Impact of Environmental Awareness on Green Practices in SMEs: A Moderated Mediation Approach

Abstract

This study investigates the determinants of green practice adoption among Small and Medium Enterprises (SMEs) in Pakistan by integrating environmental awareness, organizational readiness, and regulatory pressure into a comprehensive framework. Drawing on the Resource-Based View (RBV) and institutional theory, the study examines both the direct and indirect effects of environmental awareness on the adoption of green practices, as well as the conditional role of regulatory pressure.

A quantitative, cross-sectional research design was employed, and data were collected from 287 SME owners and managers across major cities in Pakistan. Statistical analyses, including regression and PROCESS macro (Model 7), were conducted to test the proposed hypotheses involving mediation and moderation effects.

The findings reveal that environmental awareness significantly influences green practice adoption; however, this relationship is partially mediated by organizational readiness, highlighting the importance of internal capabilities in translating awareness into action. Furthermore, regulatory pressure positively moderates the relationship between environmental awareness and organizational readiness, indicating that stronger regulatory environments enhance SMEs’ responsiveness toward sustainability initiatives.

The study contributes to the literature by providing empirical evidence from a developing economy and offering an integrated perspective that combines cognitive, organizational, and institutional factors. Practically, the findings suggest that policymakers should strengthen regulatory frameworks and provide financial and technical support to SMEs, while managers should focus on building organizational capabilities to effectively implement green practices.