Fostering Sustainable Environmental Performance Through Green Banking Practices: The Mediating Role of Employees’ Green Motivation and Green Behavior

Abstract

This study intends to ascertain the correlation between green banking practices and the sustainable environmental performance of private banks. It further investigates the mediating role of employee green behavior and motivation. This study used a quantitative research method to test the study hypotheses. A standardized questionnaire with a 5-point Likert scale was utilized to collect data for the survey. The sample size consisted of 376 respondents who were conveniently selected. Data were analyzed using PLS software (Version 4.0). The main finding is that employees’ green motivation mediated the link between employee-related and customer-related green practices and a bank’s environmental performance. Equally, employee green behavior mediated the link between employee-related, operation-related, and customer-related green practices and a bank’s environmental performance. This study is one of few in Bangladesh’s banking sector that provide a comprehensive overview of green banking practices, employee green motivation and behavior, and their connections to banks’ sustainable environmental performance.

1. Introduction

Green banking, also known as sustainable banking, is becoming recognized as a socially and environmentally responsible corporate strategy designed to mitigate adverse environmental impacts while promoting sustained economic growth [1,2,3]. Green banking practice is an emerging idea that is prominent in relation to converging environmental policy, financial services, and socioeconomic development [4]. A bank’s environmental performance is not just about its environmental protection measures but also its proactive, transparent, and ethical approach [5]. Banks should transition to recycled paper products and use green credit cards as a model for charitable organizations to incentivize environmental stewardship through monetary rewards. Financial institutions must prioritize environmental protection to reduce global temperatures, living standards, resource efficiency, service quality, and market accessibility, as well as to adopt policies emphasizing environmental protection systems, principles, and judgments [3,6]. Furthermore, the harmful impacts of climate change threaten the sustainability of our planet and require prompt and feasible solutions from both wealthy and developing countries, alongside substantial contributions from all sectors of the economy, notably financial organizations. Top management and stakeholders are generally anxious about company actions with negative societal and environmental ramifications [3,4]. Thus, green banking practices aim to create sustainable economic growth while improving the environment and ensuring the planet’s safety [6].

Adopting environmentally friendly practices has become a priority standard globally. Banking institutions have introduced paperless, tech-based services in response to green banking to preserve their status as organizations committed to sustainable development and to lessen their adverse environmental effects [7]. Since this initiative’s significant success or failure would affect the contentment and allegiance of their end clients, banks must comprehend the necessity for green practices [8]. Subsequently, sustainability often reduces costs and fosters the establishment of new businesses; all banks should develop a long-term strategy to assess how their customers or activities impact the environment [3,9]. Furthermore, growing economies like Bangladesh need green and environmental policies due to their high vulnerability to global warming and climate change. Bangladesh and other nations have adopted green banking-related practices to promote sustainable economic growth [10]. In 2011, Bangladesh announced its intention to use green banking practices to promote sustainable economic development, making it one of the first nations to do so. Aligned with Bangladesh Bank, green banking is a banking approach that considers social and environmental aspects while protecting the environment and its natural resources [11]. With its valuable capital assets, expanding infrastructure, and financial capacity, Bangladesh is poised to achieve one of the fastest growth rates in the world in the 21st century [4,12].

Green banking practices are pushed at the corporate and governmental levels to maintain environmental sustainability through sustainable investment projects [13]. Banks are a vital funding source for many businesses and industries; however, they face considerable liabilities and responsibilities. Banks that fail to enforce stringent environmental protection standards on companies before extending financing risk inadvertently exacerbate pollution issues [14]. Over the past decade, green banking has emerged to reduce environmental impacts, while financial institutions have been criticized for intentionally and unintentionally contributing to global climate change [13]. According to Bangladesh Bank’s direction, the principle of socially responsible financing, investment in green technologies, and the impact of green initiatives on policy decisions are crucial for fostering a green environment in the banking sector of Bangladesh. Moreover, financial institutions are often considered environmentally friendly due to their strong societal ties and economic importance [13,14]. However, research by Miah et al. [15] in Bangladesh reveals that financial institutions can enhance the general climate, satisfaction with life, the effectiveness of substance and energy usage, customer experience, and commodities. This suggests that while environmental conservation is not their primary goal, financial institutions can be crucial in promoting sustainable practices [16].

