DP2022-08

Environmental Awareness and Green
Business Practices in the Small Business
Sector: Empirical Evidence Using a Smalland Medium-sized Enterprises Survey
in Japan
Masahiko SHIBAMOTO

March 16, 2022

Environmental Awareness and Green Business Practices in the
Small Business Sector: Empirical Evidence Using a Small andMedium-sized Enterprises Survey in Japan*
Masahiko Shibamoto
March 16, 2022*

I am grateful for the helpful comments and discussions by Kimitaka Nishitani, Masato Shizume, Hirofumi
Uchida, and Nobuyoshi Yamori. I would also like to thank Azusa Komoda and Mayura Takami for their excellent
research assistance. This study received ﬁnancial support from the Japan Society for the Promotion of Science(JSPS KAKENHI Grant Numbers 15H05729 and 20H05633).
Correspondence to: Masahiko Shibamoto, Research Institute for Economics and Business Administration(RIEB) and Center for Computational Social Science (CCSS), Kobe University, 2–1, Rokkodai, Nada, Kobe,
657–8501, Japan. E–mail: shibamoto@rieb.kobe-u.ac.jp.

Abstract
This study argues that the heterogeneity in environmental awareness among business owners
is a pivotal component in characterizing the implementation of green business practices inthe small business sector. Speciﬁcally, using a large-scale survey of small and medium-sizedenterprises (SMEs) throughout Japan, we show a gap between environmental awarenessand green business practices in the small business sector; that is, SMEs are aware of environmental issues, but they do not practice green business to a large extent. Further, wequantitatively show that the environmental awareness of SMEs already practicing or attempting to practice green business tends to be greater than that of SMEs not practicing
green business. Our empirical results support the link between environmental awareness asa business opportunity and green business practices. However, there is less evidence thatenvironmental awareness divorced from management, such as the need to pass on a sustainable society to future generations, would be involved with green business practices in thesmall business sector. Our ﬁndings advocate that policymakers looking to strengthen environmental initiatives in the small business sector need to direct SMEs to build awareness ofenvironmental issues related to their businesses.
JEL Classiﬁcation: L21; Q56.
Keywords: green business practices; environmental awareness; small business sector; survey
data; Japan

1

Introduction

It has been argued that the business sector needs to promote initiatives to address environmental
issues to realize a sustainable society. In 2015, the United Nations adopted the 2030 Agenda
for Sustainable Development and its 17 Sustainable Development Goals (SDGs) to realize an
acceptable global environment and society for the next generation. The Global Reporting
Initiative, the United Nations Global Compact, and the World Business Council for Sustainable
Development have developed the SDG Compass as a guideline for corporate action to implement
the SDGs.(GRI, UNGC, and WBCSD, 2015) To pass on a sustainable economy and society to
the next generation, policymakers are encouraging the business sector to take steps to protect
the environment.
In response, an increasing number of large companies are managing their operations, taking
into consideration the impact of their business activities on the environment. In particular, they
are keenly aware of the need to address environmental protection as part of corporate social
responsibility.(Nishitani et al., forthcoming, and studies therein) Non-ﬁnancial information, suchas environmental, social, and governance information, is increasingly recognized by investors asnecessary information for companies to commit to long-term growth, and by companies asimportant information to attract these investors.(CDP, CDSB, GRI, IIRC, and SASB, 2020)
However, there may be challenges in encouraging ﬁrms in the small business sector to operate their businesses in an environmentally friendly manner. In particular, SMEs are likely tohave less incentive to manage the environmental impact of their businesses compared to large
companies. In general, people have a limit to their cognition; that is, they locate some information in their own limited cognitive memory and ignore others. According to the Attention
Based View proposed by Ocasio (1997), based on the premise that a company is a collectionof people’s cognition, a company’s decisions and actions depend on how it allocates the limited
cognitive attention of decision makers. If a company has suﬃcient cognitive capacity regarding
information for business continuity, it can recognize that it has to be reactive to environmental
issues under the pressure of stakeholders such as policymakers and investors. However, SME
owners are often forced to make business decisions based solely on their own cognition. They
may focus more on managing day-to-day cash-ﬂow and meeting the needs of their lifestyle andlocal communities and less on earning the long-term proﬁts or solving global social problems(See Storey & Greene, 2010; Greene, 2020, and studies therein for the diﬀerences between large
1and small businesses). In such cases, despite the potential business beneﬁts of environmental
protection eﬀorts, such as cost saving, business opportunity discovery, regulatory compliance,and reputation enhancement, some SMEs may not feel the need to proactively address environmental issues in their own business as compared to large companies (Bianchi & Noci, 1998).
In addition to quantitative diﬀerences in environmental awareness (Gadenne et al., 2009),
SME owners are likely to have qualitatively diﬀerent attitudes toward environmental issues dueto their heterogeneous business strategies and ethics. Even if they recognize that environmental
protection is important for future generations, many of them may believe that they would havelittle impact on the environment because they, individually, have limited operations. Some
SMEs may not feel the need to promote environmental protection eﬀorts as corporate social
responsibility, especially because their activities are not exposed to outsiders, such as ﬁnancial
intermediaries, as much as those of large companies. Other SMEs may assume that the progressof environmental protection initiatives is irrelevant to their business, and that it would not aﬀect
their business. Thus, SMEs may be unlikely to engage in environmentally friendly practices.
Various attitudes toward environmental issues can be a barrier to encouraging SMEs to practicegreen business.
This study empirically investigates the relationship between environmental awareness andgreen business practices in the small business sector. Speciﬁcally, we use data from the Daido
Life Survey, a large-scale questionnaire survey of SMEs in Japan, to quantitatively measuregreen business practices and environmental awareness. First, we describe the status of green
business implementation and environmental awareness in Japan’s small business sector. Then,we explore whether environmental awareness among SME groups already practicing or attempting to practice green business tends to be greater than SME groups that are not practicing green
business.
This study contributes to the literature in two ways. First, it identiﬁes a serious gap between environmental awareness and green business practices in the small business sector. Little
progress has been made in green business in the small business sector; according to the survey, as of 2021, very few SMEs are already practicing green business in Japan, although there
are a signiﬁcant number of SMEs that are not practicing but are attempting to do so. Regarding environmental awareness, attention to environmental issues varies considerably among
SMEs. According to the survey, most SMEs are aware of the environmental issues themselves;2

in addition, there is no lack of willingness among SMEs to tackle environmental issues within
their businesses. However, few SMEs link environmental issues to their management, and they
believe that environmental initiatives aﬀect their business.
Second, we provide empirical evidence that small business owners have diﬀerent environmental awareness depending on their green business practices. We ﬁnd that there is a link
between environmental awareness as a business opportunity and green business practices. In
contrast, there is little evidence that environmental awareness divorced from management, suchas the need to pass on a sustainable society to the next generation, is associated with green
business practices in the small business sector.
The rest of this paper is organized as follows. In Section 2, we discuss the relationshipbetween our research question and the literature. Section 3 explains our empirical frameworkusing the SME survey. Section 4 presents the empirical results. Section 5 concludes the study.

