What matters most to firm-level environmentally sustainable practices: Firm–specific or country–level factors?

Abstract This paper identifies the relative contribution of firm-specific versus country-level factors in modelling individual firm-level environmentally sustainable practices. The study considers firm-level data for 38 countries to include high-income, medium-income, and low-income economies in the period 2002–2013. We find that firm characteristics dominate country-level factors in explaining variation in firm-level environmentally sustainable outcomes. However, firm- and country-level factors jointly have higher explanatory power than just firm-level, or country-level, factors. The contribution of country-level factors to model explanatory power increases where infrastructure related to the environment or the quality of institutions is weak. Across industries, the joint explanatory power of firm-level and country-level factors is highest in telecommunications, technologies and utilities sectors. Our results suggest that policy initiatives focused at the firm level will be more effective in promoting environmentally sustainable strategies.