Does eco-innovation foster or hinder environmental performance? Recent evidence from Europe.
This study investigates the impact of country-level eco-innovation policies on the environmental performance of European firms. As different industries are expected to produce different levels of pollution, the study then explores the impact on the firms operating in sensitive industries. We use fixed effects panel data models to examine 1,098 firms listed in 22 European countries from 2010–2018.
The initiative taken by the United Nations (UN) at the Stockholm conference in 1972, encouraged businesses, societies, and governments to take actions regarding human rights, poverty, and the environment. Later, in 1983, a special commission has been established by the General Assembly to develop a report regarding global environmental issues and to propose strategies for sustainable development. Since then, environmental issues have become a key concern of global policymaking, specifically in the European Union (EU).
Since the establishment of a dedicated commission by the UN in 1983, environmental issues have become a key concern of global policymaking, specifically in the European Union.
In 1985, the European Commission adopted an Environmental Impact Assessment (EIA) Directive to assess the effectiveness of environmental-related policies in the EU. The purpose of the EIA Directive is to ensure that environmental integration is the cornerstone of European investment policies and to develop a “Sustainable Europe Investment Plan”. The European Commission has put in place a broad range of eco-innovation policies across Europe and the Commission also assesses the eco-innovation performance of the EU member states.
Scientific coverage of the topic
The enormity and complexity surrounding environmental issues have brought policymakers as well as academics to the forefront to investigate the impact of policies used to mitigate environmental issues and climate change risk. Accordingly, we observe an increasing frequency of empirical studies investigating the impact of green and eco-friendly tools on environmental performance. However, the existing relevant literature has some limitations. For example, cross-sectional analyses of survey studies do not provide clear evidence of causality and the empirical studies focus only on one or a few countries to shed some light on corporate innovation and corporate economic or financial performance. Therefore, we observe a scarcity of empirical studies using country-level data and concrete measures for eco-innovation to investigate the impact of eco-innovation on the environmental performance of firms to counter global warming.
We observe a scarcity of empirical studies using country-level eco-innovation data and concrete measures for eco-innovation.
This study aims to fill this gap by using a comprehensive multiyear index data that covers five main sub-indices designed by the European Commission and seeks to answer the following research question: Does country-level eco-supportive operating environment affect corporate environmental innovation and environmental performance?
Choice of metrics
Climate change is politically and economically connected in Europe, therefore, we use the EU eco-innovation index for 22 European countries and collect the data from 1,098 firms from 2010–2018 as European countries are regarded as pioneers in climate protection actions. The European eco-innovation index incorporates eco-innovation-related inputs, activities, outputs, resource efficiency, and socio-economic outcomes and reflects the environmental policies across the EU countries. Thus, the current study has several contributions to the existing literature. First, it empirically examines the impact of a comprehensive country-level eco-innovation on the environmental innovation and environmental performance of firms in the EU. Second, it investigates the impact of this country-level eco-innovation on the firms operating in sensitive industries as these firms have their specific environmental footprints. Results are important as they help to answer the questions of the usefulness of the current eco-innovation practices to corporate environmental performance and whether these practices make a difference in the environmental performance of sensitive industries. Results provide feedback to policymakers across the EU on the value of implementing a country-level eco-innovation to the environmental performance of listed firms and the creation of green business culture across industries.
Methodology
Panel data regression techniques
Applications and beneficiaries
This conclusion also demands attention from European policymakers to make their country-level eco-innovation efforts more inclusive and embrace sensitive industries; this policy shift would strengthen their capacity to tackle climate change and generate a synergy to arrest global warming more efficiently.
Reference to the research
Ahsan, T., Al-Gamrh, B., Qureshi, M. A., & Gull, A. A. (2024). Does eco-innovation foster or hinder environmental performance? Recent evidence from Europe. International Journal of Green Energy, 21(2), 205-215.
