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Environmental policies to promote environmentally sustainable economic activity have often concentrated on larger firms. However, increasing attention is being paid to the role of small‐ and medium‐sized enterprises (SMEs) and entrepreneurial actors. In this paper, we examine how policy tools are being used to improve the environmental performance of SMEs and to redirect entrepreneurial energies in more environmentally benign directions. The empirical section adopts a case‐based comparative method to examine four instances of policymaking, drawn from different countries and industry sectors. The paper argues that while some interventions have proved effective in their own terms, better integrated approaches are required to address today's complex and deep‐rooted sustainability challenges. The paper identifies several policy implications including the need to: clarify the purpose of any intervention, address potential interactions and trade‐offs; select appropriate tools based on informed reviews of the options; remain sensitive to context‐specific factors; and devise effective vehicles for the promotion and governance of entrepreneurial initiatives.
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Paper accepted for publication in: Business Ethics: A European Review (2013)
Web page: http://eu.wiley.com/WileyCDA/WileyTitle/productCd-BEER.html
SMEs and environmental responsibility: a policy perspective
Richard Blundel
Senior Lecturer in Enterprise Development
Centre for Public Leadership and Social Enterprise
The Open University Business School
Michael Young Building
Walton Hall, Milton Keynes MK7 6AA, UK
Email: richard.blundel@open.ac.uk
Adrian Monaghan
Lecturer in Strategy and Corporate Social Responsibility
Salford Business School
The University of Salford, UK.
Email: a.monaghan@salford.ac.uk
Christine Thomas
Senior Research Fellow
Integrated Waste Systems Research Group
Faculty of Mathematics, Computing and Technology
The Open University, UK.
Email: c.i.thomas@open.ac.uk
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SMEs and environmental responsibility:
a European policy perspective
Abstract
Environmental policies to promote environmentally-sustainable economic activity have often
concentrated on larger firms. However, increasing attention is being paid to the role of SMEs
and entrepreneurial actors. In this paper we examine how policy tools are being used to
improve the environmental performance of SMEs and to redirect entrepreneurial energies in
more environmentally-benign directions. The empirical section adopts a case-based
comparative method to examine four instances of policy-making, drawn from different
countries and industry sectors. The paper argues that while some interventions have proved
effective in their own terms, better integrated approaches are required to address today’s
complex and deep-rooted sustainability challenges. The paper identifies several policy
implications including the need to: clarify the purpose of any intervention, address potential
interactions and trade-offs; select appropriate tools based on informed reviews of the options;
remain sensitive to context-specific factors, and to devise effective vehicles for the promotion
and governance of entrepreneurial initiatives.
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Introduction: SMEs, entrepreneurship and environmental responsibility
In a recent Special Issue of this journal, Morsing and Perrini (2009) presented a compelling
argument in relation to the ‘collective grandness’ of SMEs. The authors pointed to the
relatively limited systematic research evidence generated on SME engagement with CSR and
the mistaken perception that small firms can be treated as miniature versions of their larger
counterparts (Jenkins 2004, Penrose [1959] 1995, Tilley 2000). This paper takes up these
themes with a focus on promoting environmental responsibility, examining the relationship
between public policy-making and the particular circumstances of European SMEs. It also
addresses the related policy challenge of promoting pro-environmental social and
technological innovation and entrepreneurship. For these reasons, it can be seen as
contributing to a broader debate around the relationship between social responsibility and the
EU’s sustainability strategy (Moon et al. 2009).
Governments around the world are beginning to respond to the complex challenges of
sustainable development. Until recently, much of the emphasis of policy-makers was around
the ‘greening’ of larger public and private sector organisations. However, over the last two
decades there has been an increasing interest in enhancing the environmental performance of
SMEs. Many different policy tools have been introduced in an attempt to control against
environmentally damaging economic activity on the part of SMEs, and to encourage them to
adopt more environmentally benign ways of operating (e.g. Parker et al. 2009, Parrish and
Foxon 2009). This is a vast policy arena, which extends from relatively modest local
conservation projects to ambitious ‘green new deals’ that span national and regional
economies. This paper provides an overview of the main types of policy developed in the
last 20 years. Its aims are to:
1. Review the arguments for intervention in order to promote environmental responsibility
amongst SMEs and to encourage pro-environmental entrepreneurship and innovation;
2. Review the options available to policy-makers and assess the available evidence on the
effectiveness and impact of specific types of intervention;
3. Stimulate debate on the framing of future research and policy-making in these areas.
The paper draws primarily on examples of environmental policy-making in European
countries, but the core arguments have a more general application. The main focus of the
paper is on waste management, energy use and climate change mitigation, three prominent
environmental policy arenas with significant implications for SMEs and entrepreneurship
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.
The remainder of the paper is organised as follows. Section 2 considers the context in which
policies are framed, arguments presented in support of intervention, and the main policy
options. Section 3 examines four case-based examples, which analyse the policy context and
drivers, summarise the tools selected and evaluate their impact, highlighting potential
strengths and limitations. Section 4 discusses the main implications for environmental policy
and practice.
Policy context and options
SMEs have a substantial environmental impact, the nature and scale of which can be
illustrated by the findings of a recent study conducted by European researchers (Calogirou et
al. 2010). They calculate that SMEs are responsible for 64% of the overall environmental
impact in the European Union, including greenhouse gas emissions (Figure 1). Many other
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environmental impact measures could be cited to reinforce this argument. For example, at a
national level, it has been estimated that almost a third of UK SME’s expenditure on energy
(i.e. approximately £1.1 billion per annum) is wasted through inefficient practices (Vickers et
al. 2009: 15). SMEs cause about 43 per cent of serious industrial pollution incidents in
England and Wales and generate 60 per cent of commercial waste, which is itself an
important source of ‘embedded’ greenhouse gas emissions (Environment Agency 2006: 11).
SMEs are important because they account for such a large percentage of economic activity,
and of the resulting pressures placed on our planet’s finite resources. Though some impacts,
such as energy use, are roughly related to their share of the economy, smaller firms can have
disproportionate impacts in some sectors (Revell and Blackburn 2007).
