Environmental practice adoption in SMEs: The effects of firm proactive orientation and regulatory pressure

ABSTRACT

Even with proven benefits of engaging in sustainability, and stakeholder and regulatory pressure to do so, small- and medium-sized enterprises (SMEs) seldom adopt environmental practices beyond those required. To investigate why some SMEs adopt environmental practices while others do not, we studied the proactive orientation–environmental practices link and the moderation of regulatory pressure on this relationship. Based on a survey of 286 SMEs in the wine industry in Italy, France, Denmark, and the United States, we tested our model using regression analysis. We found support for our hypotheses on the positive proactive orientation-environmental practices link and the enhancing role of regulatory pressure. We conducted further supplementary exploratory analyses to examine these relationships among different types of environmental practices. The findings from our study offer new research directions regarding the nuanced roles of proactive orientation and regulatory pressure in motivating SMEs to adopt more environmental practices.

KEYWORDS:

• Environmental practices
• proactive orientation
• regulatory pressure
• sustainability
• SMEs

Small- and medium-sized enterprises (SMEs) are facing increasing societal and regulatory pressure to adopt environmental practices, yet current research demonstrates that, on average, SMEs lag behind larger firms in doing so (Ernst et al., 2022). By environmental practices, we refer to the procedures and policies that firms implement in their daily operations to address environmental concerns (Aragón-Correa, 1998). Such practices include those focused on improving operational efficiency, waste management, environmentally friendly products, and environmental management systems (Cassells & Lewis, 2011). SMEs that adopt such wide-ranging environmental practices can obtain demonstrated interwoven benefits of a reduced impact on the natural environment and increased profit margins (Mayr et al., 2017), providing significant financial and reputational capital over the long term (Blasi et al., 2021; Russo & Fouts, 1997). Typically, the adoption of environmental practices must be extensive and integrated into the SME’s operations and strategies to fully obtain such benefits (Eweje, 2020); otherwise these same environmental practices may be perceived as an additional cost and competitive threat (Paldino & Herath, 2022; Seroka‐Stolka & Fijorek, 2020).

Stakeholders are demanding that SMEs adopt more environmental practices—for example, contributing to the United Nations Sustainable Development Goals (SDGs) (Blasi et al., 2021; Moneva & Hernández-Pajares, 2018; Rubio-Mozos et al., 2019). Societal stakeholders include those more “proximate” to an SME, such as consumers, employees, and suppliers (Shepherd et al., 2015; Suriyankietkaew & Avery, 2014; Wu, 2017), and those more “distant,” such as activists (Ernst et al., 2022). In response to the demands, in the past decade we have seen increasing regulation across many industries worldwide that is focused on improving the protection of the natural environment (Deloitte, 2023; KPMG, 2022). As coercive measures, these regulations aim to push all firms to adopt more environmental practices in their operations and governance (Banerjee et al., 2003; Bansal & Roth, 2000). These pressures should provide a win-win for SMEs who can benefit from adopting environmental practices, not only in meeting stakeholder demands, but also in improved operational efficiency and competitive differentiation (Jarl Borch & Brastad, 2003; Muñoz & Cohen, 2018; Wu & Pagell, 2011). However, research shows SMEs tend to adopt the minimum practices required by regulators, due to a lack of resources or interest, and to frame environmental practices as strategic threats (Williamson et al., 2006).

While SMEs as a group tend to limit their adoption of environmental practices to the minimum required, entrepreneurial orientation (EO) research has shown that firms with a high EO are more likely to frame sustainability as an opportunity, rather than as a threat, and are more likely to engage in sustainability than those with a low EO (DiVito & Bohnsack, 2017). A firm with high EO, or an entrepreneurial strategic posture, is one in which there is an opportunity-seeking competitive orientation (proactive orientation), a strong risk-taking propensity by top management (risk-taking), and frequent and extensive technological and product innovation (innovativeness) (Covin & Slevin, 1989; Kreiser et al., 2002). More specifically, research that tests the proactive orientation dimension of EO (hereafter called “proactive orientation”) in SMEs, relative to risk-taking and innovativeness in aggregate, finds that proactively oriented SMEs are likely to frame the adoption of environmental practices as strategic opportunities (Jansson et al., 2017; Schindehutte et al., 2008), particularly in the longer term (Mayr et al., 2017; Slawinski & Bansal, 2015), rather than as a threat related to short-term implementation costs (DiVito & Bohnsack, 2017). Though suggestive, this research has examined proactive orientation only in combination with risk-taking and innovativeness to examine firms’ strategic posture in the face of competition. We examine proactive orientation, disaggregated from innovativeness and risk-taking, to focus specifically on the effects of an SME’s proactive orientation on its adoption of environmental practices to reveal why some SMEs adopt more environmental practices than others. Our first research question asks, Does SMEs’ proactive orientation have a significant positive effect on their environmental-practice adoption-practice adoption?

Given that a proactive orientation is a promising firm characteristic with the potential to encourage SMEs to adopt environmental practices, one might wonder how the regulatory context might moderate the proactive orientation–environmental-practice adoption relationship. Although prior research on the direct effect of the regulatory context on SMEs’ sustainability activities has shown that SMEs tend to adopt minimal, required, practices (Ernst et al., 2022; Williamson et al., 2006), we have not yet considered the moderating effect of regulatory pressure. In particular, regulatory pressure may be an important moderator as it applies to SMEs with a proactive orientation, who are likely to be primed to frame environmental practices as opportunities rather than threats (Aragón-Correa & Sharma, 2003). We posit that strong regulatory pressure will enhance the relationship between SMEs’ proactive orientation and environmental-practice adoption-practice adoption, as regulatory pressure motivates them to search even harder for opportunities environmental practices offer to differentiate their products/services and/or shape their markets (Aragón-Correa & Rubio-Lopez, 2007; Revell & Blackburn, 2007; Schindehutte et al., 2008). Therefore, our second research question asks, Does regulatory pressure enhance the relationship between SMEs’ proactive orientation and their adoption of environmental practices?

Thus, we develop hypotheses related to the effect of SMEs’ proactive orientation on their adoption of environmental practices and how regulatory pressure moderates this relationship. Our objectives are to substantiate the importance of SMEs’ proactive orientation to their adoption of environmental practices and explore the moderating effect of regulatory pressure on this relationship. We test these hypotheses with survey data collected from 286 SMEs in 2016 in four countries—Italy, France, the United States, and Denmark—to supply generalizable results across diverse regulatory contexts representing both the “Old World” and the “New World” of the wine industry. This stable time period of data collection is appropriate given the shocks in the world’s economy between 2008 and 2023 (International Monetary Fund [IMF], 2023).¹ We propose that it is best to study proactive orientation, regulatory pressure, and environmental-practice adoption in SMEs during a stable economic period to establish baseline relationships to be studied in the future, especially as societal pressure and regulations on sustainable practices continue to increase, making these relationships even more relevant to SMEs today than they were in the past (Deloitte, 2023; KPMG, 2022). We find support for our hypotheses.

We contribute to research at the intersection of sustainability, proactive orientation, and regulation in SMEs in two primary ways. First, we confirm empirically that a proactive orientation in an SME serves as a significant predictor of the SME’s adoption of environmental practices when disaggregated from innovativeness or risk-taking. This finding validates the central role proactive orientation plays in the adoption of environmental practice in SMEs and inspires deeper investigation into how SME leaders can cultivate a proactive orientation in their firm (Aragón-Correa & Rubio-Lopez, 2007). Second, we reveal that strong regulatory pressure enhances the positive link between proactively oriented SMEs and their adoption of environmental practices, thus, better positioning them to obtain the interwoven benefits of reduced environmental harm and increased profit margins that help them stay competitive over the long term (Eweje, 2020; Russo & Fouts, 1997) and that contribute to meeting the UN SDGs (Rubio-Mozos et al., 2019). These findings should encourage further research on the nuanced ways in which regulatory pressure can motivate proactively oriented SMEs to adopt more environmental practices. Combined, our findings hold particular importance for research on sustainability in SMEs, given the role of a proactive orientation in overcoming SMEs’ framing of regulation as a strategic threat.