Recently, several investigations have explored the development of green banking, green financing, and the related global challenges and benefits associated with green banking [3,4,13,17,18]. However, these studies mainly focus on adopting green banking, green banking activities, and its development in Bangladesh’s economy, as well as the challenges and benefits of green banking, green banking performance, and the environmental sustainability of green banking. Only a handful of studies have evaluated the link between green banking practices and performance in Bangladesh through secondary data [19]. Furthermore, existing research indicates a scarcity of studies examining both the direct and indirect impacts of employee green behavior and motivation on the environmental performance of banks. This is especially relevant in relation to employee-, operation-, and customer-related green practices in developing nations like Bangladesh. Additionally, the majority of prior studies [1,3,6,9,18] considered green financing to be a mediating variable, while limited investigations considered employee green behavior [20,21] as a mediating variable to assess a bank’s environmental performance through green banking practices. Thus, significant gaps still exist. Consequently, this study seeks to address the research gaps in several ways. First, the current investigation analyzes the impact of green banking practices on employee green motivation, employee green behavior, and a bank’s environmental performance. Second, it further examines how employee green behavior and employee green motivation mediate a bank’s green banking practices and environmental performance in the context of the private banking sector of Bangladesh. Consequently, the research questions of this investigation are as follows:

RQ-1: What effects do green banking practices have on employee green behavior, employee green motivation, and the environmental performance of banks?

RQ-2: How do employee green motivation and green behavior mediate a bank’s green practices and environmental performance?

2. Literature Review and Hypothesis Development

2.1. Green Banking Practices

Within environmentally responsible banking, green banking has increased in popularity over the last several decades. According to Hasib and Basher [22], green banking is a subsection of banking that attempts to promote sustainable development while considering all social and environmental concerns. Green banking boosts a bank’s credibility by proving it cares about the environment and encouraging its customers to do the same. Green banking decreases monetary outflows and boosts national income via resource conservation and cost avoidance [2]. In addition to strengthening the bank’s credibility by showing that it cares about environmental issues, green banking also has other benefits, such as reducing expenses by cutting back on paper, electricity, and water use; boosting efficiency and productivity in the workplace through the innovative application of technology; and reducing dangers through the use of safer, more sustainable practices [2]. It reduces non-performing assets by funding lower-risk projects, conserves trees by reducing paper consumption, decreases greenhouse gas emissions through teleconferencing and a carpool for employees, and enhances environmental awareness among consumers with awareness programs [6]. Green banking includes technological innovations, business practice improvements, and a shift in consumer mindset [2]. The dimensions of green banking practices in the current study are discussed below.

Employee-related green practices refer to the environmental education and training of banking sector employees, which has become a crucial component of implementing an environmental management system [23]. Environmental education and training aim to provide employees with the information, perspective, and abilities needed to satisfy the environmental management standards established by higher management [23,24].

Operation-related green practices explain how banks are able to reduce the hostile environmental effects of their daily operations, including the quantity of paper they use, the energy they utilize, and the emissions they emit, as a direct result of green banking policies being put into place [5,6]. To enhance their environmental performance, financial institutions have integrated more environmentally conscious practices into their day-to-day operations [6,25].

Customer-related green practices refer to developing green banking practices that are facilitated by customer behaviors and practices encouraging environmentally responsible activities or businesses [5,23]. Banks adopting environmentally accountable practices boost customer trust, as they are perceived as moral entities. This enhances living conditions and the environment without compromising financial security, leading customers to pay more for environmentally friendly products [20,26].

2.2. Green Banking Practices and Banks’ Environmental Performance

When we desire progress and prosperity, the banking industry must reduce its environmental impact [27,28]. Several researchers, including Sharma and Choubey [29], have found that banks and other financial institutions use green strategies to lessen their environmental impact and slow the rate at which carbon emissions increase. Further, financial organizations are under pressure to encourage green practices, such as resource conservation and waste reduction, among their employees [27]. As a first step, financial institutions should incentivize employee performance so they can take advantage of green possibilities [30]. One of the human resource division’s main goals is encouraging employees to adopt eco-friendly practices. Companies are encouraging their employees to take various environmental precautions, such as turning off computers and laptops when not in use, keeping blinds closed during the warmer months to reduce cooling costs, replacing incandescent bulbs with more energy-efficient alternatives, and donating unused office supplies [31]. Reducing paper usage, implementing energy-efficient technology, effectively managing waste, and adopting environmentally responsive practices were all factors in each banker’s day-to-day routine assessment [32]. Electronic communication has supplanted conventional paper notes, fostering a more efficient and organic engagement. The transition to digital communication has diminished the necessity for artificial illumination, decreasing energy use. Furthermore, using electronic resources in banks and other organizations has reduced the necessity for paper-based documents [5,6].

