[8] It is theorised that as the majority of SMEs serve local markets they are less likely to be exposed to international pressures or incentives, including those likely to promote eco-innovation.
This change in environmental business ethics stems mainly from ideas of ‘ecological modernisation', a school of thought advanced most notably by German scholars Joseph Huber and Martin Janicke.
The shift towards thinking in terms of ‘ecological modernisation’ has also involved a movement to ‘smart’ regulatory instruments involving more reflexive forms of law (law which pushes businesses to reflect on and regulate their own practices) such as Environmental Management Systems, Environmental Reporting and Disclosure Strategies, Market-Based Instruments and the social license.
Whilst ‘smart’ regulation is a promising concept, SMEs have been slow on the uptake[12] and have generally been observed to retain a reactive approach to positive environmental actions.
For example, the EU White Paper[14] has often promoted a sectoral and ‘one-size-fits-all’ approach to addressing the environmental impacts of business activities.
Whilst CSR strategies have been intensively adopted by large and publicly visible corporations, the effectiveness of this type of social regulation with SMEs remains questionable.
This is because they are defined by a limited shareholder base[3] and are unlikely to exhibit environmental and social bad practice on a scale worthy of media attention.
ISO 14001 requires internal auditing (on an annual basis) meaning extra constraints such as time dedicated to staff training (as it cannot be undertaken by the individual responsible for overseeing the management system).
The act seeks to promote a greater range of incentives for SME good practice with the aim of bringing the sector in line with the sustainable development agenda.
In line with this principle several member states have provided energy efficiency funding either through subsidies or encouraging loan conditions as well as varying degrees of cost-free consultancy support to SMEs.
The SBA review[17] invites member states to use an "SME test" to assess whether disproportionate effects will be realised in relation to enterprise size.
It is theorised that by facilitating the use of networks it will be possible for information resources regarding eco-innovations to be transferred across a broader array of firms, including those from the SME sector.
Although the aims of the SBA for Europe are seen as necessary for catalysing positive change in the environmental business performance of the SME sector it is not legally binding.