Literature review

Research has shown that when managers of SMEs have strong favorable attitudes toward preserving the natural environment, their firms are more likely to implement proactive strategies and adopt policies that address changing stakeholder and regulatory concerns (Cassells & Lewis, 2011; Hamann et al., 2017; Reyes‐Rodríguez et al., 2016). SMEs that enact proactive sustainability strategies and policies, anticipating regulatory changes rather than reacting to them, are more likely to benefit from improved long-term financial performance and reputation (Aragón-Correa, 1998; Nguyen & Adomako, 2021; Roxas et al., 2017). The benefits arise from positively influencing consumers’ perception of a firm’s products and practices and taking market share from competitors not engaged in proactive sustainability strategies or policies (Hamann et al., 2017; Nguyen & Adomako, 2021). On the other hand, research shows that managers’ positive environmental attitudes and proactive sustainability strategies do not always lead to firms’ desired environmental or strategic outcomes nor to the substantive adoption of environmental practices that effectively address the environmental issues they seek to improve (Aragón-Correa & Rubio-Lopez, 2007; Cassells & Lewis, 2011; Tilley, 1999).

SMEs’ proactive orientation and opportunity framing

A proactive orientation, which refers to how firms “relate to market opportunities by seizing initiative in the marketplace” (Lumpkin & Dess, 2001, p. 429), may have the potential to better explain—more so than managers’ attitudes or firm strategies—why some SMEs adopt environmental practices while others do not. A proactive orientation is distinct from manager-level attitudes or firm-level strategies and policies in that it is a firm-level characteristic influencing how a firm tends to approach their framing and response to dynamic issues in the marketplace (Lumpkin & Dess, 2001). A proactive orientation is one of three dimensions included in Covin and Slevin’s (1989) prominent operationalization of entrepreneurial orientation (EO) (Rauch et al., 2009). They theorized that the three dimensions of EO—innovativeness, proactive orientation, and risk-taking— should be aggregated to create a unidimensional strategic orientation measure when considering how EO influences firm performance outcomes in SMEs. Studies have revealed high levels of reliability and validity for this operationalization of EO (Barringer & Bluedorn, 1999; Becherer & Maurer, 1997; Naman & Slevin, 1993) and strong support for the cross-cultural validity of the Covin and Slevin (1989) EO scale and its relationship with firm performance outcomes (Kreiser et al., 2002).

The link between the proactive orientation dimension of EO and sustainability strategies has only been explored previously in configurations with other EO dimensions (de Guimarães et al., 2018; DiVito & Bohnsack, 2017; Kreiser & Davis, 2010; Rank & Strenge, 2018; Wiklund & Shepherd, 2005). EO research suggests that SMEs with a more proactive orientation, relative to innovativeness and risk-taking, are more likely to adopt environmental practices (Galbreath, 2014). Furthermore, this research has found that varying levels of a proactive orientation, relative to risk-taking and innovativeness, can lead to different sustainability strategies and a more or less effective balance and integration of economic, social, and environmental aspects of decisions (DiVito & Bohnsack, 2017). We propose that the relationship between proactive orientation and environmental-practice adoption can be more precisely understood by assessing proactive orientation disaggregated from the other dimensions of EO for two reasons: Configural methodologies may (1) mask the direct effect of a proactive orientation on the adoption of sustainable practices and (2) make the interpretation of the relationship more challenging. Thus, we study the proactive orientation–environmental practice link exclusively.

Having a proactive orientation can provide significant advantages for firms over firms without a proactive orientation, in terms of their ability to anticipate and act on future needs by seeking new opportunities (Venkatraman, 1989) and pioneering practices that affect customers’ perceptions of products or services (Lieberman & Montgomery, 1988). Furthermore, there is a clear distinction between a proactive orientation and competitive aggressiveness. While a proactive orientation refers to how a firm relates to market opportunities by seizing the initiative and acting opportunistically to influence trends and create demand, competitive aggressiveness “refers to how firms relate to competitors … how firms respond to trends and demand that already exist in the marketplace” (Lumpkin & Dess, 1996, p. 147). Therefore, competitive aggressiveness is about competing for current demand, while a proactive orientation has more to do with meeting expected future demand. We explore whether an opportunity-seeking proactive orientation encourages SMEs to adopt environmental practices.

Environmental practice adoption in SMEs

SMEs can obtain many benefits from adopting environmental practices, and stakeholders are increasingly demanding that SMEs do so, yet current research demonstrates that they lag larger firms in adopting such practices (Ernst et al., 2022). Environmental practices include those focused on improving operational efficiency (e.g., eliminating air and water pollution, reducing electricity usage), waste management (e.g., reducing plastic packaging, recapturing materials for remanufacturing), offering environmentally friendly products (e.g., innovating product design for reduced environmental impact, using sustainable materials), and implementing environmental management systems (e.g., adopting a sustainability certification, monitoring and enforcing sustainable policies) (Cassells & Lewis, 2011; Geffen & Rothenberg, 2000; Wu & Pagell, 2011). Moreover, SMEs that adopt a diverse set of environmental practices in many areas of their operations and governance have been found to generate and capture interwoven long-term benefits of increased financial and reputational capital (Blasi et al., 2021; Eweje, 2020; Mayr et al., 2017) from improved operational efficiencies, competitive differentiation, and alignment with stakeholder demands (Blasi et al., 2021; Ernst et al., 2022; Russo & Fouts, 1997; Wu, 2017).

Stakeholders are increasingly demanding that all firms including SMEs adopt environmental practices to contribute to mitigating environmental issues through eliminating carbon emissions, reducing environmental degradation, and shifting to a circular economy (Blasi et al., 2021; Moneva & Hernández-Pajares, 2018). These stakeholders include but are not limited to consumers demanding more-sustainable products (Shepherd et al., 2015), employees demanding more sustainable employers (Suriyankietkaew & Avery, 2014), and pressure to work more closely with suppliers to generate more-sustainable products and manufacturing processes (Wu, 2017). Stakeholders in part are responding to the near-term target date of 2030 to meet the UN Sustainable Development Goals (SDGs), which requires firms to transition to sustainable business models more quickly and broadly (Rubio-Mozos et al., 2019).

Operational and stakeholder pressures should motivate SMEs to adopt many environmental practices, as they can benefit in numerous ways from adopting many, rather than only a few, practices—that is, by meeting stakeholder demands—and through improved operational efficiency and competitive differentiation (Jarl Borch & Brastad, 2003; Muñoz & Cohen, 2018; Wu & Pagell, 2011). However, even with these pressures, SMEs are less likely to adopt a wide range of environmental practices than larger firms. Because firms may not respond to these operational and stakeholder demands, in the past decade we have seen increasing regulation across many industries worldwide focused on improving the protection of the natural environment in companies’ operations (Deloitte, 2023; KPMG, 2022).

Environmental regulatory pressure

Environmental regulations are external pressures that coerce SMEs to adopt environmental practices versus not adopting them or choosing to adopt other types of practices (Banerjee et al., 2003; Bansal & Roth, 2000). Notably, regulatory pressure applies the same requirements across all firms in an industry, which could include requiring all firms to adopt a similar set of environmental practices and/or to comply with minimum environmental quality thresholds, such as air and water quality (Bansal & Roth, 2000; Nyanzu et al., 2019). When regulations stipulate environmental outcomes or quality thresholds, firms are given discretion regarding which practices are adopted for compliance (Jansson et al., 2017).

In these ways, environmental regulations place constraints on all firms who are required to comply (Banerjee et al., 2003; Hojnik et al., 2022, p. 147). SMEs might prefer to adopt certain environmental practices over others—perhaps favoring those that better enable them to either comply with desired thresholds or differentiate from competitors (Kassinis & Vafeas, 2006). But regulators can impose financial penalties on firms found to be out of compliance with environmental regulations, which shifts the equation toward longer-term costs of noncompliance outweighing the short-term costs of adopting required practices (Paldino & Herath, 2022; Seroka‐Stolka & Fijorek, 2020).

Research demonstrates that, on average, SMEs are likely to adopt only the minimum environmental practices necessary to comply with a regulation, due to lack of interest, strategic framing, or resources (Aboelmaged, 2018; Williamson et al., 2006), although some SMEs have been found to adopt unrequired environmental practices as a strategic differentiation tactic (Aragón-Correa & Rubio-Lopez, 2007). Williamson et al. (2006, p. 323) noted, “It is likely that SME owner-managers may reasonably regard [sustainable] practices as optional and expensive … because SME owner-managers are driven mainly by the bottom line,” Thus, although regulation can counteract opportunistic behavior to some extent, research on the direct effects of regulatory pressure reveal that SMEs are not typically motivated to adopt many environmental practices beyond the minimum required by a regulation (Aboelmaged, 2018). A question not yet explored in the sustainability literature is whether regulatory pressure enhances the positive effect of a proactive orientation on environmental-practice adoption.