In addition, employees’ eco-friendly actions may enable financial institutions to provide cutting-edge banking options to customers through the internet, mobile devices, and other digital mediums [6]. Banks with green practices enhance overall environmental performance, including energy and waste management, green construction, adherence to environmental standards regulations, and financing green projects [1,3]. Researchers [29,33] show that individuals care about the environment and value the social return of green ventures. In addition, green banking practices may enhance banks’ credibility with customers and external companies, attract policymakers and environmental watchdogs, and increase earnings potential [34]. Green banking practices build customer trust, putting the well-being of future generations above savings and asset security, leading consumers to pay a premium for eco-friendly products and services [23,26]. Shaumya and Arulrajah [5] and Chen et al. [6] assessed banks’ environmental performance using green banking practices, discovering that these practices positively and significantly affected performance. The positive impact of these green practices on banks’ performance is a reason for optimism, as all actions contribute to improving the banks’ environmental performance. Thus, we propose the following:

H1a. 

Employee-related green practices positively impact banks’ environmental performance.

H1b. 

Operation-related green practices positively impact banks’ environmental performance.

H1c. 

Customer-related green practices positively impact banks’ environmental performance.

2.3. Green Banking Practices, Employee Green Motivation, and Banks’ Environmental Performance

Green motivation refers to positively reducing one’s environmental impact by boosting productivity, decreasing waste generation, or protecting one’s natural resources [35]. Environmental concerns may motivate employees’ engagement in environmentally friendly activities, such as using eco-friendly procedures to develop, manufacture, and dispose of IT products. Bonuses, incentives, and public recognition are all examples of green incentive programs that may enrich employees’ green motivation [36].

Green workplaces have emerged by recognizing that competence alone is insufficient to guarantee meaningful and motivated involvement. Managers are sometimes called green champions because of their efforts to enhance operations via implicit knowledge [37]. The degree to which management successfully implements green workplace policies and practices likely significantly impacts employee sentiment. Accordingly, banks may act ethically by funding environmental groups [37]. Green banking is an economic practice that encourages using renewable natural resources and long-term planning. Green initiatives like waste management, rooftop gardening, and green credit and investment can spark interest in green banking [38]. These developments contribute to customer happiness, security, value creation, environmental consciousness, and social concern, fostering environmentally conscious staff actions [29].

Moreover, aspects such as positive organizational commitment, the perception of support from the organization for employees’ environmental initiatives, affective organizational commitment, and the organization’s social responsibilities concerning environmental conduct also influence employees’ motivation for environmentally responsible actions in the workplace [35,39]. Employees may also be motivated by the company’s strong commitment to environmental goals, its reputation for helping its employees, and the possibility that it will help its employees [35,39]. If employees care about their company’s success, they are more likely to make personal sacrifices to support its mission, values, sustainability, and environmental initiatives, ultimately enhancing banks’ environmental performance [35]. Therefore, the suggested hypotheses are as follows:

H2a. 

Employee-related green practices are positively related to employee green motivation.

H2b. 

Operation-related green practices are positively related to employee green motivation.

H2c. 

Customer-related green practices are positively related to employee green motivation.

H4. 

Employee green motivation is positively related to banks’ environmental performance.

Furthermore, all bank personnel should promote the bank’s environmental credentials to recruit individuals with similar beliefs [40,41]. Environmental awareness training reduces waste and increases employee involvement in the banks’ environmental performance [42]. The human resource department can help managers build eco-KPIs, such as water, electricity, and raw materials in relation to garbage and recycling [40]. Simultaneously, incentives related to these KPIs can be used to incentivize environmentally responsible behavior, promoting a more sustainable and environmentally friendly workplace [40]. Rayner and Morgan [37] have demonstrated that employees perform optimally when they possess the requisite knowledge, skills, and abilities; are motivated; and desire to be rewarded for their actions. Additionally, they thrive when their working environments offer suitable opportunities, assistance, and motivation [36]. Banks’ environmental performance will benefit the banks, as each employee’s activities and their positive effects on environmental sustainability yield valuable, enlightening outcomes. Positive environmental practices are integrated when a bank’s workforce engages with environmental issues driven by motivations [35,39]. Consequently, the offered hypotheses are as follows:

H6a–H6c. 

Employee green motivation mediates employee-related, operation-related, and customer-related green practices and banks’ environmental performance relations.

