Greening Enterprises: Transforming processes and workplaces

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What is a green enterprise? In general, several options are open to enterprises to reduce their impact on the natural environment, or “go green”. One option is to produce green goods and services, for example solar panels. Another option is to adopt greener production processes – in other words, to use renewable energy and sustainable raw materials, relying on technology that produces more output with the same level of inputs (resource efficiency), and to manage waste more efficiently. However, there is more to enterprises than what they produce and how they produce it. Enterprises are also workplaces. For many enterprises and workers today, the greening of workplaces can play a meaningful role in reducing carbon emissions. For example, sustainable commuting, energy and waste management at the workplace, teleworking and sustainable food at work are relatively common. In this context, the extent to which enterprises may be considered green depends on the extent to which they green their outputs, production processes and workplaces. Which enterprises are taking green measures? Among enterprises in the European Union (EU), in EU candidate countries, including Türkiye, and in the United States of America, large enterprises, enterprises enjoying high revenue or that sell their products or services to public administrations, were, in 2021, the year covered by the survey, more likely to have taken resource-efficient measures. This is in part because they benefit from easier access to green technology and have more legal obligations. But many micro, small and medium-sized enterprises (MSMEs) also implement energy-saving and waste management measures and save on material inputs. Some MSMEs working in supply chains are encouraged to adopt green measures at the request of buyers and investors. 

While green measures are taken in all sectors of the economy, enterprises engaged in the most carbon-emissive sectors are more likely to implement green initiatives than other enterprises, especially those providing technical services. The latter include manufacturing, electricity, gas, steam and air-conditioning supply. This report finds that the share of green enterprises is higher in countries with more stringent environmental standards, such as Austria, Norway and the United Kingdom. The demand for greener enterprises is driven by consumers and clients, environmental regulations, and cultural and institutional factors The impact of consumers and clients on business rationale for sustainability Consumers and clients are increasingly demanding sustainable products, as illustrated by Google searches for sustainable goods, which rose by 71 per cent between 2016 and 2020. Higher demand is a push factor for informal enterprises, especially those in the circular economy, engaged in the sale and purchase of recycled materials and the maintenance and repair of various goods. The major clients of MSMEs along global supply chains are large enterprises, which in turn are concerned about their reputation with consumers, investors, shareholders and their respective governments. The increase in environmental, social and governance (ESG) investing – which prioritizes the alignment of financial targets with ESG outcomes and the corresponding disclosure requirements – is an additional push factor.

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The growing scarcity of resources and the increased frequency of natural disasters are also drivers of the green transformation of enterprises. Green enterprises are more resilient to the consequences of environmental change. Some MSMEs have experienced adverse environmental impacts directly and have been forced to budget green investments as a means of survival, such as changing the site of production because of droughts. The role of laws and regulations in promoting environmentally sustainable enterprises The price of goods, just like the cost of waste disposal, does not fully reflect the fact that natural resources are limited and that waste has long-term effects on the environment, resulting in market failure. This is why legislative action and support for enterprises in transition can add value to both the economy and society, recognizing the specific constraints faced by enterprises. Regulations on the sustainable consumption of resources at the workplace and sustainable transport are a major driver of the greening of enterprises. Labour legislation governing teleworking and working-time organization, and providing workers with rights to protect the environment, is also becoming a common way to promote green workplaces. Green procurement and the legal framework for sustainable business models appear to be powerful tools to make enterprises greener and to better integrate their sustainable economic, social and environmental development. Many of the regulations that have an impact on enterprise environmental sustainability, green procurement and sustainable business models are fairly recent – two thirds of the regulations in force in 2019 were introduced after 2004 – and imply a vast adaptation effort on the part of enterprises. All regions are concerned, though Asia, Europe and Latin America have taken more legislative action than other parts of the world. Countries have continued to adopt legislation promoting sustainability and resource efficiency through environmental and labour legislation during the COVID-19 pandemic. In parallel with these regulations, enterprises continue to play an important role in protecting workers from occupational safety and health (OSH) risks resulting from climate change, and standards governing OSH are vital in this regard. A variety of legal and policy measures to make workplaces greener can be found around the world. Some of these measures are not compulsory, notably for MSMEs, but they provide a wealth of practices from which MSMEs can draw inspiration on their path to sustainability and a just transition. Although many environmental regulations have initial costs, such as energy-related measures, others mostly involve changes in behaviour. In both cases, training and technical advice, particularly on energy efficiency and waste management, are important to inform employers’ decision-making.

Culture, norms and social dialogue Culture and norms play a role in shaping the strategy adopted by entrepreneurs regarding the green transition, particularly that of owner-managers of smaller enterprises. Climate change has enlarged the traditional areas of negotiation between the social partners in many national and international contexts. However, more social dialogue at national level does not always mean more dialogue at the enterprise or local level. In fact, it is rare – though not unheard of – for social dialogue at lower levels to focus on supporting businesses’ efforts to change their production processes in order to reduce emissions and promote green workplaces.

What obstacles do enterprises face? Several constraints hinder climate action by multinational enterprises, such as uncertainty in climate policies, unavailability of green technology and lack of investment profitability. The adoption of green practices also remains limited in MSMEs in both developed and developing countries owing to limited access to finance and skills, lack of information and knowledge about innovation, and weak regulation enforcement in some contexts. Some MSMEs face barriers such as the complexity of administrative and legal procedures or the lack of supply of required materials, and a majority reported a lack of financial support for the green transition. In the case of informal enterprises, both formalization and the transition to environmentally and economically sustainable production are hampered by structural weaknesses of the economy and inadequate regulatory frameworks at the national and sector levels. Skills mismatches are identified as major obstacles to the greening of enterprises, notably in sectors outside energy and energy efficiency.