Impact of green supply chain management practices ...

Environ Sci Pollut Res DOI 10.1007/s11356-017-9172-5

RESEARCH ARTICLE

Impact of green supply chain management practices on firms’ performance: an empirical study from the perspective of Pakistan Syed Abdul Rehman Khan 1 & Dong Qianli 1

Received: 4 February 2017 / Accepted: 1 May 2017 # Springer-Verlag Berlin Heidelberg 2017

Abstract This article investigates the impact of five determinants of the green supply chain practices on organizational performance in the context of Pakistan manufacturing firms. A sample of 218 firms was collected from the manufacturing industry. The green supply chain practices were measured through five independent variables including green manufacturing, green purchasing, green information systems, cooperation with customers, and eco-design. By using exploratory factor and simultaneous regression analysis, the results indicate that except green purchasing, rests of the four independent variables have been found statistically significant to predict organizational performance. However, the eco-design of green practices followed by green information systems has revealed the greatest impact on organizational performance. Therefore, the managers of the manufacturing firms should not only implement eco-design in their supply chain but also concentrate on proper monitoring and implementation of green information systems to increase their firms’ performance. A main contribution of this research from theoretical side is that it is possible to notice a negative effect of Bgreen purchasing^ towards organizational performance particularly in the scenario of Pakistan manufacturing industry. Another valuable result is that green purchasing is an important antecedent of firms economic performance in the US manufacturing firms (Green et al. 2012), although not significantly related Responsible editor: Philippe Garrigues * Syed Abdul Rehman Khan [email protected] Dong Qianli [email protected] 1

School of Economics and Management, Chang’an University, Xi’an, China

to organizational performance in our study. In addition, we also discussed research limitations, areas for future research, and implications for practitioners. Keywords Green supply chain management . Organizational performance . Green manufacturing . Cooperation with customers . Eco-design . Green purchasing

Introduction In the last 40 years, supply chain management (SCM) becomes vulnerable and requires more strategic alignment and the coordination and integration of end-to-end business chain processes for the reason to fulfill the demands of final customers of the SC (supply chain) (Green et al. 2006a, b; Ho et al. 2002). Processes of business that must be coordinated and integrated include logistics, purchasing, marketing, and manufacturing (Green et al. 2012a). Strategic imperative that needs to be aligned contains efficiency, responsiveness, quality, customer focus, green practices, and/or environmental sustainability programs (Green et al. 2012a; Zelbst et al. 2010). Recently, companies have focused more on green supply chain practices implementation in their end-to-end business processes in order to reduce the customer and government’s pressure (Theyel 2001), and for better reputation, such as reverse logistics, green marketing, eco-labeling, and green advertising (Smith 2010). Customer pressure encourages companies to implement green practices in their processes and respond with in-kind performance enhancement (Kagan et al. 2003). An investment in cleaner technologies not only improves the environmental performance but also creates competitive edge and enhances economic performance (Rao and Holt 2005). Many companies are investing to adopt green practices including P&G (Procter & Gamble), Unilever, and

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Engro Corporation. Recently, General Motors also invests $2.5 billion for adopting green practices in their business (Gleim 2013). In the findings of several researchers, green practices in supply chain have been adopted in the hopes of positive impact on firm’s environmental and firm’s financial performance (Huiying Zhang Fan yang 2016; Qi et al. 2010). According to the stakeholder theory, stakeholders are groups and individuals who can directly or indirectly affect a company performance and/or can be affected by company actions. This theory puts forward that companies produce externalities, which can cause stakeholders to build pressure on companies to reduce harmful effects (Sarkis et al. 2011; Freeman 1984). Stakeholder pressures can act as motivating factors that push companies to adopt environment-friendly practices (Huiying Zhang Fan yang 2016). For example, customer pressure has always been recognized as a key motivating factor due to the customer demand because companies have no choice, but to produce green products to satisfy customer demand (Kassinis and Vafea 2006). In addition, suppliers might discontinue selling their materials to manufacturing company due to losing their own image in the public, if the buying manufacturing company is known for polluters and has poor or non-green practices in their business processes (Rivera-Camino 2007). In the last couple of decades, as environmental awareness is growing in the consumers, companies are facing more and more heavy pressure to reduce hazardous chemicals and emissions and implement green practices throughout the SC (Kumar et al. 2014). On the other hand, environmental practices have been viewed as a drain on company profitability because implementing green practices requires heavy investments in technology (Walley and Whitehead 1994), processes, and employee training to adopt green practices during manufacturing goods (Lenox and King 2004). Companies’ manufacturing activities are significantly connected with both environmental performance and economic performance (Sharma et al. 1999; Lenox and King 2004). In mainland China, a study conducted on green supply chain management (GSCM) practices on enterprise performance. The evidence shows no significant enhancement in economic performance of firms and minor improvement measured in operational and environmental performance (Zhu and Sarkis 2007). In a similar way, Hillman and Keim 2001; Fogler and Nutt 1975; Gilley et al. 2000 also mentioned that implementing green practices incurred additional cost and some researchers argue that green practices are not always well matched with the firm performance (Zaabi et al. 2013) which means that companies must bear heavy investment and cost without any financial benefits (Walley and Whitehead 1994). In recent interviews with more than 750 Chief Executive Officers (CEOs) from different countries revealed that 93% feel that executing environment-friendly or sustainability programs that mesh