Theory development

Sustainability strategy research has shown that SMEs may focus their attention on sustainability issues as opportunities or threats, and that this focus can influence the decision to adopt environmental practices (Cassells & Lewis, 2011; Tyler et al., 2020). Although SMEs can benefit financially from adopting environmental practices in the longer term (Mayr et al., 2017; Revell & Blackburn, 2007), when faced with strong competitive pressure SMEs appear to focus attention on competitive threats associated with higher costs and limited opportunities to differentiate (Tyler et al., 2020). These pressures can enhance SMEs’ risk aversion (George et al., 2005), making them less willing to adopt environmental practices (Johnson & Schaltegger, 2016; Triguero et al., 2016). However, when SMEs focus on sustainability issues as opportunities, SMEs are likely to create value by lowering operational costs in the long term and/or by finding ways to shape a differentiated positioning (Jarl Borch & Brastad, 2003; Muñoz & Cohen, 2018; Wu & Pagell, 2011). We propose that SMEs with a proactive orientation focus on the opportunities rather than the threats associated with environmental practices because they are opportunity seeking and forward-looking.

First, based on the opportunity-seeking nature of proactive orientation (Lumpkin & Dess, 1996), we propose that SMEs with a proactive orientation are more likely to adopt diverse and higher quality applications of environmental practices that will help them to increase efficiency and lower costs in internal operations and to improve quality with suppliers (Cohen & Winn, 2007). Opportunities to generate operational efficiencies arise from greater attention to areas in the production process, wherein they can eliminate inefficiencies and waste using new technology, and enhancements in products and processes that lower production costs while introducing new products (Cassells & Lewis, 2011; Geffen & Rothenberg, 2000; Wu & Pagell, 2011). Proactively oriented SMEs can leverage their ability to implement sustainability practices quickly and adopt a wide variety of environmental practices, making them a market leader rather than a follower (Lumpkin & Dess, 1996). Additionally, these opportunity-seeking SMEs will be more likely to see opportunities inherent in a diversity of environmental practices to improve supplier relationships. Influential suppliers control the flow of the materials necessary for a firm to produce its finished products and so can exert influence through supply, price, and quality controls (Krause et al., 2001). For SMEs, often constrained by limited resources and slim profit margins, supply issues can be very costly (Johnson & Schaltegger, 2016; Pullman et al., 2009; Tilley, 1999). Proactively oriented SMEs can reduce such costs and can power and leverage new technological and market opportunities by developing close relationships with their suppliers, working hand in hand to find opportunities to make the supply chain more efficient and produce higher quality and innovative products (Bos-Brouwers, 2010; Geffen & Rothenberg, 2000). Novel process improvements with suppliers create an opportunity for suppliers to reduce operational costs, which can be passed on to proactively oriented SMEs through lower prices and higher quality of materials (Golicic & Smith, 2013). Thus, opportunity-focused, proactively oriented SMEs are better able to apply environmental practices to reduce operational costs and improve quality through internal efficiencies and supplier relationships relative to SMEs that are less proactively oriented.

Second, SMEs with a greater proactive orientation are more likely to be “forward-looking” (Lumpkin & Dess, 2001, p. 431) than SMEs with a lower proactive orientation; they are more likely to anticipate future market demands and shape market forces through branding and marketing. These future-oriented SMEs are more likely to anticipate market demands, which motivates them to continuously search for new market niches. This proclivity toward looking to the future permits proactively oriented SMEs to be first movers to introduce new products or services and to shape future market demand (Revell & Blackburn, 2007; Schindehutte et al., 2008). Research suggests that SMEs with a greater forward-looking orientation are more likely to recognize value-generating activities associated with sustainability than SMEs with less of a forward-looking orientation, and these activities once implemented have been found to have stronger effects on long-term firm performance than short-term performance (Mayr et al., 2017; Slawinski & Bansal, 2015). Proactively oriented, forward-looking SMEs would also be more likely to focus on opportunities related to operational areas in which they could generate niche positioning and differentiate themselves to attract customers than SMEs that are less proactively oriented. Customers are increasingly demanding that companies implement sustainable practices, preferring that products be made in ways that mitigate risks or avoid harm to the environment and provide social benefits (Shepherd et al., 2015). As customers become better informed about environmental issues (e.g., climate change), their propensity increases for consuming products that are manufactured using environmentally friendly methods and whose use and disposal are also environmentally friendly, (Shepherd et al., 2015). To capture market share among customers, proactively oriented SMEs are likely to recognize future opportunities to implement a variety of environmental practices in their production processes and product design (Brécard et al., 2009; Revell & Blackburn, 2007). Based on these arguments, we propose the following:

H1:

A proactive orientation is positively related to environmental-practice adoption in SMEs.

The moderating role of environmental regulatory pressure

The environmental regulatory context has been found to have a direct influence on SMEs’ activities regarding sustainability, by requiring all firms in an industry to comply with environmental practices and/or environmental quality thresholds (Bansal & Roth, 2000; Nyanzu et al., 2019). However, research has not yet considered the potential moderating role of regulatory pressure on linkages between SMEs’ firm-level characteristics and environmental-practice adoption. Thus, we propose two reasons why increased regulatory pressure will motivate proactively oriented SMEs to adopt more environmental practices.

First, we theorize that stronger regulatory pressure enhances the positive link between SMEs’ proactive orientation and environmental-practice adoption by encouraging SMEs to search for unique ways to integrate required environmental practices with other operational or environmental practices or find new ways to comply with quality thresholds that allow them to lower cost and differentiate (DiVito & Bohnsack, 2017; Wu & Pagell, 2011). Alternatively, when regulatory pressure is weaker, proactively oriented SMEs will be less motivated to explore environmental practice opportunities to internalize costs from regulation and more likely to search for other types of opportunities to act in anticipation of future demands (Graafland & Smid, 2017; Hamann et al., 2017). Thus, when regulatory pressure is stronger it is more likely to trigger proactively oriented SMEs to think even more creatively about how to differentially integrate environmental practices required for compliance or unique ways to comply with quality thresholds to reduce costs and increase differentiation (Cohen & Winn, 2007).

Second, we propose that stronger regulatory pressure enhances the positive link between SMEs’ proactive orientation and environmental-practice adoption by motivating them to anticipate future market demands and shape market forces through branding and marketing by adopting unrequired environmental practices (Aragón-Correa & Rubio-Lopez, 2007; Jarl Borch & Brastad, 2003). However, when regulatory pressure is weaker, proactively oriented SMEs are more likely to invest in opportunities other than the adoption of environmental practices that allow them to anticipate future market demands and shape market forces through branding and marketing (Graafland & Smid, 2017; Worthington & Patton, 2005). Thus, opportunity-seeking and forward-looking proactively oriented SMEs are likely to view going above and beyond required compliance thresholds as an opportunity to shape market demand (Lumpkin & Dess, 2001; Schindehutte et al., 2008) when regulatory pressure is stronger rather than weaker, particularly relative to peers subject to the same regulatory pressure (Banerjee et al., 2003). For proactively oriented SMEs, strong regulatory pressure serves as an exogenous motivator to encourage a more careful search for future-oriented differentiation positioning through marketing and branding (Jansson et al., 2017), particularly as green or sustainable brands, which can support premium pricing (Shepherd et al., 2015). Alternatively, when faced with weak regulatory pressure, proactively oriented SMEs will find many opportunities unrelated to the adoption of environmental practices that can allow them to shape the future market, such as innovative products and processes, creative product labels, and new advertising campaigns (Worthington & Patton, 2005). Based on these arguments we propose the following:

H2:

Regulatory pressure positively moderates the relationship between proactive orientation and environmental-practice adoption in SMEs.

We visualize these hypothesized relationships (H1 and H2) in Figure 1.

Figure 1. Theoretical framework.

This figure depicts the relationships we are theorizing in Hypotheses 1 and 2, including the direct effect of proactive orientation on environmental-practices adoption (H1) and the moderating effect of regulatory pressure on this relationship (H2), and includes the control variables.

