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GREEN SUPPLY CHAIN MANAGEMENT PRACTICES AND

PERFORMANCE OF ISO 14001 CERTIFIED MANUFACTURING

FIRMS IN EAST AFRICA

Odock Stephen Ochieng, PhD. 1 Zachary B. Awino, PhD.

2 Muranga James

Njihia, PhD. 3 W.N Iraki, PhD.

4

ABSTRACT Increasing levels of environmental degradation by manufacturing firms has

resulted in heterogeneous pressures from various organizational groups on the need for them

to conduct environmentally friendly operations. A viable option for these firms has been the

implementation of green supply chain practices. The key concern however is whether the

implementing these practices actually lead to improved performance. The main objective of

this study therefore was to examine the relationship between the implementation of GSCM

practices and performance of ISO 14001 certified firms in East Africa. Through the use of

positivist research paradigm and descriptive cross-sectional research design, primary data

was collected from persons in charge of environmental issues in ISO 14001 manufacturing

firms in East Africa. Based on the objective, the study establishes a statistically significant

positive direct relationship between implementation of GSCM practices and organizational

performance. The study therefore confirms existence of a positive link between GSCM

practices and organizational performance thus helping to reduce the uncertainty which has

arisen out of contradictory findings from past studies on whether it is beneficial to pursue

these practices. The results support the natural resource based view that GSCM practices

affords the firm an opportunity for competitive advantage and performance improvement

through unique causally ambiguous and socially complex resources. The study recommends

that manufacturing firms should implement environmentally sound practices in all phases of

the supply chain, beginning with procurement of raw materials through to design,

manufacture, packaging, distribution and end of life disposal of their products. Regulators

can use the findings to scale up the level of implementation of GSCM practices by enforcing

stricter environmental legislation and giving incentives to firms that have already

implemented these practices. The findings also provide future researchers’ with a useful

conceptual and methodological reference to pursue further studies in this under-studied

GSCM area especially in the African context.

Key Words: Green Supply Chain, Management Practices, Organizational Performance, ISO

Certified Firms, East Africa

1 Lecturer, School of Business, university of Nairobi

2 Associate Professor, School of Business, University of Nairobi

3 Senior Lecturer, School of Business, university of Nairobi

4 Senior Lecturer School of Business, university of Nairobi

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Background

Over the past decade there has been

growing awareness of widespread

environmental degradation facing current

and future generations. Its importance

emanates from increasing environmental

problems such as air pollution, changing

water quality and quantity, discharge of

toxic substances and chemicals, increase in

solid waste and climate change (Esty &

Winston, 2009; Gutowski, Allwood,

Herrmann & Sahni, 2013). These problems

have largely been associated with the

operations of manufacturing firms

(Beamon, 1999). Consequently, the firms

have found themselves receiving

heterogeneous pressures from various

organizational groups to conduct

environmentally friendly operations.

Green Supply Chain Management

(GSCM) has therefore emerged as a key

concept for firms seeking to become

environmentally sustainable and globally

competitive (Rao & Holt, 2005).

Srivastava (2007) defines green supply

chain management as the integration of

environmental thinking in product design,

material sourcing and selection,

manufacturing processes, delivery of the

final product to the final consumer as well

as end-of-life management of the product

after its useful life. GSCM practices

comprise activities in green procurement,

environmentally responsible design, green

manufacturing, green packaging, green

distribution and reverse logistics. The

synergistic interaction of these practices

with one another is very important if

maximum environmental benefit is to be

attained (Kung, Huang & Cheng, 2012).

Green procurement is defined as

environmentally conscious purchasing

with a focus on involvement of activities

which include the reduction, reuse and

recycling of materials in the process of

purchasing (Ninlawan, Seksan, Tossapol

& Pilada, 2010). It includes all activities

that are undertaken to ensure that the

materials, equipment and services that are

acquired by the firm have minimal or no

impact on the natural environment.

