Introduction

The United Nations Sustainable Development Goals, introduced in 2015, have become a global framework for promoting sustainable growth, economic inclusion, and environmental protection. These goals are especially significant for developing countries like Pakistan, where the manufacturing sector is the key driver of economic growth, job creation, and industrial development, as well as a priority for prosperity and resource distribution. Pakistan’s manufacturing industry, which includes everything from textiles to food, beverages, pharmaceuticals, and electronics, plays a crucial role in shaping the country’s economic future. However, this sector often causes environmental harm due to resource waste, overconsumption, and high pollution levels during production.

The Pakistan manufacturing sector, which represents the backbone of the manufacturing industry, is often criticized for its inadequate adoption of sustainability and the low rate of investment in green technologies, coupled with a passive approach to environmental regulations (Smith et al. 2022). The manufacturing industry in Pakistan encounters several challenges that impede its growth, including poor institutional support, lack of funding, underdeveloped digital infrastructure, and insufficient leadership. These challenges prevent them from incorporating SDGs into their operations (Ying et al. 2019). Thus, it is necessary to consider how internal strategic capabilities can be utilized to facilitate sustainable outcomes. With increasing pressure from global and local stakeholders for sustainable business practices, it is particularly critical to understand how Pakistan’s manufacturing industry can react to its environmental challenges and play a role in making its contribution to sustainability at the country and global levels (Yu et al. 2022).

Although manufacturing sustainability is considered in the current literature, there is a dearth of understanding of the intricate interplay between leadership competencies, green dynamic capabilities, and green innovation in the context of environmental uncertainty. Previous studies have explored various dimensions, such as leadership in green practices or adopting innovation, but have failed to collectively respond to the question of how their capabilities motivate them to attain sustainability goals as a whole sub-system of the manufacturing industry, specifically in unpredictable and volatile settings such as Pakistan (Ahmad et al. 2024; Irshad et al. 2024). Furthermore, while green product and process innovations are acknowledged to be essential for reducing the environmental impact, their mediating role in the relationship between competencies of leadership and sustainable performance remains under-researched (Shahzad et al. 2020). The environmental uncertainty, which is typical of most emerging economy countries, compounds this complexity, dictating how decision-makers in the manufacturing industry prioritize resources, respond to regulatory requirement facets, and seek avenues of innovation (Dangelico 2016). This lack of empirical understanding of these dynamics constitutes a notable gap in the literature, especially when it comes to the case of Pakistan’s industrial sector, which calls for policies and practices that reconcile both economic growth and environmental sustainability more urgently than many others.

To fill this salient gap, the current study explores the degree to which leadership competencies and green dynamic capabilities facilitate manufacturing SMEs to achieve SDGs in Pakistan amid environmental uncertainty. Based on the dynamic capabilities theory, this study provides a holistic framework that depicts how manufacturing sector firms can adapt to environmental challenges, optimize resource utilization, and incorporate green innovations into their business model. Using the leadership competency and green dynamic capabilities theory, we investigate the roles of green process innovation and green product innovation as mediators between leadership competency, green dynamic capabilities, and SDGs achievement. It further examines the moderating role of environmental uncertainty in these relationships, providing insights into the interplay between internal capabilities and external factors. This study makes significant theoretical and practical contributions for managers, policy-makers, and development practitioners interested in promoting sustainable industrial development through an examination of Pakistan’s manufacturing sector. To help overcome resource limitations, comply with environmental regulations, and pursue long-term competitive advantages through sustainable innovation, this book explores actionable strategies. This study aims to answer some basic research questions. First, what is the impact of leadership competency and adoption of green technology innovation on the achievement of SDGs in the context of Pakistan’s manufacturing sector? Second, how do green process innovation and green product innovation mediate the effects of leadership competency and green dynamic capabilities on SDGs? Finally, how does environmental uncertainty moderate the relationships among leadership competency, green dynamic capabilities, green innovations, and SDG achievement in the manufacturing context of Pakistan?

Literature review

Leadership competency

The significance of strong leadership is even more pronounced in manufacturing sectors, where resource constraints are common. Leaders have to use their skills to stimulate innovation in these environments while managing the economic and environmental benefits. Research has demonstrated that firms helmed by capable leaders are more inclined to implement proactive green strategies such as cleaner production processes, energy-efficient technologies, and waste-reduction methods (Ahmad et al. 2023). The study investigates how 297 major manufacturing companies in Malaysia’s environmental performance is affected by corporate social responsibility (CSR). The results show that while CSR has a beneficial impact on green innovation and environmental strategy, it does not directly affect environmental performance. A study (Luo et al. 2022) explores the affinity at the supply chain level between green innovation and supply chain study, in the construction industry, with a clear focus on Vietnamese businesses. The results show that most transformational leadership qualities are important for promoting green innovation in the building supply chain, as agreed upon by various role groups.

Another study (Majali et al. 2022) explores the increasingly important field of green practices in SMEs, acknowledging its important role in organizational performance in the face of rising consumer demand for eco-friendly products. The study focuses on manufacturing SMEs in Amman, Jordan. The findings conclude that at 10%, the mediating level of green product innovation was considered significant, which was first considered insignificant at 5%. In SMEs, the green product outcome for linkage of green transformational leadership, green entrepreneurial orientation, and SMEs ‘ performance, among others, was considered significant at 5%, which ultimately proves leadership skills effectiveness driven by green product outcomes in SMEs.

