Environmental performance reclaimed: unleashing the power of green transformational leadership and dynamic capability

Ledi, Klenam Korbla; Prah, Joana; Xemalordzo, Enya Ameza –; Bandoma, Stephen Article Environmental performance reclaimed: unleashing the power of green transformational leadership and dynamic capability Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Ledi, Klenam Korbla; Prah, Joana; Xemalordzo, Enya Ameza –; Bandoma, Stephen (2024) : Environmental performance reclaimed: unleashing the power of green transformational leadership and dynamic capability, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 11, Iss. 1, pp. 1-18, https://doi.org/10.1080/23311975.2024.2378922 This Version is available at: https://hdl.handle.net/10419/326438 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Cogent Business & Management ISSN: 2331-1975 (Online) Journal homepage: www.tandfonline.com/journals/oabm20 Environmental performance reclaimed: unleashing the power of green transformational leadership and dynamic capability Klenam Korbla Ledi, Joana Prah, Enya Ameza – Xemalordzo & Stephen Bandoma To cite this article: Klenam Korbla Ledi, Joana Prah, Enya Ameza – Xemalordzo & Stephen Bandoma (2024) Environmental performance reclaimed: unleashing the power of green transformational leadership and dynamic capability, Cogent Business & Management, 11:1, 2378922, DOI: 10.1080/23311975.2024.2378922 To link to this article: https://doi.org/10.1080/23311975.2024.2378922 © 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group View supplementary material Published online: 16 Jul 2024. Submit your article to this journal Article views: 1932 View related articles View Crossmark data Citing articles: 10 View citing articles Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=oabm20 ACCOUNTING, CORPORATE GOVERNANCE & BUSINESS ETHICS | RESEARCH ARTICLE Cogent Business & ManageMent 2024, VoL. 11, no. 1, 2378922 Environmental performance reclaimed: unleashing the power of green transformational leadership and dynamic capability Klenam Korbla Ledia , Joana Praha, Enya Ameza – Xemalordzoa and Stephen Bandomab aDepartment of Marketing and Corporate strategy, Knust Business school, Kwame nkrumah university of science technology, Kumasi, ghana; bDepartment of teacher education, Kwame nkrumah university of science technology, Kumasi, ghana ABSTRACT This study examines the mediating role of green innovation in the relationship between green transformational leadership and environmental performance and simultaneously posits green dynamic capability as a pivotal boundary condition. A survey questionnaire was administered to 306 firms. The collected data were analyzed using Amos, and structural equation modelling was employed to test the hypotheses. The findings reveal a significant positive relationship between green transformational leadership and environmental performance. This study also demonstrates that green transformational leadership has an indirect impact on environmental performance through green innovation, and this relationship is anchored by a high level of green dynamic capability. This study demonstrates that green dynamic capability serves as a holistic catalyst that amplifies the impact of green transformational leadership on green innovation and simultaneously catalyzes the translation of green innovation into better environmental performance, ultimately offering fresh insight into environmental management puzzles. 1. Introduction The environmental crisis that bedevils most countries around the world necessitates a shift in organisational behaviour towards sustainable practices. Leadership plays a crucial role in driving this change. Transformational leadership, known for inspiring and empowering employees, has demonstrably impacted employee engagement (Kim et al., 2019; Peng et al., 2021) and organisational performance (Alzghoul etal., 2024; Xie etal., 2019). However, the urgency of environmental sustainability demands a paradigm shift within organizations. Green transformational leadership, a new wave of leadership, has emerged as a critical leadership style for promoting sustainability within organizations. Green transformational leaders encourage employees to adopt environmentally friendly practices and support the development of green initiatives (Çop, etal., 2021; Peng etal., 2021; Pham etal., 2019; Singh etal., 2020). As such, recent studies have begun to link green transformational leadership with enhanced environmental performance (Kim et al., 2019; Sun et al., 2022), suggesting that leaders who prioritise green values can significantly impact an organisation’s sustainability performance. Despite the burgeoning interest in GTL (Cui et al., 2023; Mittal & Dhar, 2016; Peng etal., 2021), there remains a significant gap in understanding the mechanisms through which GTL affects environmental © 2024 the author(s). Published by informa uK Limited, trading as taylor & Francis group. CONTACT Klenam Korbla Ledi [email protected] Department of Marketing and Corporate strategy, Kwame nkrumah university of science technology, Business school, Knust, P.M.B Kumasi, ghana. https://doi.org/10.1080/23311975.2024.2378922 this is an open access article distributed under the terms of the Creative Commons attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the