Context and methods

Context: The global wine industry

We test these hypotheses in the global wine industry, an important and appropriate context in which to examine SMEs’ proactive orientation and their adoption of environmental practices and the moderating role of the regulatory context on this relationship. Indeed, the majority of the firms in this industry globally are SMEs, including only a few larger companies (Hamann et al., 2017; Robinson, 2006; Spielmann et al., 2019). Additionally, the wine industry is based in agriculture, as firms rely on the availability of high-quality and place-based grape crops. For these reasons, climate change and other sustainability issues are central to firms that grow grapes and produce wine (Charters et al., 2017; Resco et al., 2016). Third, though firms’ practices can be similar within regions, such practices tend to vary across regions due to differences in the natural environment related to the topography and climate of the particular region where grapes are being grown (Robinson, 2006). Finally, examining the global wine industry allows us to draw on different regulatory regimes. For instance, “Old World” vineyards and wineries typically face higher regulatory pressure than those in the “New World” (Banks & Overton, 2010; Robinson, 2006). Thus, firms in the wine industry are embedded in the natural environment and varying regulatory contexts, making this industry an excellent context within which to consider the SME proactive orientation–environmental practices link and the moderating effect of regulatory pressure.

While the wine industry is in the agricultural sector, we believe that the empirical evidence on this context is generalizable to many other industries. Our data was collected in 2016, a stable period globally in which to study sustainability and regulatory pressure on SMEs. This time period is after the Great Recession (2008–2012), a period of severe economic upheaval for SMEs and diverse global stakeholders (Dvouletý et al., 2021) but before the COVID-19 pandemic (Dvouletý et al., 2021). SMEs’ reactions to the Great Recession varied, as some discovered and acted upon opportunities presented by this exogenous shock while others suffered or even closed (Durst et al., 2021; Dvouletý et al., 2021). And since 2016, there has been growing social interest in the adoption of sustainable practices, as evidenced by the adoption of the UN Sustainable Development Goals, which requires business owners across the globe to revise traditional business models to enhance sustainability (Blasi et al., 2021; Rubio-Mozos et al., 2019) and increased regulatory pressure (Paldino & Herath, 2022). We see these societal and regulatory trends not only in the wine industry (Wine Industry Advisor, 2022) but also in “consumer goods, cosmetics, food & beverage, specialty chemicals, . . . crop science” (Veeva, 2021), and financial services (Deloitte, 2023). Thus, we posit that it was an excellent time period to study the relationships between proactive orientation, regulatory pressure, and environmental-practice adoption in SMEs to be able to establish baseline relationships to be studied in the future, especially as societal pressure and regulations on sustainable practices continue to increase, making these relationships even more relevant to SMEs today than they were in the past (Deloitte, 2023; KPMG, 2022).

Sample and data collection

Given the widely acknowledged differences between the regulatory pressure on vineyards in the “Old World” and those in the “New World” (Banks & Overton, 2010; Robinson, 2006), we chose to collect data from two countries from the “Old World” (Italy and France) and two countries from the “New World” (the United States and Denmark). Thus, a global team of researchers invited managers of SMEs in the wine industry in the United States, Italy, Denmark, and France to participate in a survey in 2016.² We depict the wine production by country between 2008 and 2022 in Figure 2, and the percentage of global wine production of each country in 2016 in Figure 3. In terms of rank, Italy is first, France is second, the United States is fourth, and Denmark is 70th in global production of wine by volume (International Organisation for Vine and Wine, 2023), so we capture variation both in terms of location (i.e., Old Word and New World) and market size.

Figure 2. Wine production by country, 2008–2021.

The changes in global wine production from 2008 to 2021 by country allow us to visualize the differences in the magnitude of wine production by country over time (Source: International Organisation for Vine and Wine, 2023).

Figure 3. Percent of global wine production in 2016: Italy, France, Denmark and United States.

The percentage of global wine production contributed by the four countries included in our study, with Italy as the largest global wine producer, France as the second, Denmark as the seventieth, and the U.S. as the fourth (Source: International Organisation for Vine and Wine, 2023).

Efforts were made in each of the four countries to solicit participation from a representative sample (countries, states, and regions were either randomly sampled or the entire population served as the sample, as discussed below) but final participation varied. The survey included the following sections: (a) the firm’s profile; (b) perceived pressure of their macro and regulatory context; (c) level of adoption of environmental practices; (d) firm strategy; (e) and participant demographics. The survey questions were first drafted in English, then translated into Italian, Danish, and French languages, and finally back-translated into English from these three languages to ascertain accuracy. As researchers cannot rely solely on back-translation to ensure similarity among multicountry surveys (Brislin, 1970; Chidlow et al., 2014), we also conducted a pilot study and the use of independent reviewers for each language. We used these surveys in each country in which we collected data, although the timeline and process differed somewhat in each country based on local preferences and cultural norms. These survey methods implemented across samples are consistent with methods appropriate for survey research involving SMEs (Mullen et al., 2009).

Although the response rate in the United States was low, as we discuss below, those of Italy, France and Denmark were higher than many survey studies targeting top management, sustainability, and SMEs (e.g., Brettel & Rottenberger, 2013; Dibrell et al., 2011; Ensley & Pearson, 2005; Hambrick et al., 1993). Completed surveys were obtained for 286 firms using the survey: 22 from the United States, 135 from Italy, 24 from Denmark, 105 from France. Although two subsamples are small, recent research by Jenkins et al. (2020) reported that with very low variance data shape was always clearly identified at N ≥ 8, and that with high variance accurate inference was stable at N ≥ 25. With these data, we conducted a factor analysis, which revealed that common method bias was not an issue since no general factor explaining the majority of the variance appeared (Podsakoff et al., 2003). Indeed, the first and largest factor explained approximatively the 27%. Additionally, we computed the VIFs of a model including only the multi-item scales based on our survey respondents’ perceptions. The maximum VIF was 2.13, which is below the typically recommended cutoff point of 5. Overall, these results suggest that common method bias is not a concern. The firms included in our analysis on average have about 11 employees and represent 50 years of activities. The firms range from young to old—even to those involved in winemaking for centuries.

U.S. Sample

The data collection process began first in the United States, where there were reported to be 27,648 wine businesses incorporated according to ORBIS, the database produced by Bureau van Dijk Electronic Publishing, not to mention the smaller SMEs that have not legally incorporated. In the U.S. industry, associations were unwilling to support the research. Thus, a search for firms was conducted online. To capture a representative sample of wineries in the United States, we located lists of vineyards and wineries that were members of associations online and then stratified our random sampling of 1,000 firms based on the number of firms located online as members of Wine Associations in North Carolina, Oregon, Virginia, and five regions in California. Postcards were mailed to this random sample informing the recipients that they would be contacted via telephone to be asked if they would be willing to participate in the study. Resulting from this step, we ascertained that many of the firms on the association lists online were no longer operating, as approximately 20% of the postcards were returned as undeliverable. We hired a team of students to call the contacts for the remaining firms, who found that approximately 20% more of our sample firms were no longer in operation and that many potential owners/managers in firms still in operation were no longer allowed to participate in surveys because they had been asked to participate in so many in the past. After seeking to contact the remaining 600 participants multiple times, 77 (13% of the 600 firms in operation) SME managers verbally agreed to participate in the study and were sent the survey link by email. A total of 27 completed the survey either online (via Qualtrics) or by sending a copy of the survey via email when requested to do so.³ Thus, we received completed surveys for 35% of those selected using stratified random sampling and agreeing to participate. Missing data in five left a U.S. total sample of 22.

Italy sample

We began collecting data in Italy second. There are large numbers of wineries and vineyards in Italy (approximately 92,000, although only 1,797 businesses were legally incorporated according to the ORBIS database, and 1,750, according to IBISWorld in 2023). To focus our data collection activities, we chose to recruit SMEs from 10 main consortia located in Emilia Romagna, Lombardia, Sicilia, Toscana, and Veneto, representing five main wine-growing regions. This sample, 800 firms, was a stratified random sample, with each region proportionate to the number of firms located in that region. With the assistance of these consortia, we received 246 responses from the 800 firms contacted to the online survey (via Qualtrics), giving us a response rate of 30.75%. However, missing data resulted in a final sample of 135 surveys.

Denmark sample

Data collection began next in Denmark where a coauthor recruited the only two wine-industry associations in the country to generate a list of wineries and vineyards. They provided access to 70 active wineries in Denmark, while ORBIS reported 106 incorporated wine businesses in the country. The 70 wineries received an email sent by the associations, inviting them to access a link and fill out the online survey (via Qualtrics). SMEs that had not participated in the online survey within two weeks were contacted again via emails and phone calls to encourage participation. In the end, 51 surveys were submitted, a response rate of 72%. Of these, only 24 fully completed surveys were obtained in Denmark.