In research (Lyu et al. 2022), a relationship between ambidextrous leadership and sustainability performance in Chinese manufacturing companies is analyzed to enlighten the processes that affect sustainability results through ambidextrous leadership. Moreover, it significantly presents innovative ways for organizational leaders to promote sustainable innovation and performance by highlighting the importance of manufacturing companies’ leadership competency in advancing green product innovation and sustainability objectives. This study examines how sustainability leaders utilize influencing strategies within the institutionalizing change paradigm to facilitate and support substantial organizational transformation towards corporate sustainability (Aftab et al. 2022).

H1a: Competency in leadership is significantly associated with green process innovation.

H1b: Competency in leadership is significantly associated with green product innovation.\

Green dynamic capabilities

This study (Kiesnere and Baumgartner 2020) explores how eco-innovation in Chinese manufacturing companies clarifies how businesses perceive stakeholder pressure and interact to promote green process innovation. Eco-innovation has become a vital means of addressing urgent environmental issues, which may include societal and intellectual concerns about environmental sustainability. Through stakeholder theory and environmental literature perspectives, this research focuses on unraveling how stakeholder pressure and firm capacities interact to elevate green process innovation. The findings highlight the critical role that environmental management practices play in promoting eco-innovation initiatives by demonstrating that EMS acts as a full mediator in the interaction between dynamic capacities and eco-innovation. Study (Giannetti et al. 2023) also highlights that, Crucially, managers experience increased amounts of stakeholder pressure, which amplifies the direct and indirect effects of these connections. The model proposed in this article (Noronha et al. 2023) explains how decision-making strategies facilitate the development of flexible skills that drive sustainable innovation enterprises. The findings explain the significance of decision-making in restructuring corporate structures and creating green dynamic capabilities.

This study (Chen et al. 2023) aims to shed light on the intricate relationship between organizational improvement and corporate green innovation and how improvisation encourages the adoption of environmentally friendly practices inside businesses. The study (Asad et al. 2024) outcomes, which highlight the interaction between organizational order and unexpected change to support environmental sustainability, expand our understanding of how improvisation drives green accomplishments. Ultimately, the research provides valuable insights for professionals and decision-makers seeking to encourage green product creation in companies and enhance green dynamic capabilities. Study (Lee 2023) also proposes a consolidative approach to enable green process innovation that combines the green dynamic capabilities with the motivation, opportunity ability framework. The results show that green supply chain integration has a good effect on both internal and external integration, which positively affects green process innovation.

H2a: Green dynamic capabilities are significantly associated with green process innovation.

H2b: Green dynamic capabilities are significantly associated with green product innovation.

Mediating role of green innovation

This study (Zhang et al. 2020) examines the moderating factors and underlying tools that affect employee green creativity in China’s steel sector as a result of green transformational leadership. Findings provide support for a hierarchical linear hypothesis and shed light on the connections among green transformational leadership, involvement in the creative process, GI policy, and ecological creativity in the steel sector. This research (Chen et al. 2022) enhances the overall comprehension of the relationship between GPR, leadership competency, and SDGs. The goal of this research is to investigate government financial and non-financial incentives on the relationship between GI and the SDGs in Pakistan (Sarkar and Sarkar 2020). Conclude, waste reduction and remanufacturing of different products in smart production systems using non-linear models. The study takes a governance and policy-based approach that identifies political stability and good governance as positive precursors to SDG implementation and economic growth. The study looks at how government funding affects the relationship between GI and SDGs, moderating it. It is fascinating to notice that when government support is provided, the association between GI and environmental practices is significant (Azam et al. 2023).

H3: Green process innovation is significantly associated with SDGs

H3a: Green process innovation mediates the positive relation between leadership competency and SDGs

The significant topic of how the “environmental pollution economic development” cycle obstructs the advancement of sustainable national development is covered in this study (Guo et al. 2018). The paper examines the complex domain of environmental preservation and technological innovation and concludes that green technology innovation is crucial to breaking this cycle (Afum et al. 2021). Furthermore, it has been shown that tax breaks and direct government funding boost the advancement of GT and that the ratio of green process innovation and products is influenced by the interaction between government R&D funding and environmental rules (Awosusi et al. 2023). Subsequent study emphasizes the impact of control variables on the development of green technology by taking into consideration factors like the level of regional development, the manufacturing industry’s share, and the growth of an export-oriented economy. This study centers on technical and energy optimization in the biofuel sector. This study contributes to sustainability by investigating the enabling institutional environment (Sarkar et al. 2024).

This study (Ullah et al. 2023) discusses the need for a synergistic interaction between proactive business practices and ecological responsiveness in today’s global economy. The findings indicate that there are intricate relationships between financial success metrics and different types of green innovation strategies. Specifically, GPR has contradictory consequences on returns on assets and SDGs for the company, while having positive effects on returns on assets (Sarfraz et al. 2022). These findings show how sustainability objectives, financial performance, and green innovation are intricately related, and they provide helpful information to businesses and decision-makers who are attempting to navigate the green transition effectively.