terms on which this article has been published allow the posting of the accepted Manuscript in a repository by the author(s) or with their consent. ARTICLE HISTORY Received 1 February 2024 Revised 4 June 2024 Accepted 6 July 2024 KEYWORDS Green transformational leadership; green innovation; environmental performance; green dynamic capability; manufacturing REVIEWING EDITOR Sandra Alves, Higher Institute of Accounting and Administration, University of Aveiro, Portugal SUBJECTS Environment & Business; Leadership Strategy; School Leaders & Managers; Innovation Management 2 K. K. LEDI ETAL. performance. While studies have increasingly acknowledged a positive direct relationship between GTL and environmental performance (Begum etal., 2022; Singh et al., 2020; Sun etal., 2022), the underlying mechanisms and conditions under which this relationship is most effective remain underexplored. Specifically, there is a lack of understanding regarding the mediating role of green innovation—the development and implementation of new products, processes, and practices that reduce environmental impact (Chan et al., 2016; Chen & Chang, 2013)—in this relationship. We posit that green transformational leaders cultivate an environment that encourages the exploration and adoption of these innovations (Begum etal., 2022; Chen etal., 2014; Cui etal., 2023). This, in turn, directly contributes to improved environmental performance. However, the extent to which green innovation serves as a mechanism through which GTL affects environmental performance has not been fully examined. Additionally, there is limited research on the boundary conditions under which green transformational leadership is most effective. More specifically, it is unclear how green transformational leadership translates into environmental performance and which organisational practices or capabilities are essential for maximising this effect. While green innovation plays a crucial mediating role, we further posit that the effectiveness of this mediation is likely moderated by the organisation’s green dynamic capability. Organisations with a robust green dynamic capability are better equipped to leverage the leadership’s vision and translate green ideas into innovations. Ultimately, both green innovation and green dynamic capability contribute to improved environmental performance. Therefore, the study proposes that the strength of the relationship between green transformational leadership, green innovation, and environmental performance may vary depending on an organisation’s green dynamic capability, which, however, has received negligible attention in the literature. The current study is motivated by these knowledge gaps and aims to address the following research questions: ‘(1) To what extent is green transformational leadership able to anchor environmental performance through green innovation, and (2) what differential effect does green transformational leadership have on green innovation as well as what differential effect does green innovation have on environmental performance under different conditions of green dynamic capability?’ Consequently, this study will contribute to the literature in two ways. While the direct relationship between GTL and environmental performance has been increasingly acknowledged (Begum etal., 2022; Chen et al., 2014; Çop et al., 2021; Singh et al., 2020), the mechanisms through which GTL influences environmental performance remain underexplored. The study demonstrates how green transformational leadership impacts environmental performance directly and indirectly by establishing the role of green innovation as a mediator. The findings indicate that leaders who exhibit green transformational behaviour positively impact innovation efforts in organisations, which ultimately impacts a firm’s environmental performance. Secondly, this study identified green dynamic capability as a crucial enabling factor. When combined with dynamic green capability, firms can unleash their green innovation by capitalising on their ability to sense, seize, and reconstruct internal and external organisational resources. Thus, organisations aiming to enhance environmental performance and sustainable innovation should strategically invest in developing and enhancing their green dynamic capability. This is because green transformational leadership and green innovation can synergistically stimulate environmental performance under the auspices of green dynamic capability. This study extends the dynamic capabilities framework to the green context, proposing GDC as a critical moderator that enhances the influence of GTL on environmental performance through green innovation. This study expands and offers novel perspectives in the literature by employing upper-echelon and dynamic capability theories to explain the antecedents of environmental performance, ultimately providing rich insight into environmental management puzzles. The remainder of the paper is organised as follows: theory and hypothesis development, method and material, results, discussion and conclusion, and implications of the study. 