In recent decades, the association between the development level and environmental standards (i.e., adherence to environmental considerations) has been of great interest to researchers. Countries with higher development levels pay further attention to environmental quality. Despite essential differences between developed and developing countries regarding environmental challenges, environmental quality is a global concern. The environment is a backbone component of sustainable development as such efficient mutual relationships should be established between sustainable development components (e.g., economic growth and technological growth) to decrease the shortcomings of previous models, improve the sustainability of the current development models, and implement development evolutions while maintaining the equilibrium dynamics of nature.
Growth and development primarily impose various impacts on the environment, including environmental pollution. Environmental pollution may appear in the economic growth process and threaten the environment if exceeding the standard level. This pollution includes air pollution, water pollution, noise pollution, nuclear pollution, the excessive use of natural resources, and the excessive disposal of heat. Technological growth reduces pollution; however, the extent of pollution reduction depends on the growth level. Such technological growth is referred to as green growth in developed countries. Due to rapid technological evolutions, R&D is becoming a critical factor in the success and survival of companies and economics in a competitive world (Sheikhi et al. 2020). Companies consistently investing in R&D outperformed other companies. Although industrial and academic institutions generally carry out R&D, governments play a key role in implementing policies promoting the growth and sustainability of R&D (Noemani-Seighalan et al. 2021).
The R&D objectives significantly changed at the end of the 20th century due to economic-industrial activities and substantial changes in the environment, and the environmental aspects of R&D have enhanced. Accordingly, it is of paramount importance to enhance and support green R&D. Research has revealed that green R&D can be implemented using an environmental management system in line with the Environmental Management and Auditing Scheme (EMAS) and combined methodologies, and this environmental aspect should be organized throughout the green R&D process from the first stages of the production and supply chain. In general, green R&D improves environmental quality and sustainable economic growth for countries and organizations and their developed products.
Today, environmental protection is a socio-human issue, and field studies conducted by behavioral science researchers have indicated that social issues, including environmental ones, cannot be comprehensively solved until public conscientiousness engaged in the process with strong collective participation and green technologies are widely employed in the production of green innovations and products for green development purposes (Amiripouya et al. 2014). Environmental degradation statistics suggest that the failure to use green technologies and invest in green R&D leads to a vicious circle of environmental pollution and side costs (Popp 2006). Since developmental approaches of economic growth extend to social development and essential human requirements, and given the environmental consequences of irresponsible human behaviors, it is argued that, in addition to promoting awareness, trust, and participation, green technologies should also be exploited. This goal cannot be achieved without R&D and innovation (Moradi et al. 2016; Vakili 2017).
Today, governments are pushed to adopt approaches to reduce their economic operations (Arimura et al. 2007). Green R&D includes a set of pro-environmental and/or economically-compatible investments leading to the improvement, maintenance, and promotion of sustainable environmental activities (Bayat and Mohammadnejad-Madardi 2016). Moreover, green R&D encompasses a set of innovations in the manufacturing of green, eco-friendly products or technological innovations protecting the environment (Greaker 2003). Accordingly, green R&D is associated with green innovations at companies. However, many companies do not invest in green technologies as they consider green R&D and green technology development to be cost-inefficient, while they can acquire long-term profitability through green R&D and green technologies (Nokani and Azami 2018; Chowdhury 2009).
Green technologies are increasingly employed in Iran as a developing country due to the aggravating crises such as water deficiency, forest degradation, and environmental pollution. These crises are even more severe in larger cities. Many companies do not intend to invest in green R&D, and their R&D departments seemingly do not aim to develop green technologies. The present study seeks to identify green R&D dimensions and components and evaluate their effects on reducing the environmental pollution. The question is, "how does green R&D affect environmental pollution reduction?"
Theoretical foundations and literature review
The environment has gained increasing importance in recent decades. Considering the development of societies, higher importance is attached to environmental quality. This is the case with all countries worldwide in general, despite essential differences between developed and developing countries in environmental issues. For example, developing counties are suffering from environmental degradation due to the improper use of natural resources, a lack of effective measurement systems and efficient environmental regulations, and pollution flues. They are concerned with facilitating the efficient consumption of resources, finding optimal alternatives, managing emission and pollutant disposal, responding to the public (e.g., the form of environmental NGOs), and implementing environmental orders (Arbab and Shabani 2017).
Sustainability in development emerged from an economic growth concept that could be developed while protecting the environment and social welfare in the 1980s. Sustainability is a solution to social and environmental challenges. The term ‘sustainability’ in an organization is often defined as the ability of the company to make profits for the shareholders while supporting the environment and improving the social welfare level (Savitz and Weber 2006). Therefore, a shift from theoretical approaches to a practical one is required to achieve sustainability objectives so that sustainable products, services, and processes can be provided. The decision-making departments of an organization, which smartly and predictively evaluate social, environmental, and economic aspects, could maintain their business and generally institutionalize sustainability in organizations (Schimpf and Binzer 2012). Green R&D is a major component of business activities underpinned by strategic decisions in a company. Green innovation is a product of green R&D, which can bring competitive advantages to the company (Mirfattahi and Salavati 2018).
