Despite the plethora of studies on the impact of breakthrough developments on employment rates very few focus on environmentally beneficial innovations. In line with the White Paper on "Growth, Competitiveness and Employment" of the European Commission, this project conducted research involving case studies and interviews. Data derived from five European countries was further analysed to assess the relationship of environmental innovation and employment on the firm level. Unlike process innovations, product and service innovations have been found to have a positive effect on employment. The latter was found to be greatly affected by significant breakthroughs that are related to re-organisation. However, clean technologies regarding process and product integrated changes, as well as end-of pipe technologies concerning pollution control developments, or simply eco-innovations that involve cost-reductions can diminish jobs. On the other hand, market share as an innovation goal does not necessarily affect employment either positively or negatively. The analysis also showed that environmentally-focused innovations are skill-based and require highly qualified employees, which leads to employment increases. Additionally, small firms were found to create employment opportunities more easily than larger ones. Positive sales expectations are another factor that was found to increase employment. Although programmes for environmental support do not seem to directly affect labour market policies, the environmentally friendly modernisation of firms can have a major impact on inhibiting mass unemployment. Moreover, raising funds on cleaner products and services than end-of-pipe solutions may have a great potential for creating jobs.