2. Literature review and hypothesis development 2.1. Literature review Environmental sustainability has become a critical focus for organisations worldwide due to increasing regulatory pressures, stakeholder demands, and the urgent need to mitigate climate change. Organisations COGENT BUSINESS & MANAGEMENT 3 with strong environmental performance not only meet regulatory requirements but also achieve competitive advantages through cost savings and enhanced corporate reputation (Bhat et al., 2024; Sarwar et al., 2023). Green transformational leadership has emerged as a vital leadership style that promotes environmental responsibility and drives organisations towards sustainable practices. GTL involves leaders who inspire, motivate, and support their employees to adopt environmentally friendly practices and pursue sustainability goals (Awan et al., 2023; Hanif etal., 2023; Niazi etal., 2023; Sachdeva & Singh, 2024). The upper-echelon theory contends that the traits and values of top executives have a significant impact on strategic decision-making in organisations (Carpenter et al., 2004; Hambrick and Mason, 1984). The upper-echelon theory posits that top executives’ values and beliefs permeate through organisational layers, influencing employees’ attitudes and behaviors. The study posits that top executives’ environmental values and beliefs shape the organisation’s strategic orientation, including its environmental commitment and sustainability practices. Green transformational leaders leverage their positions to shape organisational culture and policies. Leaders committed to sustainability create a culture that values and rewards environmental responsibility, fostering widespread adoption of green practices (Khan etal., 2023; Suliman et al., 2023). Green transformational leaders inspire and empower employees to adopt green practices, further contributing to improved environmental performance (Awan et al., 2023; Niazi et al., 2023; Perez etal., 2023). Green transformational leaders also prioritize investments in sustainable technologies, innovation in eco-friendly processes, and partnerships that enhance environmental performance. These strategic decisions are critical to driving the organisation towards better environmental performance and a sustainable environment. Therefore, the environmental consciousness of top executives is more likely to influence an organisation’s commitment to green initiatives and, subsequently, its environmental performance. Thus, recent studies have highlighted the positive impact of GTL on various organisational outcomes, including employee pro-environmental behaviour, employee engagement, and organisational commitment to sustainability (Ma & Ma, 2024; Perez et al., 2023; Priyadarshini et al., 2023; Srivastava et al., 2024; Suliman et al., 2023; Younis & Hussain, 2023). While the initial research on green transformational leadership is promising, there remains a critical gap in our understanding of its full impact. Specifically, most existing studies on green transformational leadership have focused on its direct effects on organisational outcomes such as employee pro-environmental behaviour, organisational commitment, green behaviour (e.g. Niazi et al., 2023; Perez etal., 2023; Singh etal., 2020; Priyadarshini etal., 2023; Cui etal., 2023; Khan etal., 2023), environmental performance (e.g. Hanif etal., 2023; Perez etal., 2023; Suliman et al., 2023; Younis & Hussain, 2023), sustainable performance (e.g. Khan et al., 2023), environmental performance (e.g. Hanif et al., 2023; Perez etal., 2023; Suliman etal., 2023; Younis & Hussain, 2023), sustainable performance (e.g. Khan etal., 2023) and overall performance (e.g. Özgül & Zehir, 2023). However, these studies often overlook the pathways through which GTL influences environmental performance and the conditions under which these effects are maximized. Existing research primarily focuses on the relationship between GTL and environmental performance (e.g. Bhat etal., 2024; Tian etal., 2023), but a clear understanding of the underlying mechanisms is lacking. Particularly as businesses face increasing pressure to adopt sustainable practices, identifying the mechanisms through which leadership can influence these practices becomes imperative. The primary motivation for this research is to address these critical gaps by proposing a comprehensive framework that considers the combined mediating and moderating effects of green innovation and green dynamic capability. The study extends existing theoretical frameworks by integrating the roles of leadership, innovation, and dynamic capabilities in driving environmental performance. This integrative approach provides a more holistic understanding of the pathways and conditions that drive environmental performance and ultimately distinguishes this study from prior studies that have typically examined these constructs in isolation. This adds depth to the existing theoretical framework by considering the interplay of leadership, innovation, and capability in driving sustainability. 