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News article23 August 2022Directorate-General for Environment

Factors promoting green growth include access to information on funding opportunities

Issue 583: Encouraging businesses to adopt more sustainable practices is a key element in EU environment policy. This study looks at a range of factors that influence the uptake of such measures by small- to medium-sized enterprises across the EU.

Factors promoting green growth include access to information on funding opportunities

The researchers report that having information on funding opportunities promotes green growth and recommend public-private partnerships as an appropriate funding model.

The EU has a strong environmental agenda which includes a policy focus on encouraging businesses to adopt more sustainable practices. This is facilitated by the European Green Deal1, Europe’s new growth strategy and several policies, such as the Circular Economy Action Plan2, supported by funding mechanisms, including the InvestEU programme. However, adoption of sustainable practices by small- to medium-sized businesses (SMEs) varies within and between EU countries. This study considers some of the key factors that can affect the level of uptake, with a focus on whether firms with more information on funding mechanisms are more likely to adopt sustainable practices.

The study drew on data from the Flash Eurobarometer 441 survey on European SMEs and the Circular Economy, which surveyed 10 618 SMEs from 28 EU countries in April 2016. This is combined with information from specialised databases including Eurostat, the EC Eco-Innovation Observatory and the World Economic Forum. The researchers analysed these factors to determine their impact on a firm’s decisions to adopt sustainable practices – defined as proceeding, in the last three years, to minimise energy consumption, waste, water consumption or use of materials in production, or to increase renewable energy use. The researchers claim that this is one of the first studies to combine micro- and macro-scale variables in this way. The analysis included factors relating to the individual business – such as firm size and investment in research and development activities – and the national context – such as resource productivity, the economy’s competitiveness level, the regulatory environment and the share of renewables in energy supply.

The researchers report that SMEs aware of the options for national financial support are 65% more likely to adopt or expand sustainable practices than those that are not. They say that adoption of sustainable practices is less common in both smaller firms and those that invest less in research and development – in line with results from previous studies suggesting that innovation is less common in relatively small businesses.

The study indicates that SMEs using their own funds were more likely to adopt a green business strategy than those using green loans or EU funding, regardless of the level of information that they had, and were reluctant to pursue green loans or funding from the EU due to administrative complexity. Findings showcase that at a national level, greater competitiveness (based on the World Economic Forum’s Global Competitiveness Index) was a major driver of decisions to improve sustainability. However, the researchers say that a rebound effect (a negative response to positive environmental action) takes place as an increased use of renewable energy at national level corresponds with a reduced adoption of green business strategies.

The researchers argue that provision of funding and dissemination of information about financial support can help to promote the adoption of sustainable business practices. However, they say that the success of this strategy depends on the type of funding, with grants and loans less likely to stimulate adoption than self-funding. They suggest that this indicates that public-private partnerships would be an effective model to promote uptake. They also recommend potentially valuable tools that include training for businesses on transitioning to a green economy and additional incentives for early adopters.

Footnotes

  1. European Commission (COM/2019/640), the European Green Deal
  2. European Commission (COM/2015/614; COM/2018/028; COM/2020/98), Circular Economy Action Plan

Source

Chatzistamoulou, N. and Tyllianakis, E. (2022) Green growth and sustainability transition through information. Are the greener better informed? Evidence from European SMEs. Journal of Environmental Management 306: 114457.

To cite this article/service:

Science for Environment Policy”: European Commission DG Environment News Alert Service, edited by SCU, The University of the West of England, Bristol.

Notes on content:

The contents and views included in Science for Environment Policy are based on independent, peer reviewed research and do not necessarily reflect the position of the European Commission. Please note that this article is a summary of only one study. Other studies may come to other conclusions.

Details

Publication date
23 August 2022
Author
Directorate-General for Environment

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