Drivers of environmental processes and their impact on performance: a study of Turkish SMEs

Climate change and environmental pollution have become major concerns for a variety of stakeholders. Small and Medium-sized Enterprises (SMEs), which make up 99.8 percent of all businesses in Turkey, are responsible for approximately 70 percent of all industrial pollution. Based on their significance to the economy and their contribution to pollution, SMEs are not getting the research attention they deserve. In this study we explore the drivers (customers, legislation, social responsibility and expected benefits) of SMEs' environmental processes (disposal, reduction, recycling, design, and environmental management systems) and their impact on firm performance. We sample 500 Turkish SMEs using a cross-sectional design. Structural equation modeling (SEM) was utilized to test both the measurement and the structural models. Our research uncovers numerous significant findings. Although many drivers were found to be affecting various processes, the most influential driver was Expected Benefits, with the most significant forces being soft performance expectations like image, reputation, and brand. The strength of drivers is moderated by the sizes of SMEs. SMEs with ISO 14001 certification are likely to perform better on environmental processes, while disposal, design, and EMS are found to be positively impacting performance. Thus government regulations alone are not an effective way to deal with environmental pollution and climate change. SMEs need and want assistance from their business partners and governments. ► Expected soft benefits such as reputation are the most significant drivers. ► Disposal and design for the environment are positively correlated with performance. ► Environmental management system is positively correlated with performance as well. ► SMEs overstated their concern for the environment. ► SMEs with ISO 14001 certification seem to be stronger on environmental activities.