2.2. Green transformational leadership and environmental performance Green transformational leadership (GTL) is a leadership style that emphasises the importance of environmental sustainability and inspires followers to engage in pro-environmental behaviours (Awan et al., 2023; Suliman et al., 2023; Younis & Hussain, 2023). This leadership approach can significantly influence 4 K. K. LEDI ETAL. an organisation’s environmental performance. First, GTL is characterised by the ability of leaders to articulate a clear, compelling vision of sustainability (Hanif et al., 2023; Niazi et al., 2023; Sachdeva & Singh, 2024). GTL mobilises employees to achieve an organisation’s environmental sustainability goals by providing a clear vision (Bhat et al., 2024; Perez et al., 2023; Singh et al., 2020). When leaders effectively communicate the importance of environmental goals, they inspire employees to commit to these goals and integrate them into their daily activities. This ensures that sustainability becomes a core organisational value. Green transformational leaders thus influence environmental performance by encouraging green behaviours among employees (Çop et al., 2021; Cui et al., 2023; Pham et al., 2019; Tian et al., 2023). Green transformational leaders inspire and motivate employees to adopt environmentally friendly behaviours in the workplace. These behaviours include energy conservation, participating in waste reduction initiatives, recycling, and the use of sustainable materials. The promotion of green behaviours is critical as it directly impacts the organisation’s environmental performance (Awan et al., 2023; Chen & Chang, 2013; Cui etal., 2023; Peng etal., 2021; Singh etal., 2020; Tian etal., 2023; Younis & Hussain, 2023). Green transformational leaders also empower their employees by providing the necessary resources, training, and support to engage in sustainable practices. This empowerment leads to increased employee participation in environmental initiatives, fostering a culture of continuous improvement in environmental performance (Bhat et al., 2024; Özgül & Zehir, 2023; Perez et al., 2023; Sun et al., 2022). Additionally, the study argues that green transformational leaders leverage behavioural change mechanisms such as intrinsic motivation, commitment, and employee engagement to drive sustainable practices. The emphasis on intrinsic motivation ensures that employees are genuinely committed to environmental goals, rather than merely complying with regulations or external pressures. This deep-seated commitment leads to more sustainable long-term environmental performance. The upper-echelon theory suggests that the cognitive frames and values of the top management team heavily influence a firm’s strategic decision-making and long-term direction (Carpenter etal., 2004; Hambrick and Mason, 1984). The values and beliefs held by top leaders significantly impact the organisation’s strategic direction. Leaders with a strong orientation towards sustainability are more likely to prioritise and implement green initiatives (Cui etal., 2023; Khan etal., 2023). The study argues that green transformational leaders possessing environmentally conscious values and a deep understanding of ecological issues are more likely to prioritise sustainability in organisational strategies. Green transformational leaders prioritise environmental responsibility, shaping organisational goals and practices accordingly. Leaders who prioritise environmental sustainability are likely to integrate these values into the organisational mission and strategies, promoting green behaviours and practices across the organisation, which in turn leads to improvements in environmental performance. Thus, this study suggests the following hypothesis: H1: GTL has a positive and significant relationship with environmental performance 2.3. The mediating role of green innovation between green transformational leadership and environmental performance In the previous section, we established that green transformational leadership is a major predictor of environmental performance (Bhat et al., 2024; Kim et al., 2019; Perez et al., 2023; Singh et al., 2020; Suliman et al., 2023; Sun et al., 2022; Younis & Hussain, 2023). However, there are methods or mechanisms by which GTL can influence environmental performance that are currently not well understood in the academic literature. The study suggests that green innovation can amplify the impact of green transformational leadership on environmental performance. Therefore, our study posits that GTL promotes green innovation, thereby enabling higher environmental performance. Our position is based on the following arguments: Green transformational leadership, characterised by leaders who inspire and motivate followers towards environmentally sustainable practices (Çop etal., 2021; Cui etal., 2023; Niazi etal., 2023; Suliman et al., 2023), plays a pivotal role in fostering innovative and eco-friendly initiatives. Green transformational leadership stimulates green innovation by inspiring creativity, environmental awareness, and commitment to sustainability (Amui et al., 2017; Awan etal., 2023; Niazi etal., 2023; Tian etal., 2023). Green transformational leaders stimulate innovation focused on ecological solutions, which drives employees to COGENT BUSINESS & MANAGEMENT 5 generate novel ideas and environmentally friendly practices. Empowered employees are more likely to engage in green innovation, contributing to the development of solutions and strategies that enhance environmental performance (Çop et al., 2021; Hanif et al., 2023; Mittal & Dhar, 2016; Peng et al., 2021; Srivastava et al., 2024). In this regard, GTL is a crucial organisational component that supports environmentally friendly