European governments have committed themselves to a variety of environmental goals that
have direct implications for SMEs. Perhaps the most dramatic of these is in the field of
climate change mitigation, where public policies call for businesses to make substantial
reductions in emissions of carbon dioxide and other ‘greenhouse’ gases. SMEs will need to
make radical changes in their performance and impact if governments are to stand any chance
of meeting these highly ambitious targets. For example, the European Union (EU) is
formally committed to reducing greenhouse gas emissions by 80-95 per cent by 2050
compared to 1990. This will require intermediate cuts in emissions of 25 per cent by 2020,
40 per cent by 2030 and 60 per cent by 2040. The EU has recognised that SMEs are integral
to its transformation into a competitive low-carbon economy (European Commission 2011)
and has developed a 'roadmap' setting out what it regards as a cost-effective route for such a
transformation.
INSERT FIGURE 1 ABOUT HERE
Arguments in favour of intervention can be categorised using the conventional distinction
between SME policies and entrepreneurship policies (Audretsch and Beckman 2007). SME
policies tend to be justified on the grounds that they address perceived obstacles faced by
existing organisations. Small firms have generally been slower to adopt environmental
improvements compared to their larger counterparts, with research evidence suggesting that
this is due to a combination of internal and external barriers (Parker et al. 2009, Vickers et al.
2009, Environment Agency 2003). A common explanation is that smaller firms are often
more difficult to regulate than larger organisations. In addition, they may lack the necessary
awareness, motivation, capabilities, financial resources, or capacity to innovate (Daddi et al.
2010, Schaefer et al. 2011, Schaper 2002, Tilley 1999). For example, a recent UK survey
found that while 29% of SMEs reported spending on their environmental impact over the past
year, this proportion ranged from 19% for sole traders to 45% for firms with 20 or more
employees (Blundel and Gray 2010: 13). Given this background, SME policies have tended
to concentrate on overcoming barriers and countering perceived disadvantages of SMEs in
relation to larger and more established businesses. They have also been based on making the
‘business case’ for sustainability, and on ‘win-win’ arguments of eco-efficiency as a source
of firm-level cost savings (Tilley 2000: 38-39). By contrast, entrepreneurship policies have
been oriented towards the promotion of innovative technologies and practices and to the
commercial opportunities presented by emerging ‘green’ markets. However, in common
with SME policies, they tend to emphasise conventional economic imperatives, such as
enhancing competitive advantage, increasing employment and facilitating economic growth
(Hall et al. 2010), with environmental gains being treated as a secondary benefit. For
example, a policy to encourage ‘clean tech’ start-up ventures can be seen as helping to
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transform the industrial base of a region, making it more resilient and competitive in
international markets (UNEP 2009). Figure 2 summarises these cost-saving and opportunity-
based arguments.
INSERT FIGURE 2 ABOUT HERE
Environmental policies: focus, aims and options
Where should European governments be focusing their attention and their increasingly
constrained resources? The European Environmental Agency recently identified six ‘key’
areas of environmental policy (i.e. climate change mitigation; climate change adaptation;
biodiversity; water; air; waste) and five ‘key’ cross-sectoral policies that have particular
environmental impacts (i.e. transport; energy; agriculture; fisheries; structural funds)
(European Environmental Agency 2010a). While these categorisations are useful for agenda-
setting purposes, policy makers still face major challenges in reconciling distinct and
potentially conflicting agendas. In relation to SMEs and entrepreneurship, the broad aims of
environmental policies include: (1) helping smaller firms to meet governmental targets (e.g.
reducing greenhouse gas emissions); (2) enabling larger firms and the public sector to source
from environmentally-sustainable suppliers; and (3) ensuring that SMEs are well-positioned
to take up the opportunities of a greener, low carbon economy. The interface between
environmental and enterprise policies is illustrated by the European Union’s 2020 plan,
which has a number of aims related to ‘sustainable growth’ including: ‘building a competitive
low-carbon economy that makes efficient, sustainable use of resources’; ‘protecting the
environment and preventing biodiversity loss’; and ‘capitalising on Europe's leadership in
developing new green technologies and production methods’ (European Commission 2011).
Policy makers are confronted with many options for improving environmental outcomes,
involving different uses of economic, regulatory, and support-based tools. This gives rise to
another set of choices, regarding the most appropriate forms of intervention to address
particular problems. For example, the challenges of climate change mitigation and adaptation
have prompted European governments to introduce more than 1,200 different measures to
date, with a particular emphasis on economic instruments and regulation (Table 1). While the
number and distribution of tools is bound to vary across different environmental policy-
making arenas, this illustrates the range of options available.
INSERT TABLE 1 ABOUT HERE
There are a number of questions to consider in relation to the design of any intervention. For
example, policy makers can select tools that are designed to act at various levels (e.g.
individual entrepreneurs, firms, supply-chains, industrial sectors, geographic regions). They
may decide to address particular areas of business strategy and operations (e.g. procurement,
product design, production, distribution). The selection criteria applied to these decisions are
themselves likely to be influenced by a number of factors, including: (i) emphasis given to
particular issues (e.g. energy efficiency is now seen as an important element in climate
change mitigation); (ii) specific characteristics of the individuals, firms and sector(s) being
addressed (iii); and broader contextual factors (e.g. political and economic systems, physical
infrastructure, educational attainment). As a consequence, policy choices are likely to vary
by country and region. For example, while some governments might have an ideological
preference for regulation, others will favour market-based mechanisms or other types of
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intervention. For example, many of the carbon reduction initiatives introduced within
Canada in recent years have been based around financial incentives and awareness-raising,
including rebates for energy efficiency retrofits(i.e. renovations of existing buildings) that
have been undertaken by SMEs (Burch et al. 2011: 1, NRC 2011). These differences in
overall approach, and the ways that policies evolve over time, can be illustrated with
reference to the field of waste management. Early waste management policies focused on
public health concerns, with a subsequent change in emphasis to incorporate protecting the
natural environment; these early policies were mainly implemented using pollution controls
and local planning rules. However, by the 1990s there was an increasing interest in achieving
waste prevention and increasing recycling rates (Wilson 2007). This led to the adoption of
new tools, including fiscal measures, target-setting for local authorities, communications
campaigns, and programmes to stimulate growth in recovered materials markets. Waste is a
global problem, and innovative approaches can be found around the world. For example,
Hong Kong combines waste charging to change consumption and disposal behaviours, with
public education initiatives, support for the recycling industry and a ‘Wastewi$e’ award and
labelling scheme for local businesses (Government of Hong Kong 2011). Fiscal measures are
also popular, with some countries, including Switzerland, combining free recycling facilities
with high charges for waste disposal (Federal Office for the Environment 2011).
