Interconnections Between Environmental Awareness and Green Technology Adoption: Empirical Evidence from Informal Business Enterprises

Interconnections Between Environmental Awareness and Green Technology Adoption: Empirical Evidence from Informal
Business Enterprises

Environmental awareness is widely recognized as a key factor of environmentally friendly behavior, especially as human activities persist in exacerbating global environmental issues. While previous research has largely focused on environmental regulations to promote green technology, such approaches often fall short in developing countries due to weak enforcement mechanisms and the prominence of informal economic activities. This study takes a different approach by exploring how environmental awareness can foster the adoption of green technology in informal manufacturing enterprises, thereby enhancing both environmental and social outcomes. Enterprise-level survey data, collected from a major city in a developing country, serves as the basis for this analysis. The survey captures information related to knowledge attitudes and the behavioral practices of owners or managers with respect to the environment, as well as pollution and its management. Utilizing the collected data, and guided by established theoretical frameworks, the study develops an environmental awareness (EA) index. This index is then applied in probit and logit models to estimate its effect on the likelihood of adopting pollution-reducing technologies. The marginal effect analysis reveals that informal SMEs with a higher environmental awareness are 28.5% more likely to adopt green technologies. This probability increases to 30.1% when demographic- and business-related variables are incorporated into the model. Based on empirical findings, this study recommends targeted investments in awareness building initiatives, alongside long-term educational and training programs for enterprise owners and managers to instill environmental values and practices across operations. Given the financial constraints faced by informal enterprises, this study also recommends both public and private sector support to make this transition feasible and sustainable.