behaviours and the resources required for green innovation, helping foster an environment that fosters the development and application of green innovation. The upper-echelon theory posits that the individual characteristics, experiences, and values of top executives shape organisational strategies and outcomes (Carpenter etal., 2004; Hambrick, 2007; Hambrick and Mason, 1984). This study argues that leaders’ values and environmental commitment shape their strategic decisions. Leaders with strong environmental commitments are more likely to endorse and support green innovation initiatives, which they consider integral to achieving sustainability goals. Leaders with a positive attitude towards innovation are more likely to embrace innovative practices and encourage their incorporation into organisational practices to improve environmental performance. Therefore, the study argues that green transformational leadership influences environmental performance through green innovation, as green transformational leadership fosters the enhancement of green innovation, thereby improving environmental performance (Begum et al., 2022; Srivastava et al., 2024; Sun et al., 2022; Tian etal., 2023). The study contends that, while green transformational leadership can affect environmental performance, the degree of green innovation can enhance this relationship. This study suggests that: H2: Green innovation mediates the relationship between GTL and environmental performance 2.4. The moderating role of green dynamic capability on the relationship between green transformational leadership and green innovation Green transformational leadership emphasizes inspiring and empowering employees to achieve sustainability goals. GTL leaders are characterized by their vision for a sustainable future, commitment to environmental responsibility, and ability to motivate and inspire others to take action by channelling green innovation. Therefore, GTL has been widely regarded as having a positive effect on green innovation (Begum et al., 2022; Chen et al., 2014; Chen & Chang, 2013; Cui et al., 2023; Mittal & Dhar, 2016; Singh etal., 2020). The study contends that while GTL plays a significant role in fostering green innovation, the presence of green dynamic capabilities, which refer to an organization’s capacity to adapt to changing environmental conditions and develop new green products, services, and processes, can further increase its impact. Our proposition is based on the following reasons. First, green dynamic capabilities (GDC) provides the necessary resources and capabilities for implementing green innovations. The dynamic capability theory emphasizes the ability of organizations to adapt, reconfigure, and develop their resources and capabilities to navigate dynamic and changing environments (Barreto, 2010; Eisenhardt & Martin, 2000; Teece et al., 1997). Organizations that possess competences, such as GDC, are more capable of translating sustainability visions into strategic actions, such as implementing innovative green practices. The GDC offers the essential resources and abilities to successfully execute environmentally friendly innovations, guaranteeing that the organization’s commitment to sustainability is put into practical action. This includes optimizing eco-friendly processes and developing green products (Chen & Chang, 2013; Dangelico etal., 2017; Di Marco etal., 2020; Hung etal., 2010). Moreover, businesses with greater levels of GDC are more proficient in acquiring and effectively utilizing environmentally friendly or green knowledge. This is because GDC enables the acquisition and assimilation of external knowledge pertaining to environmentally friendly technologies and processes, allowing businesses to find and assess favorable prospects for green innovation (Dangelico et al., 2017; Zhang et al., 2020; Zhu & Côté, 2018). Furthermore, GDC assists firms in adjusting to evolving environmental conditions and guaranteeing the effectiveness of green innovation over time. Dynamic capacity theory posits that the corporate environment undergoes continuous change for reasons such as globalization and technological advancement (Barreto, 2010; Kim et al., 2018; Teece et al., 1997). To thrive in a dynamic environment, organizations must cultivate the capacity to sense opportunities and threats, capitalize on opportunities and mitigate threats, and sustain competitiveness by improving, integrating, safeguarding, and, if needed, reorganizing 6 K. K. LEDI ETAL. or reconfiguring their intangible and tangible resources (Amui et al., 2017; Dangelico et al., 2014; Hung et al., 2010; Wu & Lin, 2018). This study posits that businesses that possess GDC have superior capabilities to adapt and evolve. This is because GDC allows businesses to adjust to evolving environmental conditions and market requirements, guaranteeing the continued relevance and effectiveness of their environmentally friendly innovations (Dangelico etal., 2017; Di Marco etal., 2020; Zhang etal., 2020; Zhu & Côté, 2018). Furthermore, GDC promotes cooperation and exchange of knowledge among employees, fostering the creation of cutting-edge environmentally friendly solutions. Organizations with higher levels of GDC are more capable of promoting cooperation and sharing knowledge, particularly when supported