H3b: Green process innovation mediates the positive relation between green dynamic capabilities and SDGs

Mediating role of green product innovation

The global escalation of climate change and the progress of industrialization have brought about a dramatic shift in the use patterns of natural resources. Using innovative capabilities and green process innovation, this research (Sarfraz et al. 2022) aims to address the pressing need to boost the sustainable performance of manufacturing firms in Pakistan. The findings concluded a strong correlation between innovative capabilities, green process innovation (Zhang et al. 2020), and sustainable performance, which demonstrates how the moderating effect of digital leadership enhances the workers’ long-term performance and creative capacities in manufacturing businesses (Sarfraz et al. 2022). Leaders with multiple capabilities play a crucial role in promoting green organizational innovation evidence, for committing investors to the United Nations SDGs target on environmental sustainability (Abdullah et al. 2016). Although manufacturing companies can adopt green innovation, investors are still reluctant to provide capital in the absence of concrete proof of their efforts. This study proposes an optimization model for a sustainable bioenergy supply chain, utilizing crop residues from various agricultural sectors to produce biofuel and biogas (Sarkar et al. 2021). The main findings (Ullah et al. 2023) demonstrate the considerable impact of LSC on green creativity abilities, with green task motivation exhibiting a particularly robust correlation. Furthermore, green creativity abilities show up as a significant factor influencing, acting as a complementary and competitive mediating factor.

H4: Green product innovation is significantly associated with SDGs.

H4a: Green product innovation mediates the positive relation between leadership competency and SDGs.

This article (Afum et al. 2021) explores how the industrial sector is under increasing pressure to address environmental challenges and incorporate green innovation into its operations for sustainable development as a result of increased environmental awareness. Business executives are putting more of their attention on encouraging green product innovation as they realize how crucial GI is to obtaining a competitive advantage (Aftab et al. 2023). However, GI must be used in conjunction with a complex network of green dynamic capabilities and information sharing to achieve sustainable development (Asad et al. 2024). Empirical findings show positive relationships between green knowledge sharing and green dynamic capabilities, and GI, indicating the significance of these factors in advancing green innovation initiatives. Furthermore, green knowledge sharing and green dynamic capabilities have a major direct and indirect influence on GI, with green capabilities somewhat reducing the connection (Afum et al. 2021). It is interesting to note that alters these relationships, emphasizing its part in GI outcomes selection. Refining the joint effects of the green knowledge sharing, green innovation, and SDGs on both environmental sustainability and economic success is the aim of this research (Soomro et al. 2024). The findings demonstrate the significant advantages of genetically modified organisms’ variables about both green innovation and SD, including green products, green design, green supply chain, and green production (Amores-Salvadó et al. 2014). This paper explores retail risk and service satisfaction in distribution. This study shifts focus from customer service dynamics to macro-level institutional mechanisms influencing national sustainability outcomes (M. Sarkar et al. 2024). Moreover, (Irshad et al. 2024) green innovation is found to be a positive predictor of both GE and SD, highlighting its vital role in advancing sustainable development initiatives and encouraging environmental entrepreneurship.

H4b: Green product innovation mediates the positive relation between green dynamic capabilities and SDGs

Moderating the role of environmental uncertainty with leadership competency and green process innovation

This study (Hanif et al. 2023) demonstrates that green transformational leadership has a direct and indirect impact on GPR. Moreover, EMA has a noticeable effect on Corporate Environmental Performance. Managers and policymakers will find these findings useful as they highlight the need to prioritize environmental sustainability activities to meet stakeholder expectations and ensure long-term success in a volatile and changing business climate. In order to better understand how corporate environmental ethics, green innovation, and sustainable performance interact, this study specifically examines the green innovation functions and how environmental leadership and strategy modify these effects. The (Cui et al. 2023) findings indicate that green innovation plays a major mediating role between organizational environmental roles and sustainable performance in social, economic, and environmental domains. Moreover, environmental leadership appreciatively moderates the relationship between green innovation and corporate environmental ethics, emphasizing the importance of effective leadership in promoting environmentally conscious behavior. Additionally, it is found that environmental strategy enhances the impact of green innovation on both environmental and economic performance, emphasizing the strategic significance of environmental initiatives in advancing sustainable results (Hanif et al. 2023).

H5a: Environmental uncertainty positively moderates the relationship between leadership competency and green process innovation

This study (Nabi et al. 2023) examines the affinity between followers’ radical innovation and leaders’ stewardship behavior in the textile and apparel industry of a developing country. The findings point to the significant moderating role of knowledge management dynamic capability between LSB and radical innovation, suggesting that enhanced stewardship behavior facilitates knowledge management procedures, which in turn encourages radical innovation. Moreover, (Adeshola et al. 2023) the results highlight the moderating effect of the EU on the connection between knowledge management dynamic capability and radical innovation, implying that the positive impact of knowledge management dynamic capability on green product innovation is enhanced in environments characterized by raised instability. The study (Afzal et al. 2023) implications offer a special set of insights into how to support radical innovation in the face of environmental instability to managers, leaders, policymakers, and practitioners in the textile sector. This study (Mubeen et al. 2023) dissects the effects of knowledge management, dynamic capability, and green practices on the sustainable performance of SMEs. A study (Abbas and Sağsan 2019) findings conclude the positive relationship between green practices and green innovation, as well as between creating green value and green dynamic capabilities, which identifies that green innovation significantly improved the sustainable performance of SMEs (DiBella et al. 2023). The green value creation acts as a mediator that highlights the importance of sustainable results while embracing uncertainties and technological advancements.