France sample

Prior experience in data collection for the study and specific knowledge of the management of French wineries and vineyards led the coauthor there to determine that online data collection methods were unlikely to be effective. Thus, a market research firm was contracted to call the pool of potential participants and conduct telephone interviews with the survey to obtain responses. An online search resulted in a list of 2,723 vineyards and wineries in the major wine-producing areas of France. It is apparent that many wineries in France as well as Italy and the United States are small firms that have not been legally incorporated, given that ORBIS identified 2,162 legally incorporated wine businesses and IBISWorld reported 1,400 wine businesses in France in 2023. A stratified random sample of 500 firms were selected from this list, with each wine region’s sample proportionate to the number of firms located in that region. All 500 firms were contacted by telephone by the market research firm; 105 firms agreed to participate and all participated in telephone interviews, resulting in a 21% response rate.

Variables and measures

Dependent variable

The dependent variable used in testing our two hypotheses was the extent to which SMEs adopted environmental practices. Our measure for Environmental practices consisted of 25 Likert scale items, based on responses to the prompt: “For the following practices, please rate the extent to which your company has implemented each” (1 = Not at all; 2 = A little; 3 = Moderately; 4 = Significantly; 5 = Very significantly). We adopted the 25-item scale developed by Tyler et al. (2020), based on a factor analysis of 40 items, resulting in six identifiable factors. The coefficient alphas for the six factors are as follows: signaling commitment to protecting natural environment (alpha = 0.93); waste management packaging design (alpha = 0.86); life cycle assessment of products (alpha = 0.80); transportation and fossil fuel efficiency (alpha = 0.80); waste management packaging disposal (alpha = 0.85); restoration and conservation of natural habitats (alpha = 0.85); and environmental practices (alpha = 0.94) (more generally). Detailed information about the individual items in each factor can be found in Tyler et al. (2020). We combined the six factors into a single scale to serve as our dependent variable (Edward, 2011) and used the original 40-item scale as the dependent variable in a robustness check.

Independent and moderating variables

We summed the answers to three items included in the Covin and Slevin (1989) study (Items 4–6) to measure Proactive orientation (alpha = 0.73). Participants were asked to answer each item on a 7- point Likert scale. The items begin, “In dealing with its competitors, my firm …,” to which the participant could respond by choosing a number on the Likert scale: Item 1: 1 = Typically responds to actions competitors initiate to 7 = Typically initiates actions competitors respond to; Item 2: 1 = Is very seldom the first business to introduce new products/service, administrative techniques, operating technologies, and so forth to 7 = Is very often the first business to introduce new products/service, administrative techniques, operating technologies and so forth Item 3: 1 = Typically seeks to avoid competitive clashes, preferring a “live-and-let-live” posture to 7 = Typically adopts a very competitive, “undo the-competitors” posture. We tested Hypothesis 1 with the Proactive orientation variable. We measured three kinds of legal pressures to adopt environmental practices by asking participants: “Please rate the extent to which the following stakeholders—(a) supranational laws, (b) national laws, and (c) subnational laws—influence your company’s adoption of environmental sustainability practices” on a 7-point Likert scale ranging from 1 = Little influence to 7 = Extensive influence. Due to high item correlations, we summed the scores for these three items to create our composite measure of Regulatory pressure (alpha = 0.92). We tested H2 with the interaction term Proactive orientation x Regulatory pressure.

Control variables

To examine variance explained by the operating contexts of the SMEs in our samples, we included control variables for manager-, firm-, industry-, and country-level factors. We controlled for SME managers’ attitudes toward environmental issues (Environmental attitude) using the last six items of the 10-item scale developed by Cassells and Lewis (2011). These items were accompanied by a 7-point Likert-type scale and worded as statements intended to measure a manager’s focus on sustainability issues, their perception of sustainability-related regulation, their perception of any value obtained from the adoption of environmental practices, and the relevance of these practices to their firm’s strategy (alpha = 0.82). To control for firm attributes, we included Firm age, measured by the number of years since the firm was established, and Firm size, measured by the number of employees. Four variables controlled for the industry based on a factor analysis of industry characteristics. Participants were asked the following question: “Please rate the extent to which the following stakeholders influence your company’s adoption of environmental sustainability practices” on a 7 point Likert scale ranging from 1 = Little influence to 7 = Extensive influence. Competitive pressure combined their response to two items: industry associations and direct competitors (alpha = 0.72). Customer pressure to adopt environmental practices was based on their responses to pressures from two stakeholders: distributors and end customers (alpha = 0.74). Supplier pressure for SMEs to adopt environmental practices consisted of combined responses to three items: landowners, raw-materials suppliers, and equipment manufacturer suppliers (alpha = 0.83). We controlled for Community pressure to adopt environmental practices, captured by a two-item scale based on respondents’ perceptions of pressures from the local community and not-for-profit groups (alpha = 0.62). Country-level factors were controlled using three binary variables— United States, Denmark, and France—which measured any differences compared to our baseline country, Italy. In addition, in our main models, which use Proactive orientation as the independent variable, we controlled for two dimensions of EO that are commonly studied in configurations with proactive orientation: risk-taking and innovativeness. We measured Risk-taking and Innovativeness using the three items for each variable from Covin and Slevin’s (1989) scale, with Cronbach’s alpha = 0.89 and Cronbach’s alpha = 0.87, respectively.

Results

Table 1 shows the descriptive statistics and correlation for the variables of the study. Descriptive information about our data reveals that for our sample the average adoption of environmental practices is relatively high with a mean of 72.124 and a range of 26 (minimum) to 122 (maximum). Old World countries exhibit higher scores relative to New World countries: the mean values for Italy and France samples were 79.096 and 71.724, respectively, while it is 58.682 for U.S. firms and 55.37 for Danish ones. Across all countries, the mean for Proactive orientation is 11.601 with a range of 3 to 21. For these variables, differences across countries do not appear particularly relevant: The average country values of Proactive orientation ranges from 10.6 (France) to 12.583 (Denmark). Table 1 does not show particularly high correlations, suggesting that multicollinearity was not a source of bias in the results. As a postregression test, we also examined the variance inflation factors (VIFs). In our regression model with the largest number of explanator variables the average VIF is 1.57 (max VIF = 2.38), which is below the generally employed cutoff of 10, thus confirming that multicollinearity was not an issue.

Table 1. Descriptive statistics and correlations.

		Mean	SD	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
1	Environmental practices	72.829	20.788	1
2	Proactive orientation	11.601	3.882	0.310*	1
3	Entrepreneurial orientation	42.889	13.856	0.288*	0.833*	1
4	Regulatory pressure	13.797	5.533	0.185*	0.069	0.049	1
5	Environmental attitude	29.913	7.797	0.218*	0.100	0.109	−0.027	1
6	Firm age	52.164	68.882	0.018	0.009	0.007	0.039	0.012	1
7	Firm size	10.769	27.474	0.097	0.198*	0.091	−0.041	0.059	0.124*	1
8	Competitive pressure	5.633	3.057	0.146*	0.160*	0.251*	0.277*	−0.118*	−0.067	−0.028	1
9	Customer pressure	8.010	3.452	0.382*	0.211*	0.261*	0.283*	0.065	0.022	0.012	0.509*	1
10	Supplier pressure	7.829	4.363	0.339*	0.182*	0.230*	0.191*	−0.059	−0.130*	−0.024	0.530*	0.506*	1
11	Community pressure	5.947	3.131	0.299*	0.202*	0.239*	0.349*	−0.009	−0.054	−0.038	0.603*	0.449*	0.534*	1
12	France	0.367	0.483	−0.041	−0.197*	−0.219*	0.220*	−0.141*	0.147*	−0.068	−0.015	−0.101	−0.153*	−0.068	1
13	Denmark	0.084	0.278	−0.255*	0.077	0.126*	−0.137*	0.057	−0.184*	−0.108	−0.067	−0.063	−0.107	−0.112	−0.230*	1
14	United States	0.077	0.267	−0.197*	−0.048	−0.038	−0.187*	0.028	−0.149*	0.067	0.013	−0.123*	−0.055	−0.004	−0.220*	−0–087	1
15	Risk-taking	11.136	4.262	0.207*	0.663*	0.882*	−0.001	0.105	0.007	0.065	0.187*	0.167*	0.124*	0.141*	−0.072	0.174*	0.025	1
16	Innovativeness	11.657	5.049	0.219*	0.524*	0.821*	0.085	0.061	0.015	−0.021	0.304*	0.274*	0.273*	0.248*	−0.233*	0.073	−0.103	0.586*

a) N = 286; b) *p < .05.