with core competencies of their businesses would be lifethreatening to the future success of their businesses (Borin et al. 2013). In a study conducted in the wood industry and agricultural sector, researcher investigated the willingness to pay (WTP) of consumers for environmentally friendly products. The results show there is no significant effect for the buyers of kitchen garbage bags (Vlosky et al. 1999; Anstine 2000) that are made from recycled plastic. If a company has lack of capabilities, it is bound to fail, as it is all environmental investment on technology and processes are only going to be huge burden on firm’s financial performance (Christmann 2000). Several studies found significant positive relationship between green supply chain management (GSCM) practices and economic performance (Benitez et al. 2015; Mitra and Datta 2014a, b; Bose and Pal 2012; Green et al. 2012a; Ton and Harrow 2010; Yang et al. 2016; Hervani and Helms 2005). Environmentfriendly practices in supply chain not only lead to increased environmental performance but also enhance economic performance (Zhu and Sarkis 2004). Empirical researches demonstrated a positive relationship between green product design and firm performance (Capon et al. 1990). Wei and Morgan (2004) argue that market demand could be a significant motivating factor in inducing green product design. For exactly the same reason (Hasan 2013), market demand plays a vital role in the enterprise performance and green product design, if the demand is not sustainable towards the environment-friendly products, it will not lead towards the success of the enterprise. Banerjee (2001) and Hart (1995) suggest that incorporating environmental sustainability program into a company strategic planning will not only improve the overall company ability to reduce uncertainties but also develop competitive edge. Implementation of green supply chain management and eco-design approach can lead to increase efficient usage of water, energy, and byproducts (Tsoulfas and Pappis 2006). On the other hand, several researchers argue that environment-friendly practices or green supply chain practices are not necessary to boost company financial performance (Rao and Holt 2005) even it looks like it will only have a direct impact on the environmental performance of enterprise (Elliot 2011; Leon-Soriano et al. 2010). Pujari (2004) argue that there are limited empirical works to support the clear picture how green product design affects firm performance. Many papers investigated the relationship among green supply chain practices, green product design, and purchasing about the effects on enterprise performance and found mixed results and they call for further investigation (Green et al. 2012a, 2012b; Zhu et al. 2012; Hazen, Cegielski, and Hanna 2011; Jacobs et al. 2010; Molina Azorin et al. 2009; Zhu et al. 2005; Pagell et al. 2004; Anstine 2000). In fact, some researchers have found the negative relationship between environmental management practices and

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enterprise firm performance (Bansal 2005; Sarkis and Cordeiro 2001; Cordeiro and Sarkis 1997; Walley and Whitehead 1994). The conflicting results actually illustrated a gap in green supply chain practices impact on firm performance. To enhance our knowledge and understanding of green supply chain management practices and to benefit managerial staff, more research is needed. Therefore, this article tries to draw a clearer picture of the relationship between GSCM practices and firm’s performance in the context of Pakistan manufacturing industry. To the best of our knowledge, it will be the first empirical study in this field from the perspective of Pakistan manufacturing industry. The structure of this article is as follows. BLiterature review and hypotheses development^ discusses a brief literature review and hypothesis development while BTheoretical model^ explains the research chosen methodology. BHypotheses^ illustrates the data collection and analysis. BGreen manufacturing and organizational performance^ discusses research paper findings, and BGreen purchasing and organizational performance^ covers concluding remarks, research implications, and future research directions.

Literature review and hypotheses development The broader view of environment-friendly supply chain is based on triple bottom line (3PL) concepts including economic performance, social performance and environmental performance (Green et al. 2012a; Carter and Easton 2011). The literature related to sustainability is somehow well developed (Green et al. 2012a; Carter and Easton 2011). Our main focus is environment-friendly practices impact on firm economic performance. According to Linton et al. (2007), the main focus of sustainability has shifted from the organizational level to SC level. Seuring (2004) considered BGSCM^ as the managerial integration of information and material flows throughout the SC fulfilling the demand of customers with environment-friendly products and service produced through environment-friendly processes. GSCM is the process of integrating environmental concerns into firm activities (Gilbert 2001). Supply chains can build competitive edge and/or firstmover advantage for adopting green practices (Green et al. 2012a, b; Sen 2009; Handfield et al. 1997). In a similar way (Narasimhan and Schoenherr 2012; Schoenherr and Swink 2012; Hazen et al. 2011; Flint and Golicic 2009; Kleindorfer et al. 2005; Rao 2012; Banerjee 2001; Christmann 2000; Shrivastava 1995; Porter and van der Linde 1995; Hart 1995), incorporation of green practices in supply chain management enables firm not only to offer first-mover edge through differentiation and cost leadership that would not be easy for their competitor to imitate but also discover new market opportunities (Fig. 1).

In addition, environmental-related government legislation and regulation have been identified as drivers of the implementation of environment-friendly practices (Preuss 2002). There is not a well-developed relationship of the impact of green legislation on enterprise competitiveness. It is not necessary through implementing green practices in supply chain to build competitive advantage and boost economic or financial performance (Rao 2012; Rao and Holt 2005). Judge and Douglas (1998); Tsoulfas and Pappis (2006) argue that the implementation of green supply chain management and green product design approach can lead to minimize waste, which would increase the utilization of water, energy and by-products, and (Hart 1995; Porter and Van der Linde 1995; Kumar et al. 2012) also, they can grasp competitive benefits and enhance their output by implementing green technologies and processes. Further research needs to establish the impact of green supply chain practices on the firms’ performance. The literature specifically related to green supply chain management is in the initial stages of development, with related empirical researches dealing primarily with anecdotal evidence and theoretical discussions (Green et al. 2012; Quazi 2001). In addition, several researchers conducted experiments in developing measurement scales related to green sustainability (Green et al. 2012; Zhu et al. 2008a; Wee and Quazi 2005). Gimenez and Tachizawa (2012); King and Lenox (2001) did not find any convincible relationship between green supply chain practices and enterprise economic performance, so the further empirical research is called for. The existing researches offer some direction but still not conclusive (Zhu et al. 2012; Green et al. 2012a, 2012b; Hazen, Cegielski, and Hanna 2011; Zhu et al. 2005; Rao and Holt 2005; Pagell et al. 2004; Zhu and Sarkis 2004; Carter et al. 2000).