by leaders who drive environmentally friendly transformations. GDC promotes a culture of collaboration and knowledge sharing established through green transformational leadership among employees, thereby encouraging the exchange of ideas, which can lead to the development of more innovative green solutions (Chen et al., 2014; Dangelico et al., 2017; Lin and Chen, 2017; Wu & Lin, 2018; Zhang et al., 2020; Zhu & Côté, 2018). In effect, this study posits that GDC is a critical capability for organizations that want to achieve sustainability and competitive advantage in the face of increasing environmental challenges. Organizations that cultivate GDC are better equipped to harness the benefits of GTL and achieve significant environmental performance improvements through green innovation. This study suggests the following: H3: Green dynamic capabilities moderate the relationship between green transformational leadership and green innovation. 2.5. The moderating role of green dynamic capability on the relationship between green innovation and environmental performance Green innovation is increasingly being recognized as a key driver of environmental performance. Studies have consistently shown a positive relationship between green innovation and environmental performance (Albort-Morant etal., 2016; Dubey etal., 2015; Kim etal., 2019; Rehman etal., 2021; Singh et al., 2020; Xie et al., 2019). For example, Chen et al. (2006) found that green innovation has a significant positive effect on environmental performance indicators, such as energy consumption, waste generation, and greenhouse gas emissions. Whereas green innovation is associated with a firm’s environmental performance (Chan et al., 2016; Dangelico et al., 2017), the effect of green innovation on environmental performance can be enhanced by certain contingency factors. This study argues that the presence of green dynamic capability (GDC) further strengthens the positive relationship between green innovation and environmental performance. Our premises are based on the following reasons. First, GDC helps organizations identify and evaluate green innovation opportunities. Dynamic capability theory posits that organizations can achieve a competitive advantage by developing and reconfiguring their resources and capabilities to adapt to changing conditions and exploit new opportunities (Barreto, 2010; Eisenhardt & Martin, 2000; Kim et al., 2018). As GDC is an organization’s ability to adapt to changing environmental conditions and develop new green products, services, and processes (Dangelico et al., 2014; Wu & Lin, 2018; Zhang et al., 2020; Zhu & Côté, 2018), organizations with high levels of GDC are better able to identify and implement green innovations and are therefore more likely to achieve significant environmental improvements. Firms can unleash their green innovativeness by capitalizing on their capability to sense, seize, and reconstruct internal and external organizational resources when coalesced with dynamic green capability. Second, GDC enhances an organization’s ability to absorb and utilize external knowledge related to green technologies and practices. This knowledge is crucial for developing and implementing effective green innovation (Di Marco et al., 2020; Hung et al., 2010; Lin and Chen, 2017; Zhang et al., 2020). It facilitates the absorption and integration of external knowledge related to green technologies and practices. Organizations with strong GDC can effectively scan the environment for emerging green solutions, adapt them to their specific needs, and integrate them into their operations. Green dynamic capabilities make it easier to combine, create, and reconfigure the internal and external resources that are important for protecting the environment (Wu & Lin, 2018; Zhu & Côté, 2018). COGENT BUSINESS & MANAGEMENT 7 Third, GDC facilitates the implementation of green innovations by providing necessary resources and capabilities. Green dynamic capability (GDC) plays a crucial role in facilitating the implementation of green innovation by providing organizations with the necessary resources and capabilities (Di Marco et al., 2020; Lin and Chen, 2017; Zhang et al., 2020). Firms that cultivate GDC can effectively identify, evaluate, and implement green innovations, ultimately achieving superior environmental performance. Organizations that cultivate GDC are better equipped to identify, implement, and benefit from green innovations, ultimately achieving superior environmental performance. Therefore, this study postulates that the relationship between green innovation and environmental performance is contingent on the level of a firm’s green dynamic capability. This study suggests the following: H4: Green dynamic capabilities moderate the relationship between green innovation and environmental performance. This study adopts a dual theoretical framework, incorporating the upper echelon and dynamic capability theories as a basis for developing a conceptual framework, as depicted in Figure 1. Figure 1 illustrates the hypothesized paths in this study. H1 represented the direct relationship between green transformational leadership and environmental performance. H2 represents the mediating role of green innovation in the relationship between transformational leadership and environmental performance. H3 represents the moderating role of green dynamic capability in the nexus between green transformational leadership and green innovation. In the fourth hypothesis (H4) posits that green dynamic capability also has a moderating role in the association between green innovation and environmental performance. 