Institutional Structure, Union Density and Voluntary Sustainability Commitments: A Panel Data Analysis of European Countries

This study empirically examines the macroeconomic and institutional determinants shaping participation in the United Nations Global Compact (UNGC) using a panel data set created for 26 European countries for the period 2013–2022. Within this scope, the effects of the rule of law, economic capacity, trade openness, and union density on voluntary sustainability commitments were tested. Due to violations of key panel data assumptions regarding cross-sectional dependence, heteroskedasticity, and autocorrelation, the fixed effects model and Driscoll-Kraay robust standard errors were used in the estimations. The findings show that the rule of law, economic capacity, and trade openness have a statistically significant and positive effect on UNGC participation. This result indicates that strong institutional structures and integration into global markets encourage firms to engage in international sustainability and transparency initiatives. In contrast, union density, representing labor institutionalization, was found to have a significant and negative effect on UNGC participation. This finding suggests that strong organized labor may, in some institutional contexts, steer firms toward more local and binding worker-rights mechanisms rather than global voluntary commitments, suggesting a possible substitution effect. The key findings are supported by robustness tests using lagged variables and cluster-robust standard errors. The study contributes to the literature by revealing the interaction between global sustainability policies and countries' institutional structures and labor dynamics.