Theoretical model In Fig. 2, each of the hypotheses has positive impact on firm performance. The five constructs have been selected on the basis of literature reviews and conducted interviews with different firms’ supply chain and logistics professional views. Furthermore, the definition of the constructs used in the given below model isprovided in Table 1. Generally, green supply chain management is a focal construct in the theorized model with green information system, green purchasing, green manufacturing, cooperation with customers, and eco-design as antecedents and with organizational performance as consequences.

Hypotheses Green manufacturing and organizational performance Green manufacturing involves adoption of the best resources, which in the long run can lead to competitive edge through

Environ Sci Pollut Res Fig. 1 Research plan

Potentially relevant research papers identified for extraction (n = 2417 papers)

Research papers excluded based on abstracts and conclusion (n = 1931) Potentially relevant research papers for subsequent review -check full article (n = 486) Research papers excluded based on full paper review (n = 349) Research papers included after reading the full paper (n=137)

Extensive literature review on green supply chain management

Identification of GSCM constructs

Questionnaire development

Experts opinions (Academia and Industry)

Questionnaire pretest

Content validity of the questionnaire

Refinement of the items & final development of questionnaire Convenience sampling

Data collection

Random sampling

Reliability and validity testing

Data analysis

Development of research framework

Formulation of hypotheses

Testing of hypotheses

Results, discussion and conclusion

high-level quality products in the lowest possible cost. Similarly (Johansson et al. 1992; Narasimhan and Schoenherr 2012), companies reduced their cost and eliminate waste from the system by using green manufacturing technologies, green processes, and lean production initiatives (King and Lenox 2001; Zhu

and Sarkis 2004). Green manufacturing and lean manufacturing both are working for the reduction of waste, fewer manufacturing steps, and increasing the efficiency of production (Prajogo et al. 2012) along with an enhanced firm reputation and image (Porter and Linde 1995). In addition, enterprises in European

Environ Sci Pollut Res Green manufacturing

Green purchasing and organizational performance

H1a H1b

Green purchasing

Organizational performance

H1c

Eco-design Cooperation with customers

H1d H1e

Green information systems

Fig. 2 Organizational performance model with hypotheses

countries have incorporated and integrated TQM (total quality management) philosophy (Pereira-Moliner et al. 2012) and lean manufacturing practices with eco-friendly manufacturing to achieve more superior economic and environmental performance (Pauli 1997; Murovec et al. 2012. A significant number of empirical studies conducted in automobile industry. The results showed that green manufacturing significantly enhanced global competitive position of suppliers and manufacturing firms in automobile industry (Subramanian and Gunasekaran 2014; Tseng and Chiu 2013; Gunasekaran and Spalanzani 2012). Baines et al. (2012) argue that green manufacturing plays a significant role in adopting green supply chain practices to reduce the harmful effects of manufacturing activities with little waste in overall manufacturing systems and also helps enterprises to improve efficiency in the processes, increasing economic and environmental benefits supported by extended literature (Zailani et al. 2015; Govindan et al. 2015b; Mangla et al. 2014b; Dues et al. 2013; Gopalkrishnan et al. 2012; Murovec et al. 2012; Gunasekaran and Spalanzani 2012; Prajogo et al. 2012; Pereira-Moliner et al. 2012; Deif 2011; Farish 2009; Chien and Shih 2007; Pauli 1997). Accordingly, we hypotheses that green manufacturing practices improve organizational performance. H1a: Green manufacturing directly and positively impacts organizational performance; Table 1

According to Carter and Carter (1998), the role of green purchasing is the involvement of recycling, sourcing-reduction activities in the supply chain. Min and Galle (2001) further explained green purchasing as the role of reducing sources of waste encourages recycling activities without any interruption in the system. Carter et al. (2000) analyzed the effect of green purchasing on firm financial and environmental performance. They found that due to successful implementation of green purchasing activities, cost of pollution control was not only reduced but also improved the environmental performance and firm reputation in the market. In a similar line, Kleindorfer et al. (2005) argue that large firms implement more green purchasing activities as compare to small and medium-sized firms. Along with the strengthening of ecofriendly protection awareness, such implementation becomes the trend of firm improvement. The green purchasing builds competitive advantage, and meanwhile, it protects resources and improves firm performance (Zhu and Geng 2001). Zailani et al. 2015 conducted a research on the relationship between environment-friendly purchasing and firm performance. They found that eco-friendly purchasing has direct and positive impact on firm performance. Green purchasing protects the environment from hazardous and toxic materials, and also, it creates significant impact on firm performance. Yang et al. (2014) classified eco-friendly purchasing into five major dimensions: supply chain management, design operation management, ecological, environmental authentication, and external environment management have direct and positive impact on corporate performance. They also suggest that if the firms are better in adoption of green purchasing, it will offer better firm performance. The incorporation of green purchasing is a very reliable tool in controlling pollution, and it also plays a role as corner stone in enterprise environmental and economic performance (Chen 2005) and also build positive image and

