Description
This study aims to investigate the green supply chain management practices likely to be adopted by the electrical and electronic industry in Taiwan, which is dominated by Original Equipment Manufacturing and Original Designing and Manufacturing manufacturers, after the European Union implementation of the Restriction of Hazardous Substances and Waste Electrical and Electronic Equipment directives.
M. K. Chien; L. H. Shih
Received 29 March 2007; revised 8 May 2007; accepted 2 June 2007
An empirical study of the implementation of green supply chain
management practices in the electrical and electronic industry and their
relation to organizational performances
*M. K. Chien; L. H. Shih
Department of Resources Engineering, National Cheng Kung University, Tainan, Taiwan, No.1, University Road,
Tainan 701, Taiwan
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
ISSN: 1735-1472
© Summer 2007, IRSEN, CEERS, IAU
*Corresponding Author Email: [email protected]
Tel.: +886 8 8647367; Fax: +886 8 8647123
ABSTRACT: This study aims to investigate the green supply chain management practices likely to be adopted by
the electrical and electronic industry in Taiwan, which is dominated by Original Equipment Manufacturing and Original
Designing and Manufacturing manufacturers, after the European Union implementation of the Restriction of Hazardous
Substances and Waste Electrical and Electronic Equipment directives. The relationship between green supply chain
management practices and environmental performance, as well as financial performance, is studied. The approach of
the present research includes a literature review, in depth interviews and questionnaire surveys. The companies in the
electrical and electronic industry approved by the International Organization for Standardization 14001 certification in
Taiwan before December 2004 were sampled for empirical study. The data were then analyzed using statistical package
for the social sciences, and structural equation modelling was used as a path analysis model to verify the hypothetical
construction of the study. The results indicate that the original equipment manufacturing and original designing and
manufacturing manufacturers in Taiwan’s electrical and electronic industry have adopted green procurement and green
manufacturing practices in response to the current wave of international green issues and have generated favorable
environmental and financial performances for the respective companies.
Key words: Green supply chain, environmental performance, green procurement, green manufacturing
INTRODUCTION
With increasing awareness of environmental protection
worldwide, the green trend of conserving the Earth’s
resources and protecting the environment is
overwhelming, thereby exerting pressure on corporations
in Taiwan. The pressure and drive accompanying
globalization has prompted enterprises to improve their
environmental performance (Zhu and Sarkis, 2006).
Consequently, corporations have shown growing
concern for the environment over the past ten years
(Sheu, et al., 2005). The pressure on corporations to
improve their environmental performances comes from
globalization rather than localization (Sarkis and
Tamarkin, 2005). Increasing environmental concern has
gradually become part of the overall corporation culture
and, in turn, has helped to reengineer the strategies of
corporations (Madu, et al., 2002). To reduce the
environmental impact of the waste of electrical and
electronic equipment (WEEE), the EU implemented the
waste electrical and electronic equipment (WEEE)
directive in August 2005. The primary goal of the WEEE
directive is to reduce environmental damage by reusing
and recycling electrical and electronic equipment, by
which the volume of waste electrical and electronic
equipment, and thus the capacity for handling it, can be
reduced. On the other hand, the ROHS (Restriction of
Hazardous Substances) directive prohibits electrical and
electronic equipment containing lead, mercury, cadmium,
hexavalent chromium, polybrominated biphenyls (PBB)
and polybrominated diphenylethers (PBDE). Of the two
directives described above, one stresses recycling, reuse
and recovery and the other defines the restrictions on
the substances used. According to the statistics of
Taiwan customs, the total electrical and electronic
products exported from Taiwan to the rest of the world
within the scope of the WEEE directive amounted to
US$ 25.8 billion in 2005. Consequently, corporations in
Taiwan have to include the two directives into the design
and production of products and have responded by
M. K. Chien; L. H. Shih
384
adopting GSCM (green supply chain management)
practices. Green supply chain management, also known
as ESCM (environmental supply chain management)
or SSCM (sustainable supply chain management)
(Seuring, 2004), combines green purchasing, green
manufacturing/materials management, green
distribution/marketing and reverse logistics (Sarkis,
2005). The aim of corporations implementing GSCM is
to enhance environmental and financial performance;
however, the scope of GSCM practices is very wide
and includes internal environmental management,
external GSCM, investment recovery and eco-design
or design for environmental practices (Zhu and Sarkis,
2004). This study aims to investigate the GSCM
practices likely to be adopted by the electrical and
electronic industry in Taiwan, which is dominated by
OEM (original equipment manufacturing) and ODM
(original designing and manufacturing) manufacturers,
after the European Union implementation of the ROHS
and WEEE directives. The aims of the present research
are to discuss the issues that can be summarized as
follows:
1. The major external factors affecting GSCM practices
adopted by the electrical and electronic companies in
Taiwan;
2. The GSCM practices adopted by the electrical and
electronic companies in Taiwan in response to the green
issue and;
3. The relationship between the GSCM practices
adopted by the electrical and electronic companies in
Taiwan and organizational performance.