2

Research question and related literature

Our research looks at how ﬁrms in the small business sector have diﬀerent environmental awareness depending on the status of the implementation of green business practices. Speciﬁcally, we
statistically test the following three hypotheses. Hypothesis (1) Willingness to tackle environmental problems is positively related to the implementation of green business. If the willingness
to address environmental issues is related to the practice of green business, we expect that thepercentage of SMEs that are willing to address environmental issues in their business is higher
in SMEs that practice green business. Hypothesis (2) There are diﬀerences in the implementation of green business practices depending on the main reasons for interest in environmental
issues. In particular, we expect that a higher percentage of SMEs that practice green businessbelieve that there are business opportunities for environmental issues. However, even if they
are interested in environmental issues for reasons that are unrelated to their business, they may
not be related to the status of their green business practices. Hypothesis (3) SMEs that areaware of the impact of environmental issues on their businesses are more likely to practice green
business. In particular, we expect that SMEs that practice green business are more aware of
the impact of environmental issues on their businesses.
Many previous studies have highlighted the importance of an executive’s/manager’s aware-3

ness of the environmental impact of the company’s operations and corporate social responsibility
in addressing environmental issues in businesses in the manufacturing industry. 1 In particular,
they emphasize the role of stakeholder management in linking environmental practices with themain business.2 As the environmental sensitivity of internal and external stakeholders increases,
a company will become more responsive to environmental issues as part of its corporate social
responsibility. Our interest, however, is to look quantitatively at environmental awareness andgreen business practices, not only in the manufacturing industry but also in service industries
and other industries where environmental impacts are diﬃcult to envision. Moreover, small
business owners, including those of micro-enterprises with few employees, may be less aware of
the negative impacts of their operations and lack interest in pursuing environmentally friendly
practices.
Several studies empirically examine whether and to what extent small business owners’ environmental awareness aﬀects environmental practices. For example, Gadenne et al. (2009) deﬁneenvironmental awareness as owners’ awareness of the environmental impact of their business andargue that increased environmental awareness among small business owners encourages themto take actions that reduce their impact on the environment.3 The diﬀerences in the awareness of environmental issues among SMEs are, however, not only diﬀerences in degree but also
qualitative diﬀerences associated with their relationship to their own business. We focus on thequalitative diﬀerences in environmental awareness among small business owners. In particular,
the status of green business practices diﬀers depending on whether SMEs consider environmental
issues to be relevant to their management or not.
Few empirical studies have analyzed the environmental practices of ﬁrms in the small business sector across one country or multiple countries. Hoogendoorn et al. (2015) is one of the few
exceptions and uses data from about 8,000 SMEs in European countries and the U.S. obtained
from a large-scale SME survey (Eurobarometer survey) to investigate environmental practices
1

Sun & Sun (forthcoming) and studies therein present empirical evidence that increasing executives’ awarenessaﬀects environmental practices of ﬁrms in the manufacturing industry. They follow the concept of an attentionbased view in which an executive allocates limited time and attention to enterprise problems, and state thatthe strength of the relationship between environmental awareness and green business practices depends on ﬁrmspeciﬁc resource ﬂexibility and ﬁnancial constraints.
2
For example, Nishitani et al. (forthcoming) clarify the inﬂuence of stakeholder pressure on a company’s
implementation of environmentally friendly practices using data on Vietnamese companies. Nishitani (2009) ﬁnds
that the stronger pressure of foreign customers and long-term shareholders positively inﬂuences the environmental
practices in Japanese manufacturing companies.
3
Gadenne et al. (2009) utilize principal component analysis to construct an aggregate measure for the degreeof environmental awareness among SMEs from various Likert scale questions.

4

in the small business sector. In particular, they explicitly distinguish two types of environmental practices—green operational processes and green business practices—and ﬁnd that diﬀerent
ﬁrm characteristics have dissimilar inﬂuences on both environmental practices. 4 In this study,
the analysis is limited to green business practices as an environmental practice. Our researchinterest is not in the ﬁrm heterogeneity of green business practices due to the number of employees, industry, ﬁnancial condition, etc., which is of interest to Hoogendoorn et al. (2015),
but in the diﬀerences in the environmental awareness of SME owners.

3

Empirical framework

We quantitatively depict the characteristics of green business practices and environmental
awareness in Japan’s small business sector. To capture the overall picture of ﬁrms in thesmall business sector throughout Japan, we use data from a large-scale questionnaire survey ofJapanese SMEs. Based on the survey results, we select the SMEs that responded to the questionnaire regarding the implementation status of environment-related investment and productdevelopment and awareness of environmental issues, and categorize the SMEs by green businesspractices and environmental awareness. We calculate the percentage of ﬁrms’ responses regarding green business practices and environmental awareness in the small business sector. We thenuse a simple regression model to quantitatively analyze the association between the status ofgreen business practices and the diﬀerence in the awareness of environmental issues.

3.1

The Daido Life Survey

We used the results of the Daido Life Survey (DLS) to collect data. The DLS is a monthly
survey of small business owners in Japan conducted by Daido Life Insurance Co. 5 They conduct
a questionnaire survey on the business sentiment of SMEs and their eﬀorts to solve management
issues to understand the business environment of a wide range of SMEs in real time. A feature of
the DLS is the response rate, which is extremely high, while the response rate for questionnaires
for micro-, small-, and medium-sized enterprises tends to be quite low in general.(Cycyota &4

Environmental practices generally refer to activities undertaken by ﬁrms aimed at reducing the impact of
their business on the environment. We refer to green business practices as involvement in greening products
and service oﬀerings, such as oﬀering organically produced and eco-designed products. Environmental practices
include not only green business practices but also practices related to greening operational processes, such as
minimizing waste, saving on resources, and recycling in operational processes.
5
https://www.daido-life.co.jp/knowledge/survey/

5

Harrison, 2006; Pielsticker & Hiebl, 2020)6
As shown in subsection 3.3, the DLS is characterized by the fact that the survey targets
micro-enterprises (ﬁve or fewer employees) and SMEs throughout Japan. Therefore, analyzing
DLS data is well aligned with the aim of this study, which is to capture the development ofgreen business practices and the awareness of environmental issues in the small business sector
in Japan.

3.2

Categorizing SMEs by green business practices and environmental awarenessWe focus on the SMEs that responded to questionnaires in the DLS about their implementationof environment-related investment and product development and their awareness of environmental issues. Then, we categorize the SMEs by green business practices and environmental
awareness.

3.2.1

Green business practices

We collect data on the SMEs that responded to the monthly DLS in January 2021 on the speciﬁctheme “Development of sales channels and new products and services in the time of COVID19.”(Daido Life Insurance, 2021a) The survey included the following: “Please select one itemthat applies to your future capital investment and product development with environmental
protection in mind.” Respondents answered with one of the following: “Already working on
capital investment/development,” “Preparing for capital investment/development,” “Feel it isnecessary and will consider it in the future,” “Have no plans to take action,” or “Don’t know.”
We categorize responding SMEs into three groups according to the status of practicing
green business. The ﬁrst category is a group of SMEs that are already practicing green business, namely Already-Environmental Practices (A-EP); we categorize the group of ﬁrms thatanswered “Already working on capital investment/development” or “Preparing for capital investment/development” to the question as A-EP. The second category is a group of SMEs that
6This might be because Daido Life Insurance asks its customers (new and existing) to cooperate with thesurvey while conducting sales activities to small business owners. Approximately 60% of the responding SMEs
have contracts with Daido Life Insurance. This is consistent with the argument by Cycyota & Harrison (2006),
who used meta-analytic procedures to ﬁnd that topicality and sponsorship by organizations and people in theexecutive’s social network led to a higher response rate. However, note that there are some diﬀerences in the
population of responding SMEs in the DLS from that of the small business sector in Japan, as the responding
SMEs are clients of Daido Life Insurance. For more information on the diﬀerences, see the Appendix.

6

is potentially trying to implement green business practices, namely Potentially-Environmental
Practices (P-EP); we categorize the group of ﬁrms that answered “Feel it is necessary and willconsider it in the future” to the question as P-EP. The third category is a group of SMEs thathas not tried to implement green business practices, namely None-Environmental Practices (NEP); we categorize the group of ﬁrms that answered “Have no plans to take action” or “Don’tknow” to the question as N-EP.

3.2.2

Environmental awareness: Willingness to address environmental issues inbusiness

We collect data on the SMEs that responded to the monthly DLS in December 2019 on the speciﬁc theme “Review of 2019, expectations for 2020, and interest in environmental issues.”(Daido
Life Insurance, 2019) The survey included the question, “Do you want to address environmental
issues in your ﬁrm’s business activities in the future? Please select one that applies.” Respondents answered with one of the following: “Want to proactively address,” “Want to address,”or “No plans to work on (not related to the project).”
According to the results, we categorize the willingness to address environmental protection
in business into three groups: Proactive, Desirable, and No-Plans.