Eco-industries are often seen as a special case in policy terms. Eco-industries have been
formally defined as ‘activities which produce goods and services to measure, prevent, limit,
minimize or correct environmental damage to water, air and soil, as well as problems related
to waste, noise and eco-systems’ (Organisation for Economic Cooperation and Development /
Eurostat 1999: 9). They incorporate technologies, products and services that reduce
environmental risk and minimize pollution, and include firms operating in sectors such as: air
pollution and control; waste management; soil remediation; noise and vibration control;
waste and waste water treatment; environmental monitoring; renewable energy; eco-
construction; clean technologies and processes; and environmental consulting. Conventional
enterprise policy tools may be deployed in these sectors as part of an effort to promote the
growth of individual firms, or for sectoral development.
It is unlikely that any one of these policy options will act as a ‘magic bullet’. Rather, the
overall approach adopted, including the tools used and the ways they are combined, is likely
to differ according to circumstances. Due to this inherent complexity, and the lack of
rigorous data on impacts and outcomes, it is not possible to make a straightforward
assessment of the relative strengths and limitations of any specific tool. However, there is
scope to learn from past and present policy interventions.
Policy tools in practice: a case-based comparison
Method and sample selection
In this section we examine four contrasting examples of environmental policy-making in
order to indicate how specific tools have been selected and combined, and to explore the
ways in which they have impacted on the environmental performance of SMEs and promoted
other forms of environmentally- sustainable entrepreneurial activity, such as eco-industry
start-up ventures and social or community-based enterprises. We have adopted a multiple
case study design (Yin 2008), as it enables us to explore the inter-relationships between
multiple causal factors in ways that are sensitive to contexts, while also providing scope for
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cross-case comparison (Becker 1992, Flyvbjerg 2006). The four sample cases have been
selected purposively in order to illustrate three prominent areas within environmental policy-
making, waste management, energy generation, and climate change mitigation (Table 2). We
have also examined research evidence from several different geographic contexts, including
cross-country comparative studies, and have addressed both SME and entrepreneurship-
oriented policies (Audretsch and Beckman 2007, Blundel and Monaghan 2009). The cases
have been constructed following an extensive literature search of secondary sources in each
sub-field, and in several cases we have incorporated research arising from our direct
engagement with SMEs in these areas
2
. The cases have been presented using a common
format to provide for cross-case comparison, with a focus on the practical implications for
policy-making
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. The first section of each case introduces the contexts in which the policies
were formulated and identifies relevant policy drivers. The second section specifies the
policy tools, or combinations of tools, that have been selected to achieve a particular set of
goals. The final section evaluates the outputs, immediate impact and longer-term outcomes
of these policies.
INSERT TABLE 2 ABOUT HERE
Case A: Encouraging anaerobic digestion of organic waste (United Kingdom)
Context and drivers: There has been growing pressure on local authorities and waste
management companies to reduce the amount of biodegradable waste, including garden and
food waste from households and businesses, sent to landfill. There are also pressures to
reduce reliance on energy generated from burning fossil fuels. The UK’s Department for
Environment Food and Rural Affairs signalled the Government’s commitment to anaerobic
digestion becoming an established technology for treating organic waste, particularly food
waste (Defra 2009a) to both divert waste from landfill and generate a source of ‘clean’
energy. Anaerobic Digestion (AD) is the process where plant and animal material is
converted by micro-organisms in the absence of air to biogas, containing about 50% methane,
and a digestate, which is rich in nutrients and can be used as fertiliser.
Tools and goals: Two distinct fiscal measures were put in place to support the development
of AD. Firstly, in April 2009, a £10 million funding package was announced to support new
composting and AD facilities. Secondly, as a result of changes introduced by the Energy Act
2008, AD technologies will be amongst those receiving additional support in the form of two
Renewable Obligation Certificates (ROCs)
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(Defra 2009b). In addition to these financial
incentives, other kinds of policy tool are influencing AD adoption. Regulatory targets were
set by UK governments in order to comply with the EU Landfill Directive (EU 1999), and
reinforced by the fiscal penalty of a landfill tax charged on every tonne of waste sent to
landfill. These measures encouraged the collection for recycling of suitable waste materials.
Without them, there would be insufficient feedstock (i.e. source material) for the growing
number of digesters, the majority of which are processing organic wastes from either
industrial, commercial and household sources. The volumes of waste diverted from landfill
have increased significantly over the last decade. For example, the number of local
authorities collecting household food waste separately for recycling increased from 6 to 173
in the period 2000 to 2010 (Brook Lyndhurst 2009, AFOR 2011b).
Another policy development funded by Defra as a business resource efficiency activity to
bring benefits to businesses operating AD plants is the Quality Protocol (QP) for AD
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digestate which was introduced in 2009. By conforming to the QP, their digestate can be
registered with the Biofertiliser Certification Scheme and the digestate is no longer
considered a waste material but a quality product. This offers businesses the benefit of
freeing them from Environment Agency regulation and makes it cheaper and easier for
businesses and the agricultural community to use the digestate on farmland (WRAP 2009).
This policy measure is designed to make AD a more attractive business venture and confer an
environmental quality standard on the industry. A similar approach with a QP for the
composting industry, introduced in 2007, has been very successful with that industry.
Evaluation: The UK has seen considerable growth in AD (outside of the water industry),
from just 10 plants in 2008 to 68 plants in 2011 (Thomas et al. 2009, WRAP 2012). These
include 44 facilities fed by industrial, commercial and household organic waste materials
(including 26 processing food wastes) and 24 farm based facilities. This growth is set to
continue with over 100 plants having received planning permission in 2011 and a further 80
awaiting planning permission (WRAP 2012). The majority of businesses involved in this
sector are SMEs. Recognising this and the importance of the uptake of AD technologies by
rural and small businesses, the UK’s Technology Strategy Board recently awarded a
government funded grant of £880,000 specifically for the development of small scale AD
technology (Edie 2012). The intervention appears to have been successful overall, with the
recent rapid growth in AD businesses being attributed, at least in part, to the financial
incentive of ‘double ROCs’, which are encouraging many SMEs to invest in the technology.
As one manager commented, ‘I think it’s the double ROCs that are driving it – people are
getting excited about this.’