2.4. Green Banking Practices, Employee Green Behavior, and Banks’ Environmental Performance

Green behavior is defined by De Roeck and Farooq [43] as eco-friendly behaviors such as recycling, resource conservation, taking part in environmental projects, and encouraging sustainable activities. Green behavior refers to responsible or eco-friendly actions that highlight the importance of environmental sustainability, such as minimizing waste and recycling materials [44]. More organizations are encouraging green behavior in employees in response to today’s growing environmental concerns and the implementation of stricter environmental policies in many countries [45]. Individuals are more receptive to environmental actions once they understand their consequences. To achieve success in green banking practices, employees must be informed about the consequences of their actions before adopting environmentally friendly practices and contributing to sustainability [46]. Employee eco-friendly behavior impacts leadership, communication, and empowerment [40]. Employee green behavior originates from acts that positively impact the environment and is the foundational phase of a bank’s sustainability strategy and performance [45]. Therefore, the suggested hypotheses are as follows:

H3a. 

Employee-related green practices are positively related to employee green behavior.

H3b. 

Operation-related green practices are positively related to employee green behavior.

H3c. 

Customer-related green practices are positively related to employee green behavior.

H5. 

Employee green behavior is positively related to banks’ environmental performance.

Since employees’ behavior is influenced by laws, conventions, customs, beliefs, and policies, they are essential to environmental preservation and eco-friendly projects. Banks must acquire support from their employees to implement green banking practices [20]. Banks may cultivate the trust of their employees, clients, and external enterprises by offering environmentally sustainable financial services and financing only the least carbon-intensive initiatives [47]. Furthermore, they must promote green banking, motivate employees to create innovative eco-friendly products and services, and take extra steps to boost their banks’ profits [48]. It may improve the banks’ reputation with clients and external entities, gain favor with policymakers and environmental regulators, and increase profit potential [34]. Consequently, the impact of green banking practices on the environmental reputation of banks and the green behavior of their employees is vital [20,23]. Banks that integrate green banking practices into their everyday operations are perceived as more reliable by their clientele, indicating that individuals could value the welfare of future generations over safeguarding their money and assets. Consequently, customers are willing to pay a premium for eco-friendly products, enhancing banks’ performance [23,26]. Accordingly, we propose the following:

H7a–H7c. 

Employee green behavior mediates employee-related, operation-related, and customer-related green practices and banks’ environmental performance associations.

3. Methods

3.1. Sample and Data Collection Procedure

To evaluate the developed hypotheses, a structured survey questionnaire was created (Figure 1), and self-administered questionnaires were given to several privately owned bank employees in Chattogram, Bangladesh’s business hub. The survey questionnaire, which had 26 questions, was split into two parts. The initial section concentrated on the demographic portfolio, while the second part included the key components of several research variables. Four questions on the participant’s age, gender, educational level, and job status were included in the demographic section. The second section of the survey comprised 22 items about employee green practices from EGP1 49 to EGP3, operational green practices from OGP1 to OGP3, customer green practices from CGP1 to CGP3, employee green motivation from EGM1 to EGM5, employee green behavior from EGB1 to EGB5, and bank environmental performance from BEP1 to BEP3.

The Central Bank of Bangladesh reports that of the 52 banks, 33 are privately held and operated for profit, 9 are foreign-owned, and 10 adhere to Islamic Shariah principles [49,50,51]. To gather data, target banks were selected from Chattogram’s private banking sector. Following a rigorous screening process, we sent an email requesting management consent for the staff survey to 60 branch managers from different private banks in Chattogram. In total, 33 private banks gave permission. The study respondents were from various departments inside specific private banks, ranging from top-level to supervisory roles.

Furthermore, because there was no comprehensive list, it was impossible to determine the population size of the chosen banks. As a result, we closely followed Krejcie and Morgan’s [52] recommendation that 384 is an adequate sample size for an unidentified population. In keeping with other relevant studies relating to the Bangladesh banking sector [49,50,51], this study used convenience sampling to gather data from 33 bank employees, concentrating on those who were readily available because of mobility issues within the bank premises.

We ensured anonymity and privacy with utmost importance, and the information gathered would only be used for educational purposes; no personal data would be shared with other groups. After receiving consent from the designated managers of the bank, we delivered survey questionnaires to approved bank employees to participate in the research. Data were collected from April to June 2024. Approximately 600 employees of the chosen private banks received anonymous surveys. After removing missing data and outliers, 376 responses were deemed valid and suitable for social science research, equating to a response rate of 62.66%. The collected data were examined through PLS-SEM, which is an effective tool for researchers working with complex models, reflective and formative constructs, non-normal data distributions, and limited sample sizes. It offers significant advantages across various research contexts [53].

