Title page
Contents
Acknowledgements 4
Executive summary 7
1. No net zero without SMEs 9
2. A new greening indicator from contextual analysis of firms' websites 12
Step 0: Definition of environmental engagement in the firms' operations 12
Step 1: Text classification of firms' environmental engagement 16
Step 2: Training 19
Step 3: Prediction of the environmental engagement for each firm 19
Step 4: Validation with external sources 19
3. Evidence of the environmental engagement of SMEs 21
Data: firm-level information and coverage 21
Empirical framework 23
Results: micro and small firms lag behind in greening 23
There is ample space for environmental catching up across countries 24
Older SMEs are more likely to be greening, but the opposite holds for micro firms 25
Greening firms are located both in cities and remote areas 26
Successful SME performance predicts environmental engagement 27
SMEs are greening mainly through renewables and recycling 30
Environmental engagement is higher in "brown" industries such as extractive industries and manufacturing 33
4. Conclusion and policy discussion 37
Policies to increase environmental engagement in SMEs 38
Notes 40
References 42
Annex A. Further methodological details 45
Table 3.1. Descriptive statistics for the evaluated sample 22
Table 3.2. Faster growth and higher wages, and productivity are predictors of greening firms 29
Figure 1. Process and product greening in firms 14
Figure 2. Steps in the text classification to identify environmental engagement 17
Figure 3.1. Larger SMEs are more likely to declare their greening efforts 25
Figure 3.2. Firms are increasingly born green 26
Figure 3.3. Firms in distant regions show similar environmental engagement as in large cities 27
Figure 3.4. Solar, recycling and renewables are the most frequent greening strategies 30
Figure 3.5. Solar dominates in Belgium and Latvia 31
Figure 3.6. Recycling is more often mentioned by large firms 32
Figure 3.7. Solar dominates among construction SMEs, extractive firms mention recycling the most 33
Figure 3.8. Industries more engaged in greening reduce pollution the most 34
Figure 3.9. Environmental engagement is strongly associated with pollution reduction 35
Boxes
Box 2.1. Bias from self-disclosed information and the non-randomness of website existence 15
Box 3.1. Environmental engagement goes beyond emission reduction 36
Annex Tables
Table A A.1. The SME presence by country and their average environmental engagement 47
Annex Figures
Figure A A.1. Most SMEs are covered by the OECD-Orbis dataset 45
Figure A A.2. Web coverage among the firms in the OECD-Orbis is high 46
Figure A A.3. The green indicator covers one-third of small and nearly half of medium-sized firms 48
Figure A A.4. There is a considerable variation of firm greening between countries 49
Figure A A.5. Nearly all firms in the EU Emission Trading Scheme are green 50
Figure A A.6. Green firms have reduced a higher share of the emissions 52