ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)

ISSN: 2454-6186 | DOI: 10.47772/IJRISS

Special Issue | Volume IX Issue XXVIII November 2025

Page 239

www.rsisinternational.org

Green HRM and Business Diversification as Drivers of Sustainable

Performance in the Culinary Creative Industry MSMEs

Indah Wahyu Utami

, Indra Hastuti

, Marta Ardiyanto

, Lisa Nur Savira Dewi Saputri

, Ihsan

Kandung Adirangga

1,4

Faculty of Science and Technology, Universitas Duta Bangsa Surakarta

Faculty of Law and Business, Universitas Duta Bangsa Surakarta

Faculty of Computer Science, Universitas Duta Bangsa Surakarta

Faculty of Health Sciences, Universitas Duta Bangsa Surakarta

Corresponding Author

DOI: https://dx.doi.org/10.47772/IJRISS.2025.92800023

Received: 11 November 2025; Accepted: 17 November 2025; Published: 18 December 2025

ABSTRACT

This study is focused on creating a model for bsusiness sustainability for small and medium enterprises (SMEs)

in the culinary creative industry, specifically in Surakarta City.The goal is to improve business performance in

a sustainable way by using better business diversification strategies and applying Green Human Resource

Management (Green HRM). The study uses a quantitative method with an explanatory design. Data was

collected from 351 SMEs in the culinary sector through surveys, selected using purposeful sampling. The data

was analyzed using Structural Equation Modeling (SEM) with AMOS software version 26.0 to check the

validity, reliability, and relationships between different factors. The findings show that Green HRM and business

diversification have a positive and significant impact on business sustainability, both directly and through

improved performance of SMEs. This model adds value to the theoretical understanding of Green HRM and

diversification strategies as key factors in achieving sustainable business growth. In practice, this model can help

SMEs and related stakeholders create better strategies and policies that are adaptable, innovative, and

environmentally friendly, supporting the growth of a green industry.

Keywords: SMEs, creative industry, culinary, business sustainability, business diversification, Green HRM

INTRODUCTION

The creative industry plays a big role in helping the global economy grow because it adds to the Gross Domestic

Product (GDP), creates jobs, and makes a country's exports more competitive. UNESCO (2021) says that the

creative industry contributes about 3% to GDP and is expected to grow more as technology changes and people's

tastes change (Betáková et al., 2020). In Indonesia, the creative industry is important for the country's economy.

According to the Ministry of Cooperatives and SMEs (2023), there are about 65.5 million business units, which

is up 1.7% from the previous year, and most of these are small and medium-sized enterprises (MSMEs) in the

creative industry (Morozova, 2019). Data from the Ministry of Tourism and Creative Economy (Kemenparekraf,

2023) shows there are 15,898 MSMEs in the creative industry, showing that this is a promising and long-term

business area (Sadick & Kamardeen, 2020). Surakarta, a city in Central Java, Indonesia, is one of the areas where

the creative industry is growing a lot, especially in the food sector. According to the Surakarta City Cooperative,

SME, and Industry Office (2024), there are 13,203 creative industry MSMEs in the city, mostly micro businesses

(11,138 units), with 18 small businesses and only 3 medium-sized ones (Central Statistics Agency, Surakarta

City, 2024). From this data, about 75% of these MSMEs are in the food and beverage sector, making it the most

important part of the creative industry at both local and national levels. According to the Central Statistics

Agency (BPS) of Surakarta City, there are 3,962 food and beverage MSMEs. These include businesses involved

in making food and drinks, as well as those that offer creative and innovative serving services.

Cullinary small and medium-sized businesses in Surakarta have a lot of economic potential, but they are still

facing big challenges in keeping their businesses going long-term (Widjaja et al., 2018). To deal with these

ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)

ISSN: 2454-6186 | DOI: 10.47772/IJRISS

Special Issue | Volume IX Issue XXVIII November 2025

Page 240

www.rsisinternational.org

problems, it's important to use strategies that help these businesses grow and stay strong. One such strategy is

business diversification, which includes offering a wider range of products, using better marketing methods, and

managing the supply chain more effectively (Nahar et al., 2019). Diversification helps businesses become more

competitive, better able to handle changes in the market, and less likely to suffer from economic downturns

(Rozi & Sunarsi, 2020). In addition to diversifying their business, these small businesses also need to embrace

environmentally friendly practices. This includes using fewer raw materials, managing waste properly, and

working with suppliers who are also eco-friendly (Arokiasamy et al., 2023). These efforts are part of green

innovation and green supply chain management, which help make operations more efficient and improve how

the business is seen in the community (Tobing et al., 2024). Successful management of these small businesses

isn't just about strategy; it's also about how they manage their people (Sono & Limpo, 2024).