3.2.3

Environmental awareness: The primary reason for interest in environmental
issues

We collect data from SMEs that responded to the monthly DLS in December 2019. The survey
also included the following: “Please select the one that best describes your reasons for being
interested in environmental issues.” Respondents answered with one of the following: “Environmental preservation is important for the next generation,” “Necessary to take action as
corporate social responsibility,” “Because we see environmental issues as a business opportunity,” “For the provision of environmentally friendly products, etc., and technology development
projects,” “To be required by business partners to address environmental issues,” “To comply
with legal regulations,” “To improve corporate image,” “To improve employee motivation,”“Others,” or “Not interested in any particular environmental issue.”We categorize responding SMEs into ﬁve groups according to the primary reason for interestin environmental issues. The ﬁrst category is a group of SMEs that considers the importance7

of protecting the environment for future generations as the primary reason for interest in environmental issues, namely Next-gen. The second category is a group of SMEs that considers
corporate social responsibility as the primary reason, namely CSR. The third category is agroup of SMEs that considers the relevance of business as the primary reason, namely Business; we categorize the group of ﬁrms that answered “Because we see environmental issues as abusiness opportunity,” “For the provision of environmentally friendly products, etc., and technology development projects,” “To be required by business partners to address environmental
issues,” “To comply with legal regulations,” “To improve corporate image,” or “To improve
employee motivation” to the question as Business. The fourth and ﬁfth categories are groupsof SMEs that answered “Others” and “Not interested in any particular environmental issue,”respectively.

3.2.4

Environmental awareness: Greening as a matter inﬂuencing businessWe collect data on the SMEs that responded to the Daido Life Survey in April 2021 on thespeciﬁc theme “Impact of the Second Emergency Declaration and Business Development during
COVID-19.” (Daido Life Insurance, 2021b) The survey included the following: “Please select up
to three events that you feel will have an impact on the implementation of your business activities
over the next year.” Respondents answered with up to three of the following: “Environmental
protection initiatives, such as the SDGs and a decarbonized society,” “Spreading COVID-19
vaccination,” “Hosting the Tokyo Olympics and Paralympics,” “International aﬀairs, such as
U.S.-China relations, etc.,” “Promoting a digital society,” or “None in particular.”
We categorize the group of ﬁrms that answered “Environmental protection initiatives, suchas the SDGs and a decarbonized society” as the SMEs that regarded greening as a matterinﬂuencing their business activity, namely Inﬂuence business: Greening.

3.3

Descriptive statistics of the sample of SMEs in the Daido Life Survey

We describe the characteristics of the sample of SMEs responding to the DLS. Table 1 shows
the descriptive statistics of the sample in the DLS of December 2019, January 2021, and April
2021. A total of 7,311 SMEs responded to the DLS in December 2019, 8,419 in January 2021,
and 10,973 in April 2021.
As shown in Table 1, data from the sample of SMEs responding to the DLS capture the8Table 1: Descriptive statistics of SMEs responding to the Daido Life Survey.
Category

Dec. 2019

Jan. 2021

Apr. 2021

221 [3%]456 [6%]592 [8%]
1,540 [21%]559 [8%]608 [8%]1,482 [20%]544 [7%]276 [4%]
1,033 [14%]315 [4%]710 [8%]823 [10%]
1,586 [19%]832 [10%]852 [10%]
1,362 [16%]850 [10%]300 [4%]789 [9%]388 [4%]727 [7%]
1,033 [9%]2,375 [22%]931 [8%]
1,142 [10%]1,987 [18%]1,003 [9%]233 [2%]
1,154 [11%]1,304 [18%]1,620 [22%]1,659 [23%]2,224 [31%]407 [6%]

1,614 [19%]1,913 [23%]1,845 [22%]2,555 [31%]437 [5%]2,140 [20%]2,420 [22%]2,402 [22%]3,400 [31%]515 [5%]

3,385 [47%]2,475 [34%]1,343 [19%]3,938 [47%]2,798 [34%]1,605 [19%]5,101 [47%]3,648 [34%]2,104 [19%]922 [13%]
1,825 [26%]2,180 [31%]1,978 [28%]237 [3%]978 [12%]2,069 [25%]2,535 [31%]2,355 [29%]307 [4%]

1,218 [11%]2,671 [25%]3,287 [31%]3,174 [30%]391 [4%]

1,915 [27%]2,030 [28%]1,964 [27%]1,283 [18%]2,272 [27%]2,346 [28%]2,235 [27%]1,471 [18%]2,799 [26%]3,219 [30%]2,794 [26%]2,026 [19%]RegionHokkaido
TohokuNorth Kanto
South Kanto
Hokuriku/Koshinetsu
Tokai
Kansai
Chugoku
Shikoku
Kyushyu
Industry
Construction
Manufacturing
Wholesale/RetailServiceMISCELLANEOUS
Number of employees
Less than 5 employees
6–20 employees
More than 21 employees
Firm ageLess than 10 years
10 to less than 30 years
30 to less than 50 years
50 to less than 100 years
More than 100 years
Owner ageLess than 50 years old
50 to less than 60 years old
60 to less than 70 years oldMore than 70 years old

Source: Authors’ calculations using data from the Daido Life Survey (December 2019, January 2021, and April
2021).
Notes: The ﬁgure indicates the number of SMEs responding to the Daido Life Survey in December 2019, January 2021, or April 2021 by category described in the left header. MISCELLANEOUS includes “Agriculture,
Forestry, and Fisheries” and “Information and communications.” The percentages of SMEs in each category arein brackets.

9characteristics of the population of ﬁrms in the small business sector in Japan as a whole. 7
In particular, (1) There is a regional diﬀerence in the number of ﬁrms, with a relatively large
number of ﬁrms in urban areas such as South Kanto and Kansai, and a small number in rural
areas such as Tohoku, Chugoku, and Shikoku. (2) SMEs in the manufacturing sector do notaccount for a large share of the total, while the service sector has a higher percentage. 8 (3) The
percentage of micro-businesses, such as SMEs with ﬁve or fewer employees, is high. (4) The
ﬁrm age in the small business sector in Japan is high; only about 10% of the ﬁrms are younger
than 10 years, and more than 30% of the ﬁrms are more than 50 years old. (5) The aging ofowners in Japan’s small business sector is serious, with approximately 27% of young owners
under the age of 50 and nearly 20% of elderly owners over the age of 70.
Note that SMEs surveyed in the DLS are not necessarily the same ones surveyed every
month; there are 1,340 ﬁrms that responded to both the December 2019 and January 2021
surveys, and 3,337 ﬁrms that responded to both the January 2021 and April 2021 surveys.
Nevertheless, we conﬁrm that SMEs that responded to both of the monthly surveys also tended
to be sampled from a similar population as the group of ﬁrms that were surveyed monthly. 9
Although the DLS was conducted for a diﬀerent group of SMEs each month, the data
used in the analysis were not drawn from diﬀerent populations each month of the survey.
As seen by comparing each line in Table 1, there is no meaningful diﬀerence in the monthly
descriptive statistics. This means that SMEs are sampled every month without any bias toward
the population of a group of ﬁrms when conducting the survey.

3.4

Regression model for the association between the status of green businesspractices and the diﬀerence in the awareness of environmental issues

We consider a regression model to quantitatively assess the correlation between the environmental awareness and green business practices in the small business sector. Let AEPi and P EPi
be dummy variables that are set to 1 if SME i belongs to the A-EP and P -EP groups, respectively, and 0 otherwise. Furthermore, let EAki be a dummy variable that is set to 100 if SME
i is responding to environmental awareness k, and 0 otherwise. Then, consider the following
7
See the Appendix for the characteristics of the population of the SMEs around Japan based on Economic
Census for Business Frame of Japan conducted on the full set of economic units.
8
For more detailed descriptive statistics by industry, see Table A3 in the Appendix.
9
For descriptive statistics of the sample in the DLS that responded to both the December 2019 and January
2021 surveys or both the January 2021 and April 2021 surveys, see Table A4 in the Appendix.

