Effect of Inclusive Leadership on Sustainable Supply Chain Performance: Mediating Roles of Psychological Safety and Green Employee Empowerment

Abstract

While there is a general increase in organizational investment in sustainable infrastructure and technology, the connection between leader behavior and sustainable supply chain performance (SSCP) is not well understood and the psychological mechanisms by which organizations are able to make this connection are poorly understood. In countries like Bangladesh, a country undergoing a rapid transition to an emerging economy, the need for inclusive leadership is particularly acute and is now recognized as a key element in sustainability efforts, yet the path to achieving performance outcomes has not been proven empirically. This study investigates the relationship between inclusive leadership and sustainable supply chain performance (SSCP) by examining the role of psychological safety and green employee empowerment through the lens of social exchange theory in the product-based corporate sector in Bangladesh. A cross-sectional survey was conducted among 300 professionals engaged in the supply chain, utilizing partial least squares structural equation modeling (PLS-SEM) analyzed with SmartPLS 4. The results indicate that while inclusive leadership did not have a significant direct effect on SSCP, it fully mediated its effects on psychological safety and green employee empowerment. Both mediators were found to be significant and positively predictive of SSCP, and inclusive leadership significantly enhanced both. The findings build on social exchange theory by demonstrating that the psychological states created by leadership actions influence reciprocity towards sustainability outcomes, providing evidence-based recommendations for supply chain managers and policymakers to integrate leadership development into organizational sustainability strategies.