Using Green Human Resource Management (Green HRM) is a good way to increase awareness of environmental

issues, improve productivity, and boost company performance (Di Vaio et al., 2022). Studies have shown that

applying Green HRM helps businesses perform better in terms of the environment, their operations, and their

overall sustainability (Purwadinata et al., 2021). Therefore, combining business diversification with Green HRM

could be a powerful way to help these small businesses become more sustainable (Pradipta, 2024). Despite these

opportunities, there are still several issues that small businesses in the creative culinary industry are facing.These

include a lack of innovation in product variety, weak marketing plans, limited access to eco-friendly materials,

and not enough use of Green HRM in managing their staff (Muñoz et al., 2020). These problems make it hard

for some businesses to stay afloat and compete with more innovative products (Ud et al., 2024). To address this,

there is a need to create a sustainable business model that smartly combines business diversification and Green

HRM practices. This model could help improve business performance, make these businesses more competitive,

and support the growth of a greener industry both locally and nationally.

LITERATURE REVIEW

Business Diversification

Business diversification is when a company tries to grow by creating new products or entering new markets,

either partly or fully. This helps the company increase sales, profit, and flexibility (Nisa, 2023). Product

diversification is when a company changes the type of products or services it offers, making them better match

what customers want and need, which helps boost sales (Yusnidar & Amelyani, 2023). When a company

diversifies in terms of products, markets, or how it distributes its goods, it needs a more flexible, adaptable, and

sustainable human resource management system. Wulandari et al. (2024) say that business diversity also opens

up chances for innovation and increases the need for people with different skills across departments. In the case

of small and medium-sized culinary businesses, diversification might involve adding catering services, using

digital menus, and selling online, which pushes the need for human resources to be more flexible and ready to

adapt to changing markets (Nasution et al., 2025). Business diversification is a key strategy for dealing with

complex and competitive markets (Porter, 2019). This strategy not only opens up more business opportunities

but also helps lower the risk of failure and improve the long-term sustainability of the business (Hitt et al., 2020).

Green Human Resources Management (GHRM)

Green Human Resources Management (GHRM) is about having awareness and rules that help businesses,

including small and medium-sized enterprises (MSMEs), manage the environment better (Ren et al., 2018).

Studies show that using green HRM practices helps SMEs perform better in a sustainable way. Also, green

innovation has a big effect on how well a company can be sustainable (Al-shammari et al., 2022). Another study

found that Green HRM plays a major role in creating a sustainable HRM system. This means that things like

hiring people with green values, training them in eco-friendly ways, and evaluating their performance with

sustainability in mind can help build a work culture that cares about the environment (Veerasamy et al., 2023).

These findings match the work of Jabbour et al. (2019), who said that including environmental values in the

HRM process can make an organization perform better. Renwick et al. (2020) also showed that using Green

HRM can make companies use energy more efficiently, cut down on waste, and encourage more eco-friendly

work practices (Yong et al., 2020).

ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)

ISSN: 2454-6186 | DOI: 10.47772/IJRISS

Special Issue | Volume IX Issue XXVIII November 2025

Page 241

www.rsisinternational.org

Business Sustainability

Business sustainability is very important for small and medium-sized enterprises (MSMEs) in the creative

industry, especially when dealing with economic and social problems in a constantly changing market. A study

by Widya Paramita (2025) shows that MSMEs are a big part of the Indonesian economy, but most of them have

not fully started using green business practices. In fact, 87.81% of these businesses have not yet put sustainability

principles into action. This is because there are several challenges, such as limited regulations, lack of support

for green financing, and high costs for starting sustainability efforts. However, there is still a lot of potential for

MSMEs to include sustainability in their business plans. Most of these businesses are micro-enterprises, and

they have shown good results, with an average increase in sales of 13.3%. Also, 1,655 MSMEs have used digital

platforms, leading to a sales growth of 29.9% (Bank Indonesia, 2025). Research by Sudirman et al. (2025)

highlights the need for MSMEs to adopt sustainability and resilience strategies to handle outside challenges and

use digital technology to make their products more competitive and innovative. Therefore, including

sustainability in the creative industry MSMEs not only helps their businesses improve but also brings positive

changes to the economy and environment.