10

linear regression model for each environmental awareness k;

EAki = αk + β k AEPi + γ k P EPi + ϵki ,(1)

2 . The constant term αk represents thewhere ϵki is an error term with mean-zero and variance σϵkunconditional percentage mean of the environmental awareness k for SMEs that have not tried
to practice green business, N -EP . The coeﬃcients, β k , γ k , can be interpreted as the percentage
diﬀerence in the probability of environmental awareness for the green business SMEs relative to
the SMEs in the N -EP category. We also test the null hypothesis β k = γ k regarding whether
there is a diﬀerence in the probability of environmental awareness for those business owners
who respond to either status of green business practices, A-EP or P -EP .
Based on the hypotheses described in section 2, we create dummy variables for groups by
their environmental awareness and test the null hypothesis β k = 0, γ k = 0, or β k = γ k . First,
with respect to Hypothesis (1), we create dummy variables EAPi roactive and EADesirable
for theiwillingness to tackle environmental problems in business. If willingness to tackle environmental
problems is related to green business practices, then β P roactive and γ P roactive are expected to
be positive and statistically signiﬁcant. Furthermore, there may be a diﬀerence in willingness
between SMEs that are already practicing green business and those planning to do so. In thatcase, it is expected that quantitative diﬀerences exist statistically between β P roactive , γ P roactive ,β Desirable , and γ Desirable .
With respect to Hypothesis (2), we create dummy variables EAiN ext-gen , EACSR, andi
EABusinessfor the primary reasons for interest in environmental issues. We test whetheriβ Business and γ Business are positive and statistically signiﬁcant to examine the link between
environmental awareness as a business opportunity and green business practices. We also test
the null hypotheses β N ext-gen = 0, γ N ext-gen = 0, β CSR = 0, and γ CSR = 0 separately to check
whether environmental awareness, which is not closely related to business, is associated withgreen business practices.
With respect to Hypothesis (3), we create a dummy variable EAGreening
on whether SMEsi
consider their business activity to be inﬂuenced by greening. If SMEs that are aware of the
impact of environmental issues on their business are more likely to practice green business,
β Greening and γ Greening are expected to be positive and statistically signiﬁcant.

11

We also consider a regression model that adds ﬁrm-speciﬁc variables to equation (1). In
particular, we predict that the status of green business practices is signiﬁcantly related to thediﬀerent ﬁrm characteristics due to the number of employees, industry, and so on (Hoogendoorn
et al., 2015). Then, we have a concern that the relationship obtained in the regression (1)would be spurious; obtained dependences between environmental awareness and green businesspractices are merely due to such ﬁrm heterogeneity. Therefore, we also report the results oftesting the above hypotheses by adding various ﬁrm-speciﬁc dummies such as region, industry,
number of employees, ﬁrm age, and owner age as control variables to equation (1).

4Empirical results

In this section, we report the empirical results obtained using data from the DLS on green business practices and environmental awareness among SMEs in Japan. First, we show the resultsof calculating the percentage of ﬁrms’ responses to questions about green business practices
and environmental awareness. We then present empirical evidence on the association between
the status of green business practices and the diﬀerence in awareness of environmental issues
obtained using regressions.

4.1

Green business practices among Japanese SMEs

In this subsection, we discuss the progress of green business practices in the small businesssector in Japan. Figure 1 indicates the percentage of SMEs that responded “Already working
on/Preparing for,” “Feel necessary and will consider in the future,” or “No plans/Don’t know”
to the question in the DLS of January 2021 on capital investment and product developmentwith environmental protection in mind.
There are very few SMEs in Japan that are already practicing green business. As of January
2021, only 6% of all SMEs are investing in or developing products with environmental protection
in mind.
A good number of SMEs are not practicing, but potentially trying to implement green
business. The ﬁgure indicates that about 28% of SMEs feel the need for future capital investment
and product development with environmental protection in mind, and will consider it in the
future.

12Figure 1: Percentage of SMEs by the status of green business practices as of January 2021
Source: Authors’ calculations using data from the Daido Life Survey (January 2021).
Notes: The ﬁgure indicates the percentage of ﬁrms that responded “Already working on/Preparing for,” “Feelnecessary and will consider in the future,” or “No plans/Don’t know” to the question on capital investment andproduct development with environmental protection in mind. Number of responding ﬁrms: 7,572

4.2

Environmental awareness among Japanese SMEs

First, we determine how many SMEs are willing to tackle environmental protection in theirbusiness activities. Figure 2 indicates the percentage of SMEs that responded “Want to proactively address,” “Want to address,” or “No plans to work on (not related to the project)” tothe question in the DLS of December 2019 “Do you want to address environmental issues inyour business activities?”
There is no lack of willingness among SMEs to tackle environmental issues within theirbusinesses. The ﬁgure shows that more than 70% of SMEs want to address environmental
issues in their business activities in the future. This suggests that there is a gap between thewillingness to address environmental issues in business and green business practices, in the sensethat while there are few SMEs that are practicing or trying to practice green business, there
are many SMEs that have a desire to address environmental issues.

13

Figure 2: Percentage of SMEs by the degree of willingness to address environmental protection
in business activities as of December 2019
Source: Authors’ calculations using data from the Daido Life Survey (December 2019).
Notes: The ﬁgure indicates the percentage of SMEs that responded “Want to proactively address,” “Wantto address,” or “No plans to work on (not related to the project)” to the question “Do you want to addressenvironmental issues in your business activities?” (%). Number of responding SMEs: 6,686

However, few SMEs want to immediately address environmental issues in their business.
Only 13% of SMEs responded that they are proactively willing to work on environmental issues,and 61% of SMEs seem to have only a desire to work on environmental issues. This suggeststhat the majority of SMEs that want to address environmental issues in their business only
have a desire but not an immediate intention to do so.
Next, we examine the primary reason small business owners are interested in environmental
issues. Figure 3 indicates the percentage of SMEs that responded “Environmental preservation is important for the next generation,” “Necessary to take action as a corporate social
responsibility,” “To be related to the business,” “Others,” or “Not interested in any particularenvironmental issue” to the question “Why are you interested in environmental issues?”
SMEs are not uninterested in environmental issues themselves. Over 90% of SME owners
are interested in some kind of environmental issues. In addition, 60% of them are interested

14

Figure 3: Percentage of SMEs by the primary reason for interest in environmental issues as ofDecember 2019
Source: Authors’ calculations using data from the Daido Life Survey (December 2019).
Notes: The ﬁgure indicates the percentage of SMEs that responded “Environmental preservation is important
for the next generation,” “Necessary to take action as a corporate social responsibility,” “To be related to thebusiness,” “Others,” or “Not interested in any particular environmental issue” to the question “Why are you
interested in environmental issues?” Number of responding SMEs: 6,876

in environmental issues because of the importance of environmental protection for the next
generation as their primary reason.
However, not many SMEs are interested in environmental issues because of their corporatesocial responsibility and relevance to their business. Only 11% of ﬁrms are concerned about
environmental issues with corporate social responsibility as the primary reason. Further, only
12% of SMEs chose one of “Because we see environmental issues as a business opportunity,” “Forthe provision of environmentally friendly products, etc., and technology development projects,”“To be required by business partners to address environmental issues,” “To comply with legal
regulations,” “To improve corporate image,” or “To improve employee motivation.” This suggests that, although they are interested in environmental issues, few SMEs link them to their
management.