H5b: Environmental uncertainty positively moderates the relationship between green dynamic capabilities and green product innovation

Moderating role of environmental uncertainty with leadership competency and green product innovation

The study (Ho et al. 2023) explores an extensive stability framework specifically planned to help businesses in the hospitality and tourism sector navigate uncertain environments resulting from events like the COVID-19 pandemic. The industry parties can gain from the research’s actionable discernment, which provides firms with specific actions to improve their organizational health and strength in the face of the EU (Alam and Islam 2021). Unlike other studies that focused on partial strategic resilience solutions, this research provides a holistic framework tailored to the unusual needs and challenges of the hospitality and tourism sector (Nabi et al. 2023). This framework gives businesses a solid plan to navigate rough situations and foster innovation, thereby enhancing their overall performance. This study, conducted by Cui and Wang (2022), examines the impact of external environmental pressure on extreme GI, using organizational learning and transformational leadership theories. The findings demonstrate the correlation between the green market and environmental regulations, which leads to the promotion of exploratory green learning, ultimately fostering radical green innovation (Veršič et al. 2022). By shedding light on these dynamics and offering helpful data for creating organizational strategies and governmental legislation. This research enhances our understanding of the correlation between extreme GI and external environmental pressure.

H6a: Environmental uncertainty positively moderates the relationship between LC and green product innovation

With a special emphasis on the effects of corporate social responsibility and green dynamic capabilities, this study (Yuan and Cao 2022) explores the mechanisms underlying corporate green innovation in emerging markets. It illustrates the extent to which CSR programs aid in the advancement of environmentally friendly procedures and goods. These results provide Chinese manufacturing companies with valuable guidance for improving their green innovation techniques in the face of environmental unpredictability, which will ultimately boost regional sustainable development programs (Mahmood et al. 2024). A study (Hoang et al. 2024) explores the connection between innovation aspects and export operations of Vietnamese manufacturing and processing enterprises, with a focus on the moderating effect of environmental uncertainty. To be more precise, firms that prioritize innovation have a significant 1.4% increase in export intensity and a 12.4% increase in export propensity when compared to their non-innovative counterparts (Bresciani et al. 2022). These results offer a more thorough understanding of the connection between environmental uncertainty and innovation, especially with respect to export interpretation. To be more precise, the report emphasizes that in order to increase competitiveness in global markets, innovation and environmental issues must be addressed (Mahmood et al. 2025).

H6b: Environmental uncertainty positively moderates the relationship between GDC and green product innovation

Dynamic capabilities theory

The dynamic capabilities transformation is important to interpret the way organizations are aligning with the environmental shifts for improved adaptation and promoting sustainable development through the determination of green dynamic capabilities, leadership capabilities, and green innovation from the perspective of Pakistan’s manufacturing industry (Gull et al. 2023). The study integrated the green dynamic capabilities in a way that highlighted the core understanding that for an organization to be in a position to respond to environmental change in any way, the organization must be capable of identifying change or assimilating changes or opportunities in its environment and altering organizational resources or capabilities (Bresciani et al. 2022). This study, therefore, extends green dynamic capabilities by specifying how leadership boosts the dynamic capabilities of the organization in order to create and manage resources and capabilities for dealing with environmental issues. This is achieved very well by establishing LC under the Act (Herold et al. 2023). Green dynamic capabilities are the process by which the manufacturing sectors of Pakistan can improve environmental resilience and discover opportunities amid the integration of environmental action plans and frameworks and other active operational activities, key strategic decision-making, and intricate creative processes. However, green innovation refers to the start of undertaking the processes and strategies of developing as well as utilizing the appropriate technological solutions to structures and products (Li et al. 2023). Therefore, based on studies conclusion, the analysis highlighted that the application of dynamic capabilities is critical for managing organizational change and creating innovation to respond to environmental challenges or to fulfill the goals of sustainable development with a focus on the development of green innovation within the framework model.

Figure 1 illustrates the theoretical framework of the study, suggesting that two independent variables, leadership competency and Green Dynamic Capabilities, influence sustainable development goals. This influence is moderated by environmental uncertainty and mediated through GPI and green process innovation.

Fig. 1
figure 1

Conceptual framework illustrating the interplay between leadership competencies, green dynamic capabilities, and environmental uncertainty in achieving Sustainable Development Goals (SDGs) through green process and product innovation.

