This study investigated the performance of environmentally conscious small and medium-sized enterprises (SMEs) in the fashion industry. Specifically, it focused on those implementing green business strategies and cultivating innovation skills for eco-friendly practices. This study employed SEM with PLS to test the hypotheses. Data were collected through a survey involving 94 creative SMEs in Bantul Regency, spanning various sub-districts known for natural batik artisans and organic leather craftsmen. Findings indicate that a green business strategy effectively mediates the relationship between environmental orientation and business performance. However, the direct association between environmental orientation and business performance is not significant for creative SMEs in Bantul Regency. Presently, environmentally friendly innovations do not markedly enhance corporate performance when meeting the preferences of environmentally conscious clientele. The mediation of green innovation on the relationship between green market orientation and business performance also yields insignificant positive results. The research results regarding environmental orientation were not proven to be significant for business performance, allegedly due to the inaction of creative batik SMEs which were slow to respond to regulatory requirements such as the green branding policy for natural colored batik products. The novelty in this research is testing the role of green business strategy as a mediation, meaning that in formulating a green business strategy, SMEs must focus on the external and internal environment which is more appropriate in encouraging increased business performance.

Keywords: Stakeholder, Business Performance, Environmental Orientation, Green Market Orientation, Green Business Strategy, Green Innovation, SEM-Fashion