It is widely known that Chennai is fast developing into a manufacturing hub. Although it is a big growth engine, this growth will hurt environmental sustainability. However, if organizations plan to adopt green supply chain practices, there must be a basic active evidence linking greening to economic and competitive performance. This paper attempts to find this link among a sample of small and medium enterprises (SMEs) from Chennai.

Design/methodology/approach

A conceptual model was developed based on the extant literature, and data was collected using a structured questionnaire mailed to a sample of SMEs in Chennai, followed by structural equation modeling. The conceptual model endeavored to seek significant linkages involving green supply chain components (Greening of Inbound Logistics, Greening of Production Function, and Greening of Outbound Logistics) and environmental performance, competitive advantage, and economic performance. The methodology used was Structural Equation Modeling (SEM).

Findings

The model showed significant linkage from Greening Initiatives on the Inbound Phase to Production phase, which leads to Environmental Performance as well as to Competitive Advantage and Economic Performance. Environmental performance may not be a pre requisite to Economic Performance ( as observed in the final model) but environmental performance does lead to competitive advantage significantly.

Though there is no direct relationship between Greening the Inbound Logistics to Economic Performance or Competitive Advantage, it is Greening of Inbound which ensures that Green Production is achieved, which drives the firm towards creating and maintaining Competitive Advantage.

INTRODUCTION

Organizations across the world have integrated various innovative concepts such as environmental sustainability, responsible manufacturing, customer empowerment, adherence and compliance to standards, sustainable waste management, reverse logistics, etc. into their overall company strategy. However, there has not been a major study to establish the impacts of these initiatives on the performance of the firm in the context of small and medium enterprises (SMEs) in India.

This study examines the effects that greening the supply chain has on the competitiveness and economic performance of SMEs based in Chennai. In India, the growing manufacturing need is pushing the growth of this sector; simultaneously, it is reducing the environmental burden. Most of the big manufacturers are moving towards higher standards in response to their customers’ demands (many of whom are situated abroad). Owing to this shift, there is a substantial emphasis on greening the manufacturers’ supply chain, which involves their supplier groups, distributors, retailers, customers, and other business partners. This emphasis is reflected in their endeavor to achieve a triple bottom line in their corporate vision. Green supply chain management (GSCM) is part of this endeavor to achieve a triple bottom line.

The objective of this research is to investigate to what extent GSCM has been established and implemented for SMEs in Chennai and to determine the degree of correlation of the GSCM initiatives with the environmental performance, economic performance, and competitive advantage of the SMEs.

Green Supply Chain Management

The basic framework of a green supply chain involves the following components (Sarkis, 1999; Rao, 2002):

• greening the inbound function of the supply chain
• greening production or internal supply chain
• greening the outbound function of the supply chain.

This research aimed to explore the relationship among these GSCM components and a firm’s environmental performance, economic performance and competitiveness.

The conceptual model examined in this study (Rao & Holt) was developed through an examination of the extant literature on all aspects of the totality of the supply chain. This “totality” is encapsulated using five latent constructs, measured using indicator variables developed from the responses obtained from a survey of various organizations in South-East Asia. These constructs are:

• Greening the inbound function of the supply chain
• Greening production or internal supply chain
• Greening the outbound function of the supply chain
• Environmental performance
• Competitiveness
• Economic performance

(Rao and Holt, 2005)

Empirical Research.

Sample

An empirical, survey-based research approach was adopted, involving 64 items in the survey questionnaire. This questionnaire was distributed to the environmental management representative (EMR) or the chief executive of SMEs in Chennai.

The final sample size was 99.

Results of the Study.

The database created from the survey conducted was analyzed using Structural Equation Modeling approach (SEM approach) and the following final model was obtained.

Notes: Bold lines show significant link, dotted lines show links that are not significant.

The model showed a significant linkage from Greening Initiatives on the Inbound Phase to Production phase, which leads to Environmental Performance as well as to Competitive Advantage and Economic Performance. Environmental  performance may not be a pre requisite to Economic Performance ( as observed in the final model) but environmental performance does lead to competitive advantage significantly.

Though there is no direct relationship between Greening the Inbound Logistics to Economic Performance or Competitive Advantage, it is Greening of Inbound which ensures that Green Production is achieved, which drives the firm towards creating and maintaining Competitive Advantage.

Greening of Inbound Logistics includes activities such as green sourcing, greening of suppliers, and using materials that do not generate hazardous waste. These initiatives are reflected in the operations of the firm through Greening of Production, which leads to Environmental Performance, which can be judged through waste reduction, recycling, reduction in emission, etc. Over a period of time, these practices would provide sustainable competitive advantage to a firm in the market, as observed from the significant link between environmental performance and competitive advantage.

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Authors 

Anuj Rawat, Great Lakes Institute of Management, Chennai, anujrawat6@gmail.com

Goutam Sankar Behera, Great Lakes Institute of Management, Chennai, behera.goutam.sankar@gmail.com

Vidhul Dev, Great Lakes Institute of Management, Chennai, vidhuldev@gmail.com

Purba Halady Rao, Great Lakes Institute of Management, Chennai, Purba.h.rao@gmail.com