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Research methodology

Questionnaire design process

The design of the questionnaire for this study was a highly systematic process to obtain valid, reliable, and relevant data from the respondents in the manufacturing sector of Pakistan. The overall design process comprised a few major steps. The first step was based on identifying the study’s core constructs following a comprehensive literature review of the sustainability, green innovation, leadership competencies, and dynamic capabilities domains. The main constructs were leadership competency, GDC, GPI, GPR, environmental uncertainty, and SDGs. These constructs are operationalized with clear definitions with well-defined theoretical concepts in mind, notably the Dynamic Capabilities Theory.

Validated scales were adapted based on the existing literature to measure each variable after constructs had been identified, ensuring that each scale possessed both content and construct validity, see explained under the section of research instruments. A five-point Likert scale, ranging from 1 = strongly disagree to 5 = strongly agree, was used to measure each construct through multiple items, and respondents indicated the agreement or frequency of their behavior or perception. A panel of expert professionals and academicians in the fields of business management and sustainable manufacturing was consulted to confirm that the questionnaire was contextually relevant and semantically clear. Feedback from interviews led to revisions in wording for local relevance and cultural sensitivity. Redundant or ambiguous items were rewritten or dropped to prevent response bias. The final questionnaire was organized into four key sections. The first section included demographic and organizational information (e.g., the size of the firm and type of industry, as well as the position of the respondent and years of experience). The second part leaned on leadership competencies and green dynamic capabilities. The third section explored activities related to green product and process innovation; the final section consisted of items determining environmental uncertainty and perceived contributions to relevant SDGs. It was developed in English using appropriate plain language for managerial-level respondents.

Data collection procedure

Samples were collected from various manufacturing sectors in Pakistan, including automotive, textile, fertilizer, chemical, and cement, for significant analysis and research purposes. Manufacturing is the second-largest industry in Pakistan. Then, operational systems and supply chains have been well demonstrated in earlier studies, and green innovation is widely assumed in the industry (Lockström et al. 2010). Therefore, manufacturing industries are a suitable population for inspecting the relationship between leadership competency, Green Dynamic Capabilities, EU, green process innovation, green product innovation, and SDGs. In order to examine this correlation, the authors employed a quantitative research methodology and gathered data from manufacturing sectors. The author used a Likert scale with five alternatives, ranging from “strongly agree” to “strongly disagree (Mahmood et al. 2024). We implemented a two-stage sample methodology and recruited surveyors to obtain the desired participants. During the initial stage, the surveyors obtained a list of firms from the Pakistan Chamber of Commerce and Industry. In the second stage, they engaged with the HR departments of these firms, including CEOs, General Managers, and Departmental Heads, encouraging their participation in the study by assuring them of confidentiality and anonymity. Respondents were assured of the confidentiality and research-oriented usage of their information. Between August 2024 and October 2024, the surveyors handed out 550 questionnaires to employees in the industry and received 407 completed surveys.

After removing questionnaires with abnormalities and significant missing data, a total of 371 valid cases were available for detailed analysis, resulting in a response rate of 67.45%. The response rate was consistent with the study conducted in the manufacturing industry (Aftab et al. 2023; Farrukh et al. 2022) and surpassed the minimum sample size criteria proposed by Wolf et al. (2013) for “structural equation modeling.” Table 1 presents the participant profile derived from the survey. Table 1 provides a concise overview of the demographic data, such as gender, firm size, firm city, level of education, profession, and type of firm.

Table 1 Information about the social and demographic aspects.
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Research instruments

The measures and scales are derived from reputable and meticulously conducted research in each respective subject (Latif et al. 2021). LC, GDC, UN, GPR, GPI, and SDGs are the five variables used in the research model. In this study, LC and GDC are the dependent variables. A six-item scale is employed to assess LC, and seven items are utilized to measure GDC, as adapted from Álvarez‐García et al. (2022) and Chen and Chang (2013), respectively. This study used GPR and GPI as a mediator variable. Five items are employed to assess GPR, and four items are utilized to measure GPI, as adapted from Dangelico (2016) and Xie et al. (2019), respectively. EU is used as a moderator variable for these five items adopted from Downey et al. (1975). Seventeen items of the SDGs are listed, with a scale ranging from Hsu (2023).

Result

The research goals are accomplished by using structural equation modeling with the help of smart PLS 4. SEM is a statistical method that combines the ideas of regression, multiple correlations, exploratory factors, and hypothesis testing. PLS-SEM is particularly well-suited for such exploratory research, as it maximizes the explained variance of endogenous variables and provides robust results in theory development and prediction-oriented studies.

Descriptive Statistics

To determine the variance, mean value, and normality of the data, we employed descriptive statistics in SPSS. The results are displayed in Table 2, with the EU having the greatest mean score and the green product innovation having the lowest mean score. Similarly, green product innovation displays the highest standard deviation, but leadership competency displays the lowest mean standard deviation. The skewness and kurtosis values support data normalcy.

Table 2 Descriptive Statistics.
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Common method bias

To mitigate the risk of common method bias (CMB) in our study, we implemented two precautionary strategies as suggested by prior research [67]. Firstly, participants were assured of the confidentiality of their responses and were encouraged to answer honestly rather than in a socially desirable manner. Secondly, we applied Harman’s single-factor test along with a Variance Inflation Factor (VIF) analysis to assess the presence of CMB. The results indicated that no single factor accounted for more than 50% of the total variance. Additionally, all VIF values were within the acceptable range outlined by [68], confirming the absence of both multicollinearity and CMB. These methodological safeguards enhance the robustness and reliability of our findings, thereby contributing to the rigor of future studies in related domains.

