businesses in our research because they are vital to economic growth. By participating in international trade, SMEs contribute to the development of the global economy and create jobs. Small and medium-sized businesses explain around 90% of trade and employment worldwide. SMEs contribute approximately 40% of the national income in emerging economies. In order to keep up with the growth of the global workforce, approximately 600 million jobs will be required by 2030, according to World Bank estimates (World Bank, 2021). Since implementing globalization strategies, small and medium-sized companies have expanded their operations.

Regarding descriptive analysis, for EP, the mean value of 4.3 and the standard deviation (STD) of ±0.72 show that average respondents fell in agreement with statements with variation (3.58 to 5), respectively. The mean value for the green knowledge is 4.08, and the standard deviation is ±0.64, showing that this deviation ranges from 3.44 to 4.72. This suggests that agreed statements were observed. According to the mean value of 4.06, the respondents comprehend the average GC agreement. The standard deviation demonstrates the deviation ranging from 3.46 to 4.66. Regarding the GTL, the mean value of 4.00 shows that, on average, they went for positively agreed with the statements. Also, the standard deviation of ±0.67 shows this deviation, which ranges from 3.33 to 4.67; displayed in Table 2.

A measurement model evaluates convergent and discriminant validity, where convergent validity pertains to the level at which multiple items represent the same variable or concept. AVE, factor loads, and composite reliability (CR) can all be used to assess convergent validity, and all items exceeded the limit of 0.50 (Fan et al., 2021). Further, Hair et al. (2017) used 0.50 and 0.7 as cutoff values for AVE and CR, respectively. Further supporting the dependability of the measurement items was Cronbach’s alpha (CA), which indicated higher than 0.70 for all variables. A factor loading threshold of 0.6 and variance inflated factor (VIF) less than 3.3 (Qalati et al., 2022b) are considered standards. Tables 2, 3 show the output of the measurement model.

As per Fornell and Larcker (1981), discriminant validity is an important check for validating the data. Also, correlational numbers identify that the square root of AVE is considered higher than all other correlations within a column, as presented in Table 4. This study fulfilled. The Heterotrait-Monotrait ratio (HTMT) was also utilized to evaluate discriminant validity, which measures how well a construct or set of measures distinguishes between various constructs. The HTMT ratio was considered. Besides the frequently used Fornell-Larcker criterion, the method follows two different threshold values lower than 0.85 and 0.90, a benchmark by Henseler et al. (2015). In the study, 0.85 was used as the cutoff point for evaluating discriminant validity, and the outcome was satisfactory (Table 4). Therefore, discriminant validity and convergent validity determined which outcomes were acceptable for the measurement model (Figure 2).

The employability of Smart-PLS has been accepted widely in different fields, especially social and management sciences (Zafar et al., 2022). Hence, the researchers used this software package. It is essential to consider the coefficient of determination (R²), the significance of the b-path coefficient, the effect size (f²), and the cross-validated redundancy (Q²) when evaluating a structural model evaluation (Hair et al., 2017). Cohen (1992) suggests the following ranges to understand R² values: low, 0.02–0.12; moderate, 0.13–0.25; and significant, 0.26 and above. A study of moderate EP found that it was explained by GTL and GC (Cohen, 2013) (R² = 0.419); see Table 5. The default model achieves the square root of mean residual (SRMR = 0.05) and normed fir index (NFI ≅ 0.9) values in acceptable range; see Table 5.

Table 6 depicts that a positive association between GC and EP (β = 0.570, p > 0.01, t = 8.58), but GK does not significantly influence RP (β = 0.022, p < 0.05, t = 0.709), which contradicts H2, but supports H1. In contrast, it was discovered that GK significantly ensured a positive relation with GC (β = 0.587, p > 0.01, t = 13.04) and that GTL had a positively significant relation with EP (β = 0.121, p > 0.01, t = 2.60), sustaining hypotheses H3 and H4. Hypothesis H5 is also supported as GTL positively influenced the GC by the analysis result of (β = 0.226, p > 0.01, t = 4.875).

Green creativity was also examined as a mediator between EP, GTL, and GK. Mediating impacts are significant if there is an indirect link between independent and dependent variables (Preacher and Hayes, 2008). GC was found to hold a significant mediation impact on the relationship between GK and EP (β = 0.334, p > 0.01, t = 6.07), as well as on the relationship between GTL and EP (β = 0.129, p > 0.01, t = 4.60), supporting hypotheses H6 and H7 respectively, shown in Table 6 and Figure 2. As a final step, the predictive significance of the model was evaluated using blind-folding at a distance of 7.

The model has a predictive value if Q² is bigger than 0 for the specified endogenous constructs (Hair et al., 2017). For EP and GC, Q² was greater than zero and greater than 0.118, indicating adequate predictive relevance (Table 5).

Environmental performance has become an essential and influential topic for many scholars, as was previously supposed. Numerous studies are being conducted to identify the multiple factors that affect EP. Our research first looked into how environmental beliefs influence EP in businesses. Second, to close the information gap, this study affixes to the disciplinary knowledge by exploring how green creativity intermediates the relation between GTL and green environmental practices in SMEs. Second, the measurement strategy that examines the influence of values would add to the body of knowledge. Third, the researcher concludes that incorporating GK into practices will not necessarily improve EP. Fourth, the research confirmed the importance of GC as a mediator for enhancing ecological performance (Renwick et al., 2013). Consequently, a recent study examining the influence of GC as a mediator to strengthen or alter the association between GK and EP has suggested an important contribution to enhancing EP.

The research offers crucial recommendations for managers and leaders on fostering green practices and using them to boost EP and overtake market rivals. Consistent with our research findings, businesses should support and develop green leadership traits to apply green human resources management methods. The GC and GK division must implement green procedures to draw in, train, and keep employees who share its commitment to ethical business practices and environmentally friendly goods and services. We advise transforming small-medium enterprises’ leadership to foster an environment where individuals with green talents and drive impressions are supported and have the chance to reach their full potential to stay up-to-date and competitive.

First, it is guided that future studies look at other cities of Pakistan encompassing vast geographic areas, including growing divisions since the data was gathered from SMEs operating in major cities in Pakistan. Second, the EP scale is usually employed to gauge the impact of environmental values using the practice of green management activities. To further evaluate the hypothesis’s findings, it is advised that researchers examine the ecological importance of construction at the employee level using the Best/Worst Questionnaire. Third, this study employed GC as a mediator; it is advised that future research can think through pro-environmental activities or environmental knowledge as moderators.