15

Figure 4: Percentage of SMEs responding to what matters inﬂuence business as of April 2021
Source: Authors’ calculations using data from the Daido Life Survey (April 2021).
Notes: The ﬁgure indicates the percentage of SMEs that responded “Environmental protection initiatives, suchas the SDGs and a decarbonized society,” “Spreading COVID-19 vaccination,” “Hosting the Tokyo Olympics andParalympics,” “International aﬀairs, such as U.S.-China relations, etc.,” “Promoting a digital society,” or “Nonein particular” to “Matters that you feel will have an impact on the implementation of your business activities
over the next year.” Number of responding SMEs: 10,413

Finally, we see if small business owners believe that environmental initiatives are importantenough to inﬂuence their business activities. Figure 4 indicates the percentage of SMEs that
responded “Environmental protection initiatives, such as the SDGs and a decarbonized society,”“Spreading COVID-19 vaccination,” “Hosting the Tokyo Olympics and Paralympics,” “International aﬀairs, such as U.S.-China relations, etc.,” “Promoting a digital society,” or “Nonein particular” to “Matters that you feel will have an impact on the implementation of yourbusiness activities over the next year.”
Many SMEs do not consider the progress of environmental initiatives as matters that aﬀect
their business. As of April 2021, less than 20% of SMEs feel that environmental initiatives
would have an impact on the implementation of their business activities in the coming year.
Since the survey was conducted during the COVID-19 pandemic, we can understand that the16spread of the COVID-19 vaccine was of high interest for their management. Nevertheless, thissuggests that while policymakers are actively encouraging the business sector to take action
on environmental issues, many SMEs do not believe that this is important enough to have an
impact on their operations.

4.3

Association between environmental awareness and green business practices

In this subsection, we explore the association between environmental awareness and green business practices. We focus on the status of the practices: Already-Environmental Practices (AEP), Potentially-Environmental Practices (P-EP), and None-Environmental Practices (N-EP).
Although the number of A-EP is very small, as shown in the previous subsections, P -EP SMEs
that attempt to practice green business in the future may have a similar propensity for environmental awareness as A-EP SMEs. However, it is also expected that A-EP SMEs have diﬀerent
environmental awareness than P -EP SMEs. We run a linear regression (1) of each of the various
dummy variables, for the categories of environmental awareness on the two dummy variablesof green business practices, to examine how small business owners have diﬀerent environmental
awareness depending on their status of green business practices.
Table 2 presents the results of these regressions (1). The ﬁrst row “Constant” reports
the constant from each regression, αk . The next two rows show the coeﬃcients of the green
business practice dummy variables, β k , γ k . The fourth row shows the diﬀerence between thecoeﬃcients of the two dummy variables, β k −γ k . This can be interpreted as the diﬀerence in theprobability of environmental awareness for those business owners who respond to either statusof green business practices, A-EP or P-EP. For example, SMEs who are already practicing
green business are 17.5% more likely to be proactively willing to address environmental issues
in their business than those who are not practicing it but are trying to do so.
There is a diﬀerence in the degree of willingness to address environmental issues in theirbusiness between SMEs that are already practicing green business and those that are potentiallyattempting to do so. The ﬁrst and second columns of the table indicate that, as expected, both
SMEs that are already practicing green business and attempting to do so tend to be willingto address environmental issues in their business. More importantly, SMEs that are alreadypracticing green business are highly motivated and want to proactively address environmental

17

Table 2: Association between environmental awareness and green business practices.
Willingness to do
for EIs in business:
P roactive

Primary reason forinterest in EIs:

Desirable

N ext-genInﬂuencebusiness:

CSR

Business

Greening

11.1∗∗
(1.1)

8.8∗∗
(1.0)

12.3∗∗(0.7)

7.1∗∗
63.7∗∗
64.2∗∗
(0.9)
(1.7)
(1.7)
b
Coeﬃcient on green business practice dummy
A-EP
28.3∗∗-5.2-11.1†
(6.0)
(6.3)
(6.4)
∗∗
∗∗
P -EP
10.7
9.2
-2.7
(2.1)
(2.8)
(2.9)
Diﬀerence between coeﬃcients
17.5
-14.4
-8.5
[0.01][0.03][0.20]

4.1
(4.6)
3.4†
(2.1)

10.9∗
(5.0)
5.5∗∗
(2.0)

19.4∗∗(3.5)
13.6∗∗(1.6)

0.6[0.90]

5.4[0.30]

5.8[0.12]

Number of SMEs

1,308

Constant (N -EP )a

1,289

1,289

1,308

1,308

3,236

Source: Authors’ regressions using data from the Daido Life Survey (December 2019, January 2021, and April
2021).
Notes: We run regressions (1) of each dummy variable described in the upper header on the two dummy variablesof green business practices. White (1980) heteroskedasticity-robust standard errors are indicated in parentheses.
∗∗ ∗, , and † denote signiﬁcance at the 1, 5, and 10% levels, respectively. The ﬁgures in brackets show the p valueof a two-sided test for equality of the two coeﬃcients, β k and γ k .
a. Represents the mean for SMEs who have not tried to practice green business (N-EP ).
b. Variable equals 100 if the SMEs belong to each category described in the left header, and 0 otherwise.

issues in their businesses. This suggests that SMEs that do not practice—but are attempting
to do so—green business tend not to seriously address environmental issues in their business,but only to have aspirations.
The primary reason for interest in environmental issues diﬀers between SMEs that are
already practicing or trying to practice green business and those that are not trying to practice.
As shown in the ﬁfth column of the table, both SMEs that are already practicing green businessand attempting to do so tend to be interested in environmental issues because of the following:“To be related to their business.” This suggests that having environmental awareness closely
linked to their management is related to the practice of green business.
However, the percentage of A-EP and P-EP SMEs that believe that “Environmental protection is important for the next generation” and “Necessary to take action as corporate social
responsibility” as the primary reason is not much diﬀerent from that of N-EP SMEs. Thissuggests that considering the environmental impact of their business, such as the need to passon a sustainable society to the next generations and corporate social responsibility, is not a18

strong motivation for them to implement green business practices.
SMEs that are already practicing green business and trying to practice are more likely tobelieve that the progress of environmental initiatives has an impact on the implementation of
their business activities. As shown in the sixth column of the table, they tend to feel that“Environmental protection initiatives such as SDGs and decarbonization” aﬀect their business.
This suggests that understanding how environmental issues aﬀect their business is strongly
related to green business practices.
These results are robust when considering diﬀerences across ﬁrm-speciﬁc categories. 10 Table 3 presents the results of the regressions with the following ﬁrm category dummies as control variables: the number of employees dummy (6 to 20, 21 or more), ﬁrm age dummy (10to 30 years, 30 to 50 years, 50 to 100 years, 100 years or more), owner age dummy (50 to60, 60 to 70, 70 or more), industry dummy (Construction, Manufacturing, Information andcommunications, Transport and postal activities, Wholesale, Retail, Real estate and goods
rental and leasing, Accommodations, eating and drinking, Medical, Education, learning support, Living-related and personal and amusement, Scientiﬁc research, professional and technical, Services, N. E. C, MISCELLANEOUS), and region dummy (Tohoku, North Kanto, South
Kanto, Hokuriku/Koshinetsu, Tokai, Kansai, Chugoku, Shikoku, Kyushu). We can conﬁrm thatthey are qualitatively and quantitatively similar to the results in Table 2.
Based on the empirical results, we can infer that the awareness of business opportunities
in the environmental ﬁeld is crucial for SMEs to practice green business. For example, we
can quantitatively measure the extent to which SMEs are already practicing green business
if they believe that the progress of environmental initiatives aﬀects their business. The estimated unconditional probability that the average SME perceives that progress in environmental
initiatives has an impact on their business is approximately 16%, while the conditional probability of an SME already practicing green business is 32% (≃ 12.3+19.4), which means thatthe likelihood ratio is approximately twice (≃ 32/16) as high. This implies SMEs that believeenvironmental initiatives aﬀect their business are about twice as likely as the average SME toalready practice green business.
10

We ﬁnd that there are large diﬀerences in green business practices and environmental awareness among SMEs
by ﬁrm categories. In particular, (1) SMEs in the manufacturing industry have a relatively high percentage ofenvironmental awareness and green business practices, and those in the retail and service industries have a low
percentage. (2) Green business practices and awareness of micro-enterprises are extremely low. (3) Lower ﬁrm
age tends to have lower levels of green business practices and awareness. See the Appendix in the empiricalresults for the heterogeneity.