3.2. Measurement of Variables

This study identifies three key components of green banking practices—operational green practices, employee green practices, and customer green practices (Appendix A). To assess green practices related to employees, operations, and customers, we selected three items for each variable from a study by Chen et al. [6]. Additionally, we selected five items from a study by Junsheng et al. [35] to assess employees’ green motivation, as well as five items from a study by Su and Swanson [45] to assess employees’ green behavior. The bank’s environmental performance was assessed using three items adapted from the work of Zhang et al. [3]. To collect bank employee opinions about the research variables, a five-point scale was used, with 1 = “strongly disagree” and 5 = “strongly agree”.

3.3. Demographic Profile

Table 1. Demographic profile (N = 376).

Demographic	Category	Frequency	Percent (%)
Gender	Male	226	60.1
	Female	150	39.9
Age Group	21–30 Years	103	27.4
	31–40 Years	80	21.3
	41–50 Years	168	44.7
	51–60 Years	25	6.6
Education	Bachelor’s Degree	106	28.2
	Master’s Degree	209	55.6
	Professional Degree	61	16.2
Employment Status	Less than 5 years	106	28.2
	5–10 years	136	36.2
	Over 10 years	134	35.6

Source: created by author.

shows that males accounted for 60.1%, while females comprised 39.9%. As concerns participant age, 27.4% of employees were aged between 21 and 30, 21.3% were between 31 and 40 years, 44.7% were between 41 and 50 years, and 6.6% were between 51 and 60 years. In relation to educational qualifications, 28.2% possess a bachelor’s degree, 55.6% hold a master’s degree, and 16.2% have a professional degree. Furthermore, 28.2% of employees have fewer than five years of experience, 36.2% have five to ten years, and 35.6% have more than ten years.

4. Findings

4.1. Measurement Model

Using composite reliability (CR), average variance extracted (AVE), and factor loading values, the measurement model’s reliability, convergent validity, and discriminant validity were evaluated following the criteria of Henseler et al. [54]. According to Hair et al. [53], the factor loadings, CR values, and AVE values should be above the cutoff points of 0.7, 0.7, and 0.5, respectively. Strong internal consistency was indicated by item loadings over 0.70, CR values above 0.70, and AVE values above 0.50, as shown in

Table 2. Construct reliability and validity.

Construct	Items	FL	α	CR	AVE
Employee-related green practices	EGP1	0.842	0.803	0.883	0.716
	EGP2	0.842
	EGP3	0.854
Operation-related green practices	OGP1	0.866	0.855	0.912	0.775
	OGP2	0.875
	OGP3	0.900
Customer-related green practices	CGP1	0.884	0.845	0.906	0.764
	CGP2	0.853
	CGP3	0.884
Employee green motivation	EGM1	0.760	0.859	0.896	0.635
	EGM2	0.889
	EGM3	0.731
	EGM4	0.829
	EGM5	0.765
Employee green behavior	EGB1	0.836	0.903	0.928	0.720
	EGB2	0.890
	EGB3	0.827
	EGB4	0.811
	EGB5	0.875
Banks’ environmental performances	BEP1	0.908
	BEP2	0.907	0.899	0.937	0.832
	BEP3	0.922

Source: created by author.

. Furthermore, the HTMT ratio needs to be less than 0.85 in order to confirm discriminant validity [54] (Henseler et al., 2016). The discriminant validity of the model is demonstrated by HTMT ratios < 0.85, as shown in

Table 3. Discriminant validity (HTMT ratio).

Constructs	1	2	3	4	5	6	VIF (<3.3)
Banks’ environmental performance	-------
2. Customer-related green practices	0.780	-------					2.047
3. Employee green behavior	0.799	0.728	-------				2.674
4. Employee green motivation	0.728	0.635	0.610	-------			1.716
5. Employee-related green practices	0.721	0.712	0.822	0.597	-------		2.448
6. Operation-related green practices	0.670	0.701	0.753	0.536	0.819	-------	2.249

Source: created by author.

.

4.2. Structural Model

To determine the hypothesized correlations across variables using path coefficients, this study used Smart PLS bootstrapping with 5000 samples and 376 cases [50]. Following the recommendation by Kock and Lynn [55] to assess common method bias, the data underwent thorough collinearity testing since it was taken from a single source. The VIF values were below 3.3, suggesting that single-source bias was not a significant concern with this dataset. Additionally, exploratory factor analysis indicated that common method bias was not a concern, as no factor accounted for more than 46.77% of the total variance, which is below the 50% threshold suggested by Podsakoff and Organ [56].

