Abstract
This study investigates the effects of eco-efficiency actions on firm performance in terms of sales growth in an extensive sample of 11,336 small- and medium-sized enterprises (SMEs) located in 28 European countries. Our empirical results suggest that not all eco-strategies are positively related to better performance, at least not in the short term. We found that European companies using renewable energies, and recycling or designing products that are easier to maintain, repair, or reuse, perform better. Those that aim to reduce water or energy pollution, however, seemed to show a negative correlation to firm growth. Our results also indicate that high investment in eco-strategies improves firm growth, particularly in new members that joined the EU from 2004 onwards. Finally, we observed a U-shaped relationship between eco-strategies and firm growth, which indicates that a greater breadth of eco-strategies is associated with better firm performance. However, few European SMEs are able to either invest heavily or undertake multiple eco-strategies, thus leaving room for policy interventions.
Highlights
In existing research there seems to be a robust understanding of the factors that determine which innovations positively impact the environment [1,2,3], exactly how eco-strategies to reduce environmental impact affect firm performance is still widely debated.Conventional wisdom among economists, policymakers, and business managers concerning environmental protection was dominated by the idea that eco-strategies necessarily increased internal costs but not profits for firms
We find that European firms using renewable energies perform better
We must stress that the cross-sectional nature of the dataset we are using constitutes a limitation to the scope of the present analysis and only allows us to comment on correlations between variables rather than proper causations
Summary
In existing research there seems to be a robust understanding of the factors that determine which innovations positively impact the environment [1,2,3], exactly how eco-strategies to reduce environmental impact affect firm performance is still widely debated.Conventional wisdom among economists, policymakers, and business managers concerning environmental protection was dominated by the idea that eco-strategies necessarily increased internal costs but not profits for firms. Barbieri et al, Ambec et al, Dixon-Fowler et al and Albertini [3,6,7,8] provided reviews and meta-studies summarizing the empirical work on the economic effects of eco-strategies These studies reveal the presence of considerable diversity in the empirical results, ranging from negative through non-significant to moderately (or even strongly) positive links between eco-innovation and firm performance. Such mixed results suggest that the relationship between eco-innovation strategies and firm performance is complex and poorly understood, indicating the need for greater effort in investigating the linkage. A better evaluation of the relationship would be useful in designing effective future eco-innovation policies
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