Carbon footprint reduction initiatives and green jobs creation: The mediating role of green innovation

The transition to a low-carbon economy is placing increasing pressure on small and medium-sized enterprises (SMEs) to adopt carbon footprint reduction initiatives (CFIs). While CFI contributes to environmental sustainability, its impact on green job creation (GJC) remains underexplored, particularly in SMEs. Additionally, the role of green innovation (GI) as a mediator of this association remains poorly understood. The paper investigates the direct effect of CFI on GJC and investigates the mediating role of GI in this process. A survey of 256 SMEs in the Northeast of England, UK, that employ carbon-reduction measures was conducted, and the data were analysed using Structural Equation Modelling (SEM). The results confirm a positive association between CFI and GJC, with GI partially mediating this link. Findings reveal that SMEs engaging in green innovation experience greater employment growth, particularly in manufacturing and technology sectors. Additionally, external factors such as government incentives and regulatory frameworks moderate the effectiveness of CFI in driving job creation. We extend the Resource-Based View by demonstrating how CFI serves as a strategic resource that can enhance firms' competitive advantage. It also contributes to Stakeholder and Institutional theories by highlighting the role of regulatory pressures in shaping SMEs' sustainability and economic strategies. Our results offer practical insights for SME managers and policymakers, emphasising the need to integrate green innovation with CFI to maximise employment opportunities. Given SMEs’ significant contribution to UK business-related emissions, their effective decarbonisation is critical for achieving net-zero targets. The evidence presented confirms that carbon footprint reduction is not merely an environmental compliance exercise but a strategic and economic pathway for innovation-led employment growth.