Evaluation of outer measurement model

Hypotheses and the conceptual model were evaluated using Partial Least Squares Structural Equation Modeling (PLS-SEM), a variance-based methodology (Fig. 2). Factor loading measures the correlation between observed variables (items) and latent factors, indicating the magnitude and direction of their link. Table 3 displays the factor loading of each item, all of which surpass the threshold of 0.7 as per convention. Cronbach’s alpha, a measure that ranges from 0 to 1, indicates greater values when there is improved internal consistency. Table 3 illustrates Cronbach’s alpha exceeding 0.9 for each variable, indicating excellent internal consistency (Hair et al. 2020). This underscores the scale’s high reliability, with items consistently measuring the construct. Composite reliability evaluates the internal consistency or reliability of a composite or latent variable in SEM. It is computed as the ratio of the squared sum of factor loadings to the total of squared sums of factor loadings and residual variances; it is especially used for latent variables with numerous indicators or observable variables. Values that exceed 0.8 are considered acceptable (Hair et al. 2020).

Fig. 2
figure 2

Algorithm model evaluated using Partial Least Squares Structural Equation Modeling (PLS-SEM), a variance-based approach, to test hypotheses and analyze the relationships in the conceptual framework.

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Table 3 Convergent validity, alpha (α), and “reliability”.
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Table 3 displays composite reliability exceeding 0.9 for each variable, indicating the composite variable’s reliability and consistent measurement of the underlying construct. In addition, the multicollinearity of each item was evaluated using the variable influence factor (VIF). A VIF value below five is considered acceptable; values exceeding five indicate multicollinearity issues among variables. This study does not exhibit multicollinearity concerns as all constructs have VIF values below 5, Hair et al. (2020) as depicted in Table 3. Secondly, the measurement model’s evaluation employed discriminant validity to examine variable correlations.

To measure the discriminant validity, Fornell-Larcker and cross-loading tests are used. Findings showed strong discriminant validity with no or very weak correlation between variables from start to end. This can be determined from Table 4, the results of the Fornell-Larcker criterion, as the square root of the AVE of each construct is higher than its correlations with other constructs, demonstrating discriminant validity.

Table 4 Fornell larcker criterion.
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The SRMR index is a metric that quantitatively compares the standardized residuals between predicted and actual covariance matrices (Cohen 2013), evaluating the fit of the specified model. A satisfactory fit, indicating appropriate performance and acceptance of the research framework, is achieved when the SRMR value is equal to or less than 0.08. The model’s satisfactory fit is demonstrated by the SRMR value of 0.077, as indicated in Table 5. In Table 5, the NFI value is reported as 0.709, while the Chi-Square (2) value is recorded as 4191.004.

Table 5 Model fit summary.
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Hypothesis Testing

Statistical analyses were performed to determine whether the hypotheses were supported (see Table 6 and Fig. 3). All the direct hypotheses (H1a–H4) are supported. Leader capability has a substantial positive impact on green process innovation (β = 0.193, p = 0.002) and on green product innovation (β = 0.317, p = 0.000). Green dynamic capabilities also play a crucial role in influencing both green process innovation (β = 0.336, p = 0.000) and green product innovation (β = 0.208, p = 0.003). In addition, both green process innovation (β = 0.191, p = 0.001) and green product innovation (β = 0.447, p = 0.000) contribute positively to the achievement of SDGs. All proposed hypotheses are supported by these findings by theoretical expectations.

Table 6 Hypothesis (Direct Effect).
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Fig. 3
figure 3

PLS SEM. Partial Least Squares Structural Equation Modeling (PLS-SEM) results demonstrating the structural paths between Leadership Competency (LC) and Green Dynamic Capabilities (GDC) in the proposed research model.

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Mediation effects

Table 7 and Fig. 3 present the results of indirect hypothesis testing. Green process innovation significantly mediates the relationship between leadership competency and SDGs (β = 0.037, p = 0.033), supporting H3a. Likewise, it mediates the link between green dynamic capabilities and SDGs (β = 0.064, p = 0.003), confirming H3b. Furthermore, green product innovation positively mediates the effect of leadership competency (β = 0.133, p = 0.000) and green dynamic capabilities (β = 0.172, p = 0.015) on SDGs, validating H4a and H4b. These findings highlight the crucial mediating roles of green innovations in achieving sustainable development.

Table 7 Hypothesis (mediation effect).
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Moderation effects

Table 8 and Fig. 3 illustrate the outcomes of the moderation analysis. The results suggest that the EU moderates positively between GDC and green process innovation. This moderation is statistically significant at a 5% level (β = 0.195, p = 0.007), yet it shows no significant influence on LC (β = −0.046, p = 0.459) and GPR. Accordingly, hypothesis H5b is accepted, while H5a is negated. The results also indicate that the EU moderates positively between GDC and GPI. This moderation is statistically significant at a 5% level (β = 0.166, p = 0.039), yet it shows no significant influence on leadership competency (β = 0.193, p = 0.041) and green process innovation. Accordingly, hypotheses H6a and H6b are accepted.