Green R&D
Green R&D refers to a set of investments, ideas, knowledge, and innovation associated with the manufacturing of pro-environmental green products (Arimura et al. 2007). Green innovation has been recognized as one of the key factors to achieve environmental and economic success in markets (Lee and Kim 2011). The R&D process incorporating the environmental aspect is known as green R&D; hence, organizations could calculate, assess, and earn profits from new incomes raised by enhanced services, process improvement savings, and pro-environmental products (Khamseh and Asari 2019).
Green R&D efforts promote organizations' value and industrial competition by having impacts on the design and development of products, services, and future business models and their behavior in the lifecycle. Pioneer countries in new sciences and technologies do not neglect continuous assessment. They exploit wise assessments for effective strategies in research productivity to enhance R&D quality, the outcomes of which enable national and international cooperation (Khamseh and Marei 2020). To perform green R&D, this environmental aspect in the entire R&D process should be enhanced integrated manner using organized methods and practices to enable the development of green products. These methods focus on green product R&D. The R&D research are classified into five steps: pre-project planning, concept development (idea), system-level design, detail design, and testing & refinement. This R&D process is believed to be a pre-reaction process that consumes company resources to identify evolutions in the market and possess opportunities earlier than competitors to develop and introduce new products. Since it sustainably considers the environmental aspect, the concept of green R&D should be incorporated into the entire R&D process. Schimpf and Binzer (2012) argued that the environmental aspect could be considered throughout the R&D process for product innovation using the following methods:
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Green design principles (eco-design, design for environment): Green design principles provide instructions on the responsibilities and outcomes of each R&D stage. These general principles could include avoiding waste production, increasing material productivity, and designing for the development of recyclable products. Thus, green design principles could be exploited in all the R&D stages. This method is integrated with other methods in the R&D process.
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Environmental indicators (environmental metrics, eco-indicators): These indicators) are used to describe factors relating to the environmental behavior of products and processes quantitatively. In other words, they encompass information on the material flow and product behavior during the lifecycle. In general, these quantitative indicators complement green design principles and help achieve strategic objectives in each R&D stage using the environmental behavior of products. Furthermore, such environmental indicators are often integrated with mother methods, such as environmental checklists and ecological balance sheets.
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Environmental checklists (eco-checklists): They are employed to analyze and validate environmental indicators in the R&D stages. They are used to check and control R&D outcomes with the aforementioned indicators and green design principles in the R&D process.
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Ecological balance sheets (environmental life cycle assessment, eco-balance): An economic balance sheet is aimed at identifying, assessing, and describing the environmental impacts of products, components, or production processes. The ISO14020 and ISO14040 Standards are exploited in this stage for the R&D process.
Innovation enables economic growth, market globalization, company competitiveness, and improving living standards in a country (Namaayandeh and Khamseh 2019). Several environmentalists have opposed free trade and economic growth from a market failure perspective in recent decades and suggested that governmental intervention is necessary. On the other hand, some individuals believe that economic growth is necessary to acquire a healthier environment and eradicate poverty. Therefore, the conflict between economic growth and environmental quality has become challenging. In this respect, several governments enacted national regulations or signed international agreements. However, some individuals believe that rules and regulations alone cannot guarantee the protection of the environment from hazards imposed by profiteering human activities, and comprehensive green movement planning and deep environmental protection culture are required (Sadeghi and Fathi 2009). Patil and Biswas (2014) stated that governments might participate in R&D for the following reasons:
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Innovation could reduce product and process costs in society;
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Governmental participation in R&D is necessary for some sectors, including national defense and railways;
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Industries may not pursue innovation in some environmental fields unless regulations and other policies require innovation;
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R&D is costly, has a high probability of failure, and may even rise beyond the risk threshold of the private sector. Governments can provide many opportunities for the private sector and institutions to participate in R&D plans and increase their R&D expenditures through innovative and encouraging policies.
The traditional approach to analyzing governments' environmental policies toward green R&D includes a comparison of the positive outcomes and costs of environmental regulations. Many countries have adopted green growth strategies in their industrial policies. Green growth refers to the development of green technologies and innovations (e.g., a tendency toward clean energy resources and economic growth with decarbonization in energy and transportation systems). In general, green growth policies require support from governments. Governments need to motivate the participation of the private sector by providing efficient incentives and infrastructures, reducing investment risks, and offering legal support (Patil and Biswas 2014). There is a background that no technology or policy could alone be a driver of green technology and innovation development, and green technology and innovation enhancement policies can be successful when the enhancement of infrastructures and instruments is of high priority, and innovation system loops are implemented and complemented (Khamseh and Asghari 2019). Hu et al. (2021) results that government green subsidies have positive effects on green process and product innovation, but only green product innovation can rise higher financial performance, which further verifies that green subsidies positively influence financial performance through green product innovation rather than green process innovation.