MATERIALS AND METHODS
Fig. 1 shows the research framework of GSCM
practices in the present study, in which the
relationships between environmental regulations,
external stakeholders, GSCM practices, environmental
performance and financial performance will be
discussed through a literature survey, and hypotheses
relating these variables will be developed.
Description of GSCM practices
To meet international expectations and demand for
environmental protection, some Taiwanese companies
have already implemented GSCM practices. ACER, for
example, has established a green product supply chain
management system, including green product
specification, green products compliance data, an
auditing management mechanism, and a green
procurement system (ACER, 2005). The environmental
management in TSMC covers environmental
accounting, life cycle assessment, green procurement
and reduction of greenhouse emissions. The company
has also implemented measures to ensure that no
prohibited substances as defined by the EC are present
in their products (TSMC, 2005).
Fig. 1: the research framework of GSCM practices in the present study
Financial performance
.Cost reduction
.Market share growth
.Profit increase
Environmental performance
.Management performance
. Environmental policies and
measures
. Approval rate of the management
system
. Improvement in community
relations and corporation image
.Operational performance
. Performance in using
energy/resources
. Reduction of emission
. Waste disposal
H3
H4
GSCM practices
.Green procurement practices
. Establishing a control list of
environmentally hazardous substances
. Profiles for raw materials containing no
prohibited substances
. Assessment tables for the environmental
management of suppliers
. Green product approval data
. An auditing mechanism for green
management
.Green manufacturing practices
.Green design
. Manufacturing of green products
. Recovery and reuse of used products
. Green products standards
Environmental regulations
.Domestic environmental
regulations
.Government environmental
Policy
.International environmental
agreements
External stakeholders
.Suppliers
.Customers
.Community stakeholders
H1
H2
M. K. Chien; L. H. Shih
385
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
Apart from meeting the demands of its clients, ASUS
has also taken initiatives to understand the difficulties
faced by its suppliers and provide them with necessary
information and services. ASUS also provides their
suppliers with ASUS e-Green for registration and
evaluation to ensure the capability of suppliers through
the mechanism of a part approval process. Finally, the
company has established an auditing mechanism for
the green management system to ensure that their
suppliers conform to green management, thus
establishing incentive and elimination mechanisms for
green procurement. In summary, ASUS promotes green
engineering by implementing green design, green
procurement, green production, green marketing and
green services in order to conserve natural resources.
To ensure that its export to the European market is
unhindered, TATUNG established a green supply chain
to meet the demands of its clients’ green procurement
standard and the EU ROHS directive. Consequently,
its upstream suppliers are requested to provide a
guarantee, evaluation report and inspection of
hazardous substance management, to assess the
suppliers and strengthen the existing supply chain, in
order to be able to supply its downstream clients with
products conforming to the green procurement
standard and the EU ROHS directive (TATUNG, 2005).
UMC has established a control list of environmentally
hazardous substances and profiles for raw materials
containing no prohibited substances, as well as having
developed an environmental management table to
evaluate the environmental protection performance of
its suppliers. The company has also included suppliers’
environmental information into its e-management of
suppliers and provides necessary training to relevant
personnel to enhance their awareness of environmental
protection (UMC, 2004). According to Zhu and Sakis
(2006), Li, et al. (2006) and Walton, et al. (1998), the
green supply chain practices adopted by companies in
Taiwan in response to green issues and experts’
opinions can be divided into green procurement
practices, including establishing a control list of
environmentally hazardous substances, profiles for raw
materials containing no prohibited substances,
assessment tables for the environmental management
of suppliers, green product approval data, and an
auditing mechanism for green management, and green
manufacturing practices, which include green design,
manufacturing of green products, recovery and reuse
of used products and green products standards.