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However, the policy landscape is rather more complex. The
‘pull’ applied by fiscal tools needs to be seen in the context of the broader regulatory ‘push’
to divert organic wastes from landfill and the increasing awareness of climate change
mitigation. AD is also presented as a technology that can deliver positive benefits in
reducing greenhouse gas emissions: digesting one tonne of food waste anaerobically, rather
than sending it to landfill, is estimated to save between 0.5 and 1 tonne of CO2equivalent
(Defra 2009b).
Case B: Creating web-based waste management support services (Germany/UK)
Context and drivers: Government agencies and third sector organisations in both countries
have a long history of supporting SMEs by providing information and advice on waste
management issues. This includes giving guidance on compliance with regulations and
highlighting opportunities to reduce and recycle waste. The growth of the internet, and
associated web-based applications, has created new possibilities for engaging with SMEs.
Tools and goals: Since 1994, the UK the government has funded a support agency,
Envirowise, to deliver free, independent advice to UK businesses with the aim of enabling
them to increase profitability and reduce environmental impact. Also, UK Environment
Agencies have supported NetRegs, an online tool designed to provide users with clear and
concise information on legal compliance and environmental good practice. Both aim to
reduce the amount of environmental harm caused by SMEs. The German national waste
prevention plan also seeks to support and encourage pro-environmental actions through an
online database, which facilitates coordination and networking. This includes areas such as
eco-design, where the database highlights measures that support SMEs developing
environmentally-friendly products. A consulting programme in Hamburg is showcased,
where firms receive advice from industrial designers and product engineers (ETAP 2011).
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Evaluation: Penetration of information-based support services has often been limited. In the
case of NetRegs, a recent survey indicated that only 5% of SMEs had heard of the site (EA
2009). Levels of awareness were low but improving: in 2003 only 18% respondents was able
to name any piece of environmental legislation unprompted. Six years later, the figure had
risen to 23% (EA 2003, 2009). UK research also showed an underlying issue regarding
perceptions of environmental impact: before prompting, only 7% of businesses believed that
they undertook any activities that could harm the environment (EA 2009). However, once
prompted with a list of activities that are potentially harmful to the environment, 46% of the
businesses surveyed stated that they carried out one or more of the mentioned activities (EA
2009). A recent evidence review of business waste prevention found that even though
businesses demand support in environmental matters, the response to the offered support
programmes is generally low and predominantly embraced by companies already engaged in
environmental issues (Oakdene Hollins et al. 2012b: 27).
The ability to convert pro-environmental attitudes into operational changes has been
identified as a key obstacle (Tilley 1999, Schaper 2002, Revell and Blackburn 2007). There
are indications that attitudes amongst SMEs can be as receptive to environmental issues as
with larger companies but that their behaviour is more constrained by resources (including
staff capacity, skills and expertise, and access to capital) and in the case of waste prevention
they also often lack conceptual understanding of the true costs of waste (Oakdene Hollins et
al. 2012a: 29). Business support agencies attempt to overcome these barriers by providing
advice and reduction of costs has been found to be a main motivator of companies to accept
offers of support. Where it does engage effectively with SMEs, business support was found
to play an important role in encouraging and helping SMEs to reach full legal compliance and
generally effective in helping companies to reduce the generation of waste (Oakdene Hollins
et al. 2012b: 27).
The lack of cohesion in provision of recycling services in the UK may also be a contributory
factor, with each SME having separate contracts with different waste management
companies
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.Evaluating waste prevention requires assumptions about ‘the kind and amount of
waste would have been generated without the measure’ (Dehoust et al. 2011: 8). The study
also found networking was a key requirement: ‘Often there is a lack of opportunities to
exchange experiences between stakeholders (producers, retailers, consumers, government,
etc.) in order to realise possible learning effects. For the policymakers structures such as the
Swedish Waste Council, enabling its participants to exchange experiences in the areas of
waste prevention and resource management would also be desirable.’ (ibid.: 18). Regarding
achievements in waste prevention, it is difficult to separate the role of business support
organisations from price signals set by taxation or the need for companies to comply with
new regulations. A study by the UK’s National Audit Office found it impossible to
disentangle the effect of introducing the UK Landfill Tax from the effect of accompanying
business support by the BREW (Business Resource Efficiency and Waste) Programme
(Oakdene Hollins et al. 2012b: 28). This Defra-funded evidence review concluded that the
academic and technical literatures do not yet indicate the right balance, between regulatory or
supply-chain pressure on the one hand and the enabling business support on the other hand, to
achieve the most effective approach to waste prevention (ibid.: 28).
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Case C: Promoting wind energy innovation and entrepreneurship
(USA/Denmark/Germany/Netherlands)
Context and drivers: With its large coastline, strong prevailing winds and lack of alternative
sources of energy, Denmark was well-positioned to develop wind energy. Simple wind
turbines had been used in Denmark in the early 20th century, but today’s familiar three-blade
turbine originates from a design pioneered by Johannes Juul, which remained in operation
between 1956 and 1967. Juul’s ideas were revived in the early 1970s, when the global oil
crisis led politicians and others to seek alternative sources of energy. Danish wind turbine
pioneers of this period included many self-builders, who included both amateur enthusiasts
and grassroots opponents of nuclear power. Their work was promoted by the magazine
Naturlig Energie and by the Danish Windmill Owners Association, both of which were
founded in the late 1970s (Gipe 1995: 59). The United States also had a long track record in
wind energy generation, which was also rooted in its historical and geographical context
(Righter 2008). These factors, coupled with technological expertise and large-scale
manufacturing capabilities, created a distinctive ‘big science’ approach to technological
development (Heymann 1998, Garud and Karnøe 2003). From the 1970s, the Dutch
government began to introduce policies to promote wind energy, prompted by a combination
of environmental concern and economic interests in developing a competitive wind turbine
manufacturing sector (Breukers and Wolsnik 2007: 93). The introduction of environmental
policies in Germany was somewhat later, with a significant variation between the Federal
states; they became more prominent in NRW after 1998, when the Greens became part of a
government coalition (Agterbosch and Breukers 2008: 638-642).