Table 8 Hypothesis (Moderation Effect).
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Discussion

The present study investigates the consequences of leadership competency and green dynamic capabilities on SDGs through the mediation roles of green process innovation and GPI and the moderator role of the EU in the manufacturing sector in Pakistan. Specifically, the research responds to the subsequent question. To examine the effect of leadership competency and green dynamic capabilities on the achievement of SDGs in Pakistan’s manufacturing industry. H1a argued that LC has a direct effect on GPI in Pakistan’s manufacturing sector. The findings indicated that leadership competency exerts a beneficial and influential impact on green product innovation. These results are compatible and significantly based on prior literature (Irshad et al. 2024). For instance, the alliance of leadership competency with GEO and green innovation is supported by prior studies (Ma et al. 2022; Muff et al. 2020).

Furthermore, H1b claims that the relationship between leadership competency and green product innovation was validated. Results are in line with prior studies (Bashynska et al. 2024; Manchidi 2024) that also confirm the positive effect of sustainable leadership on green innovative activities, sustainable innovations, and competitive advantage. H2a and H2b claimed that GDC has a positive and significant effect on GPR and GPI in Pakistan’s manufacturing sector. Both H2a and H2b hypotheses were found to be supported. The results align with the study by Huang and Chen (2022) and Lee (2023), in which the authors asserted that dynamic capabilities improve an organization’s strategic value by enriching its capability to adjust and become more agile. The idea of green dynamic capabilities is embedded (Dahlquist 2021). Based on this theory, the primary basis for gaining competitive advantages lies in the dynamic capabilities of an enterprise. Meanwhile, when considering the implications of green process innovation and GPI, manufacturing companies have the opportunity to improve the effectiveness of uncertain variables, leading to increased innovation and reconfiguration of other factors (Hanif et al. 2023; Sarfraz et al. 2022). Thus, the efficacy of industry green resources is to be anticipated as an application of the GDC. Through green capabilities and green processes, companies can rapidly respond to market modifications via green innovation (Mahmood et al. 2024; Mubeen et al. 2023).

Green dynamic capabilities also aid companies in handling green technology and external information, as social networks impact GDC. Social networks integrate both external and internal resources that are crucial for enhancing the environmental understanding of an industry (Gliedt and Parker 2010). Thus, GDC aids companies in becoming green. H3 and H4 claimed that GI has a positive and influential impact on SDGs. The results endorsed H3 and H4 (Abbas and Sağsan 2019). Also said equivalent findings in their investigation. It was noted that the integration of environmental innovation is crucial for manufacturing companies to achieve their sustainability goals in emerging Asian economies.

These results are consistent with the results of Ahmed et al. (2022), where the author stated that GI positively affects financial and environmental performance. GI is essential for technological advancement and sustainable practices, addressing the balance of ecological sustainability with long-term profitability of firms (Mahmood et al. 2024). Eco-friendly business practices in developing nations have progressed tremendously due to the government-endorsed green technology and innovation initiatives. Our findings show that the firms in the data do progress toward SDGs through GI. The fifth hypothesis and H5b were found to support that green process innovation mediates the link between leadership competency and SDGs in the manufacturing sector of Pakistan. These findings corroborate (Awan et al. 2021), which argued that green process innovation encourages the implementation of environmentally friendly and community-oriented practices. Our results also align with Albort-Morant et al. (2016), who emphasized the dual benefits of GI, improved performance of social and economic aspects. Thus, H6a and H6b are also confirmed, suggesting that green product innovation has a stronger effect on leadership competency and SDGs than green process innovation. This indicates that managers would need to show favor toward green product innovation and continue green process initiatives. Likewise, the outcome is similar concerning (Acquah et al. 2023; Hsu 2023), yet validating green process innovation on both environmental and social approaches. The non-significance of moderation between leadership competency and green process innovation (reject H9) and significant moderation between leadership competency and green product innovation (support H8) are further clarified by our study of the EU. These results highlight the importance of leadership competency in the context of high EU, echoing (Ar 2012; Muff et al. 2020), who asserted that external collaboration will be a greater necessity when confronted with higher environmental uncertainty. Our findings further confirm the critical effect of the EU as a moderator on the relationship between green dynamic capabilities and both types of green innovation (Mubeen et al. 2023). Moreover, the research shows that the EU harms the relationship between leadership competency and green process innovation. This finding is related to the study conducted by Wong (2013), which found that the institutional environment has a regulatory role in reducing the impact of innovation on exports. Both relationships were found to be significant, thus supporting hypotheses H9 and H10. This not only satisfies the public’s desire for sustainability but also helps reduce production costs. Environmental regulations play a crucial role in driving enterprises towards green innovation (Afzal et al. 2023).

Managerial and practical implementations

The results reveal intriguing and valuable insights for policymakers. First, the manufacturing sector in Pakistan should prioritize specialized training programs aimed at developing sustainable competencies. This will empower leaders to approach organizational strategies with a greater focus on their environmental and community impacts.