Table 4. Summary of hypothesis results.

Hypothesis Path	Beta	T Values	p Values	CI (BC)		Decision
				5.0%	95%
Direct Hypotheses
H1a: EGP→BEP	0.054	1.058	0.145	−0.026	0.143	Not supported
H1b: OGP→BEP	0.041	0.695	0.244	−0.060	0.135	Not supported
H1c: CGP→BEP	0.245	4.265	0.000	0.154	0.340	Supported
H2a: EGP→EGM	0.262	4.720	0.000	0.169	0.349	Supported
H2b: OGP→EGM	0.100	1.509	0.066	−0.008	0.211	Not supported
H2c: CGP→EGM	0.353	5.683	0.000	0.242	0.448	Supported
H3a: EGP→EGB	0.381	6.739	0.000	0.286	0.472	Supported
H3b: OGP→EGB	0.252	4.908	0.000	0.170	0.340	Supported
H3c: CGP→EGB	0.265	4.170	0.000	0.166	0.374	Supported
H4: EGM→BEP	0.312	6.591	0.000	0.236	0.392	Supported
H5: EGB→BEP	0.316	4.189	0.000	0.195	0.445	Supported
Indirect Hypotheses
H6a: EGP→EGM→BEP	0.082	3.653	0.000	0.049	0.122	Supported
H6b: OGP→EGM→BEP	0.031	1.523	0.064	−0.002	0.066	Not supported
H6c: CGP→EGM→BEP	0.110	4.250	0.000	0.071	0.157	Supported
H7a: EGP→EGB→BEP	0.121	3.288	0.001	0.068	0.189	Supported
H7b: OGP→EGB→BEP	0.080	3.183	0.001	0.045	0.128	Supported
H7c: CGP→EGB→BEP	0.084	2.604	0.005	0.041	0.144	Supported

Note: CI (BC)—confidence interval corrected bias. Source: created by author.

and Figure 2 present the hypothesis outcomes and the estimated structural model.

Table 4 reveals that employee-related (β = 0.054; t = 1.058; p > 0.05) and operation-related green practices (β = 0.041; t = 0.695; p > 0.05) had an insignificant association with banks’ environmental performance, while customer-related green practices (β = 0.245; t = 4.265; p < 0.05) significantly influenced banks’ environmental performance. Furthermore, employee-related (β = 0.262; t = 4.720; p > 0.05) and customer-related green practices (β = 0.353; t = 5.683; p > 0.05) were significantly associated with banks’ environmental performance, whereas operation-related green practices (β = 0.100; t = 1.509; p > 0.05) had an insignificant influence on banks’ environmental performance. Similarly, employee-related (β = 0.381; t = 6.739; p < 0.05), operation-related (β = 0.252; t = 4.908; p < 0.05), and customer-related green practices (β = 0.265; t = 4.170; p < 0.05) significantly influenced employee green behavior. In addition, employee green motivation (β = 0.312; t = 6.591; p < 0.05) and green behavior (β = 0.316; t = 4.189; p < 0.05) were significantly associated with banks’ environmental performance.

Additionally, employee green motivation acts as a mediator in the connection between employee-related (β = 0.082; t = 3.653; p < 0.05) and customer-related green practices (β = 0.110; t = 4.250; p < 0.05) and the environmental performance of banks. However, it does not mediate the link between operation-related green practices (β = 0.031; t = 1.523; p > 0.05) and banks’ environmental performance. Similarly, employee green behavior mediates the relationship between employee-related (β = 0.082; t = 3.653; p < 0.05), operation-related (β = 0.031; t = 1.523; p > 0.05), and customer-related green practices (β = 0.110; t = 4.250; p < 0.05) and the environmental performance of banks.

4.3. Model Quality

Table 5. Model quality.

Construct	R Square (R2)	f Square (f2)	Q2 Value
Banks’ environmental performance	0.666	0.004	0.544
		0.002
		0.088
Employee green behavior	0.608	0.112	0.426
Employee green motivation	0.390	0.170	0.218

Source: created by author.

displays the R² values for employee green motivation, green behavior, and banks’ environmental performance, denoted as 0.390, 0.608, and 0.666, respectively, indicating the moderate quality of the structural model [53]. Furthermore, employee green motivation (f² = 0.170) demonstrated a medium effect on the environmental performance of banks. In contrast, employee green behavior (f² = 0.112) and customer-related green practices (f² = 0.088) showed minimal influence on banks’ environmental outcomes. However, based on the model’s effect size, green practices connected to operations (f² = 0.002) and employees (f² = 0.004) had no impact on banks’ environmental performance [53].