METHOD

This study used a quantitative method to explain how certain factors affect business sustainability and

performance. It involved a survey with a 1 to 5 scale questionnaire. The research focused on 3,962 small and

medium-sized businesses in the food and culinary sector in Surakarta, Central Java. A sample of 351 businesses

was chosen based on the Krejcie and Morgan (1970) table. The data was analyzed using SEM-AMOS software

to examine the impact of business diversification and Green HRM on business sustainability and performance.

Tests were done to check if the model was valid, reliable, and had a good fit. The variables in the study were:

(1) Independent Variables: Business Diversification and Green HRM, (2) Mediating Variable: Business

Sustainability, and (3) Dependent Variable: MSME Performance.

RESULTS AND DISCUSSION

RESULTS

The following are the results of data processing of the questionnaire results of all research respondents, using

AMOS software version 26.00, as shown in the table below:

Goodness of Fit Model

Table I. Results of Goodness of Fit Model

Indeks

Results

Ideal Criteria

Description

Chi-Square (CMIN)

104,87

p > 0,05

Goode Enough

CMIN/DF

1,248

≤ 2,00

Fit

GFI

0,927

≥ 0,90

Fit

AGFI

0,888

≥ 0,85

Enough Fit

TLI

0,981

≥ 0,90

Fit

CFI

0,987

≥ 0,90

Fit

RMSEA

0,048

≤ 0,08

Fit

ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)

ISSN: 2454-6186 | DOI: 10.47772/IJRISS

Special Issue | Volume IX Issue XXVIII November 2025

Page 242

www.rsisinternational.org

Based on the table above, the following interpretation can be given: that the model meets the goodness of fit

criteria, so it is suitable for use.

Validity & Reliability

● Loading factor ≥ 0.6 (valid).

● Construct Reliability (CR) ≥ 0.70 (reliable).

● Average Variance Extracted (AVE) ≥ 0.50 (valid).

● No excessive error terms.

Path Analysis

● Green HRM → Business Sustainability β = 0.61; p = 0.001 (significant).

● Business Diversification → Business Sustainability β = 0.47; p = 0.008 (significant).

● Green HRM → MSME Performance β = 0.59; p = 0.000 (significant).

DISCUSSION

1. Green HRM is important for making businesses sustainable. Practices like green hiring, training, and

performance reviews help create a work environment that cares about the environment, cuts down on waste,

and uses energy more efficiently.

2. Business diversification helps with sustainability. by creating new products, offering services, using digital

menus, and selling online, companies need to adjust their HR strategies to be more flexible and responsive.

3. Green HRM helps small and medium businesses perform better. The study found that it has a direct impact,

especially in keeping a balance between money, people, and the environment.

4. Combining different models shows that Green HRM and business diversification help improve the

performance of small food businesses. This happens through sustainable business practices that act as a

bridge between these factors.

CONCLUSION

The study shows that using Green Human Resource Management (Green HRM) and business diversification in

the culinary creative industry in Surakarta, Central Java, helps businesses stay sustainable and improves the

performance of small and medium enterprises (MSMEs). The analysis using SEM-AMOS shows the model fits

well, is valid, and reliable, so it can be trusted as a real representation of the situation. Green HRM helps

businesses stay sustainable by using better ways to hire people, train them, and assess performance based on

environmental goals. These practices create a work culture that cares about the environment, uses energy wisely,

and reduces waste. At the same time, business diversification encourages new product ideas, uses digital tools,

and offers extra services, which helps businesses reach more customers and become more competitive. From

these findings, it's clear that business sustainability plays an important role in connecting Green HRM, business

diversification, and MSME performance. This research also adds to the understanding of how Green HRM and

diversification strategies can work together to support sustainability in MSMEs.

ACKNOWLEDGEMENT

The author would like to express his gratitude to the Directorate General of Research and Development,

Ministry of Higher Education, Science and Technology, Duta Bangsa University, Indonesia, the Research and

Community Service Institute of Duta Bangsa University Surakarta, the Rector, and the Academic Community,

the Cooperative and SME Agency of Surakarta City, the Indonesian Young Entrepreneurs Association, the

ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)

ISSN: 2454-6186 | DOI: 10.47772/IJRISS

Special Issue | Volume IX Issue XXVIII November 2025

Page 243

www.rsisinternational.org

Surakarta City PLUT, BNI Surakarta Branch, the media, and the entire Creative SME Community in the culinary

field for their support in providing data and facilitating this research process.

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