19

Table 3: Association between environmental awareness and green business practices (with control variables).
Willingness to do
for EIs in business:
P roactive

Primary reason forinterest in EIs:

Desirable

N ext-genInﬂuencebusiness:

CSR

Business

Greening

Coeﬃcient on green business practice dummyb
A-EP
27.1∗∗
-7.1
-9.7
(6.1)
(6.4)
(6.4)
P -EP
10.4∗∗
8.4∗∗
-0.3
(2.2)
(2.9)
(3.0)
Diﬀerence between coeﬃcients
16.7
-15.5
-9.3
[0.01][0.02][0.16]

1.2
(4.3)
1.9
(2.2)

11.2∗
(5.1)
4.8∗
(2.0)

16.1∗∗(3.5)
11.9∗∗(1.6)-0.8[0.87]

6.3[0.23]

4.2[0.26]

Number of SMEs

1,302

1,284

1,284

1,302

1,302

3,199

Source: Authors’ regressions using data from the Daido Life Survey (December 2019, January 2021, and April
2021).
Notes: We run regressions of each dummy variable described in the upper header on the two dummy variablesof green business practices and control variables. White (1980) heteroskedasticity-robust standard errors areindicated in parentheses. ∗∗ , ∗ , and † denote signiﬁcance at the 1, 5, and 10% levels, respectively. In theestimation, the following dummies are added as control variables: the number of employees dummy (6 to 20,
21 or more), ﬁrm age dummy (10 to 30 years, 30 to 50 years, 50 to 100 years, 100 years, or more), ownerage dummy (50 to 60, 60 to 70, 70 or more), industry dummy (Construction, Manufacturing, Information andcommunications, Transport and postal activities, Wholesale, Retail, Real estate and goods rental and leasing,Accommodations, eating and drinking, Medical, Education, learning support, Living-related and personal andamusement, Scientiﬁc research, Professional and technical, Services, N. E. C, MISCELLANEOUS), and region
dummy (Tohoku, North Kanto, South Kanto, Hokuriku/Koshinetsu, Tokai, Kansai, Chugoku, Shikoku, Kyushu).
b. Variable equals 100 if the SMEs belong to each category described in the left header, and 0 otherwise.

5

Concluding remarks

This study provides two major lines of empirical evidence that characterize green business practices and environmental awareness in the small business sector. First, there exists a serious
gap between environmental awareness and green business practices in the small business sector;
despite a reasonably high level of environmental awareness, there are few green business practices. Second, small business owners diﬀer in their environmental awareness depending on theirgreen business practices; while there is a link between environmental awareness as a business
opportunity and green business practices, there is little evidence that environmental awarenessdivorced from management, such as the need to pass on a sustainable society to future generations and corporate social responsibility is associated with green business practices in the small
business sector.
We believe that our ﬁndings have important implications for policymakers looking to boost
20

environmental eﬀorts in the small business sector. Historically, Japanese companies, especiallymanufacturing companies, have been aware of the environmental impact of their operations andhave promoted the greening of operational processes as a response to environmental pollution
as a social problem.(Organisation for Economic Co-operation and Development, 1994) 11 While
the global awareness of environmental issues, such as global warming, in recent years has led tocontinued eﬀorts by policymakers, however, as shown in this paper, SMEs have not made muchprogress in managing their businesses in consideration of environmental issues. Our empiricalresults suggest that the key environmental awareness for SMEs to practice green business is not
to recognize that environmental issues are a challenge for the next generation and society, but
to understand how environmental issues aﬀect their business. This environmental awarenesswould be more critical in the small business sector than in the large business sector, where itis easier to assume that their business has an impact on the environment. We argue that forpolicymakers and intermediaries to promote environmental protection eﬀorts among SMEs, theyneed to direct SMEs to build awareness that there are business opportunities in environmental
issues, which have not yet been widely recognized among SMEs.
Therefore, an important future research question is to quantitatively clarify to what extent
the support of policymakers and intermediaries in changing SMEs’ environmental awarenesscan encourage SMEs to practice green business. Although the empirical analysis in this paper
showed a correlation between environmental awareness and the status of green business practices, it is necessary to investigate the causal inﬂuence of changing environmental awareness on
the green business practice. According to the results of this paper, qualitative diﬀerences insupport may lead to signiﬁcant diﬀerences in the degree of practice.
Clearly, the diﬀerence in the environmental awareness of business owners would be theonly component in characterizing the implementation of green business practices in the small
business sector. In particular, green business practices may be related to the growth potential
and productivity of SMEs; green business practices can be used as a means to diﬀerentiatethemselves from their competitors by promoting innovation.(Porter & van der Linde, 1995)
11

Organisation for Economic Co-operation and Development (1994) highly praised Japan’s eﬀorts in environmental conservation. After World War II, Japan experienced rapid economic growth but also experienced serious
environmental pollution, which became a major social problem. In response, policymakers developed the Basic Law on Pollution Control (enacted in 1967) and other environmental laws. As discussed by Organisation
for Economic Co-operation and Development (1994), these policy responses have been successful in overcoming
pollution. This is mainly because manufacturers and large corporations have been promoting management thatconsiders the environmental impact of their business activities and advances green operation processes such as
minimizing waste, energy conservation, and recycling.

21

Thus, it would be useful to explore the macro relationship between green business practices andthe products, services, and resources managed by SMEs. The existing and potential challengesof SMEs in product development, channel expansion, risk perception and response, technologicalinnovation, human resource development, and ﬁnancing are expected to diﬀer depending on thestatus of green business practices. In such cases, policymakers and intermediaries should ensurethat measures are in place to support SMEs at diﬀerent stages of green business practices.
Though beyond the scope of this study, this is worthy of future research.

References
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Daido Life Insurance. 2019. Daido Life Survey. December 2019 Survey Report. (In Japanese).
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GRI, UNGC, and WBCSD. 2015. SDG Compass: The Guide for Business Action on the SDGs.
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Hoogendoorn, Brigitte, Guerra, Daniela, & van der Zwan, Peter. 2015. What Drives Environmental Practices of SMEs? Small Business Economics, 44, 759–781.
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23

Appendix
A.1

The population of Japanese SMEs based on the 2014 Economic Census
for Business Frame of JapanWe brieﬂy introduce the characteristics of the small business-sector population in Japan. Table
A1 shows the descriptive statistics of the SMEs around Japan as of 2014 based on the 2014
Economic Census for Business Frame of Japan conducted on the full set of economic units.
Table A1: Descriptive statistics of the SMEs around Japan (as of 2014).
Category

Census 2014

RegionHokkaido
153,216 [4%]Tohoku279,836 [7%]North Kanto
388,344 [10%]South Kanto
776,483 [20%]
Hokuriku/Koshinetsu
300,650 [8%]Tokai476,751 [13%]Kansai
636,855 [17%]Chugoku
223,928 [6%]Shikoku
132,144 [3%]Kyushyu
441,272 [12%]Industry
Construction
455,481 [12%]Manufacturing
413,938 [11%]Wholesale/Retail902,034 [24%]Service 1,970,538 [52%]MISCELLANEOUS
67,488 [2%]The number of employees
1-4 employees 2,580,732 [68%]5-9 employees
677,384 [18%]10-29 employees
419,574 [11%]More than 30 employees
128,383 [3%]Seconded or dispatched only
3,406 [0%]Source: Authors’ calculations based on the 2014 Economic Census for Business Frame of Japan.
Notes: The ﬁgure indicates the total of “Individuals” and “Companies” (“Sole Proprietorship” + “Head Ofﬁce/Headquarters”). Excludes public and ﬁnancial services. MISCELLANEOUS includes “agriculture, forestry,”“ﬁshery,” “mining, quarrying, gravel extraction,” “electricity, gas, heat supply, water supply,” and “informationand communication.” The percentages of SMEs in each category are in brackets.