Tools and goals: The Danish government founded a small wind turbine testing station at
Roskilde, and also intervened to subsidise and regulate the emerging industry. At this point
Vestas, a small manufacturer of farm equipment and cranes, decided to develop wind
turbines. In 1979, the firm signed a licensing agreement with a self-builder, Karl Erik
Jørgensen, to produce one of his new designs. Meanwhile, policy-makers in the United
States identified the aerospace industry as the obvious source of expertise on turbine design
(Gipe 1995: 56, 83-86). Government intervention in the United States also took the form of
fiscal measures, notably tax credits that were made available for wind farm construction
projects. In the German state of North Rhine-Westphalia (NRW), federal and state-level
policies were oriented towards grassroots initiatives in the early years. As in Denmark, new
entrants, including farmers and small, community-owned projects, were actively encouraged.
In NRW, policy tools included granting access to the electricity grid for smaller scale
generators and providing revenue streams in the form of preferential feed-intariffs, or
stromeinspeisungsgesetz (Agterbosch and Breukers 2008: 639, Klaassen et al. 2005: 229-
230). By contrast, in the Netherlands, wind energy policy tended to favour large incumbent
energy companies over independent entrepreneurs.
Evaluation: While US engineers concentrated on perfecting the aerodynamic qualities of
their designs, their Danish counterparts focused on reliability. Danish designers were in more
regular contact with the user community, which comprised mainly small independents and
co-operatives, sharing their ideas through regular ‘wind meetings’. Geographic proximity,
varied site conditions and a spirit of open experimentation helped generate a rapid pace of
learning, based on practical experience in the field. Danish designers were responsible for
several key innovations, including glass fibre blades, which had their origins in boat building.
Despite changes of government, the political coalition around wind energy was sufficient to
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‘steer’ the industry towards maturity, with a gradual reduction in subsidies in the decade to
1989 (Garud and Karnøe 2003: 293). By contrast, fiscal incentives in the US encouraged a
speculative boom, with installations being constructed in order to obtain tax breaks rather
than to generate electricity (Asmus 2000: 116). There was a dramatic collapse in the mid-
1980s when tax credits were withdrawn, with financial failures, expensive lawsuits and many
turbines left rusting and unused (Gipe 1995, Asmus 2000: 122). Despite this setback, the
wind power generation industry in the US has recovered much of its momentum; the US now
has the world’s second largest installed capacity after China, and the Department of Energy
has an ambitious strategy to develop offshore wind generation (DoE 2011). There is also
evidence that wind energy policies in NRW played some role in accelerating the growth of
the industry in the region. This has been explained in terms of a greater diversity of
entrepreneurial experimentation, and in the capacity of grassroots activism to promote a
wider social acceptance of these technologies (Devine-Wright 2005, Pasqualetti et al., 2002).
In the Netherlands, policies that enabled incumbent energy distribution companies to
dominate the market impeded other entrepreneurial actors in their efforts to obtain a fair price
for price they received for wind-generated electricity (Agterbosch and Breukers 2008: 638).
From the mid-1990s, many of the locally-owned initiatives in NRW were displaced by larger
organisations. This was followed in 2002 by a radical reframing of Dutch policies as part of
the new energy transitions management programme, or energie transitie (Breukers and
Wolsink 2007, Kern and Smith 2008), the German wind energy industry continued to expand
at a faster rate than that of its counterpart in the Netherlands. A comparative analysis of wind
energy policies in Denmark, Germany and the UK drew broadly similar conclusions, noting
that, ‘R&D policy in Denmark was most successful in supporting innovation, and capacity
promoting subsidies were most effective in Denmark and Germany in stimulating innovation
(Klaassen et al. 2005: 237).
Case D: The ‘roof transition’ – a case of policy entrepreneurship? (The Netherlands)
Context and drivers: Recent years have witnessed the adoption of systems thinking to
promote policies for sustainable production and consumption in a range of European
countries such as Austria, Belgium and Finland (Geels et al., 2008). A systems thinking
approach demanding a much greater integration of environmental, innovation and
enterprise policies posits that the environmental impact of any product or process can only
be understood with reference to the wider system (e.g. domestic energy or air transport), of
which it is part. It is only at the level of such systems that configurations of social and
technological innovations can bring about the necessary degree of change (or transition)
required to address deeply-rooted and pervasive environmental challenges. This approach to
combining environmental, innovation and entrepreneurial policies for sustainability is most
developed in the context of The Netherlands, under the label of ‘transitions management’.
Initially a policy experiment in 2002, transitions management had by 2005 evolved into a
substantial policy programme to help The Netherlands make the transition to a more
sustainable energy system by 2050. Since then, transitions management has been
implemented by government departments and public agencies in other domains, such as
healthcare (in The Netherlands) and waste/resource management (in Belgium) (Loorbach and
Rotmans 2010).
Tools and goals: Transition management policies typically combine two goals. First, they
seek to increase pressure on an existing system through mechanisms such as financial and
regulatory instruments. Second, they seek to stimulate and support the emergence and
12
development of protected environments or niches - where experimentation with new
concepts and radical innovations may take place. There are many challenges in translating
grassroots innovations to the level of the socio-technical regime (e.g. Seyfeng and Smith
2007, Monaghan 2009). However, success in the first dimension of transition management
should create windows of opportunity in existing systems for the wider diffusion and
mainstreaming of sustainable innovations developed in the niches.
Entrepreneurs and entrepreneurial activity are pivotal in experimenting with innovation in
transition niches. However, given the scale of transitions envisaged at the system level, less
emphasis is placed on supporting individual entrepreneurs with potential ‘silver bullet’
solutions to a specific environmental problem. Rather, action is directed towards developing
networks and coalitions around innovation niches involving not only entrepreneurs but
other parties such as policy makers and regulators, sectoral professionals, NGOs, user groups
and providers of financial support. As frontrunners with radical concepts and ideas outside of
the mainstream, entrepreneurs need to be empowered to build their own innovation networks.
This requires a certain amount of protected space (financial, mental, organisational, juridical,
regulatory) in order to “find out in practical situations what the potential of various
alternatives is and to try and develop them further so that they can make practical
contributions to sustainability” (Hoogma et al. 2005: 234).
Transitions researchers also have argued that several instruments should be used in
combination in order to empower entrepreneurs and other frontrunners, and so influence the
direction of niche-oriented innovation processes (Geels et al. 2008: 12):
Visions: There is evidence to suggest that, ‘many frontrunners see only parts of the
problem or have difficulties with building an integrated puzzle of the problem
(Loorbach and Rotmans 2010: 244). A range of visioning tools have been identified to
overcome these obstacles, including: foresight exercises, scenario workshops, ways of
translating long-term visions to short-term actions, methods for opening up (i.e. ‘out
of the boxthinking) and closing down (i.e. reaching temporary closure in order to
move the initiative forward).