Additionally, green intellectual capital is a variable that can influence green R&D. The concept of green intellectual capital was proposed by Chen (2008). Green intellectual capital is the accumulation of knowledge, by which organizations can manage their environment-related processes to obtain competitive advantages. Green intellectual capital plays a vital role in companies focusing on stabilization and sustainability via knowledge transfer, environmental regulations, novel technologies, more efficient operations, and innovation to achieve objectives. Green intellectual capital enables companies to adhere to international environmental regulations and gain the satisfaction of environmentally concerned consumers. leading to enhanced value for companies (Lopez-Gamero et al. 2010). In light of green intellectual capital, companies could be distinguished from their rivals and prevent the arrival of new rivals in the market. This enhances the competitive advantage of a company and stabilizes its position in the market (Cheng-Li and Fan-Hua 2011). Table 1 summarizes the most important variables affecting green R&D in the literature.
Table 1
Factors affecting green R&D
Factor | Definition | Ref. |
Green ideas | A set of new, creative ideas to develop or design products or innovations to reduce the environmental pollution of processes and operations | Roy Chowdhury (2009) |
Green intellectual capital | It refers to the unobservable assets, knowledge, capabilities, and relationships concerning environmental protection or green innovation at individual or organizational levels at a company. | Chang and Chen (2012) |
Green design | Development of products and practices with no environmental hazards | Casamayor and Su (2021) |
Green rules and standards | The rules and regulations of governments, environmental organizations (e.g., the Environmental Protection Agency), and environmental standards (e.g., ISO 14000, which was developed by the International Organization for Standardization in 1996) | Agarwal et al. (2018) |
Green investment | A set of physical and non-physical investments, e.g., employing skilled individuals with ideas, in green technologies that could be producers of green products | Sivakumar et al. (2015) |
Environmental pollution classification
Environmental pollution refers to a set of human-caused pollutions in the environment that damage or destroy plant or animal species (Lanoie et al. 2008). Pigo (1920) pioneered the systematic economic analysis of pollution. Hence, the concept of side-effects of economic activities was extended. Despite Pigo’s fundamental work, little attention had been paid to the side effects of production and pollution economics before 1950. The theory of production side effects was extended in the 1950s, and high attention was paid to pollution economics in the 1960s (Arbab and Shabani 2017).
Today, air pollution and climate change are crucial global challenges in the energy aspect of sustainable development. These challenges arise from the emission and leakage of gaseous pollutants from the combustion of fossil fuels in the production of products and services (Adams 2006). Global pollutant losses include the accumulation of pollutants at the top layer of the atmosphere. For example, CO2 imposes the greenhouse effect. Furthermore, chlorofluorocarbons (CFCs) lead to ozone depletion at the top layer of the atmosphere. Local pollution harms are observed only in the vicinity of the pollution source. Local pollutants include noise, optical, and visual flows. Regional pollution losses are observable near the pollution source and in a larger geographical area. For example, sulfur and nitrogen oxides at least impose regional losses. The global losses of pollution affect the world's economy, even though pollution is not the same throughout the world (Khoshnevis and Pajooyan 2012). Pollutants can be classified based on different criteria. This study classifies environmental pollution into the soil, water, air, and noise pollution as they have the largest effect on pollution economics analyses and pollution control.
Effects of green R&D on environmental pollution reduction
The environment has gained increasing importance in recent decades, and high attention is paid to environmental quality. Despite essential differences between developed and developing countries in the nature of environmental issues, environmental quality is a worldwide priority. Developing countries are suffering from environmental degradation due to the improper use of natural resources, a lack of adequate measurement (monitoring) systems and efficient environmental regulations, and pollution flues, developing counties are concerned about the efficient consumption of resources and finding optimal alternatives, emission management, and pollutant disposal, responding to the public (e.g., the form of environmental NGOs), and implementing environmental orders. Environmental management, protection, and enhancement are of international concern. Therefore, a solution that could help countries implement such measures can be assumed as a general solution. It should be noted that investing in research that leads to the creation of innovation or the development of green products and/or green processes can effectively mitigate environmental pollution (Kemp 2000).
Chen et al. (2021) demonstrated that R&D activities had the largest positive effect on reducing SO2 emissions. Moreover, the effect of green R&D activities on SO2 emission depends on technology attraction capabilities. Alam et al. (2019) showed that green investment in R&D influenced environmental performance and, at the same time, improved financial performance. Muduli et al. (2013) argued that green R&D provided companies with a sort of sustainability, in which a set of products, ideas, and processes lead to the creation or development of products or innovations that protect the environment. Accordingly, the present study primarily hypothesized that:
H1: Green R&D has a significant effect on environmental pollution reduction.