Potential indicators of green procurement

for this study were obtained from the

following papers (Min, & Galle, 1997,

2001; Rao & Holt, 2005; Vachon, 2007;

Zhu, Sarkis & Lai, 2008a; Zhu, Sarkis &

Lai, 2008b; Testa & Irlado, 2010; Diabat

& Govindan, 2011; El-Tayeb, Zailani &

Ramayah, 2011; Khisa, 2011;

Laosirihongthong, Adebanjo & Tan, 2013;

Mittra & Datta, 2013).

Environmentally responsible design is the

practice of incorporating environmental

concerns in product and process

engineering design with the objective of

developing products and processes that are

compatible with the natural environment

while maintaining quality, cost and

performance standards (Allenby &

Fullerton, 1991; Dewberry & Goggin,

1995; Dewberry, 1996). Environmentally

responsible design also stresses the need to

design products and processes which have

the lowest environmental impact over their

entire life cycle (Sarkis, 1998). It is

important to note that the most efficient

and effective point at which to catch

problems is in the design stage (Handfield

Melnyk, Calantone & Curkovic, 2001).

Environmentally responsible product

designs can bring down the resources

required to manufacture the product and

thus diminish the pollutants generated (Wu

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& Dunn, 1995). A list of environmentally

responsible design practices for this study

were taken from the following previous

work (Kleiner, 1991; Manzini, 1994; Hart,

1995; Robert, 1995; Dewberry, 1996;

Sarkis, 1998; Beamon, 1999; Lin, Jones &

Hsieh, 2001; Zsidisin & Siferd, 2001;

Asian Productivity Organization, 2004;

Vachon, 2007; Choi, 2012; Mittra & Datta,

2013).

Designing green products and processes is

not enough. It is possible that the actual

product and process may turn out to be

different from the design. Therefore, the

objective of green manufacturing is to

ensure reduction of negative

environmental impacts of a firm’s products

and processes through elimination of waste

by re-defining the existing production

process or system (Handfield et al., 2001).

This is achieved among other things by

using inputs with low environmental

impacts, highly efficient and ones which

generate little or no waste or pollution.

Based on early definitions of green

manufacturing, this study emphasized the

green manufacturing practices in the

following works (Sarkis & Rasheed, 1995;

Wu & Dunn, 1995; Atlas & Florida, 1998;

Rao & Holt, 2005; Hu & Hsu, 2006;

Vachon, 2007; Zhu et al., 2007; Zhu et al.,

2008a; Zhu et al. 2008b; Gonzalez, Sarkis

& Adenso-Diaz, 2008; Holt & Ghobadian,

2009; Paulraj, 2009).

Green packaging is the development and

use of packaging which results in reduced

negative impact on the environment.

Packaging physically protects the product

from harm and gives a medium for

information transmission (Tseng, 2009). In

spite of these and other important

functions, packaging is an undesired item

once the product is consumed. Wu and

Dunn (1995) argue that better packaging

can greatly reduce use of materials,

increase space utilization in the warehouse

and vehicle, and reduce the amount of

handling required and therefore result in

less environmental impact. Indicators of

green packaging for this study are

supported by the following previous

research (Wu & Dunn, 1995; Tseng, 2009;

Ninlawan et al., 2010; Laosirihongthong et

al., 2013).

Green distribution involves employing

forward freight distribution practices and

strategies that are environmentally friendly

and efficient (Rodrigue, Comtois & Slack,

2006). Shipping of the products to

customers is the single largest source of

environmental hazard in the logistics

system (Wu & Dunn, 1995). Transport

modes use petroleum products for fuel and

produce toxic chemicals and gases into the

atmosphere. Construction of transport

infrastructure, for example, roads, airport,

railways, and harbors have a significant

impact on the environment. When these

modes reach their end of life, they become

an environmental menace. It is hence

important to choose modes that reduce or

eliminate these problems and therefore

preserve the natural environment. A

number of measures for green distribution

have been adopted in previous research

(Wu & Dunn, 1995; Rodrigue et al., 2006;

Zhu et al., 2008a; Paulraj, 2009; Ninlawan

et al., 2010).