Learning processes: Innovation can be encouraged with tools such as, R&D
subsidies, subsidies for programmes of experimentation and pilot projects,
codification and exchange of experiences, training and competence building. Public
procurement policies can also be re-oriented to include innovative potential alongside
conventional cost and efficiency criteria.
Networks: Public agencies and other organisations can use network management
methods and participatory methods to facilitate multi-stakeholder interactions, which
promote debate and negotiation. Transition researchers suggest that networks of this
kind are more effective if they are aligned with horizontal, sector-specific policy
coordination (e.g. transport, energy, housing, economy, spatial planning) (Geels et al.
2008: 13).
The ‘roof transition’, which was prompted by the need to reconsider bitumen’s traditional use
as a roof coating, illustrates how a transition initiative can be driven by independent
entrepreneurial activity. In 2007, the CEO of EHSA, a manufacturer of bituminous products,
began to formulate a strategy to transform roofs into products that could contribute to
sustainable energy, efficiency and CO2reductions within 10-15 years. Recognising that a
fundamental change would be necessary to realise this vision, the CEO established an
13
innovative niche called the ‘Earth Recovery Open Platform’ (EROP). EROP involved a range
of stakeholders, ‘municipalities, local water boards, large manufacturers of roofing products,
knowledge institutes, companies where implementation was envisaged, environmental
NGOs, architects, urban planners and energy companies’ (Loorbach and Rotmans 2010: 240).
EROP developed a range of visions for the future role of roofs, reframing them as energy
producers, heat repositories, air cleaners and building coolers. A number of ‘roof
development companies’ have been established based on these visions. Each company is
explicitly linked to persistent societal problems such as poor air quality in urban areas and
energy dependency. Their role is to identify roofs that could be developed to contribute to
sustainability, while also creating extra value for local municipalities. EROP is now at the
experimentation stage, but it is already generating results. For example, as part of a wider
programme in the city of Rotterdam, 80,000 m2of green roof has already been installed, and
160,000 m2expected to be in place by the end of 2014 (Rotterdam Climate Initiative 2012).
ESHA opened the first 100% bitumen-recycling plant in 2008, and is now developing new
ranges of CO2-extensive roofing equipment (Icopal 2012).
Evaluation: Given the experimental nature of innovation niches and their dynamic learning
processes, combined with the fundamental sectoral change required to realise the 10-15 year
transition towards sustainable roofs, it is no surprise that ESHA has yet to make any
substantial return on its investment in the ‘roof transition’. While the roof producers have
achieved a consensus regarding the role bitumen roofs could play in reducing CO2emissions,
recent studies indicate that there has been a significant amount of competition over the
specific technologies and practices to use. This has been compounded by other barriers to the
wider mainstreaming of the ‘roof transition’, including existing regulations (e.g. roofs cannot
currently be leased or treated as energy production facilities) and economic structures (i.e. the
social value of the transition has not been translated into monetary terms) (Loorbach et al.
2010). Nevertheless, this transition has demonstrated how the shared vision of entrepreneurial
actors in an industry sector can stimulate broader institutional changes:
By strategically tuning into the current political debate and favourable climate for
sustainability in the Netherlands, the ‘roof transition’ has been adopted by national policy as
one of the central innovation programs for the built environment and the norms developed
within EROP have been adopted as national policy’ (Loorbach and Rotmans 2010: 241).
Concluding discussion
This paper has argued that SMEs have an important role to play in addressing today’s
environmental challenges. Policy interventions will be necessary in order to achieve current
and future sustainability targets in Europe and elsewhere. There is a requirement to improve
the environmental performance of existing SMEs and to guide entrepreneurial firms in more
sustainable directions. Such actions may also generate opportunities to reduce costs, improve
other performance measures and promote innovative entrepreneurial activities in emerging
‘green’ industries. When framing policy, it is important to clarify the environmental goals to
be pursued and their relationship to other goals, such as supporting smaller businesses or
enhancing competitive advantage. There is a great deal of heterogeneity, and as others have
noted, CSR and sustainability policies need to reflect geographical, sectoral and firm-level
specificities (e.g. Spence and Perrini 2010: 40, Cooke 2010: 264-265). In some cases, the
economic, social and environmental arguments for pro-environmental actions may coincide,
14
but in others there will be unavoidable trade-offs. These situations raise a number of issues
for those seeking to encourage more environmentally-responsible activity by smaller firms.
The four cases illustrate some of the different ways that policy tools have been combined in
order to improve environmental performance. The different outcomes can be explained by a
combination of factors, including the choice of policy tools, the context in which they were
applied, and the response of non-governmental actors, including local communities and large
corporations. For example, in Case A, a range of policy interventions played a role in
promoting the growth of anaerobic digestion (AD) businesses. However, it would appear that
direct fiscal incentives were important in making investment in this sector more attractive and
that without it the rapid expansion in AD may not have occurred. In the area of business
support (Case B), the agencies involved saw themselves as offering indirect financial
incentives in the win-win scenario that were helping SMEs to cut their costs as well as
reducing their environmental impact. Historical influences often play an important role, as
indicated in Case C, where initial differences in wind in public policies influenced subsequent
patterns of entrepreneurship in wind energy manufacturing. One of the over-riding themes in
recent literature has been the need for much better integrated policies in order to promote
environmental responsibility. Governments have often been encouraged to develop more
coherent and integrated entrepreneurship policies (e.g. Audretsch and Beckman 2007).
Similar calls are being heard in relation to environmental policies, with environmental
campaigners, industry bodies and entrepreneurs expressing similar views, especially in
relation to global environmental issues. To take an example from further afield, in their
recent report, ‘Seizing the Sustainability Advantage’, leading firms in Australia’s built and
natural environment sectors voice concern about national and state policies:
‘Australian governments’ fragmented responses to climate change, and diluted incentives
towards achieving a sustainable built and natural environment, reduce our competitive
advantage in the global economy and increase the risks to which the Australian community
are now exposed.’ (Consult Australia 2011: 4)
Such integration is possible, given the necessary political will and technical competence. For
example, in Case B, we saw how different tools might be combined in support of a particular
policy goal. The German government’s researchers identified one of the important objectives
of a national waste prevention programme as creating ‘a strategic reference framework’
capable of coordinating actions at the federal, state and municipal level. The authors saw a
common approach as generating significant synergies between the different individual
projects (Dehoust et al. 2011: 18)
7
. Case D also showed how coordinated interaction is also
central to the transitions management approach, though national and regional governments do
not always need to take the lead. Commercial and societal actors can also play the role of
‘institutional entrepreneur’, creating and mobilizing other people around new visions of the
future that diverge from established structures and practices (Battilana et al. 2009).
