Firm Formality and the Implementation of Sustainable Management Practices

We explore whether informal or formal firms are more likely to implement sustainable management practices. While much policy focus emphasizes formalization as key to sustainability, the relationship remains unclear. While formal firms face regulatory pressures that may promote sustainable practices, informal firms, relying on community legitimacy and flexibility, may innovate sustainably despite lacking formal status. Using comprehensive survey data on small firms in Uganda, we find that fiscal registration correlates with certain management practices but not universally. Our findings challenge assumptions about the benefits of formalization, highlighting its multifaceted nature and the need for a nuanced understanding of how firm status shapes sustainability across diverse contexts.