Reverse logistics is the flow of materials

and products from the point where they are

consumed to the point where the original

goods had been produced in order to

recover or create value or for safe disposal

with the overall objective of minimizing

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the negative impact of a firm’s products on

the environment (Carter & Ellram, 1998;

Rogers & Tibben-Lembke, 1999, 2001;

Srivastava & Srivastava, 2006). Toffel

(2004) notes that firms engage in reverse

logistics to reduce production costs, meet

changing customer demands, protect

aftermarkets and most importantly

promote an image of an environmentally

conscious firm. Potential reverse logistics

practices for this study were derived from

the following earlier studies (Wu & Dunn,

1995; Florida & Atlas, 1997; Harps, 2002;

Toffel, 2004; Vachon, 2007; Ninlawan et

al., 2010).

Literature Review

GSCM Practices and Organizational

Performance

The relationship between GSCM practices

and organizational performance is

grounded on the natural RBV, RBV,

institutional theory, stakeholders’ theory

and TCE. The implementation of GSCM

practices could actually reduce production

cost and improve product value or the

image of the organization and therefore

make it more competitive in the market

(Porter & Van der Linde, 1995; Hart &

Ahuja, 1996; Madsen & Ulhøi, 2003).

GSCM practices are also likely to reduce

costs in the long run due to reuse of

materials, reduction in energy use and

fines for flouting environmental

regulations. The reduction in costs and

increase in sales volumes results in

improved financial and market

performance. Molina-Azorin, Claver-

Cortés, López-Gamero and Tarí (2009)

have pointed out that implementing GSCM

practices contributes positively to a firm’s

marketing performance. Welford (1995)

established that implementing GSCM

practices improves the reputation of firms

thus strengthening business relations.

A number of studies addressing the direct

link between GSCM practices and

organizational performance have been

conducted. These studies have established

contradictory findings. Some studies

established significant positive

relationships between GSCM practices and

organizational performance (Rao & Holt,

2005; Chien & Shi, 2007; Zeng, Meng,

Yin, Tam & Sun, 2010; Kirchoff, 2011).

Others revealed that there is no significant

relationship between such practices and

organizational performance (Pullman,

Maloni & Dillard, 2010; Testa & Irlado,

2010; Lee, Kim & Choi, 2012). Others

showed a negative relationship (Cordeiro

& Sarkis, 1997). Yet others found a

combination of positive, negative and no

relationships (Azevedo, Carvalho & Cruz

Machado, 2011; Eltayeb et al., 2011;

Green, Zelbst, Meacham & Bhadauria,

2012; Laosirihongthong et al., 2013;

Mittra & Datta, 2013). This is because

they were investigating the relationship

between individual GSCM practices and

organizational performance. The lack of

consensus on this link causes a research

gap in the literature.

Another gap arises from the fact that a

number of these studies have not looked at

GSCM in its entirety as advocated by

Kung et al., (2012) and Hart (1995).

Moreover, the organizational performance

variable for some studies (Rao & Holt,

2005; Chien & Shi, 2007; Pullman et al.,

2010; Testa & Irlado, 2010) does not

include both the financial and market

component as emphasized by Green et al.

(2012). Weinzimmer, Nystrom and

Freeman (1998) assert that firm

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performance is best captured by

considering multiple aspects of it. The

influence of GSCM practices on

organizational performance of firms in

Africa and specifically in East Africa

remains unclear. GSCM is a relatively new

concept in this region. Previous research

on this topic is currently skewed to

countries, mostly in Asia, North America

and Europe, yet there is evidence that

throughout the world there is growing

concern for environmentally sustainable

supply chain practices (Golicic & Smith,

2013). Therefore, this study sought to

extend this previous research into the East

African context and gather more empirical

evidence to establish if indeed there is a

link between the implementation of GSCM

practices and organizational performance.

This leads to the hypothesis:

H1: Implementation of GSCM practices

has a direct impact on the organizational

performance.

Figure 1: Conceptual Framework

Research Methodology

The study employed cross-sectional survey

research design which is appropriate where

the overall objective is to establish

whether there exist significant

relationships among variables at some

point in time (Mugenda & Mugenda, 2003;

Cooper & Schindler, 2006). The

population of the study comprised all ISO

14001 certified manufacturing firms

operating in East Africa. A census of all

108 ISO 14001 certified manufacturing

firms in East Africa was conducted.

