The educating process does not limit itself to schools and universities, but it is also a significant aspect of the competitiveness of profit-seeking firms. Education is expected to provide the subject being educated with increasing levels of knowledge and understanding, either within some particular field or in relation to the general ability to assess and critically evaluate available data and information. One of such particular fields of interest that enjoys a growing attention is the general awareness of environmental issues. These issues ultimately concern all members of the global socioeconomic space, including firms. However, not all firms deem the environmental aspect of their business important and might be missing on opportunities that could either improve or at least secure their position among their competition.

The empirical analysis evaluates data of 4 655 firms from 11 Central and Eastern Europe (CEE) countries, extracted from the World Bank Enterprise Survey (WBES), by constructing a PLS-SEM (Partial least squares – structural equation modelling) model focused on determining the relationships between environmental awareness and firm’s research and innovation abilities.

The research and innovation activities/abilities are represented by the firm’s inhouse spending on research and development (R&D) and on outsourced R&D; and also by introducing a significantly new product or process in recent years. The environmental awareness of the firm’s leadership is assessed by verifying whether the firm sets specific goals in their environmental area and whether there is a specialised manager position for environmental or climate issues. The relationships are examined in three different sets of countries, firstly in all 11 CEE countries together and secondly in two groups created by the innovation performance of those countries – 5 „moderate innovators“ and 6 „emerging innovators“ countries.

The results indicate a significant positive relationship between environmental awareness and both R&D and innovation performance across all three datasets, with the relationship between environmental awareness and innovation relying on R&D as a mediator. Such results showcase the effects of the level of leadership education when it comes to firm’s decision-making.

Keywords: Environmental awareness, firm innovation ability, leadership, innovation, R&D.