Eco-Strategies and Firm Growth in European SMEs

Abstract

This study investigates the effects of eco-strategies 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 find that European companies using renewable energies, recycling or designing products that are easier to maintain, repair or reuse perform better. Those that aim to reduce water or energy pollution, however, seem 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 observe 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.