Primary data was collected using a semi

structured questionnaire. The respondents

were required to respond to scales

operationalizing the research variables

from the questionnaire which contained

direct measures and likert type scales. The

senior manager responsible for

environmental management from each of

the manufacturing firms in the population

was targeted. The survey questionnaire

was administered personally, using mail

and via email. For most of the firms in

Kenya, the questionnaires were hand

delivered. For firms in Tanzania, Uganda

and Rwanda, the questionnaires were

either sent by courier services or emailed

to the informants.

Data Analysis and Findings

Out of the 108 manufacturing firms

targeted, a total of 67 responded. 30 of the

firms were from Kenya, 19 from Tanzania,

16 from Uganda and 2 from Rwanda.

Thus, the study achieved a response rate of

62%. The respondents’ characteristics are

shown in Table 1.

Green Supply Chain

Management Practices • Green procurement • Environmentally responsible

design • Green manufacturing • Green packaging • Green distribution

• Reverse logistics

Organizational

Performance • Financial performance • Market performance

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Table 1: Firm’s Demographic Characteristics

Features Category Frequency Percent

Ownership status of the firm Fully locally owned 20 29.9%

Fully foreign owned 13 19.4%

Joint locally and foreign owned 34 50.7%

Total 67 100%

Scope of the market that is served

by the firm Local 7 10.4%

Global 60 89.6%

Total 67 100%

Manufacturing sub-sector Building, Construction & Mining 8 11.9%

Chemical & Allied 6 9%

Electrical & Electronics 3 4.5%

Food Beverages & Tobacco 30 44.8%

Metal & Allied 8 11.9%

Motor Vehicle & Accessories 1 1.5%

Paper & Board 3 4.5%

glass and glass products 2 3%

Imaging and phogrametry 1 1.5%

General merchandise 3 4.5%

Brush manufacturing 1 1.5%

Fertilizer manufacturing 1 1.5%

Total 67 100%

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Features Category Frequency Percent

Length of operation of the firm Less than 20 years 6 9.0%

20 to 40 years 25 37.3%

40 to 60 years 25 37.3%

60 to 80 years 7 10.4%

80 and above 4 6.0%

Total 67 100%

Number of full-time employees in Less than 100 6 9.4%

the firm 100 to 299 employees 12 18.8%

300 to 499 employees 8 12.5%

500 to 699 employees 9 14.1%

700 and above 29 45.3%

Total 64 100%

Source: Research Data, 2015

Measurement Model Estimation

Partial least squares structural equation

modeling (PLS-SEM) approach was used

to evaluate the relationship between

GSCM practices and organizational

performance and to determine the

predictive power of the conceptual model

for the 67 14001 ISO certified firms in

East Africa. The statistical analysis

process involved two stages. The first step

was the estimation of the outer or

measurement model which evaluates the

relationship between the observable

variables and the theoretical constructs

they represent.

The second stage was the specification of

the inner or structural model and

evaluation of the relationships proposed

and testing of hypothesis (Bryne, 2001). A

total of 8 measurement items representing

two constructs were subjected to

confirmatory factor analysis (CFA) as part

of PLS outer model analysis. Each of the

relationships between the observed

variables and their respective factors were

specified in an outer/measurement model.

The constructs in the study were measured

using multiple items. Details on the type of

constructs are contained in the Table 2.

Table 2: Key Latent Constructs

Latent Construct Type of Construct Number of observed variables

GSCM practices Reflective Six items

Organizational performance Reflective Two items

Source: Research Data, 2015

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Construct Unidimensionality

Both the inner and outer models were first

assessed for construct Unidimensionality

before PLS-SEM analysis was done. In

order to establish construct

unidimensionality, item to total

coefficients for all the indicators

representing a construct were obtained.

Factor loadings were also assessed using

EFA and CFA. This was done at two

levels. The first level entailed verifying the

unidimensionality of the indicators of the

constructs. This involved testing the

reliability and validity of these constructs.

At the second level item to total scores

were obtained for the indicators

representing each latent construct in the