Green procurement
Purchasers can improve the environmental
performance of products and services by expressing
environmental preferences through so called “green
procurement” (Faith-Ell, et al., 2006). Carter, et al. (1998)
defined environmental purchasing as consisting of
purchasing involvement in activities that include the
reduction, reuse and recycling of materials. The
procurement or purchasing decisions will have an
impact on the green supply chain through the purchase
of materials that are either recyclable or reusable, or
have already been recycled (Sarkis, 2003).
Green manufacturing
Pursuing the green manufacturing of products is
very beneficial in the alleviation of environmental
burdens. Green manufacturing is a manufacturing mode
designed to minimize the environmental impact in the
manufacturing processes of products (Tan, et al., 2002),
and the adoption of green manufacturing helps to
reduce waste and pollution (Hui, et al., 2001).
Environmentally responsible manufacturing processes,
GSCM practices, and their many related principles have
become important strategies for companies to achieve
profit and increase market share objectives by lowering
their environmental impact and enhancing efficiency
(Zhu and Sakis, 2006).
Research hypothesis
External factors affecting GSCM practices:
The drives or pressures upon companies to
implement GSCM include regulations, marketing,
suppliers, competitors and internal factors (Zhu and
Sarkis, 2006). The pressure of environmental protection
does not come solely from the demands of regulations;
consumers and clients also exert pressure on companies
(Hall, 2000). Standards, regulations and competition
have together prompted organizations to become more
aware of any consequences for the environment
(Sarkis, 1998). On the other hand, the regulatory,
organizational, community and media stakeholders
have prompted companies to conduct environmental
management (Henriques and Sadorsky, 1996).
Environmental regulations and external stakeholders
are considered the major factors affecting GSCM
practices according to Zhu and Sarkis (2006), Hall (2000),
Sarkis (1998) and other experts.
Environmental regulations
Traditionally, system theory stresses the effects of
M. K. Chien; L. H. Shih
386
An empirical study of the implementation of green supply chain management...
external systems on the decisions and behavior of an
organization; external systems include regulations, the
law, professional standards, interest organization and
social belief (Oliver, 1991). System theory also
characterizes the effects of external pressure on
organizational structure (Meyer, et al., 1987).
Environmental regulations is considered to include
domestic environmental regulations, government
environmental policies and international environmental
agreements according to Zhu and Sarkis (2006), Hall
(2000), Sarkis (1998) and other experts.
Domestic environmental regulations
Domestic environmental regulations prompt
companies to adopt relevant strategies and practices
to enhance their environmental performance. Domestic
regulations and corporations’ environmental missions
are the two main sources of pressure (Zhu and Sakis,
2006). Furthermore, the major drive for corporation
environmental awareness is increasing the role of
government regulations (Handfield, et al., 1997).
Government environmental policy
The public’s increasing environmental conscience,
the statutory requirements due to government policies
and regulations, and pressure from organized groups
are traditionally considered to be the factors that sway
companies towards adopting a green manufacturing
or environmental management system policy (Hui, et
al., 2001). Environmental policy targeted directly at
emissions will still typically provide the most important
single element of a cost-effective environmental policy
strategy (Jaffe, 2005).
International environmental agreements
Although domestic environmental regulations
seem to have a greater and more immediate effect on
eco-design than the type of economic policy incentive
currently associated with WEEE (Gottberg, et al.,
2006), many companies and the government are also
being influenced by international environmental
agreements, such as the Kyoto agreement, the Climate
Change Treaty and the Montreal Protocol (EIC, 2005).
The EU WEEE directive attempts to tackle the growing
quantity of WEEE by making producers responsible
for the costs of the collection and recycling of their
products at the end of usable life (Gottberg, et al.,
2006). Based on the above arguments, a hypothesis
can be made as follows:
Hypothesis 1: Environmental regulations have a
positive relationship with GSCM practices
External stakeholders
Stakeholder theory did not enter the domain of
business management until Freeman published his
book, Strategic management: A stakeholder approach,
in 1984. Stakeholders, in the wider definition, include
any group or individual who can affect or is affected
by the corporation (Greenwood, 2001). External
stakeholders affecting GSCM include customers,
suppliers, the community, regulators and non-
governmental organizations (Hervani, et al., 2005).
According to Hervani, et al. (2005), Henriques and
Sadorsky (1996) and Hall (2000), as well as other experts,
major external stakeholders of GSCM practices are
considered to include suppliers, customers and
community stakeholders.
