Exploring the Linkage of Supply Chain Integration between Green Supply Chain Practices and Sustainable Performance: a Conceptual Link

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1 2014 4th International Conference on Future Environment and Energy IPCBEE vol.61 (2014) (2014) IACSIT Press, Singapore DOI: /IPCBEE V Exploring the Linkage of Supply Chain Integration between Green Supply Chain Practices and Sustainable Performance: a Conceptual Link Rohani Abdullah 1, Mohamad Ghozali Hassan 2 and Nor Azmi Johari 3 1,2 Universiti Utara Malaysia 3 Universiti Malaysia Perlis Abstract. Globalization results in both pressure and drivers for Malaysian enterprises to improve their environmental performance. As a developing country, Malaysia has to balance economic, social and environmental performance. Green Supply Chain Management (GSCM) is emerging to be an important approach for Malaysian enterprises to improve sustainable performance, possibly on all dimensions of sustainability. Using empirical results from manufacturing companies on GSCM practices in Malaysian, this study will examine the relationships between GSCM practices and sustainable performance by taking into consideration the influence of supply chain integration on this relationship. Through moderated hierarchical regression analysis, the study seek to evaluate the general relationships between specific GSCM practices and sustainable performance. The study also investigated how supply chain integration influenced the relationship between GSCM practices and performance. Significant findings will be determined for a number of relationships. Managerial implications will also be identified. Keywords: Green supply chain management practices, supply chain integration, sustainable performance. 1. Introduction Organizations are increasingly finding it challenging to balance economic and environmental performance particularly those facing competitive, regulatory and community pressures. In particular, manufacturers are facing increasing pressures for environmental sustainability and this calls for the implementation of strategies to minimize the products and services negative impact upon the environment. As awareness of environmental protection on a global level has witnessed an increasing trend of the proposed strategy, Green Supply Chain Management (GSCM) has been receiving significant interest from researchers and practitioners of operations and supply chain management. In fact, the increasing significance of GSCM is urged by the increasing negative impact upon the environment. Hence, GSCM is now considered as an effective management tool to lead manufacturing organizations in improving the environment s sustainability along with their performance. Hence, the main purpose of this study is was to determine the relationship between GSCM practices and sustainable performance and to investigate whether supply chain integration does affect the relationship of GSCM practices and sustainable performance. It is with the researchers hope that this study provides a thorough review and the framework proposed can serve as a new direction for future research in GSCM field. 2. Problem Statement In the context of Malaysia, the studies of green supply chain management (GSCM) practices are still lacking and the findings are inconclusive. Most researchers conducted on GSCM practices in several Asian Corresponding author. Tel.: ; fax: address: ghozali@uum.edu.my. 116

2 countries such as China may have similar market and social-cultural situation with Malaysia. However, as stressed by [1], different industry sectors of different countries face different pressure. This is also supported by [2] who stated the level and mode of implementation of GSCM practices vary significantly in different countries. It means a manufacturing industry in Malaysia is different from other countries owing to its unique background or culture. Thus, there is a need to investigate the extent of GSCM practices and its sustainability potential in the context of Malaysian manufacturing industry. Besides, a lot of companies are still behind and are yet to adopt the green supply chain management concept in their business operation. According to [3], Malaysian fully owned companies have lower level of adoption and participation in green supply chain practices compared to foreign based companies and the Multinational Company (MNC). The barriers to the adoption of GSCM in Malaysia depend on the companies size and high cost of adopting green supply chain practice. Due to this impediment, the establishment of the Ministry of Energy, Green Technology and Water on April, 9 in 2009 by Prime Minister Y.A.B Datuk Sri Najib Tun Razak has pushed business organizations to adopt a green culture in their business operations. However, the level of readiness to adopt green technology among Malaysian manufacturing companies is still unclear. Therefore, given the above issues, future studies are required to conduct in-depth investigations of the adoption and implementation of GSCM in Malaysia and also other variables relevant to the field may be included, particularly ones that promote green practices for sustainable performance outcomes. Responding to this need, this study is deemed necessary to bridge the gap in GSCM particularly on the relationship between GSCM practices and supply chain integration and their impact on sustainable performance. It aims to discover the green practices that existed in Malaysian certified MS (Malaysian Standard) ISO manufacturing firms and its significant result that influences sustainable performances. With the hope that the result will captivate many researchers who are interested in identifying a strategy and methodology to enhance the GSCM practices that contributes to sustainable performance. 3. Literature Review GSCM is gaining increasing interest among researchers and practitioners of operations and supply chain management. The growing importance of GSCM is driven mainly by the escalating deterioration of the environment, e.g. diminishing raw material resources, overflowing waste sites and increasing levels of pollution. However, it is not just about being environmentally friendly; it is about good business sense and higher profits. In fact, it is a business value driver and not a cost centre. In addition, the regulatory requirements and consumer pressures are driving GSCM. Hence, the scope of GSCM ranges from reactive monitoring of the general environment management programmes to more proactive practices implemented through various reverse activities such as reduce, re-use, rework, refurbish, reclaim, recycle, remanufacture, reverse logistics, etc. Sufficient published literature exists about various aspects and facets of GSCM which include, green design [4], repairable inventory [5], production planning and control for remanufacturing [6], issues in green manufacturing and product recovery [7], reverse logistics (RL) [8] and logistics network design [9]-[10]. Comprehensive review also can be found in [11], one that deals with interactions between operational research and environmental management, and in [12] who discussed recycling through value-chain collaboration. Meanwhile, [13] discussed the combination of location-routing problems and elements for success in GSCM, while [14] developed a theory of RL. Sufficient literature also exists in the related areas such as, green purchasing, industrial ecology and industrial ecosystems. However, earlier works and reviews have a limited focus and narrow perspective. They do not cover adequately all the aspects and facets of GSCM practices and their relationship towards sustainable performance. The main objective of this study is to present a comprehensive integrated view on all the aspects and facets of GSCM particularly on GSCM practices, taking a supply chain integration angle to facilitate further relationship of GSCM practices and sustainable performance whereby it is expected to provide some new insights of GSCM concepts and theory. Therefore, this study tries to define a few relevant 117