From the table, we can conﬁrm the following three features of the small business-sector population in Japan: (1) There is a regional diﬀerence in the number of ﬁrms, with a relatively large
number of ﬁrms in urban areas such as South Kanto and Kansai, and a small number in rural
24

areas such as Tohoku, Chugoku, and Shikoku. (2) SMEs in the manufacturing sector do notaccount for a large share of the total, at approximately 11%. Construction and wholesale/retailindustries account for 12% and 24%, respectively, while the service sector has a higher percentage. (3) The percentage of micro-businesses is high, with the majority of SMEs having four or
fewer employees.
With respect to the population of the group of ﬁrms surveyed monthly by the Daido Life
Survey, we ﬁnd that a comparison of Table A1 and Table 1 regarding regional diﬀerences showsthat the survey is conducted in a manner consistent with the population of Japan as a whole.
In terms of industry, the population of SMEs in the DLS has a slightly higher percentage ofmanufacturing and construction ﬁrms and a lower percentage of service ﬁrms. In terms of thenumber of employees, the percentage of small businesses with ﬁve or fewer employees is slightly
lower. This implies that the DLS has a smaller proportion of micro-service ﬁrms than the overall
Japanese population.

A.2

Heterogeneity in the green business practices and environmental awareness within SMEs

In this subsection, we report the heterogeneity in green business practices and environmental
awareness within SMEs by ﬁrm category. Speciﬁcally, we ran a linear regression of each dummy
variable for the categories of green business practices and environmental awareness on each of
the dummy variables of industry, number of employees, ﬁrm age, and owner age.
Table A2 presents the results of these regressions. The ﬁrst row “Constant” in each panel
reports the constant from each regression. This represents the unconditional percentage meanof green business practices and environmental awareness for the SMEs belonging to the baseline
category described in parentheses. The remaining rows in each panel show the coeﬃcients ofthe category dummy variables described in the left header. These coeﬃcients can be interpreted
as the percentage diﬀerence in the probability of green business practices and environmental
awareness relative to respondents in the baseline category.
SMEs in the manufacturing industry have a relatively higher percentage of environmental
awareness and green business practices than average. In contrast, SMEs in the retail and service
industries, such as “Real estate and goods rental and leasing,” “Accommodations, eating anddrinking,” “Medical,” and “Education, learning support,” have a lower percentage of green

25business practices and environmental awareness.
The results in panel (b) show that the green business practices and environmental awarenessof micro-enterprises are extremely low. Among SMEs with ﬁve or fewer employees, only 3%
belong to A-EP and approximately 20% belong to P -EP . Regarding awareness, considerably
fewer ﬁrms responded that they wanted to work on environmental issues. The number of ﬁrms
that responded that environmental initiatives aﬀected their business is also quite low. Relatively
few ﬁrms answered CSR or Business as the primary reason for their interest in environmental
issues, while more ﬁrms tended to answer N ext-gen.
In the results in panel (c), we ﬁnd that SMEs with lower ﬁrm age tend to have lower levelsof green business practices and environmental awareness. While there is less heterogeneity
in the primary reason for interest in environmental issues, younger SMEs tend to be relatively
unwilling to address environmental issues in their business and do not believe that environmental
initiatives aﬀect their business.
The results in panel (d) show that there is less heterogeneity in green business practices andenvironmental awareness by owner age.

26

27

RetailWholesale

Construction

Scientiﬁc research, professional and technical

Living-related and personal and amusement

Education, learning support

MedicalAccommodations, eating and drinking

Real estate and goods rental and leasing

Transport and postal activities

Information and communications

Coeﬃcient on industry dummyb(a) By industry
Constant (Manufacturing)a
-2.0∗
(0.9)
-1.8
(1.1)
-4.5∗∗
(0.9)
-2.0
(1.9)
0.9
(1.9)
-3.8∗∗
(1.1)
-0.1
(2.1)
-4.0∗∗
(1.6)
-3.5
(3.1)
-2.2
(1.7)
-4.6∗∗
(1.4)

7.8∗∗
(0.7)

A-EP

-5.0∗∗
(1.6)
-3.0
(2.0)
-5.4∗∗
(1.9)
-6.3†
(3.5)
4.8
(3.3)
-9.4∗∗(2.3)-11.0∗∗(3.3)-11.8∗∗(3.2)-12.3∗
(6.0)
-4.3
(3.2)
-8.7∗∗(3.1)

31.8∗∗
(1.2)

P -EP

Green business
Practices:

3.3∗∗
(1.3)
1.2
(1.5)
0.0
(1.4)
-1.3
(2.7)
1.5
(2.3)
0.6
(1.8)
0.9
(2.8)
5.6∗
(2.7)
1.3
(4.7)
0.1
(2.9)
3.9
(2.7)

10.7∗∗(0.9)

P roactive

-1.3
(1.9)
-0.6
(2.3)
-3.9†
(2.2)
-10.2∗
(4.6)
3.2
(3.4)
-8.8∗∗
(2.8)
-1.4
(4.2)
-10.7∗∗
(3.7)
-9.3
(7.2)
4.1
(4.4)
-7.6∗
(3.8)

63.3∗∗(1.4)

Desirable

Willingness to do
for EIs in business:

3.6†
(1.9)
0.1
(2.3)
1.1
(2.2)
0.2
(4.5)
-7.5∗
(3.5)
7.6∗∗
(2.7)
-2.0
(4.3)
5.6
(3.6)
21.8∗∗
(5.8)
-5.6
(4.5)
5.0
(3.7)

58.2∗∗(1.4)

N ext-gen

-2.1†
(1.2)
-1.7
(1.5)
-3.9∗∗
(1.4)
0.3
(3.1)
1.6
(2.4)
-0.9
(1.8)
-1.6
(2.8)
-5.0∗
(2.1)
-6.6†
(3.5)
1.5
(3.1)
-1.2
(2.5)

12.6∗∗
(0.9)

CSR

-1.7
(1.3)
0.9
(1.6)
-2.0
(1.4)
-3.9
(2.7)
0.4
(2.4)
-6.2∗∗
(1.5)
-3.4
(2.6)
-2.5
(2.3)
-9.0∗∗
(2.9)
0.4
(3.1)
-2.6
(2.4)

13.0∗∗(1.0)

Business

Primary reason forinterest in EIs:

Table A2: Green business practices and environmental awareness among SMEs by ﬁrm category.

-7.6∗∗
(1.1)
-2.1
(1.5)
-5.9∗∗
(1.4)
-5.6∗
(2.7)
-3.5
(2.1)
-10.9∗∗(1.5)-11.3∗∗(1.9)-13.5∗∗
(1.8)
-3.8
(5.2)
-11.0∗∗
(1.9)
-1.4
(2.4)
(continued)

20.8∗∗(0.9)

Greening

Inﬂuencebusiness:

28

50-less than 100 years

30-less than 50 years

10-less than 30 years

Coeﬃcient on ﬁrm age dummybLess than 10 years

Number of SMEs(c) By ﬁrm age
Constant (More than 100 years)a

6-20 employees

Coeﬃcient on number of employees dummybLess than 5 employees

Number of SMEs(b) By the number of employees
Constant(More than 21 employees)a

MISCELLANEOUS

Agricultures, Forestry, and FisheriesServices, N.E.C-9.1∗∗(3.2)-8.5∗∗
(3.0)
-7.3∗
(2.9)
-1.6

33.7∗∗
(2.8)

8.1∗∗
(1.6)
-2.8
(1.8)
-3.6∗
(1.7)
-2.7
(1.7)
-1.2

7,518

7,518

-19.1∗∗(1.4)-9.9∗∗(1.6)

40.0∗∗(1.3)

10.7∗∗(0.8)-7.0∗∗(0.9)-5.1∗∗
(0.9)

7,528

-3.4
(2.1)
0.8
(7.0)
-7.6∗
(3.5)

-4.1∗∗
(1.0)
0.9
(4.2)
-3.2†
(1.7)
7,528

P -EP

A-EP

Green business
Practices:

-0.1
(2.5)
-0.9
(2.4)
0.4
(2.4)
-0.2

12.6∗∗
(2.2)

6,614

-6.8∗∗(1.2)-4.0∗∗(1.3)

