Factors Influencing Profitability in Eco-design: Lessons from European and Canadian Firms

Abstract

Eco-design is a response to the collective desire to engage in sustainable development combining innovation, environment, and profitability and participates in the development of products that serve circular economy. While some authors attempt to provide evidence on the link between eco-design and profitability, very few analyze the drivers of profitability in this case. To reduce this gap, we try to identify factors influencing profitability for eco-designed products. Through direct collaboration with professional organizations, we conduct an original phone survey with European and Canadian firms adopting eco-design. We perform an econometric analysis using a robust order probit regression. The results prove that regulation and market motivations are important factors to achieve superior financial performance. Moreover, firms using rigorous eco-design tools increase the probability to improve their financial performance. We demonstrate that in Europe the motivations and characteristics of eco-design have significant effects on profitability, in Canada only the latter is influential.JEL Codes: O31, Q55