https://www.mdu.se/

EU sustainability-related regulations are increasingly influencing how manufacturing firms organize their operations, develop competencies, and make strategic decisions. As regulatory requirements develop and become increasingly more complex, compliance is no longer only a legal obligation but is also something that requires firms to build organizational capabilities for monitoring, interpreting, and integrating regulations into their daily operations. The purpose of this study is to examine how manufacturing firms develop organizational capabilities to respond to sustainability-related EU regulations. The study is guided by two research questions: what challenges arise for SME and large manufacturing firms during the implementation of regulations, and how do SME and large manufacturing firms develop competencies and organizational strategies to respond to EU legislation?  The study uses a qualitative multiple-case study approach, based on semi-structured interview with five manufacturing firms in Region Västmanland. The empirical findings were analysed through thematic analysis and interpretated through theories on organizational competences, dynamic capabilities, regulatory pressure, and sustainability-oriented capabilities.  The findings show that both SMEs and large firms face challenges related to regulatory uncertainty, interpretation, competence development, and internal coordination. SMEs are more affected by limited resources and dependence on external support, while larger firms face challenges related to coordination across departments and organizational complexity. The findings also show that firms develop capabilities by embedding regulatory requirements into routines, monitoring systems, decision-making processes, and cross-functional collaboration.  The study concludes that regulatory adaptation should be understood as an organizational capability rather than only a compliance task. Firms that develop systematic ways of monitoring, interpret, and integrate EU regulations into the organization are better positioned to respond to future regulatory requirements.