We test our hypotheses using OLS regression as the estimation method and report our results in Table 2. All models reported Environmental practices, calculated using 25 items, as the dependent variable. Heteroskedasticity was not an issue either, since the Breusch-Pagan/Cook-Weisberg test was not significant, indicating that the null hypothesis of homoskedasticity could not be rejected. In Model 1 only the control and moderating variables are included. Model 2 tests Hypothesis 1 by incorporating the direct effect of Proactive orientation on SMEs’ adoption of environmental practices, while also controlling for the effects of Risk-taking and Innovativeness. Models 3 displays the full model with the interaction term Proactive orientation x Regulatory pressure to test Hypothesis 2, the moderating effect of regulatory pressure on the relationship between proactive orientation and the adoption of environmental practices in SMEs. To avoid the problem of multicollinearity, these variables were mean centered, both as stand-alone ones, and as components of the interactions (Aiken et al., 1991).

Table 2. Direct effect of proactive orientation on environmental-practices adoption and moderation of regulatory pressure (Models 2–3); Robustness check using EO instead of proactive orientation (Models 4–5).

	Model 1	Model 2	Model 3	Model 4	Model 5
Proactive orientation		0.840** (0.372)	0.933**(0.369)
Proactive orientation X Regulatory pressure			0.128*** (0.046)
Entrepreneurial orientation				0.309*** (0.079)	0.302*** (0.078)
Entrepreneurial orientation X Regulartory pressure					0.026** (0.013)
Regulatory pressure	0.083 (0.210)	0.088 (0.205)	0.110 (0.202)	0.094 (0.205)	0.123 (0.204)
Environmental attitude	0.548*** (0.135)	0.495*** (0.132)	0.473*** (0.131)	0.499*** (0.133)	0.503*** (0.132)
Firm age	−0.014 (0.016)	−0.017 (0.015)	−0.018 (0.015)	−0.018 (0.015)	−0.018 (0.015)
Firm size	0.059 (0.038)	0.028 (0.038)	0.034 (0.038)	0.044 (0.037)	0.045 (0.037)
Competitive pressure	−1.111** (0.467)	−1.204** (0.461)	−1.168** (0.456)	−1.308*** (0.458)	−1.309*** (0.455)
Customer pressure	1.444*** (0.380)	1.323*** (0.370)	1.448*** (0.368)	1.320*** (0.372)	1.346*** (0.370)
Supplier pressure	0.851*** (0.313)	0.810*** (0.305)	0.673** (0.305)	0.793** (0.306)	0.730** (0.306)
Community pressure	1.050** (0.449)	.897** (0.438)	0.826* (0.433)	0.922** (0.439)	0.881** (0.437)
France	−1.978 (2.399)	−1.404 (2.467)	−1.539 ((2.437)	−0.574 (2.366)	−0.874 (2.357)
Denmark	−18.776*** (4.004)	−21.447*** (3.993)	−21.373*** (3.944)	−20.792*** (3.937)	−20.806*** (3.914)
United States	−15. 657*** (4.152)	−15.578*** (4.136)	−15.094*** (4.088)	−14.835*** (4.053)	−14.927*** (4.030)
Risk-taking		0.531 (0.357)	0.470 (0.353)
Innovativeness		−0.132 (0.272)	−0.163 (0.268)
Constant	41.838*** (5.497)	42.212*** (6.211)	44.031***(6.168)	46.516*** (5.491)	46.970*** (5.463)
R^2	0.336	0.381	0.399	0.372	0.381
Adjusted R^2	0.310	0.350	0.366	0.344	0.352
Number of observations	286	286	286	286	286
F	12.65***	11.94***	11.95***	13.47***	12.91***

a) The dependent variable is the 25-item scale for environmental practices; b) Standard errors is in brackets; c) *p < .1, **p < .05, ***p < .01.

We first note the impact of the control variables. SME managers’ attitude toward environmental issues (Environmental attitude) is positively associated with the adoption of environmental practices as expected based on prior research (Models 2–3, p < .01). Regarding firm-level characteristics, Firm age and Firm Size do not have a statistically significant effect. Many industry pressures also encourage SMEs to adopt environmental practices: Customer pressure (Models 2–3, p < .01), Supplier pressure (Model 2, p < .01, and Model 3, p < .05), and Community pressure (Model 2, p < .05, and Model 3, p < .10) are positively associated with the adoption of environmental practices. Alternatively, Competitor pressure is negatively related to the adoption of environmental practices (Models 2–3, p < .05). We also see that country-level factors significantly affect the number of environmental practices SMEs adopt: SMEs in France and Italy are more likely to adopt environmental practices than firms in the United States and Denmark. Indeed, the coefficient is negative and significant for the United States and Denmark, revealing that SMEs in these countries tend to adopt environmental practices to a significantly lower degree than those in Italy (p < .01) (our reference group), while no statistically significant difference is associated with France, relative to Italy. The United States and Denmark are in the New World wine industry; whereas, Italy and France are in the Old World wine industry (Robinson, 2006), which could have some explanatory power for the correspondence of the results among the two pairs of countries.

Our first hypothesis suggests that SMEs’ proactive orientation will be significantly related to their adoption of environmental practices. Hypothesis 1 receives support: Proactive orientation is positive and significant in Model 2 (p < .05). It is also worth noting that Risk-taking and Innovativeness are not significantly related to the adoption of environmental practices in SMEs. In terms of the moderating effect of regulatory pressure, Hypothesis 2 predicts that the effect of SMEs’ proactive orientation on environmental-practices adoption becomes stronger as regulatory pressure increases. The positive and statistically significant coefficients of the interaction terms Proactive orientation x Regulatory pressure (Model 3, p < .01) indicate that regulatory pressure positively moderates the relationship between SMEs’ proactive orientation and environmental-practice adoption, lending support to Hypothesis 2. We graph the interaction term from Model 3 in Figure 4, which provides a visual confirmation of our prediction that the effect of SMEs’ proactive orientation on their adoption of environmental practices is stronger for higher levels of regulatory pressure.

Figure 4. The moderating effect of regulatory pressure on the relationship between proactive orientation and environmental-practices adoption.

The moderating effect of regulatory pressure on the relationship between proactive orientation and environmental-practices adoption is depicted here. Strong regulatory pressure enhances the impact of proactive orientation on the adoption of environmental practices, while weak regulatory pressure weakens such impact.

Robustness tests and further analyses

We conducted six additional analyses to assess the robustness of our findings. First, an 11-item scale (alpha = 0.92) measure of EO by Anderson et al. (2015) was used as a robustness test in the place of Proactive orientation. We find that EO positively affects the adoption of environmental practices (Table 2, Model 4, p < .01) and that regulatory pressure strengthens such relationship (Table 2, Model 5, p < .05). However, results shown in Table 2 indicate that these effects are largely due to Proactive orientation. Second, since our multicountry research setting includes only one non-European country, we explored whether our findings may be altered by the presence of the U.S. sample. The results of the regression analyses on the subsample of European firms (N = 264) are fully consistent with those presented in Table 2, offering support for both our Hypothesis 1 (p < .05) and Hypothesis 2 (p < .05). We also used the composite measure based on all the original 40 items of environmental practices described above as the dependent variable. The results of these analyses were similar to those presented in Table 2, thus, showing that our findings are robust to the use of different measures of the dependent variable.

Furthermore, to respond to concerns that our country dummies might not control for industry differences in each country, we conducted three final robustness checks to include variables capturing industry characteristics. In the first model, we include the “number of firms” in the wine industry for each country (log-transformed). We collected this data from ORBIS using the NACE code 11.02–Manufacture of wine from grape. In the second model, we take the number of wine firms in the country as defined above, and divide it by the total number of firms in that country according to ORBIS to get a “relative weighting” of the importance of the wine industry in each country. In the third model, we control for the industry concentration, calculated as the sum of the value of production of the largest four wine companies in a country divided by the sum of the value of production of all the wine companies. Data for this analysis was retrieved from ORBIS and the database produced by Bureau van Dijk Electronic Publishing, which includes financial data on over 50 million corporations on a worldwide basis. However, due to missing data on Denmark, the analysis was conducted on the wineries in Italy, France, and the United States (N = 262). The results of these three robustness tests are fully consistent with those presented in Table 2, thus, providing further support for our hypotheses. Details related to our robustness tests are available from the authors upon request.