Moreover, Table 5 indicates that the Q² values for the endogenous variables (such as employee green motivation, green behavior, and the banks’ environmental performance) exceeded zero, which suggests that the model possesses predictive power [53].

5. Conclusions

5.1. Discussions

This study examines how employee green motivation and behavior mediate the link between green banking practices and Bangladeshi private banks’ environmental performance. The research results confirm that only customer-focused green practices enhance banks’ environmental performance, supporting Hypothesis 1c. This is supported by Chen et al. [6], who discovered that banks’ customer-related activities directly impact their environmental performance. Alternatively, the outcome of Hypothesis H1c opposed that of several prior studies [9,28,32], where they found an insignificant association between customer-focused green practices and banks’ environmental performance. The customer-related practices of banks are considered a vital component of green banking and directly enhance their financial and environmental performance, owing to their direct association with clients. Conversely, the findings showed that employee-related and operation-related green practices do not directly impact banks’ environmental performance, nullifying Hypotheses 1a and 1b. These results contradict those of previous studies [25,28,32], emphasizing that employee-related green business practices, including training and education, focused on the environment, systems for evaluating sustainable performance, and eco-friendly incentives and facilities positively influence banks’ environmental performance. In the same way, the environmental performance of banks was substantially improved by the integration of eco-friendly banking practices, the management of electronic waste, the adoption of energy-efficient technologies, and the reduction in paper consumption, all of which were critical components of each banker’s daily evaluations [9,32]. However, our results might contrast with earlier research due to limited knowledge of green banking and a deficiency in environmental training and education for bank staff. As a result, banking authorities should give enough training to their personnel to promote green banking practices and lessen the negative environmental consequences on society.

Moreover, the study findings confirmed that employee-related and customer-related green practices are significantly associated with employee green motivation. In contrast, operation-related green practices are not significantly linked to employee green motivation. Thus, Hypotheses 2a and 2c were confirmed, while Hypothesis 2b was not confirmed. Dynamics influencing employees’ motivation to engage in environmentally friendly practices at work include their emotional and positive organizational commitment, the perceived support for their environmental initiatives, and the company’s dedication to social responsibilities related to environmental conduct [35]. Equally, employee green behavior is significantly associated with the three types of green banking practices, such as employee-related, operation-related, and customer-related green practices, consequently validating Hypotheses 3a, 3b, and 3c. The results were supported by Alshebami [20]. Banks implementing green banking practices require internal support and enthusiasm from employees. Their positive reaction is crucial for success, as employees contribute to developing innovative green products and services and implementing management policies [20]. Banks may earn the trust of employees, customers, and external businesses by providing environmentally friendly financial services and funding only the least carbon-intensive activities [47]. In addition, customers view banks incorporating green banking practices into their daily operations as more reliable and suggest that individuals may value the welfare of future generations over safeguarding their money and assets [23].

The study results further illustrated positive and significant associations between employee green motivation, green behavior, and banks’ environmental performance. Accordingly, Hypotheses H4 and H5 were confirmed and supported by previous studies such as those of Alshebami [20] and Junsheng et al. [35]. Organizations can enhance employee green motivation by recognizing and rewarding environmentally responsible behaviors. Incentives, awards, or public recognition can encourage employees to sustain environmentally conscious actions [39]. Equally, Ojo et al. [39] and Renwick et al. [41] noted that employees who strongly connect to the company’s mission are more inclined to exceed expectations by implementing eco-friendly practices and enhancing the organization’s environmental performance.

Additionally, employee green motivation mediated the connection between employee- and customer-related green practices and banks’ environmental performance. Nonetheless, it failed to mediate the link between operation-related practices and a bank’s environmental performance. Consequently, Hypotheses H6a and H6c were confirmed, while Hypothesis H6b was not supported. The limited knowledge of green banking practices, a deficiency in environmental training and education for bank staff, and the absence of incentives, awards, or public recognition are some of the potential factors for not mediating the link between operation-related green practices and a bank’s environmental performance. Similarly, employee green behavior acted as a mediator in the connections between all green banking practices (employee-, operation-, and customer-related) and the environmental performance of the banks, thereby supporting Hypotheses H7a, H7b, and H7c. The distinctive outcomes of the mediation highlighted in this study enhance the current body of literature on green banking practices.

