Firms' Green Responses to Environmental Regulations: A Three‐Dimensional Concurrent Engineering Perspective

This study investigates companies' responses to energy efficiency policies, focusing on mandatory and voluntary regulations that create a complex landscape for businesses to navigate. Using a sample of 1473 firms across 29 European countries (2002–2018), we explore the impact of legislation on green redesign—operationalized through sustainability‐related indicators reflecting specific initiatives in firms' production process, product, and supply chain—through a three‐dimensional concurrent engineering (3DCE) framework. Multilevel growth models show that mandatory measures outperform voluntary ones. In addition, mixed‐type regulations—combining mandatory and voluntary elements—exert a positive effect. Responses occur in all three operational pillars of the 3DCE model concurrently, and the green redesign of one of them is systematically related to the redesign of the other two. Policy implications suggest that mandatory and mixed‐policy approaches drive more sustainable improvements. Firms should adopt a holistic transformation across their operations.