Though there are some good examples of coordination of this kind, progress towards more
integrated policies is still in its early stages. Many issues remain open to debate, including
the ways that such coordinated transitions are governed, how they can be adapted to fit
different contexts, and the role that entrepreneurial actors of various kinds might play in
facilitating or resisting change (Grin et al. 2010, Smith et al. 2005). It seems increasingly
likely that policy-makers will need to seek new solutions, including the use of commercial
and social entrepreneurs, in order to facilitate the kinds of sustainability transitions that are
15
now needed. In some countries, a preference for independent entrepreneurial action over
direct state intervention may reflect prevailing political and social values. However, given
the continuing dislocation in the global economy, with many national governments operating
under increasingly severe fiscal constraints, there is now a more general requirement to
consider alternative options. Furthermore, if entrepreneurs and SMEs are to take a more
active role in future sustainability policy-making, it will become increasingly important to
ensure that a diverse range of voices is heard, and not simply those of incumbents and others
with a vested interest in the status quo (Spence et al. 2000). This concern links into a broader
question, regarding the ways that governments might draw more effectively upon
entrepreneurial actors of various kinds in the implementation of sustainability strategies
(Moon et al. 2009: 268, Blundel and Monaghan 2009).
This paper has reviewed a growing body of research on environmental responsibility in
smaller and more entrepreneurial firms, with a particular focus on policy-making in Europe.
The evidence presented in the four case studies has reinforced Morsing and Perrini’s (2009)
statements regarding the ‘collective grandness’ of SMEs, and provided additional empirical
support with respect to specific sustainability issues. As Cases A and B have indicated, SMEs
are indeed vitally important players in environmental terms by virtue of their combined scale
and impact on the natural world. We have addressed a complementary strand of argument in
this paper, highlighting what might be termed the ‘prospective grandness’ of entrepreneurial
agency. Cases C and D have each demonstrated how such agency might be guided in ways
that could help to address environmental problems. One of the most important research tasks
over the next decade will be to expand this work in order to inform more effective policy-
making. Researchers are likely to require relational approaches such as network mapping and
in-depth case studies in order to examine the interactions and interdependencies between the
multiple actors (e.g. SMEs, municipalities, research institutes) as they engage with particular
sustainability transitions. It will also be important to conduct more comparative studies in
order to tease out the impact of contextual factors (e.g. differences between SMEs according
factors such as industry sector, size, geographic location, degree of social embeddedness and
commercial orientation). A research programme of this kind could inform future
interventions, ensuring that policies are sufficiently sensitive and flexible to take local
specificities into account. The obstacles to promoting greater environmental responsibility
amongst Europe’s smaller firms might appear insurmountable given current economic, fiscal
and political constraints. However, across Europe and beyond, there are countless examples
where innovative and entrepreneurial energies are being directed towards a more socially-
and environmentally-sustainable future. The critical task for policy-makers is to devise more
effective vehicles for the promotion and governance of such activities over extended periods.
16
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21
Figures and Tables
Figure 1: The average environmental impact from SMEs in the EU27 per sector
NOTE: CAN BE PRESENTED AS ORIGINAL GRAPHIC (ABOVE) OR SOURCE DATA (BELOW)
Austria
55%
Belgium
59%
Bulgaria
62%
Cyprus
86%
Czech Republic
58%
Denmark
55%
Estonia
75%
Finland
57%
France
57%
Germany
61%
Greece
75%
Hungary
61%
Ireland
64%
Italy
72%
Latvia
75%
Lithuania
70%
Luxembourg
57%
Malta
73%
Netherlands
67%
Poland
57%
Portugal
74%
Romania
52%
Slovakia
51%
Slovenia
61%
Spain
72%
Sweden
58%
United Kingdom
53%
Total
64%
Source: Calogirou et al. (2010: 60 - Table 31)
22
Figure 2: Cost reductions and green business opportunities for SMEs
Source: Calogirou et al. (2010: 138 - Figure 6)
23
Table 1: Main focus of policy making: climate change
Type of measure
Number of citations
Economic
371
Regulatory
342
Information
182
Fiscal
119
Voluntary
80
Planning
76
Education
49
Research
39
Source: European Environmental Agency (2010b)
Table 2: Policy tools in practice - four case illustrations
Case
Details
Policy tools deployed
A
Encouraging anaerobic digestion of organic
waste (UK)
Fiscal
Regulatory
B
Creating web-based waste management
support services
(Germany/UK)
Information
Education
C
Promoting wind energy innovation and
entrepreneurship
(Denmark/USA)
Fiscal
Regulatory
Research
Voluntary
D
The ‘roof transition’- a case of policy
entrepreneurship?
(The Netherlands)
Voluntary
Research
24
Notes
1
The climate change mitigation policies reviewed in this paper reflect current climate change
science (e.g. IPCC 2007, IEA 2011: 377-458). While there is a general consensus in the
peer-reviewed scientific literature, public policy-making is also shaped by competing
priorities and can be influenced by the countervailing discourses of climate change scepticism
and denial (e.g. ).
2
This includes evidence gathered from direct engagement during a project auditing waste
from SMEs (Thomas et al. 2006), subsequent research on SMEs involved in anaerobic
digestion (Thomas et al. 2009), a study of grassroots innovation (Monaghan 2009), and
survey-based research on SMEs and environmental responsibility (Blundel and Gray 2010).
3
Flyvberg (2006: 240) cites Abbott’s (1992: 79) observation that case-based narratives are
capable of providing, ‘far better access for policy intervention than the present social science
of variables’.
4
The Renewables Obligation is the main support scheme for renewable electricity projects in
the UK. Renewables Obligation Certificates (ROCs) are issued to accredited generators of
eligible renewable electricity generated within the UK and supplied to UK-based customers.
ROCs place an obligation on UK electricity suppliers to source an increasing proportion of
their electricity from renewable sources; their tradability provides income for renewable
electricity generators.
5
Telephone interview with a manager in an SME involved in waste management and
composting and now developing an Anaerobic Digestion (AD) enterprise.
