Environmental Sustainability in Practice: The Role of Generative Leadership and Greenwashing in Improving Environmental Performance

Introduction
This study examines the relationships among environmental sustainability thoughts, greenwashing practices, generative leadership styles, and environmental performance within Iranian small and medium-sized enterprises (SMEs). The research is motivated by the growing recognition of the critical role SMEs play in achieving overall environmental sustainability, alongside increasing societal and regulatory pressure on these firms to adopt environmentally responsible practices. Unlike large corporations, which often possess dedicated sustainability units and substantial resources, SMEs typically face limitations in financial capacity, expertise, and organizational infrastructure, making the integration of environmental considerations into daily operations more challenging. Accordingly, this study seeks to clarify how internal organizational factors—particularly leadership styles and environmental mindsets—shape environmental outcomes in resource-constrained SME contexts. It addresses an important gap in the literature by focusing specifically on Iranian SMEs, an economically significant and rapidly evolving sector that has received limited attention in sustainability research. Iran’s distinctive socio-economic and regulatory environment offers a valuable empirical setting, with insights that may be applicable to other developing economies confronting similar structural constraints. A central objective of this research is to examine the mediating role of generative leadership in the relationship between environmental sustainability thoughts and environmental performance. It is proposed that a strong organizational commitment to environmental sustainability, reflected in a shared environmental mindset, fosters the emergence of generative leadership practices. Such leaders are expected to cultivate innovation, collaboration, and environmental stewardship, thereby enhancing environmental performance. At the same time, the study acknowledges the potential role of greenwashing—defined as the misleading promotion of environmentally friendly initiatives without substantive commitment—in weakening this relationship. Accordingly, the research investigates whether greenwashing moderates the link between environmental sustainability thoughts and environmental performance, potentially undermining the positive effects of a strong environmental orientation.
 
Methodology
This research adopts a quantitative approach and utilizes a survey-based methodology. Data were collected through a structured questionnaire administered to a sample of Iranian SMEs. The instrument was designed to measure the key constructs of environmental sustainability thoughts, greenwashing practices, generative leadership style, and environmental performance. Measurement scales were adapted from validated instruments in prior studies to ensure reliability and consistency. To enhance data quality, the questionnaire was carefully reviewed for clarity and coherence and was pre-tested through a pilot study to identify and resolve potential ambiguities. The final sample consisted of SMEs drawn from a range of industries, ensuring diversity in organizational activities while adhering to the study’s definition of SMEs as firms employing fewer than 250 employees. This criterion was applied to ensure consistency with international SME classifications and to facilitate effective data collection. Descriptive statistics were employed to profile the sample and provide an initial overview of the participating firms. The hypothesized relationships were subsequently tested using Structural Equation Modeling (SEM), which enabled the examination of both direct and indirect effects among the variables. This analytical approach provided a robust assessment of the proposed mediating and moderating relationships and allowed for a comprehensive analysis of the interactions among organizational mindset, leadership, and environmental performance.
 
Findings
The results reveal several significant relationships among the study variables. First, environmental sustainability thoughts were found to have a positive and statistically significant effect on the adoption of generative leadership styles. This finding indicates that a strong, organization-wide commitment to environmental sustainability creates favorable conditions for the emergence of generative leadership. Second, generative leadership was positively and significantly associated with improved environmental performance, highlighting the pivotal role of leadership in translating sustainability-oriented values into concrete environmental actions. This result underscores the importance of leadership practices that emphasize employee empowerment, collaborative decision-making, and a shared vision for environmental responsibility. In contrast, the hypothesized moderating effect of greenwashing on the relationship between environmental sustainability thoughts and environmental performance was not supported. The findings suggest that, within the surveyed Iranian SMEs, greenwashing practices do not significantly weaken or alter the positive impact of a well-established environmental sustainability mindset on environmental performance. Finally, the analysis confirms a significant mediating role of generative leadership in the relationship between environmental sustainability thoughts and environmental performance. This indicates that the influence of environmental sustainability thoughts on performance is partially transmitted through generative leadership, which serves as a critical mechanism for converting environmental intentions into improved environmental outcomes.
 
Discussion and Conclusion
The findings highlight the central role of internal organizational factors in improving environmental performance within SMEs. In particular, they demonstrate that environmental sustainability thoughts alone are insufficient unless they are effectively enacted through appropriate leadership practices. Generative leadership emerges as a key conduit through which environmental values are operationalized, reinforcing the importance of leadership development in sustainability-oriented SMEs. Several limitations should be acknowledged. The focus on Iranian manufacturing SMEs and the specific size threshold applied may limit the generalizability of the results to other sectors, organizational sizes, or national contexts. Future research could extend this model to non-manufacturing SMEs, larger firms, or different geographical settings to enhance external validity. Additionally, while this study controlled for selected organizational characteristics, future studies may incorporate external factors such as stakeholder pressure, regulatory intensity, and market dynamics to provide a more comprehensive understanding of environmental performance drivers. Moreover, the exclusive reliance on quantitative methods may overlook deeper insights into leadership behaviors and organizational processes. Future research employing mixed-methods designs, including qualitative interviews or case studies, could enrich understanding of how generative leadership is enacted in practice. Despite these limitations, this study contributes to the literature by providing empirical evidence on the interplay between environmental sustainability thoughts, generative leadership, and environmental performance in Iranian SMEs. The findings offer meaningful implications for policymakers, managers, and researchers seeking to promote effective and authentic environmental sustainability practices in developing economies.