To further understand the potentially varying effects of a proactive orientation on the adoption of environmental practices in SMEs, we conducted an exploratory analysis, in which we decomposed the 40 items of environmental practices serving as the dependent variable in the robustness check described above into the following four types: operational practices (11 items), waste management practices (10 items), environmentally friendly practices (9 items), and environmental management practices (10 items). We examined the relationships hypothesized in H1 and H2, using the same control variables noted above. Table 3 shows the results of this exploratory analysis. In terms of the direct effect of proactive orientation, the greatest effect size is associated with Operational practices (0.493, p < .01), followed by Waste management (0.393, p < .05), and Environmentally friendly practices (0.281, p < .10, marginally significant). No statistical significance was found for the effect of proactive orientation on Environmental management practices. Thus, Hypothesis 1 is supported for three out of four practices. In terms of the moderating effect of regulatory pressure, the pattern is similar, and Hypothesis 2 is supported for two types of environmental practices. The interaction term Proactive orientation X Regulatory pressure has the highest coefficient in the model where Operational practices are the dependent variable (0.059, p < .01) followed by Waste Management (0.049, p < .05). These varying effects offer an interesting avenue for future investigation of how a proactive orientation may differently affect the adoption of specific environmental practices in SMEs. Next, we offer further interpretation of these findings and discuss the implications of our research.

Table 3. Direct effect of proactive orientation on different environmental-practices adoption and moderation of regulatory pressure (by practice category).

	DV: Operational practices		DV: Waste management practices		DV: Environmentally friendly practices		DV: Environmental management practices
	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8
Proactive orientation	0.049*** (0.173)	0.054*** (0.172)	0.039** (0.169)	0.043** (0.168)	0.281* (0.151)	0.299* (0.151)	0.258 (1.99)	0.294 (0.199)
Proactive orientation X Regulatory pressure		0.059*** (0.021)		0.049** (0.021)		0.024 (0.188)		0.049** (0.025)
Regulatory pressure	−0.036 (0.095)	−0.026 (0.094)	0.104 (0.093)	0.113 (0.092)	0.138* (0.083)	0.143* (0.083)	0.038 (1.110)	0.047 (0.109)
Environmental attitude	0.286*** (0.162)	0.275*** (0.061)	0.175*** (0.060)	0.166*** (0.060)	0.115** (0.054)	0.111** (0.054)	0.206*** (0.071)	0.197*** (0.071)
Firm age	−0.002 (0.007)	−0.002 (0.007)	−0.006 (0.007)	−0.006 (0.007)	−0.005 (0.006)	−0.005 (0.006)	−0.11 (0.008)	−0.012 (0.008)
Firm size	0.006 (0.018)	0.009 (0.018)	0.011 (0.017)	0.014 (0.017)	0.001 (0.015)	0.10 (0.015)	0.015 (0.020)	0.017 (0.020)
Competitive pressure	−0.293 (0.215)	−0.276 (0.212)	−0.403* (0.209)	−0.389* (0.208)	−0.663*** (0.187)	−0.656*** (0.187)	−0.602** (0.247)	−0.588** (0.246)
Customer pressure	0.379** (0.173)	0.436** (0.172)	0.267 (0.168)	0.315* (0.168)	0.593*** (0.150)	0.617*** (0.151)	0.920*** (0.195)	0.968*** (0.199)
Supplier pressure	0.266* (0.142)	0.203 (0.142)	0.520*** (0.138)	0.428*** (0.139)	0.362*** (0.124)	0.337*** (0.125)	0.134 (0.163)	0.081 (0.165)
Community pressure	0.388* (0.204)	0.355* (0.202)	0.144 (0.199)	0.117 (0.197)	0.226 (0.178)	0.212 (0.178)	0.469** (0.235)	0.441* (0.234)
France	−1.781 (1.149)	−1.844 (1.136)	−0.350 (1.119)	−0.401 (1.110)	−3.152*** (1.002)	−3.178***(1.001)	1.404 (1.322)	1.352 (1.315)
Denmark	−8.534*** (1.860)	−8.500*** (1.838)	−9.594*** (1.810)	−9.566*** (1.796)	−7.792*** (1.622)	−7.778*** (1.620)	−7.636*** (2.140)	−7.607*** (2.128)
United States	−4. 681** (1.927)	−4. 458** (1.905)	−5.530*** (1.875)	−5.344*** (1.861)	−2.114 (1.168)	−2.022 (1.679)	−7.592*** (2.216)	−7.405*** (2.206)
Risktaking	0.152 (0.166	0.124 (0.164)	0.049 (0.162)	0.026 (0.161)	0.274 (0.145)	0.263 (0.145)	0.323* (0.191)	0.299 (0.191)
Innovativeness	−0.088 (0.126)	−0.103 (0.125)	−0.088 (0.123)	−0.100 (0.122)	−0.056 (0.110)	−0.062 (0.110)	0.047 (1.456)	0.035 (0.145)
Constant	22.973*** (2.894)	23.811*** (2.875)	24.181*** (2.817)	24.877*** (2.801)	18.343*** (2.522)	18.686*** (2.533)	8.934*** (3.328)	9.636*** (3.328)
R^2	0.319	0.338	0.302	0.316	0.354	0.358	0.318	0.328
Adjusted R^2	0.284	0.301	0.266	0.278	0.321	0.322	0.283	0.291
Number of observations	286	286	286	286	286	286	286	286
F	9.06***	9.18***	8.37***	8.32***	10.61***	10.04***	9.04***	8.80**

a) Standard errors in brackets; b) *p < .1, **p < .05, ***p < .01.

Discussion and conclusion

Facing increasing pressure from stakeholders for SMEs to contribute to meeting the UN SDGs, further insight is needed as to whether and why SMEs adopt environmental practices and to what extent (Rubio-Mozos et al., 2019). Our study set out to examine this issue, specifically focusing on how a higher proactive orientation is related to environmental-practice adoption in SMEs. Then, recognizing the research that has substantiated the direct impact of regulatory pressure on the adoption of environmental practices, we explored how regulatory pressure moderates the relationship between SMEs’ proactive orientation and their environmental-practice adoption. In this study we integrate the literature at the intersection of sustainability, proactive orientation, and regulatory pressure to untangle and enrich our understanding of the significant positive effect of SMEs’ proactive orientation on their adoption of environmental practices and how regulatory pressure enhances this relationship, thus showing that these factors combine to motivate SMEs to adopt more environmental practices.

Contributions to theory and practice

Our study makes two primary contributions to SME research on sustainability, proactive orientation, and regulation. First, we theorize and confirm empirically the significant positive relationship between SMEs’ proactive orientation and their adoption of environmental practices disaggregated from other EO dimensions. Prior EO studies have found in configurational research that more proactively oriented firms, relative to innovativeness and risk-taking, can lead to different sustainability strategies and a more or less effective balance and integration of economic, social, and environmental aspects of decisions, but these studies have shown variability in this relationship (de Guimarães et al., 2018; DiVito & Bohnsack, 2017; Kreiser & Davis, 2010; Wiklund & Shepherd, 2005). We theorize the need to disaggregate proactive orientation from risk-taking and innovativeness when considering its direct effect on environmental-practice adoption to better estimate its effect and make the interpretation of the relationship less challenging. We advocate that, because these SMEs are more opportunity seeking and forward-looking (Lumpkin & Dess, 2001)—their managers can better identify and act on a range of opportunities for lowering operational costs and increasing differentiation related to environmental practices, compared to less proactively oriented SMEs. Our findings extend prior research by empirically demonstrating that a proactive orientation, disaggregated from other EO dimensions, is positively related to SMEs’ adoption of environmental practices. We encourage future research to investigate whether other factors shown to influence SMEs’ engagement in sustainability, such as managers’ perceptions for their firms’ environmental conditions (Kammerlander et al., 2015; Tyler et al., 2020) and firm resources (Pullman et al., 2009; Tilley, 1999) moderate the relationship our study demonstrates between SMEs’ proactive orientation and their adoption of environmental practices.