3. Method 3.1. Sampling procedure The study adopted a quantitative approach and, therefore, used a questionnaire to collect data. The study tested the hypotheses using a sample of manufacturing firms in Ghana. Accra, Ghana’s capital city, which houses most manufacturing firms in the country, faces significant air pollution challenges that pose health risks to residents and hinder environmental sustainability. The city’s air quality, for instance, consistently ranks among the worst in the world, with particulate matter (PM) levels exceeding the World Health Organization’s (WHO) guidelines (IQAir, 2023; Odoi, 2021), placing environmental performance at the forefront of priorities and concerns for corporations, governments, NGO’s, consumers, and investors. Therefore, there is an urgent need to reclaim sustainable business practices and address environmental issues in Ghana. We drew the sampling frame from the Ghana Enterprise Agency, which has an estimated population of 5000. Based on Morgan and Krejcie’s (1970) sampling formulas, the study randomly selected 500 firms and used a key format approach to distribute questionnaires to the selected firms’ senior executives (CEOs and owner managers). Top executives, who are mainly CEOs or managers, have better knowledge of the firm’s operations and often make strategic decisions on its behalf. H3 H4 H2 H1 Environmental performance Green innovation Green transformational leadership Green dynamic capability Figure 1. the conceptual framework. 14 K. K. LEDI ETAL. ideas. They need robust processes for evaluating, selecting, and implementing these ideas to ensure they translate into better environmental performance. Given the demonstrated relationships in this study, organisations should strategically focus on combining leadership, innovation, and dynamic capabilities to enhance environmental performance. Green transformational leadership helps to create a culture of innovation and sustainability, whereas green dynamic capability facilitates the implementation of new green ideas and achieves environmental performance. This suggests that organisational leaders play a pivotal role in aligning green innovation with environmental performance. Leadership alignment guarantees the strategic generation and deployment of green innovations for optimal environmental impact. Thus, organisations aiming for enhanced environmental performance and sustainable innovation should strategically invest in developing and enhancing their green dynamic capabilities. This involves creating structures, processes, and systems that allow for agile resource allocation, adaptation to changing environmental contexts, and seamless integration of green initiatives into the organisational strategy. 6.2. Theoretical implication This study offers significant theoretical contributions to the environmental performance literature (e.g. Alzghoul et al., 2024; Çop et al., 2021). Firstly, the study demonstrates the positive influence of green transformational leadership on environmental performance. This finding underscores the critical role leaders play in driving a firm’s environmental sustainability efforts. The study aligns with upper-echelons theory by highlighting the impact of executive green leadership on environmental performance. This integration suggests that top-level executives’ environmental orientation translates into strategic action. They configure dynamic capabilities to enhance the organisation’s responsiveness to sustainability challenges. Second, this study further contributes to the green innovation literature (e.g. Albort-Morant etal., 2016; Cui etal., 2023) by identifying green innovation as a key mediating mechanism in the relationship between green transformational leadership and environmental performance. Our findings emphasise the critical role of fostering green innovation to translate the effects of green transformational leadership into improved environmental performance for organisations. Moreover, this research goes beyond existing literature by proposing a comprehensive theoretical model that considers the boundary conditions influencing green innovation as well as environmental performance concurrently. While prior studies have extensively investigated green innovation (Begum et al., 2022; Khan & Johl, 2019) and environmental performance (Kim et al., 2019; Rehman et al., 2021) independently, a gap exists in understanding the specific factors moderating these relationships. Our study addresses this gap by empirically examining green dynamic capability as a boundary condition. We argue that this capability acts as a boundary condition, influencing the strength of the relationship between green transformational leadership and green innovation, as well as the impact of green innovation on environmental performance. This multifaceted approach offers a more robust and comprehensive framework for understanding how firms can achieve environmental performance, ultimately offering a fresh perspective