Economic entities influence the environment significantly. Economic activity in the EU lacks skills, experience and financial and management

tools. Innovation is a key element of sustainable economic activity, but economic activity needs a complex approach to cover economic,

social and environmental aspects. The most common measure for environmental improvement is the reduction of energy and material

consumption. This article analyses the development of economic entities using the Innovation and Small Business Act (SBA) approach. The

research objective is to analyse how economic entities in EU countries develop their activities to achieve sustainability by reducing their

environmental impact. A comparison of the sustainability aspects of economic entities was carried out. The contribution of innovations was

analysed to assess the level of sustainability of economic entities in EU countries. The results show that the impact of the activities of economic entities needs to be assessed along the entire value chain, which assesses the social environment of economic entities. EU countries such as Finland, Germany, Slovenia and Sweden are leading the way in investing in innovation and sustainability measures. However, EU countries face challenges in implementing sustainability goals, because of the complexity of the system and a lack of attention from responsible institutions. Nevertheless, innovation is essential to reduce negative environmental impacts.