Construct definitions

Construct

Definition

Green information system (GIS)

GIS is an information system that has been modified and is used to monitor environment-friendly practices and output (Esty and Winston 2006a, b) GP emphasis on cooperating with vendors for the purpose of developing products under environment-friendly processes and without any harm to environment (Kenneth W. Green Jr. et al. 2012a; Zhu et al. 2008a)

Green purchasing (GP) Green manufacturing (GM)

GM involves manufacturing planning and control, minimizing the energy consumption and material exploitation, and reducing waste during manufacturing processes (Liu et al. 2012)

Cooperation with customers (CWC) CWC requires cooperation with customers to develop cleaner manufacturing processes that produce green products with green packaging (Zhu et al. 2008a) Eco-design (ED)

ED requires that producers design products which reduce consumption of energy and materials, who facilitate the recycle, reuse, and recovery of component parts and materials and meanwhile reduce or avoid the use of toxic and harmful materials use in manufacturing processes (Zhu et al. 2008a)

Organizational performance (ORG) ORG indicates the marketing and financial performance of the firm as compared to the industry average (Kenneth W. Green Jr. et al. 2012a;Green and Inman 2005a, b)

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reputation in the market (Carter et al. 2000). Accordingly, we offer the hypotheses for formal testing: H1b: Green purchasing directly and positively impacts organizational performance.

value (Porter and van der Linde 1995). Therefore, we propose the following hypotheses. H1c: Eco-design directly and positively impacts organizational performance.

Eco-design and organizational performance

Cooperation with customers and organizational performance

Product stewardship incorporates in the context of external stakeholders into the eco-design development stages through life cycle analysis; environment-friendly product can measure the product impact on environment till its end of life (Fiksel 1993; Allenby 1991). According to the Kleindorfer et al. (2005), the first-mover advantage is where enterprise introduces eco-friendly innovations in product design and increases benefits including developing inimitable manufacturing capabilities, and getting royalties for licensing green technology, and, also, builds proprietary information which will lead to sustainable competitive edge. In a similar line, Gronhaug and Kaufmann (1988) describe the eco-friendly product has a significant impact on enterprise’s survival and plays a role of weapon to build sustainable competitive edge in the market. A number of enterprises are using eco-friendly practices into their product innovation in order to gain competitive edge and also differentiate themselves from their competitors (Reinhardt 1998). There is no doubt that eco-design practices are heavily dependent on customer management, supplier management, customer management, and internal management (Lin et al. 2013). Büyüközkan and çifçi, G. (2012) claimed that enterprises can reduce 80% harmful effect from their products and processes on the environment due to successful adoption of green design practices. Zhu et al. (2007) conducted an empirical study on automobile industries of China. They found that environment-friendly design practices significantly reduced the negative effect on the environment and also improved firms’ contribution towards sustainability. Gonzalez-Benuito and GonzalezBenito (2005) argue that firms focus on Eco-design can reduce usage of hazardous materials in products and also reduce resource consumption in manufacturing products. In addition, green design also facilitating reusability, remanufacturing, disassembly, and recyclability of products. Eco-design products have positively and significantly impact on enterprise performance, and similarly customers are more willing to buy environment-friendly products to achieve the advantage of environmental protection and cost (Lin et al. 2013). The results show that eco-design products have positive relationship with enterprise financial and environmental performance (R-J. Lin et al. 2013), build competitive advantage, and adoption of eco-design practices improve firm reputation and image in the market (Zailani et al. 2012). In addition, eco-design products reduce the cost of products and significantly enhance product

Customers are the key stakeholders in the supply chain, and customers probably put pressure on organization to reduce harmful or negative effects in their activities (Freeman 1984). In simple words, customer can influence organizational practices. Generally, customer pressure plays a positive role for adopting green supply chain practices (Harms et al. 2013; Krause et al. 2000). Undeniably, strong customer relationship leads to enhanced financial and marketing performance (Green and Inman 2005a, b) and competitive pressure meaningfully enhances economic performance due to adoption of more green supply chain practices (Zhu et al. 2007). Geffen and Rothenberg (2000) conducted an empirical research and found that in the manufacturing setting, close collaboration and coordination with suppliers and customers resulted in better environmental performance. Vaccaro and Echeverri (2010) suggest that corporate transparency with reference to eco-friendly sustainability measures taken by the firm can easily motivate customers to participate in environment-friendly initiatives and further collaboration with the enterprise. Manufacturers cannot identify the eco-friendly requirement of their customers without collaboration with them, but involvement of their valuable feedback (Vachon and Klassen 2008). H1d: Cooperation with customers directly and positively impacts organizational performance. Green information system and organizational performance Green information systems refer to the use of information systems that can promote sustainable development and environment-friendly operations. It optimizes enterprise activities towards green innovation and green practices (Chen et al. 2008; Corbett 2013; Watson et al. 2010; Watson et al. 2008). The implementation of green information systems supports information sharing about environment-friendly initiatives, in the end-to-end supply chain in terms of coordination (Chandra et al. 2007). In a similar line (EI-Gayar and Fritz 2006), green information system denotes the backbone for green management efforts and fulfills the coordination and reporting needs for several supply chain players. Zhu and Cote (2004) results show that companies implement green information system in the hope of improvement in competitiveness and environmental performance including, quality, efficiency, and reducing cost. In addition, when companies use green technology to exploit and explore relational

