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The relationships between competitiveness, environmental performance and management of Small and Medium sized European manufacturing firms

Deliverables

The aim of this research was to identify and weigh the importance of factors that promote and constrain, the adoption of environmental initiatives by SMEs. Contrasts were made of the factors, which influenced the environmental performance of SMEs in these industries in four countries: Germany, Italy, the UK and Republic of Ireland. Hypotheses Three hypotheses were tested. These concerned the relationship between investment in environmental initiatives and firm competitiveness, the role of the environmental culture of management, and the importance of external sources of advice. Data and Methodology Data were obtained from 844 postal questionnaires (PQ), 300 face-to-face (FTF) interviews with manufacturers, 300 face-to-face interviews with advisors and from industry specific focus groups. For analysis, firms were divided into three environmental performance groups; compliance; compliance plus and excellence. In the FTF interviews firms were also matched by size and product between these groups to control for other factors, which influence environmental performance. Findings The Influence of Competitiveness On firm competitiveness the research found no convincing evidence that firms with better economic performance adopt more environmental initiatives. What was clear is that the firm's competitive position is not a hindrance to environmental performance or that the take up of environmental initiatives weakens the competitive performance of firms. Analysis of the economic impact of the individual initiatives indicated that the furniture firms gained an overall marginal business benefit from the adoption of environmental initiatives. The benefit recorded for textiles and fruit and vegetable processing firms was greater. However there is variability in the economic effects reported by firms, and this is likely to influence their willingness and ability to adopt initiatives. There were some differences by size. Smaller firms in the furniture and textiles industries reported fewer positive benefits than larger SMEs, the reverse was the case for small firms in the fruit and vegetable sector. Employment Effects In all three industries there were small positive effects on employment. Obstacles to the Adoption of Environmental Initiatives The most important obstacle to the take up of initiatives was capital. Also important was, the pursuit of other management priorities, and a lack of skills, expertise or advice to adopt initiatives. In furniture regulatory uncertainty and the unproven nature of clean technology were highlighted as constraints. These constraints were independent of the current environmental performance of the firm. Environmental Performance and the Firms' Environmental and Economic Strategy While in general there was little association between environmental performance and the environmental strategy adopted by firms, there was some scattered evidence that more proactive environmental strategies were adopted by better environmental performers. Environmental Culture Attitudes towards the environment were positive. Environmental attitudes were not related to the environmental performance of sample firms. Poor environmental performers also held positive environmental attitudes. Importance of Advice There is an abundance of easily accessible and cheap advice. However most SMEs are unaware of the environmental impacts associated with their business activities and have a low awareness of environmental programs or resources available to them. As environment is not regarded as important, many SMEs do not feel the need for any advisory services, hence there were problems with the take up of advice. This is significant because SMEs can be isolated, and not have the networks to understand and evaluate technology. Advisors indicated that the support needs of SMEs varied enormously. Advisors identified shortage of resources (human and capital), resistance to change, lack of clear-cut cost savings and a negative firm culture as obstacles to better environmental performance. Policy Recommendations The implications of the research were first, that policy should not be constrained by the expected impact on competitiveness of pressure to improve the environmental performance of firms, though it must be recognised that the same pressure can lead to different economic outcomes across similar firms. Second firms need more expert help than they seek or realise they need, in order to adopt environmental initiatives. Third, poor environmental performance is not the outcome of a negative attitude to the environment. Product policy (such as eco-design) provides a further opportunity to boost the environmental performance of SMEs.