Factors influencing sustainability practices of European SMEs: a multilevel analysis

Small and medium-sized enterprises (SMEs) are crucial drivers of the European economy, yet their collective environmental impact is substantial. This study investigates factors influencing the adoption of sustainability practices by European SMEs across nine categories: water savings, energy savings, renewable energy use, material savings, switching to greener suppliers, minimizing waste, selling scrap materials, recycling, and eco-design. Utilizing data from the Flash Eurobarometer 498 survey, a multilevel modeling approach is employed to account for the hierarchical structure of the data, with SMEs nested within countries. Probit regression models with random intercepts are used to assess the effects of SMEs’ characteristics (sector, size, age, revenue, product type) and country-level indicators (population density, GDP per capita, unemployment, education, air quality, environmental tax revenue) on the probability of adopting each practice. The findings reveal significant variability across European countries, with manufacturing, larger, and selling directly to consumers SMEs exhibiting higher adoption rates. Higher environmental tax revenues in a country correspond to lower adoption of sustainability initiatives by SMEs, suggesting penalties may not incentivize sustainable management. Results highlights the need for targeted policy interventions and support mechanisms tailored to specific SMEs’ sectors, sizes, and national contexts to accelerate the transition towards a circular, resource-efficient economy.