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opportunities, greater operational and strategic benefits arise (Lin (2013). Numally 1978 argues that if the quality of environmental data is not reliable then comparing environmental performance with firm financial performance can be problematic. The green information systems not only positively impacts on coordination and integration with supply chain members but also significantly enhances environmental and economic performance of enterprise (Schniederjans and Hales 2016). Recent researches significantly emphasize the importance of green IT in manufacturing firms (Benitez and Walczuch 2011; Dao et al. 2011a, b) and the usage of green information technology develops competitive advantage and enhances performance, and besides, it is not easy for competitors to replicate (Klassen and Whybark 1999). In a similar way (A. Ajamieh et al. 2016; Benitez et al. 2013; Wang et al. 2015), its infrastructure capability and competitiveness directly and positively impact on firm superior performance by adoption of green practices. The successful implementation of green information systems in end-to-end supply chain can improve efficiency of enterprise in terms of operational performance and financial performance by optimizing resource allocation (Daugherty et al. 2005) and also improve enterprise sustainable development capabilities (Sanders 2005a, b; Seggie et al. 2007; Rai et al. 2006; Wu et al. 2006; Dao et al. 2011a, b; Darnall et al. 2008; Hertel and Wiesent 2013) and play a vital role in overall firm performance (Yang et al. 2016). We argue that green information systems improve organizational performance. We propose the given below hypotheses for formal testing: H1e: Green information systems positively impact organizational performance.

Method The green supply chain management practice performance model is theorized, and the constructs involved in this model are described with a focus on Pakistan manufacturing companies. First of all, we develop a pre-test instrument for pilot testing, and after consultations with academic and industry experts, we develop the final questionnaire on the basis of five-point Likert scale ranging 1 (strongly disagree) to 5 (strongly agree). The questionnaire mainly covers six parts including green information systems, green purchasing, green manufacturing, cooperation with customers, eco-design, and organizational performance. The data was collected from supply chain supervisors, managers, and directors of manufacturing companies in Pakistan during February to September 2016. We visited to 489 manufacturing enterprises to give them brief introduction and purpose of conducting this research. The data collection was completed by four master-level supply chain major students who had voluntarily participated in this activity. In

addition, the authors also directly and indirectly were involved in data collection. We followed the data collection process similar to the one employed by Inman et al. (2009). A total of 305 filled questionnaires were received, 87 questionnaires were identified as not usable. The data from 218 respondents were incorporated in the dataset and then analyzed. The effective response rate is 44.5%. All respondents were grouped as responding to either the initial or follow-up requests that were sent 1 week later. Of the respondents, 71% (155) were considered as early respondents and 29% (63) considered as late respondents. We conducted the one-way ANOVA for the comparison of the means of the demographic variables. The result shows that difference is not significant at the .01 confidence level. Because nonrespondents have been found to descriptively resemble late respondents (Lambert and Harrington 1990; Armstrong and Overton 1977), these results show that non-response bias has not negatively impacted the assembled dataset. The objective is measured to the theorized model as a whole, we opted to assess the model using simultaneous multiple regression techniques. SPSS software version 22 was used to perform all the necessary analysis. In the dataset, the respondents selected from 15 different industries demonstrate a dissimilar collection of manufacturing firms. The experiences of respondents are between 6 and 10 years on their current positions. See Table 2 for respondent and firm profiles.

Analysis and results This research performed reliability, Pearson’s correlation, exploratory factor analysis, and linear multiple regression. Exploratory factor was performed to evaluate the underlying structure for the 32 items of the organizational performance questionnaire. On the basis of hypothesized equation showed below, six factors were requested. M ¼ α0 þ β 1 ðGMÞ þ β 2 ðCWCÞ þ β 3 ðGISÞ þ β4 ðECODÞ þ β5 ðGPÞ þ e where M, GM, CWC, GIS, ECOD, and GP denote organizational performance, green manufacturing, cooperation with customers, green information systems, eco-design, and green purchasing, respectively. In addition, α0 represents constant and e indicates error term in the model. For the reason that the items were designed to index six constructs: organizational performance (dependent variable), while green information systems, green purchasing, green manufacturing, cooperation with customers, and eco-design (predictors), the value of KMO (Kaiser-Meyer-Olkin) measure of sampling adequacy (.755) presents that the sample is

Environ Sci Pollut Res Table 2 Demographics profile Demographics

Number of respondents

Percent

Job title Supply chain supervisors

123

56

Supply chain managers

76

35

19

9

Fabricated metal product manufacturing

21

10

Chemical manufacturing Textile mills

34 46

16 21

Supply chain directors Industry category

Food manufacturing

14

6

Plastic and rubber manufacturing Electronic product manufacturing

4 8

2 4

Machinery manufacturing

12

6

Furniture manufacturing Coal and petroleum product manufacturing

8 6

4 3

Paper manufacturing Beverage product manufacturing

26 10

12 5

Tobacco product manufacturing Wood product manufacturing Transportation equipment manufacturing Apparel manufacturing