3 terms which have either been taken from the existing literature, or been defined appropriately to suit with the scope of study Green Supply Chain Management (GSCM) For the purpose of this study, GSCM is defined as integrating environmental thinking into supply-chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers as well as end-of-life management of the product after its useful life. This definition is derived from the study by [15] Supply Chain Integration The integration of the supply chain was described by Putzger (1998) as an attempt to elevate the linkages within each component of the chain, by facilitating a better decision making and to get all the pieces of the chain to interact in a more efficient way by creating a visibility of supply chain and to identify bottlenecks Therefore, the integration within a supply chain can be expected to positively influence cooperative activities related to environmental issues. Evidence supporting the contention that supply chain integration is an antecedent to environmental collaboration can also be found in [16] Sustainable Performance Sustainability in business is a dynamic state that occurs when a company creates ongoing value for its shareholders and stakeholders. While an essential aspect of sustainable value is that by doing well for society and the environment, the company does even better for its customer and shareholders than it otherwise would. Sustainability as stated by [17] in his book Conceptualizing Sustainability: The Business Opportunity, consists of actions that extend socially useful life of the organization, enhance the planet s ability to maintain and renew viability of the biosphere and protect all living species, enhance society s ability to maintain itself and to solve its major problem and to maintain a decent of welfare, participation and personal freedom for present and future generations of humanity. In such, sustainability is a better way of doing business, and an important part of making the change to sustainable enterprises is to develop constructive, innovative corporate cultures. These cultures create high performance and make maximum use of existing assets in ways that have good outcomes for the environment, society and economic (Dunphy, 2011). The proposed framework of appropriate criteria to assess the sustainability performances of operational initiatives in industry can be divided into three main sustainability dimensions as proposed by [18]. These dimensions are economic sustainability, environmental sustainability and social sustainability. Therefore, by embracing the whole concept of sustainability, these three pillars of sustainability is crucial to run a successful business not just for now but for the future. 4. Theoretical Framework Based on literature review, the research variables of the study comprise of green supply practices as independent variables, supply chain integration as moderating variable and finally, sustainable performance as the dependent variable. The Fig. 1 below visualizes the interconnection of this relationship: Fig. 1: GSCM and Sustainable Performance Framework 118

4 5. Research Design A quantitative research questionnaire was used to answer the research questions and to test the hypothesis proposed and a set of questionnaires will be used to gather data in order to identify and to examine the relationship between GSCM practices, supply chain integration and sustainable performance. This study will use a cross sectional design as a form of quantitative research. According to this design, each individual in the sample will be evaluated on several constructs at the same time, and the relationship between the construct is determined. It is a study of the connections that occur without any planned intervention between constructs or variables. Statistical Package for Social Science (SPSS) version 19.0 will be used to analyze the data and both descriptive analysis and inference analysis will be conducted in the data analysis process. Data analysis will involve testing for frequency statistics, standard deviation, mean, factor analysis, correlation and hierarchical regression analysis. Mean analysis will also be conducted to answer the first objective of the study in examining the level of GSCM practices and supply chain integration among the Malaysian manufacturing companies In order to answer the second objective (to examine the relationship between variables), the Pearson Correlation analysis will be conducted to determine the relation and degree of relationship between variables. Lastly, hierarchical regression and multiple regression will be used to answer the third and the fourth objectives of the study. The following Table 1 shows the overall statistical analysis that will be used to answer the four main objectives of the study. Table 1: Procedures to be used for data analysis Main Objectives Objective 1: To examine the level of GSCM practices and supply chain integration of manufacturing companies in Malaysia. Statistical Analysis Mean Objective 2: To determine the possible relationship between GSCM practices and sustainable performance. Pearson Correlation Objective 3: To determine the supply chain integration as possible moderator on the relationship between GSCM practices and sustainable performance. Objective 4: To determine which practice has the most impact on sustainable performance. 6. Conclusions Hierarchical Regression Multiple Regression Firms face a great deal of scrutiny from many diverse stakeholder groups, including governmental agencies, neighbors, workers, and not-for-profit groups. Naturally, this scrutiny is over and above the growing demands of at least some customer segments for more environmentally friendly practices. To address these stakeholders concerns, manufacturers have adopted different strategies that focus on internal operations, including the implementation of an environmental management system. Collectively, this will require a great effort in practicing environmental actions; practices related to environmental issues and performance encompassing both internal and external activities, whether related to preventing pollution before it is generated, recycling waste and spent products, extracting resources and raw materials, or capturing harmful pollutants followed by proper disposal. Partly due to the lack of consensus in the literature, researchers continue to struggle with identifying a clear, unified framework for GSCM practices particularly in relation with performance measure and the influence of supply chain integration on the successful implementation of GSCM practices. The absence of such a framework partly explains the wide variety of definitions terms and conceptualizations found in the research and practitioner literature. Thus, organizational relation or collaboration between each partners are crucial to the development of supply chain strategy and performance gain. In sum, it is suggested that the success of strategies and practices are contingent on the integration of each parties of the supply chain. 7. References [1] Christmann, P. and G. Taylor, Globalization and the environment: determinants of firm selfregulation in China. Journal of International Business Studies, (3): p

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