5.2. Theoretical Implication

This study adds value to current theories in several ways. This research first identifies green banking practices associated with employees, operations, and customers. It establishes a conceptual framework to explore the connection between these practices and banks’ environmental performance in developing countries like Bangladesh. The results of this study enhance the green banking literature by emphasizing the critical need for organizations to integrate sustainability factors into their green management systems [35]. Moreover, the study results emphasize how effectively these employee-, operational-, and customer-oriented green banking practices foster environmentally responsible behaviors among employees and customers, ultimately enhancing sustainable environmental performance. Furthermore, it reinforces the connection between green banking practices and the environmental performance of banks in a nation facing significant challenges related to environmental degradation and pollution caused by population density. This study enhances the existing knowledge on green banking practices and, through its findings, deepens the theory related to sustainability.

Secondly, few prior studies have established a link between green banking practices and the environmental performance of banks through employee motivation and behavior related to sustainability in the private banking sector. This research explores how employee motivation and green behaviors serve as mediators in the relationship between green banking initiatives and banks’ environmental performance. Consequently, this study uniquely highlights the importance of employee motivation and behavior in this mediation process. The results will substantially enhance the existing literature on green banking practices, particularly within the context of Bangladesh’s private sector.

5.3. Managerial Implications

This study highlights the importance of understanding how organizations utilize three distinct green banking practices related to employees, operations, and customers to enhance environmentally friendly performance through employee green motivation and behavior. According to the findings, organizations should effectively utilize green banking practices to improve their employees’ skills in terms of environmental management, as these results reveal the importance of such practices. This approach will assist managers in refining their business strategies by emphasizing environmental initiatives that influence the pillars of sustainability [39,41].

Next, the research reveals that banks can better protect the environment by enforcing green banking practices at the employee, operation, and customer levels. Incorporating green banking practices into everyday operations—such as e-banking, electronic bill payments, dedicated deposits, mobile banking, and environmentally friendly debit and credit cards—provides managers with a strategy to improve profitability and environmental sustainability. Moreover, employees’ motivation for green practices and corresponding green behaviors have significantly impacted how banks’ environmental performance relates to green banking initiatives. To truly enhance their ecological footprint, banks should boost their investments in waste management, renewable energies, alternative sources of energy, the development of green industry, initiatives of energy efficiency, and other environmental areas. Therefore, the Bangladesh Bank should continue investigating private banks’ spending habits to help the country achieve its sustainable development goals and maintain sustainable economic growth. Bangladesh Bank should adopt a cooperative financing plan, in which private banks should be able to work together to develop green banking practices in their day-to-day operations. Studies indicate that collaboration among governments, public and private banks, financial institutions, international bodies, and businesses is essential to tackle issues related to green banking. In this case, it may be beneficial for private banks if the Bangladesh Bank monitors the situation, offers support, and organizes efforts related to green banking, such as hosting seminars and symposiums for customer and employee education on green banking initiatives.

This study may also enlighten managers about the importance of environmentally sustainable practices, as employees’ green motivation and behavior positively impact their banks’ environmental performance. Consequently, decision-makers and administrators can better understand the underlying reasons for individuals’ inclination toward ecological initiatives. In summary, managers can develop rewards and recognition as green motivational strategies to encourage employees to participate in environmentally beneficial activities. Although implementing sustainable organizational practices presents several challenges [35,39], the findings of this research will empower managers and decision-makers to identify a range of environmentally friendly activities that address environmental concerns more effectively.

6. Limitation and Future Scope

This investigation has several drawbacks that must be considered when assessing the results. Initially, data were collected from authorized private banks in the Chattogram division, which is the business hub of Bangladesh. The inability to encompass all private banks across several divisions may limit the generalizability of the findings about private banks in Bangladesh. Future research may encompass all divisions of Bangladesh. Additionally, future studies might utilize different probability sampling techniques, like simple random sampling or systematic sampling, as well as time lag data, to more precisely reflect the population, given that the data were obtained from a singular source, which creates selection bias, and the target participants were chosen conveniently, which possesses a diminished likelihood of accurately representing the overall population.

Additionally, this study focused solely on three categories of green banking practices related to employees, operations, and customers. However, many more types exist. As a result, subsequent studies should incorporate yet unknown green banking practices. In addition to employee motivation for green initiatives and sustainable behaviors, future research should consider other mediating factors, including green financing, trust, image, and culture. To conclude, this study did not incorporate a moderator; therefore, future research should consider including moderating variables such as organizational culture, size, and environmental orientation.