6 9 12 2

3 4 6 1

21 115

10 53

11 to 15 years More than 15 years Sales (million US$) Less than $10 $11 to 50

61 21

28 10

39 101

18 46

$51 to 100 $101 to 200 More than $200 Number of employees Less than 50 workers

46 21 11

21 10 5

Age of firm Less than 5 years 6 to 10 years

50 to 100 workers 101 to 200 workers 201 to 500 workers More than 500 workers

appropriate to run factor analysis. Furthermore, a significant result of KMO (p < .05) shows that matrix is not an identified matrix. In other words, these six components relate from each other sufficient to run a meaningful factor analysis. Table 3 displays the Kaiser-Meyer-Olkin and Bartlett’s test results. In addition, the early solution of factor analysis was rotated by using an orthogonal (varimax) rotation method with Kaiser Normalization which extracted the requisite six Buncorrelated^ factors. They accounted for organizational performance 18.35, green manufacturing 16.68, cooperation with customers 10.78, green information systems 9.08, eco-design

39

18

119 32 17 11

55 15 8 5

7.92, and green purchasing 7.32. However, these six components explained 70.14 cumulative percentage of the total variance. In addition, we also calculated Cronbach’s alpha of Table 3

KMO and Bartlett’s test results

Kaiser-Meyer-Olkin measure of sampling adequacy

.755

Bartlett’s test of sphericity

6433.904 276 .000

Approx. chi-square Df Sig.

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each variable. The overall reliability of the scale was .921 of 24 loaded items because to enhance clarity, the factor loading less than .40 was omitted. Table 4 shows the items and factor loadings for the rotated factors. Meanwhile, all of these 24 items were loaded onto their respective components in the rotated matrix and there were no such cross-loadings too. Additionally, we also ensured both construct and discriminant validity. First of all, we satisfied all the basic parametric assumptions for simultaneous multiple regression and then conducted the test to determine what is the size of the overall relationship between determinants of green practices (predictors) and organizational performance (dependent variable) and how much each of the predictors variable (i.e., green manufacturing, green information system, cooperation with customers, ecodesign, and green purchasing) uniquely contributed to predict organizational performance. Table 5 represents means,

Table 4 Rotated components matrix

standard deviations, and inter-correlations for dependent variable (organizational performance) and its predictors. In Table 6, we draw the results of hypothesis testing through linear regression analysis for predicting organizational performance. The combination of variables predicted almost 30.3% of the total variance in predicting organizational performance F (5304) = 27.9, p < .001, with four variables that significantly predicted organizational performance except green purchasing. Furthermore, the problem of multicollinearity is not found between independent variables because VIF (variance inflation factor) value for each independent variable is less than 10. The coefficient of parameter estimates propose that Beco-design^ (.256, p < .05), Bgreen information systems^ (.124, p < .05), Bgreen manufacturing^ (.115, p < .05), and Bcooperation with customers^ (.089, p < .05) reflect a significant impact on organizational performance. Therefore, their four respective hypotheses (H1a, H1c,

Items

Component Alpha

Organizational performance 6 Organizational performance 1 Organizational performance 5 Organizational performance 2 Organizational performance 4 Organizational performance 3 Green manufacturing 1

.897

1

2

4

5

6

.849 .825 .824 .803 .791 .775

.923

.874

Green manufacturing 5 Green manufacturing 7 Green manufacturing 6 Green manufacturing 4 Green manufacturing 3 Cooperation with customer 2 Cooperation with customer 1 Cooperation with customer 4 Cooperation with customer 3 Green information system 2 Green information system 8 Green information system 3 Eco-design 1 Eco-design 2 Eco-design 3 Green purchasing 6 Green purchasing 3 Eigenvalues

3

.870 .870 .865 .849 .769 .788

.921 .921 .775 .473

.716

.972 .970 .369

.712

.820 .779 .778

.922

% of variance explained Cumulative % of variance explained

4.404 18.35 18.35

Extraction method: principal component analysis Rotation method: Varimax with Kaiser Normalization

4.004 16.68 35.04

2.586 10.78 45.81

2.180 9.08 54.90

1.902 7.92 62.82

.958 .957 1.757 7.32 70.14

Environ Sci Pollut Res Table 5

Means, standard deviation, and inter-correlations for organizational performance and predictor variables (N = 218) Mean

Standard deviation

1

2

3

4

1 Organizational performance predictors

1.67

.546

1

2 Green manufacturing

2.16

.718

.362**

1

3 Green purchasing 4 Eco-design

2.90 1.79

1.043 .652

.145* .472**

.305** .434**

1 .210**

1

5 Cooperation with customers 6 Green information systems

1.80 2.22

.891 .910

.382** .308**

.286** .216**

.211** .147**

.520** .147**

5

6

1 .191**

1

*p.05 (2-tailed); **p < .01(2-tailed)

H1d, and H1e) were supported, respectively. On the other hand, green purchasing (−.014, p > .05) has shown insignificant impact on organizational performance. Therefore, H1b was not supported.