According to Álvarez‐García et al. (2022), the proposal emphasizes the importance of developing four key competencies: action, interpersonal, normative, foresight, and systems thinking. These competencies enable leaders to effectively apply their skills in driving creativity, fostering collaboration, aligning values, and being proactive. Implementing sustainable practices requires leaders who possess the necessary capabilities to identify and capitalize on environmentally focused green innovation opportunities (Lans et al. 2014).

If such skills are important for leadership in large organizations, they are even more crucial for the manufacturing sector, especially considering the unpredictable circumstances in developing countries like Pakistan. Therefore, the results of this study offer valuable recommendations for effectively leveraging leadership skills to promote green innovation, address environmental uncertainty, and achieve the SDGs. Effective leaders in the manufacturing sector play a critical role in driving organizational success through their interactions with various stakeholders, guiding the organization toward sustainable growth and innovation (Hlady‐Rispal and Servantie 2018). In addition, it is common for large corporations to have CSR departments dedicated to promoting sustainable development. However, in the manufacturing sector, the skills and abilities of leaders can be utilized to achieve ambitious goals by adopting sustainable practices, seizing entrepreneurial opportunities, and implementing effective solutions to address challenges. Industries in Pakistan are subject to strict regulatory standards and face significant environmental issues. The government is particularly focused on creating an environmentally friendly society and conserving resources. Therefore, the industrial sector should collaborate with institutions throughout its innovation processes, as this collaboration would have a substantial impact on achieving sustainable performance.

Conclusion

This study fills the research gap of how leadership influences the green technology adoption of manufacturing firms and their linkage with the SDGs. The paper also explores the role of environmental uncertainty as a moderator affecting the relationship between leadership competency, green dynamic capabilities, and sustainability performance by taking manufacturing firms in Pakistan. Such effects may be exacerbated by environmental uncertainty, which may be critical in terms of adaptive strategies. Existing literature has predominantly concentrated on supply chain or project management perspectives, which somehow overlook the main objective of an organization, which is achieved through enterprise-wide transformation, and how leadership can help enable this transformation. This research enriches our understanding of the confluence between internal management assets and external competition in contributing to sustainable manufacturing outcomes by combining such concepts as leadership competence, green dynamic capabilities, and environmental uncertainty into a more holistic conceptual framework. The results indicate that sustainable competence is a full mediator of green dynamic capabilities between operational, financial performance, and sustainability integrity, which means that competent leadership to develop and deploy green dynamic capabilities significantly leads to sustainable performance. Further, the research demonstrates that when embedded within an environmental context marked by high levels of volatility and unpredictability, feedback loops either magnify or undermine the contributions to group effectiveness stemming from adaptive leadership and creative ideation. For managers, the results highlight the crucial need for more targeted leadership development. Manufacturing executives need to develop a systems-thinking approach that means they understand the interdependencies of manufacturing activity across environmental, social, and economic dimensions. They need to enhance levels of stakeholder engagement to establish alliances with internal and external stakeholders who can form supportive networks that drive sustainability programs. Furthermore, integrating sustainability into the mainstream of a business means having models for decision-making that balance short-term performance and long-term environmental and social outcomes. Educational programs, therefore, should not only provide technical content regarding green technologies but also promote innovation management, flexibility, and social responsibility as well. For policymakers, the same lessons apply. The findings in this study support the importance of developing and marketing leadership development programs that include both sustainability goals and innovation outcomes. In addition, manufacturing firms with policy frameworks that incentivize sustainable innovation, offer resources for building resilience, and support cross-border knowledge exchange will be better placed to cope with known uncertainties emerging in global markets, such as those created by the forthcoming European Union. More broadly, it contributes to the developing literature on human dimensions of sustainability transitions. By empirically demonstrating the combined effects of leadership competency, green dynamic capabilities, and environmental uncertainty, the study provides actionable insights for both theory and practice.

Limitations and future research directions

Although the research has the potential to make valuable contributions to both academic research and management practice in green innovation in the manufacturing sector in Pakistan, it is important to acknowledge that there may be some limitations to its findings. One reason for this limitation is the restricted data access, which only allows for measuring innovation based on product and process dimensions. One potential limitation is the sample data’s country-specific nature. It would be beneficial to conduct further research in other countries to strengthen the generalization of the findings, considering that the questionnaire survey was conducted in Pakistan. Understanding the SDGs can be quite challenging because of the wide range of objectives and targets that are part of this theme, requiring a multidisciplinary approach. Thus, it is imperative to conduct further research to address this gap and create more efficient and dependable approaches for assessing progress towards the SDGs. Three potential areas for future research in the study have been identified. Our primary focus is on the manufacturing sector of Pakistan. Future research can explore different industries and make comparisons with this study. Additionally, our attention is directed towards companies in Pakistan. Future research may consider examining companies from different countries and conducting comparative analyses with this study. Additionally, we conduct a questionnaire survey to test the hypotheses. However, it’s important to note that the survey only provides cross-sectional data, which means we cannot capture the dynamic changes in green dynamic capabilities, leadership competency, green process, green product innovation, EU, and SDGs across different stages. Thus, further research can prioritize a longitudinal study to examine the variations in green dynamic capabilities, leadership competency, green product and process innovations, EU, and SDGs across different stages.