17.0∗∗
(1.1)

6,613

3.6∗
(1.6)
-0.2
(4.2)
2.6
(2.7)

P roactive-10.9∗∗(3.5)-9.7∗∗
(3.3)
-6.8∗
(3.3)
-6.4†

68.5∗∗
(3.1)

6,614

-8.6∗∗
(1.6)
-2.8†
(1.7)

65.7∗∗
(1.3)

6,613

-4.0†
(2.4)
6.8
(6.2)
-4.5
(3.9)

Desirable

Willingness to do
for EIs in business:

-1.3
(3.7)
-0.3
(3.5)
-0.1
(3.4)
1.2

59.9∗∗
(3.3)

6,798

7.9∗∗
(1.6)
3.8∗
(1.7)

55.0∗∗
(1.4)

6,799

2.2
(2.3)
-5.7
(6.6)
3.0
(3.8)

N ext-gen

-1.0
(2.2)
0.1
(2.1)
1.5
(2.1)
2.3

9.7∗∗
(2.0)

6,798

-8.8∗∗(1.1)-4.4∗∗(1.2)

16.3∗∗
(1.0)

6,799

-3.3∗
(1.5)
-7.7∗∗
(2.9)
-3.5
(2.3)

CSR

-3.1
(2.8)
-6.1∗
(2.6)
-6.5∗
(2.6)
-5.9∗

17.2∗∗
(2.5)

6,798

-4.9∗∗
(1.1)
-1.6
(1.2)

14.4∗∗
(1.0)

6,799

-1.1
(1.6)
1.8
(4.6)
0.3
(2.7)

Business

Primary reason forinterest in EIs:

-7.4∗∗(2.3)-8.2∗∗
(2.2)
-5.0∗
(2.2)
-0.5
(continued)

20.4∗∗(2.1)

10,320-13.9∗∗(1.1)-10.1∗∗(1.1)

25.6∗∗(1.0)

10,336-5.1∗∗
(1.5)
6.9
(6.6)
-2.8
(2.6)

Greening

Inﬂuencebusiness:

29
7,455

7,455

0.4
(1.6)
0.8
(1.6)
2.0
(1.6)

26.8∗∗
(1.2)

5.3∗∗
(0.6)
0.0
(0.8)
0.2
(0.8)
1.0
(0.8)

7,454

7,454

(3.0)

(1.7)

6,601

-1.7
(1.3)
-2.8∗
(1.3)
-2.9∗
(1.3)

14.5∗∗
(1.0)

6,572

(2.4)

P roactive

6,601

2.3
(1.9)
1.5
(1.8)
3.4†
(1.8)

58.8∗∗
(1.4)

6,572

(3.3)

Desirable

Willingness to do
for EIs in business:

6,785-7.1∗∗(1.8)-5.9∗∗
(1.8)
-1.3
(1.8)

63.9∗∗
(1.4)

6,754

(3.4)

N ext-gen

6,785

0.6
(1.1)
1.4
(1.1)
0.6
(1.1)

10.0∗∗
(0.9)

6,754

(2.1)

CSR

6,785

3.4∗∗
(1.2)
2.6∗
(1.1)
2.0†
(1.1)

9.4∗∗
(0.8)

6,754

(2.6)

Business

Primary reason forinterest in EIs:

10,237

2.7∗
(1.1)
2.4∗
(1.0)
3.1∗∗
(1.1)

13.5∗∗(0.8)

10,234(2.2)

Greening

Inﬂuencebusiness:b. Variable equals 100 if the SMEs belong to each category described in the left header, and 0 otherwise.

Source: Authors’ regressions using data from the Daido Life Survey (December 2019, January 2021, and April 2021).
Notes: We run regressions of each dummy variable described in the upper header on the category dummy variables by (1) industry, (2) the number of employees, (3) ﬁrm
age, or (4) owner age. White (1980) heteroskedasticity-robust standard errors are indicated in parentheses. ∗∗ , ∗ , and † denote signiﬁcance at the 1, 5, and 10% levels,
respectively.
a. Represents the mean for the SMEs in the category described in parentheses.

Number of SMEs

60-less than 70 years old

50-less than 60 years old

Coeﬃcient on owner age dummybLess than 50 years old

Number of SMEs(d) By owner age
Constant (More than 70 years old)a

P -EP

A-EP

Green business
Practices:A.3

Descriptive statistics of the SMEs responding to the Daido Life Survey
in details

Table A3: Descriptive statistics of the SMEs responding to the Daido Life Survey by industry.
Category

Dec. 2019

Jan. 2021

Apr. 2021

1,620 [22%]1,304 [18%]774 [11%]885 [12%]257 [4%]466 [6%]161 [2%]220 [3%]53 [1%]
144 [2%]204 [3%]719 [10%]67 [1%]
138 [2%]202 [3%]

1,913 [23%]1,614 [19%]829 [10%]1,016 [12%]278 [3%]522 [6%]207 [2%]207 [2%]51 [1%]
255 [3%]247 [3%]788 [9%]52 [1%]
189 [2%]
196 [2%]2,420 [22%]2,140 [20%]1,075 [10%]1,327 [12%]402 [4%]671 [6%]310 [3%]272 [3%]60 [1%]
342 [3%]344 [3%]999 [9%]53 [0%]
214 [2%]248 [2%]

Industry
Construction
Manufacturing
Wholesale
RetailTransport and postal activities
Real estate and goods rental and leasing
Accommodations, eating and drinking
Medical
Education, learning support
Living-related and personal and amusement
Scientiﬁc research, professional and technical
Services, N.E.C
Agricultures, Forestry, and Fisheries
Information and communications
MISCELLANEOUS

Source: Authors’ calculations using data from the Daido Life Survey (December 2019, January 2021, and April
2021).
Notes: The ﬁgure indicates the number of SMEs responding to the Daido Life Survey in December 2019, January
2021, or April 2021 by category described in the left header. The percentage of SMEs is in brackets.

30

Table A4: Descriptive statistics for the SMEs responding to the January 2021 DLS on green
business practices.
Category

Dec. 2019

Apr. 2021

Hokkaido
57 [4%]
Tohoku93 [7%]
North Kanto 112 [8%]South Kanto 184 [14%]Hokuriku/Koshinetsu 150 [11%]Tokai 124 [9%]Kansai 277 [21%]Chugoku 134 [10%]Shikoku79 [6%]
Kyushyu 130 [10%]Industry
Construction 307 [23%]Manufacturing 284 [21%]Wholesale/Retail 320 [24%]Service 337 [25%]MISCELLANEOUS
80 [6%]The number of employees
Less than 5 employees 516 [39%]6-20 employees 490 [37%]More than 21 employees 321 [24%]Firm ageLess than 10 years 131 [10%]10-less than 30 years 312 [24%]30-less than 50 years 416 [31%]50-less than 100 years 411 [31%]More than 100 years
55 [4%]
Owner ageLess than 50 years old 383 [29%]50-less than 60 years old 391 [29%]60-less than 70 years old 371 [28%]More than 70 years old 184 [14%]112 [3%]290 [9%]348 [10%]573 [17%]334 [10%]326 [10%]548 [16%]389 [12%]87 [3%]
330 [10%]

Region749 [23%]671 [20%]742 [22%]996 [30%]165 [5%]
1,524 [46%]1,099 [33%]
700 [21%]365 [11%]807 [24%]
1,007 [30%]992 [30%]
138 [4%]865 [26%]
1,004 [30%]874 [26%]578 [17%]

Source: Authors’ calculations using data from the Daido Life Survey (December 2019, January 2021, and April
2021).
Notes: The ﬁgure indicates the number of SMEs responding to the Daido Life Survey in December 2019 orApril 2021 among those responding to the question on capital investment and product development with environmental protection in mind in the Daido Life Survey January 2021 by category described in the left header.
MISCELLANEOUS includes “Agriculture, Forestry, and Fisheries” and “Information and communications.” The
percentages of SMEs in each category are in brackets.

31