Discussion and conclusion The results of simultaneous regression analysis reveal that determinants of green supply chain practices have a significant positive association with organizational performance. The findings indicate that four out of five determinants of green supply chain practices (i.e., green manufacturing, ecodesign, cooperation with customers, and green information systems) are significant factors in predicting organizational performance (with the exception of green purchasing). The result also reveals that eco-design implementation is an essential key predictor of organizational performance. In a similar track, Sezen and Cankaya 2013 found the implementation of eco-design processes had a significant positive impact on economic performance. In fact, organizational performance can be achieved when management successfully implements green practices in the supply chain. According to Roy and Khastagir (2016), organizations can achieve financial gain and higher environmental performance due to truly commitment of the senior management towards implementation of

Table 6

green supply chain practices. Eco-design supports the idea of environmental sustainability because firms which implement eco-design can easily recycle and remanufacture the products after PLC (product life cycle). Furthermore, eco-design not only supports the environmental sustainability and firms’ environmental performance, but also builds a competitive advantage and improves financial performance in the long run. Governments and regulatory authorities are encouraging ecodesign products, and on the other hand, in some countries, custom policies are very strict and create barriers for pollutant products. The green purchasing itself cannot promote to financial performance of the firms. In many European countries, regulatory authorities have very strict environmental policies and laws to support and encourage sourcing green materials from foreign and local suppliers in terms of tax exemptions and import duty on sourcing green materials from other countries. Unlike previous researches (e.g., Liu et al. 2012), Klassen and McLaughlin (1996) found the Bgreen purchasing^ had negative or no significant impact on organizational performance. In our model, green purchasing also has a significant negative effect on enterprise financial performance. In similar way, Qinghua and Yong 2002 conducted the empirical research and found that green purchasing can only increase the overall cost in the system and sometimes have negative impact on organizational performance. Undeniably, manufacturing firms in Pakistan are facing resistance from customers’ side so that they have to adopt green

Hypothesis testing for organizational performance

Hyp.

Predictors

SE

B

VIF

t stat

Sig.

Remarks

H1a H1b H1c H1d H1e

(Constant) Green manufacturing Green purchasing Eco-design Cooperation with customers Green information systems

.111 .042 .026 .050 .035 .030

.574 .115 −.014 .256 .089 .124

1.340 1.130 1.563 1.414 1.075

5.150 2.749 −.533 5.155 2.577 4.199

.000 .006* .595 .000** .010* .000**

Supported Not supported Supported Supported Supported

F = 27.9, Adj R2 = .303 *p < .05; **p < .001

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practices. Todays’ customers are more aware of harmful effect and pollution created by manufacturing firms in Pakistan. But unfortunately, government and regulatory authorities have no any significant compensation for green firms such as tax exemptions or subsidies. On the other hand, the importing and purchasing of green materials are much more expensive than nongreen materials and these huge costs incur in the overall supply chain systems, which create negative effect on enterprise financial performance. According to the stakeholder theory, stakeholders are individuals and groups who can be affected by a company actions and/or affect a company performance. Stakeholders can create pressure on companies to minimize or discontinue negative effects and consequently influence on firms practices (Freeman 1984). Furthermore, in our model, the Bgreen information systems^ has been shown a statistically significant predictor of organizational performance. It indicates that green information system role is very critical in overall green supply chain practices. The green information system is the backbone of the overall green systems since the green information system integrates and coordinates across the internal and external SC (supply chain) to evaluate the environmental performance of the firms. In a similar way, previous studies (e.g., Wang et al. 2015; Benitez et al. 2013) confirmed that IT capabilities supported environmental management activities across the external and internal supply chain which in turn can signify an important precursor of superior enterprise performance and green information system also provides feedback from external and internal supply chain stakeholders. Dao et al. (2011a, b) conducted the research on green supply chain practices, and the results revealed that green information system has become a vital means of gaining sustainability through helping firms deliver eco-friendly value to relevant stakeholders and achieve long-term competitive edge through the coordination and integration of supply chain. Further GIS (green information systems) enhances efficiency of firms in terms of operational and financial performance by optimizing resource allocation (Daugherty et al. 2005) to improve firms’ sustainable development capabilities (Hertel and Wiesent 2013; Dao et al. 2011a, b; Seggie et al. 2007) and play an important role in successful implementation of green supply chain practices (Yang et al. 2016) (Fig. 3).

Green manufacturing Green purchasing

0.115* -0.014ns 0.256**

Eco-design Cooperation with customers Green information systems

Organizational performance

0.089* 0.124** F= 27.9; Adj R2 = 0.303

Fig. 3 Organizational performance model with hypotheses results. Notes: **significant at .01 levels; *significant at .05 levels; ns not significant

Moreover, in our results, we found cooperation with customers and green manufacturing have positive relationship with organizational performance. In other words, they both also play a supporting role in organizational performance. During the implementation of green practices, firms cannot take a risk to ignore their customers because customers are the primary financial source of the firms, and all firms primary objective is to earn healthy profit except NGOs (non-government organizations). Customers will provide valuable feedback to the firms and share their opinion and requirements with the firms. Mostly firms conduct surveys in order to know about their customers’ feedback such as Bwhat they need and what the requirements are.^ In addition, cooperation with customers has a significant role to increase organizational performance. A strong relationship with customers on the part of manufacturing firms leads to enhanced financial and marketing performance. Stakeholder and competitor pressure significantly enhance firms economic benefits due to adoption of different green supply chain practices (Sarkis et al. 2011; Zhu et al. 2007; Freeman 1984). Generally, customer pressure plays a significant role in manufacturing firms’ decision for adopting GSCM practices (Harms et al. 2013; Krause et al. 2000). Previous studies also support our results and confirmed that independent variable cooperation with customers has significant positive impact on organizational financial and environmental performance. (e.g., Harms et al. 2013; Green et al. 2005; Krause et al. 2000; Geffen and Rothenberg 2000; Hartley and Choi 1996). Furthermore, the results show that green manufacturing has a significant impact on organizational performance. Firms cannot implement green manufacturing without greening all processes, and due to greening the manufacturing processes, firms also reengineering the processes and eliminate the waste from their manufacturing processes (Subramanian and Gunasekaran 2014). Greening the manufacturing processes not only reduces the setup time, waiting or queuing time, and processing time of the product but also reduces the waste of materials and human efforts, which significantly impact on organizational financial performance in terms of resource optimization, speedy processes, and pollution free processes (Zailani et al. 2015; Mangla et al. 2014b). Green manufacturing uses eco-friendly resources and provides maximum output with little waste and pollution (Baines et al. 2012; Gopalkrishnan et al. 2012). Green manufacturing reduced the consumption of energy, raw materials, fewer manufacturing steps, along with an enhanced firm reputation and image (Porter and Linde 1995), and helped companies to gain superior financial and environmental performance. The results of our model is also confirmed by Gavronski et al. 2013; Pereira-Moliner et al. 2012; Murovec et al. 2012; Dues et al. 2013; Caniels et al. 2013; Tseng and Chiu 2013; Pereira-Moliner et al. 2012; Murovec et al. 2012; Prajogo et al. 2012; Deif 2011; Deif, 2011; Farish 2009; Pauli 1997; Porter and Linde 1995. In total, hypotheses for green manufacturing, eco-design, cooperation with customers, and green information systems