Second, we reveal the enhancing effect of regulatory pressure on the relationship between SMEs’ proactive orientation and their adoption of environmental practices, thus showing the important effects of both proactive orientation and regulatory pressure on SMEs’ engagement in sustainability. Prior research has found that SMEs tend to adopt only the minimum practices necessary to comply with environmental regulation, perceiving such regulation as a strategic threat and costly (Ernst et al., 2022; Williamson et al., 2006). Counter to these prior findings, we theorized and found support for our contention that strong regulatory pressure serves as a motivator for proactively oriented SMEs to adopt even more environmental practices. We theorized that strong regulatory pressure enhances the positive link between a proactive orientation and environmental-practice adoption in two primary ways. By encouraging proactively oriented SMEs to search for unique ways to implement and integrate required environmental practices to lower cost and differentiate (Dibrell et al., 2011; Wu & Pagell, 2011) and to anticipate future market demands and shape market forces through branding and marketing by adopting unrequired environmental practices (Aragón-Correa & Rubio-Lopez, 2007; Jarl Borch & Brastad, 2003; Schindehutte et al., 2008). Alternatively, we posit that weak regulatory pressure does not motivate proactively oriented SMEs to consider the opportunities associated with environmental practices but rather encourages proactively oriented SMEs to consider a broader set of opportunities that can provide them with lower costs, more differentiated products, and unique branding and marketing ideas that can shape market forces (Graafland & Smid, 2017; Hamann et al., 2017; Worthington & Patton, 2005). These findings highlight the significant influence of the regulatory context as an important influence on proactively oriented SMEs’ motivations toward adopting environmental practices and thus contribute to the UN SDGs (Rubio-Mozos et al., 2019). Our findings demonstrate that, rather than primarily a threat or limitation to SMEs (Williamson et al., 2006), the regulatory context can enhance the ability of proactively oriented SMEs to focus on the opportunities related to adopting a broader range of environmental practices. It also reveals how weak regulatory pressure appears to allow, maybe even encourage, proactively oriented SMEs to focus their attention on opportunities unrelated to the adoption of environmental practices to anticipate future market demands and shape the market (Worthington & Patton, 2005). Future research can build on this study by examining the influence of other contextual factors that may be important boundary conditions on the relationships between proactively oriented SMEs and their adoption of environmental practices. Future research could also examine the moderating role of regulatory pressure on the relationship between other SME characteristics and their adoption of environmental practices.

Additionally, our exploratory analysis, which decomposed environmental practices into four types, provides interesting and novel pathways for future research. This exploratory analysis showed that three out of four practice types supported the relationship between a proactive orientation and the adoption of environmental practices in SMEs—operational practices, waste management practice, and environmentally friendly practices—while environmental management practices were not supported. Similarly, the moderating effect of regulatory pressure was the strongest on the relationships between a proactive orientation and the adoption of operational and waste management practices. Notably, operational and waste management practices are related to tangible and actionable practices, involving supply chain, energy, water, and materials, which are more easily measured and monitored than general management practices (Marshall et al., 2015; Pullman et al., 2009). Thus, our exploratory results suggest that, although all types of environmental practices improve firm performance (Golicic & Smith, 2013), SMEs may require different motivators to adopt different types of environmental practices. Future research could explore underlying reasons for these differences in the types of practices that are more strongly associated with a proactive orientation, and with risk-taking and innovativeness and could also explore the moderating effects of regulatory pressure on these relationships in much more depth.

Finally, we contribute to the practice of sustainability by deepening and extending our understanding of when SMEs are likely to adopt environmental practices. Research has highlighted the variance in SMEs’ engagement in sustainability, showing that SMEs tend to lag larger firms in their adoption of environmental practices and thus lose potential for a competitive advantage through sustainability (Aragón-Correa et al., 2008; Johnson & Schaltegger, 2016; Triguero et al., 2016). This variance may be due to SMEs’ focus on sustainability as a threat due to increased short-term costs of implementation, particularly in the context of a fragmented industry (Tyler et al., 2020). Importantly, we found that more proactively oriented SMEs are more likely to act on the opportunities associated with sustainability than less proactively oriented SMEs. Thus, SMEs should consider how to increase their proactive orientation to promote engagement in sustainability.

Limitations and future research

Limitations present opportunities for future research to test the boundary conditions of our findings and extend them further. Our study has limitations, as all studies do. First, the data collected in our survey was from the wine industry, a context with agricultural foundations. Future research could test the boundary conditions of our findings to ascertain the generalizability of our findings in diverse industry contexts. Second, we met with many challenges in our data collection efforts partly due to the online format in the United States, Italy, and France (Szolnoki & Hoffmann, 2013), but also because SME managers were not willing to answer many questions. While we had trouble getting U.S. managers to participate at all, missing data reduced the number of usable questionnaires in Italy and Denmark (55% and 47%, respectively, of the responses were dropped due to missing data). It is also worth noting that we experienced challenges in trying to locate secondary data. Indeed, even for incorporated wineries, data on revenues was not available in ORBIS for a large percentage of firms. These challenges resulted in smaller sample sizes in the United States and Denmark as compared to France and Italy. However, with these relatively small samples we were able to control for differences in the country samples as supported by the robustness checks conducted, and the coefficient alphas for our scales suggest that the multicountry data collected was reliable internally (Jenkins et al., 2020). More importantly, including them allowed us to answer our research questions, which required countries from both the “New World” and the “Old World.”

Third, our data sample included SMEs in only four countries with established wine industries, although there are other countries that meet these same criteria. We chose Italy and France to represent the “Old World” and the United States and Denmark to represent the “New World,” where grapes are grown and wine is bottled. Due to the complexity of data collection, including finding coauthors, translation, and survey implementation issues, we included a limited number of countries in our research. Future research could test the boundary conditions of our contributions by sourcing data from other countries in the “Old World” and “New World” that grow grapes and bottle wine not included in this study. Fourth, we were not able to control for response bias, as the only information we had on sample firms was the firm name, the owner/manager’s name, a telephone number, and an address, and there were no set waves of data collection but rather a continuous process. We encourage future researchers to find a sampling technique that provides measures they can use to assess non-response bias and specified waves of data so response bias can be assessed (Armstrong & Overton, 1977).

Fifth, we focused on regulatory pressures as a contextual influence, in part because sustainability research has adequately demonstrated the existence of other stakeholder pressures on the adoption of environmental practices in SMEs. This is why we purposefully include competitive (Tyler et al., 2020), supplier (Geffen & Rothenberg, 2000), customer (Shepherd et al., 2015), and community (Wolf, 2014) pressures as controls in our analyses. However, future research could study these pressures and how they moderate the link between SMEs proactive orientation and their adoption of various types of environmental practices. Finally, the hypotheses we developed and tested are appropriate for a study drawing on quantitative survey data. However, building on the findings of our study, future work could delve deeper into the mechanisms used by SMEs to proactively respond to perceptions of regulatory pressure by adopting environmental practices. This research would require a qualitative and inductive approach, based on in-depth interview data and likely also longitudinal archival data, to unpack the process by which these relationships unfold in SMEs over time.

Conclusion

In conclusion, this study integrates sustainability, proactive orientation, and regulation research by developing and empirically testing hypotheses regarding how a proactive orientation is positively associated with the adoption of environmental practices in SMEs and how regulatory pressure positively moderates this relationship. Because SMEs face many challenges to engaging in sustainability, we hope this study encourages future research to investigate when and how regulatory pressure can enhance SMEs’ engagement in sustainability. We also advocate for future research to build on our study to enrich our understanding of the important distinct influence of SMEs’ proactive orientation on their environmental-practice adoption and how other factors moderate this relationship. This research is important because environmental practices continue to offer opportunity-seeking and forward-looking SMEs an opportunity to differentiate products or services and/or shape markets through branding and marketing, given the growing stakeholder and regulatory pressure to adopt these practices.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ This time period of data collection reflects the only stable period in economic activity worldwide between the aftermath of the Great Recession of 2008 to 2012, the rapid economic growth from 2017 to 2019, the COVID-19 crash and shut down from 2020 to 2022, and national governments’ stimulus spending during some of these periods (Dvouletý et al., 2021; IMF, 2023).

² The authors obtained ethics approval from their institutions in each country in which this study was conducted, including IRB approval at the U.S. institution, and by reporting all results anonymously and in aggregate as required by the institutions in Denmark, France, and Italy.

³ A study comparing the effectiveness of various survey methods in Germany on recruiting wine consumers’ participation found that face-to-face and telephone surveys were more effective than online methods to capture higher sample sizes (Szolnoki & Hoffmann, 2013). We could not find a study on wine industry associations or wine company participation, but this study suggests that our use of an online survey contributed to our lower sample size.