on sustainability literature. Scholars have widely explored dynamic capabilities (Dangelico et al., 2017; Di Marco et al., 2020), but this study introduces the concept of green dynamic capability, highlighting its crucial role in enhancing the impact of green transformational leadership on green innovation and green innovation’s influence on environmental performance. This extension highlights the need for organisations to innovate and dynamically manage resources in a manner that contributes to enhanced environmental performance. This expansion enriches our theoretical understanding of dynamic capabilities beyond generic adaptive capacities to include the specific ability of organisations to dynamically manage and leverage resources for environmentally innovative endeavors. This finding suggests that the agility and flexibility inherent in dynamic capabilities extend beyond market responsiveness to include responsiveness to ecological imperatives. This study paves the way for future research by highlighting the need to delve deeper into specific strategies and practices that enhance green dynamic capability. Such advancements can facilitate the development and implementation of innovative green initiatives, ultimately leading to improved environmental performance. Further exploration of other influencing factors, such as organisational culture, employee green investment, green competencies, and resource availability, could provide a more COGENT BUSINESS & MANAGEMENT 15 comprehensive understanding of the mechanism through which green transformational leadership translates into environmental performance. Future research could also examine the potential interactions between these factors and other organisational elements, such as employee green motivation or external regulations. Exploring these factors will help to advance knowledge in the field of sustainability and provide a roadmap for organisations striving to become more environmentally conscious and innovative. Author contribution Conception and design: Klenam K. Ledi; Analysis and interpretation of the data: Bandoma Stephen & Klenam K. Ledi; Drafting of the paper: Joana Prah and Klenam K. Ledi; Revising for intellectual content: Enya Ameza –Xemalordzo; Final approval for publication: Klenam K. Ledi. All authors are accountable for all aspects of the work. Disclosure statement No potential conflict of interest was reported by the author(s). About the authors Klenam Korbla Ledi is a researcher at the department of marketing and corporate strategy at Kwame Nkrumah University of Science (KNUST). Business School. His main research areas are sustainability, marketing, corporate strategy, entrepreneurship, and innovation. Joana Prah is an MPhil student at the department of marketing and corporate strategy at Kwame Nkrumah University of Science (KNUST) Business School. Her main research fields are marketing, strategic management, and innovation. Enya Ameza Xemalordzo is a lecturer at KNUST Business School’s department of marketing and corporate strategy, as well as a Chartered Management and Administration consultant. His research areas are corporate governance, corporate social responsibility, marketing, and entrepreneurship. Stephen Bandoma is a research assistant at the Department of Teacher Education, Faculty of Educational Studies, Kwame Nkrumah University of Science (KNUST). His main research fields are educational technology, inclusive education, innovation, digital transformation, and entrepreneurship. ORCID Klenam Korbla Ledi http://orcid.org/0000-0002-7759-3604 Enya Ameza – Xemalordzo http://orcid.org/0000-0003-1329-4952 Stephen Bandoma http://orcid.org/0000-0003-1791-2674 Data availability statement Data supporting the findings of this study are available from the corresponding author upon reasonable request. References Albort-Morant, G., Leal-Millán, A., & Cepeda-Carrión, G. (2016). The antecedents of green innovation performance: A model of learning and capabilities. Journal of Business Research, 69(11), 4912–4917. https://doi.org/10.1016/j.jbusres.2016.04.052 Alzghoul, A., Aboalganam, K. M., & Al-Kasasbeh, O. (2024). Nexus among green marketing practice, leadership commitment, environmental consciousness, and environmental performance in Jordanian pharmaceutical sector. Cogent Business & Management, 11(1), 2292308. https://doi.org/10.1080/23311975.2023.2292308 Amui, L. B. L., Jabbour, C. C. J., de Sousa Jabbour, A. B. L., & Kannan, D. (2017). 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My company’s manufacturing processes effectively reduce the consumption of coal, oil, electricity or water. Green dynamic capability The company can quickly monitor the environment to identify new green opportunities. The company has effective routines to identify and develop new knowledge. The company has the ability to assimilate, learn, generate, combine, share, transform, and apply new green knowledge (e.g. developing green technology). The company has the ability to successfully integrate and manage new specialized green knowledge. Environmental performance Environmental activities in my organization has significantly… Reduced the overall costs. Reduced lead times. Improved product/process quality. Improved reputation of my company. Reduced waste within the entire value chain process.