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are supported except green purchasing. The following equation shows the simultaneous multiple regression equation to predict organizational performance: M = 0.574 + 0.115(GM) + 0.089(CWC) + 0.124 (GIS) + 0.256 (ECOD) – 0.014(GP)This article examined the impact of green supply chain practices on organizational performance in the Pakistan manufacturing industry. Five dimensions of green supply chain practices were assessed including green manufacturing, green purchasing, green information systems, cooperation with customers, and eco-design. The results show that except green purchasing, all of the four dimensions of green supply chain practices have significant and positive relationship with organizational performance, and these results have been confirmed by previous studies including PereiraMoliner et al. 2012; Murovec et al. 2012; Dues et al. 2013; Caniels et al. 2013; Hertel and Wiesent 2013; Dao et al. 2011a, b; Seggie et al. 2007; Harms et al. 2013; Green et al. 2005; Krause et al. 2000; Hart and Ahuja (1996); Geffen and Rothenberg 2000; Hartley and Choic 1996. Furthermore, green purchasing has a negative impact on the organizational performance because green materials are much more expensive than non-green materials and firms received such no any significant benefits from government and regulatory authorities in the context of Pakistan. On the other hand, in European countries, government and regulatory authorities have very strict laws and regulation of environmental performance and in terms of rewards government and custom authorities provide tax exemptions and low or no import duties on green materials and also encourage the green supply chain concepts through environment-friendly policies. But in our research, we revealed negative impact of green purchasing on firm financial performance and our results are also confirmed by Liu et al. (2012). Qinghua and Yong (2002) conducted the empirical research in Chinese firms to explore the relationship between green purchasing and firms’ financial performance, but they found the negative effect of green purchasing on Chinese firms’ financial performance. Furthermore, Chinese government also has no as such strict environmental policies, but if Chinese firms implement green practices due to the demand of customers and for the fear of losing their businesses in international arena. But in the long-run, green practices payback to the firms, in terms of competitive edge, attracting customers’ sympathy, and creating positive image and reputation of firms in domestic and international markets, and green firms have more broad international market to export their products as compare to non-green firms. Therefore, it is highly recommended that the manufacturing firms in Pakistan should adopt green supply chain practices to increase their overall organizational performance. In addition, we also found that green supply chain practices not only decrease harmful effect of manufacturing activities but also create competitive advantage. Greening different phases of a supply chain will directly or indirectly lead to enhance financial/ economic performance of the firms.

Implications for practitioners We argue that environment-friendly sustainability is an SC level imperative and offer evidence supporting the necessity for manufacturing firms to execute green supply chain management practices in coordination and collaboration with customers and suppliers. Manufacturing firms’ managers have to build supply chain management skills and knowledge structure in addition to the skills and knowledge needs to manage at the firm level. The managers must emphasize on enhancing the SC in order to enhance firms’ performance. We repeat the key importance that firms implement supply chain management strategies and work to enhance the processes that integrate throughout the SC to better meet the needs of the final customers. In practical viewpoint, managers are held responsible for the performance of their firms. If enhancing the SC and making customers delighted finally result in enhanced overall firm’ performance, firms’ managers will adopt such a tactic. We set out to determine whether the implementation of green supply chain practices focuses on collaboration with customers, and suppliers will lead to enhanced overall firm s’ performance. The implementation of green practices enhances the firms’ capabilities to sustain the environment and to strengthen the firm financial viability. Many manufacturing firms have begun to adopt comprehensive programs to control green practices throughout their SC (Vachon 2007). Specific activities that help environmental collaboration, coordination, monitoring, and control involved monitoring reverse flow of products and materials, sharing knowledge and techniques related to green practices with SC members, working to control the environmental risk related with operations of suppliers, and working to guarantee proper use of products (Vachon 2007).

Limitations of the study and future research There are several limitations in this study. We only included Pakistan manufacturing firms in our research sample. However, future researchers may conduct research in a different industry to find whether this model has positive or negative effect on organizational performance. In this research, we have included only five independent variables (green manufacturing, green purchasing, and cooperation with customers, eco-design, and green information systems). But future researches may include more independent variable including green distribution, investment recovery, internal environmental management, and green transportation in the model to test the relationship with organizational performance.

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