Implementing green HRM is expected to foster green innovation inside small and medium-sized enterprises (SMEs). The promotion of a sustainable environment and the implementation of organizational procedures contribute to the advancement of green innovation and the cultivation of a culture of responsibility. The implementation of Green Human Resource Management (HRM) practices, the cultivation of eco-friendly behavior among employees, and the adoption of HRM strategies aimed at fostering a sustainable environment within the business. To the extent of our current understanding, previous research has not investigated the potential influence of green climate in enhancing the effects of Green HRM in environmentally friendly behaviors and the development of green innovations. The assessment of the collective impact of these variables on environmental performance within a comprehensive model has not been previously examined. Therefore, this study has added significance by assessing the mediating role of employees’ eco-friendly behavior between Green HRM practices and the organization’s environmental performance. This study has been conducted in the context of SMEs in Saudi Arabia by taking responses on a self-administered questionnaire from 371 respondents from SMEs in Saudi Arabia Selected through cluster sampling technique. Hence, the findings of this study affirm the significance of Green HRM and Green Innovation in driving environmental performance within SMEs in Saudi Arabia. The underpinning theory for the study model is the ability motivation and opportunity (AMO) model, which has been validated in the context of the present study. By taking these practical steps, SMEs in Saudi Arabia can proactively contribute to environmental sustainability while reaping the benefits of improved organizational performance. However, other cultural, demographic, and governmental factors need consideration in future research studies that should include these external factors for further implications.