Which SMEs are greening?

Small and Medium-sized Enterprises (SMEs) could play a pivotal role in the pursuit of climate objectives. SMEs have a significant carbon footprint on aggregate, but they can also contribute to reaching net zero through their innovations and commitment to the use of environmentally friendly practices. This study develops a novel metric to identify environmental engagement, also referred to as “greening”. The study harnesses the power of machine-learning and analyses the content of over one million websites of firms from 15 OECD countries encompassing about 10 billion words. Greening is identified based on firms’ self-declared information about products or processes on their websites. The resulting indicator is then evaluated considering firms’ characteristics. The results show that: (1) About one-third of SMEs are environmentally engaged, albeit with considerable variations across countries; (2) Greening SMEs are more productive, pay higher wages and their sales grow faster than non-greening SMEs; (3) Solar energy is the most cited action among greening SMEs, followed by recycling and energy efficiency, (4) Sectors with higher greenhouse gas emission reduction over the past decade also display higher levels of environmental engagement.