6
In the UK there is an intention to encourage local authorities to provide adequate recycling
facilities for SMEs, either through direct service delivery or by facilitation (Defra 2009a).
The report cites evidence that recycling rates on industrial estates and business parks could be
improved, offering significant environmental and economic benefits.
7
Business representatives in Australia have made a broadly similar recommendation, with
proposals for a ‘Commission for a Sustainable Australia’ capable of driving ‘innovation and
new technology pathways for a sustainable future’, a National Sustainability Framework and
a National Adaptation Plan for Action (Consult Australia 2011: 9).
... Given the economic importance of SMEs and their impact on social and environmental issues, efforts to promote sustainable development are unlikely to succeed without the involvement and commitment of SMEs. Moreover, some countries cognizant of the key role of SMEs in achieving sustainable development objectives have developed sustainable development policies geared specifically toward SMEs (Pimenova and van der Vorst, 2004;Parker et al., 2009;Blundel et al., 2013;MDDELCC, 2015;European Commission , 2020). However, despite the implementation of such policies, SMEs struggle to integrate social and environmental issues into their business practices. ...
... In seeking to account for the limited integration of sustainable development in SMEs, the literature has identified a number of barriers (e.g., del Brio and Junquera, 2003;Revell and Rutherford, 2003;Brammer et al., 2012;Blundel et al., 2013;Johnson and Schaltegger, 2016). Barriers specific to SMEs include a limited awareness of the impacts and benefits associated with sustainability, a lack of time and resources, and a lack of skills and expertise. ...
... A large body of research has examined and highlighted the barriers to adoption of sustainability practices within SMEs (e.g., del Brío and Junquera, 2003;Revell and Rutherford, 2003;Brammer et al., 2012;Blundel et al., 2013;Johnson and Schaltegger, 2016). Three main barriers identified in the literature are examined in this study: lack of awareness of the impacts and benefits associated with sustainability; lack of time and resources; and lack of skills and expertise. ...
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... Moreover, the study of Blundel et al. (2013) cited that small, medium-sized companies have conducted sustainability practices to address problems in terms of quality features of their product and services. Furthermore, Aminu (2018) indicated that the orientation of stakeholders creates value for all stakeholders, both social and financial as part of their sustainability practices. ...
... In a singular state, indicators such as sales revenue, increase output unit cost of production, optimize labour utilization, and optimize capital utilization are correlated to sustainability practices. The findings of the study were congruent to the findings of Jayeola (2018) and Blundel et al. (2013) that there were significant correlations between sustainability practices and qualitative productivity. The study highlighted that sustainability practices plays a significant role on productivity. ...
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This study aimed to determine the best fit model on qualitative productivity. In particular, sustainability practices, organizational performance, and quality management practices were investigated with the use of adapted questionnaires as tools in gathering the primary data from the 400 respondents in Region XI. The research design used in the study was descriptive-correlative technique using Structural Equation Model. Findings reveal that sustainability practices, organizational performance, and quality management practices have significant relationships with qualitative productivity. All latent exogenous variables significantly influence the endogenous variable qualitative productivity. Model 4 was depicted as the best fit for this study, and it revealed qualitative productivity was influenced by sales revenue and optimization of labour capitalization, anchored on the strong evidence sustainability practices influenced by stakeholder orientation and sustainability features of products and services; organizational performance defined by financial and market performance; quality management practices defined by leadership and process management.
... Moreover, the study of Blundel et al. (2013) cited that small, medium-sized companies have conducted sustainability practices to address problems in terms of quality features of their product and services. Furthermore, Aminu (2018) indicated that the orientation of stakeholders creates value for all stakeholders, both social and financial as part of their sustainability practices. ...
... In a singular state, indicators such as sales revenue, increase output unit cost of production, optimize labour utilization, and optimize capital utilization are correlated to sustainability practices. The findings of the study were congruent to the findings of Jayeola (2018) and Blundel et al. (2013) that there were significant correlations between sustainability practices and qualitative productivity. The study highlighted that sustainability practices plays a significant role on productivity. ...
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This study aimed to determine the best fit model on qualitative productivity. In particular, sustainability practices, organizational performance, and quality management practices were investigated with the use of adapted questionnaires as tools in gathering the primary data from the 400 respondents in Region XI. The research design used in the study was descriptive-correlative technique using Structural Equation Model. Findings reveal that sustainability practices, organizational performance, and quality management practices have significant relationships with qualitative productivity. All latent exogenous variables significantly influence the endogenous variable qualitative productivity. Model 4 was depicted as the best fit for this study, and it revealed qualitative productivity was influenced by sales revenue and optimization of labour capitalization, anchored on the strong evidence sustainability practices influenced by stakeholder orientation and sustainability features of products and services; organizational performance defined by financial and market performance; quality management practices defined by leadership and process management.
... For example, and according to a study conducted by the European Commission, SMEs were responsible for 64% of the industrial pollution in Europe (European Commission, 2010). In the UK context, SMEs account for about 60% of commercial waste and they cause about 43% of serious industrial pollution incidents (Blundel et al., 2013). ...
... This paper, therefore, extends, as well as contributes to the extant limited qualitative evidence by providing insights on why SMEs engage in SEPs. Additionally, and unlike previous limited qualitative studies that have largely been descriptive or relied on insights from innovation and grounded theoretical perspectives (Baron & Apitsa, 2019;Boiral et al., 2019;Blundel et al., 2013;Bos-Brouwers, 2010;Williamson et al., 2006), we use the legtimacy theoretical framework as proposed by Ashforth and Gibbs (1990) to explain why SMEs might voluntarily engage with SEPs. ...
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... Small firms are of critical import in ensuring economic and social prosperity, especially in developing countries as inextricable components of global production networks (Karam & Jamali, 2017). Equally, small businesses often generate high levels of innovation and serve as a foundation for longer term economic growth and development (Morsing & Perrini, 2009) while collectively having a considerable environmental footprint (Blundel et al., 2013). Small businesses are typically idiosyncratic and are diverse in relation to revenue, employee numbers and geographic reach (Bretherton & Chaston, 2005). ...
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... Por esse motivo, acadêmicos e formuladores de políticas estão reconhecendo, cada vez mais, o papel essencial que as MPEs devem desempenhar para a resolução dos problemas ambientais da atualidade (Aragón-Correa et al., 2008;Blundel et al., 2013). ...
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