Suppliers
Suppliers contribute to the overall performance of a
supply chain, and poor supplier performance affects the
performance of the whole chain (Sarkar and Mohapatra,
2006). Supplier–manufacturer relationships are
considered important in developing a sustainable
competitive advantage for the manufacturer (Sheth and
Sharma, 1997; Cannon and Homburg, 2001). Screening
of suppliers for environmental performance has now
become a key deciding factor in many organizations
(Clark, 1999).
Customers
Customer demands have now become the most
important type of external pressure (Doonan, et al., 2005).
To obtain more sustainable solutions, the environmental
properties of products and services must meet customer
requirements (Zhu and Sarkis, 2006). In the U.S.A., an
estimated 75% of consumers claim that their purchasing
decisions are influenced by a company’s environmental
reputation, and 80% would be willing to pay more for
environmentally friendly goods (Lamming and Hampson,
1996). Consequently, the influence of the natural
environment organizational decisions not only affects
the organization that makes the decision, but also its
customers and suppliers (Sarkis, 2003).
Community stakeholders
Community stakeholders are defined as people who
are not necessarily involved in the partnership formation
M. K. Chien; L. H. Shih
387
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
but who have knowledge of the community and the
organization (Nelson, et al., 1999). If health impacts and
sustainable solutions are to be identified with
confidence, it is essential that community perspectives
are adequately represented and that they influence
decision-making (Kearney, 2004). It has been shown that
community stakeholders have the ability to influence
society’s perception of a firm (Henriques and Sadorsky,
1996). Based on the literature review by Greenwood et
al., the researcher’s hypothesis is as follows:
Hypothesis 2: External stakeholders have a positive
relationship with GSCM practices.
Organizational performance
Performance is a measure for assessing the degree
of a corporation’s objective attainment (Daft, 1995).
Corporations adopting GSCM practices may generate
environmental and business performances (Walton, et
al., 1998; Zhu and Cote, 2004). A green supply chain, for
example, can improve environmental performance
(reducing waste and emissions as well as increasing
environmental commitment) and competitiveness
(improving product quality, increasing efficiency,
enhancing productivity and cutting cost), thereby
further affecting economic performance (new marketing
opportunities and increasing product price, profit margin,
market share and sale volume; Purba, 2002). According
to Walton, et al. (1998), Zhu and Cote (2004) and Purba
(2002), as well as other experts, organizational
performance is considered to include environmental and
financial performance.
Environmental performance
Environmental performance is defined as the
environmental impact that the corporation’s activity has
on the natural milieu (Sharma and Vredenburg, 1998).
Environmental performance indicators consists of OPI
(operative performance indicators) and MPI
(management performance indicators): OPI are related
mainly to materials’ consumption, energy management,
waste and emission production, and evaluation of real
environmental aspects of organizations, whereas MPI
mainly concerns the administration’s efforts, measures,
and contribution to the overall organization’s
environmental management (Papadopoulos and Giama,
2007). GSCM stresses more than just improving
environmental performance; the implementation of green
supply chain management can ensure that the
corporation itself and its suppliers conform to
environmental regulations. Effective management of
suppliers can reduce transaction costs and promote
recycling and reuse of raw materials. Also, the production
of waste and hazardous substances can be cut,
preventing corporations from being fined as a result of
violating environmental regulations. Consequently, the
relevant handling and operational cost involved can be
further reduced and, in the mean time, the efficiency of
using resources can be enhanced (Sarkis, 2003).
Furthermore, adopting a sustainable approach can
produce less waste and use more recycled material,
thereby using energy, water and by-products in a more
efficient way (Tsoulfas and Pappis, 2006). Following the
above discussions, the present study considers
environmental performance to include two dimensions:
management performance (environmental policies and
measures, the approval rate of the management system,
and the improvement in community relations and
corporation image) and operational performance (the
performance in using energy/resources, the reduction
of emission, and waste disposal). After the above
analyses, the researcher makes the following
hypothesis:
Hypothesis 3: GSCM practices have a positive
relationship with environmental performance.
Financial performance
Environmental protection activities can have a
positive effect on a corporation’s financial performance.
GSCM can cut the cost of materials purchasing and
energy consumption, reduce the cost of waste treatment
and discharge, and avoid a fine in the case of
environmental accidents (Zhu and Sarkis, 2004). A
sustainable approach can lead to internal cost saving,
open new markets and find beneficial uses for waste
(Tsoulfas and Pappis, 2006). Environmental
munificence has a positive effect on financial
performance (for example, growth in profits, sales and
market share) (Fuentes-Fuentes, et al., 2004). Financial
performance is defined here as cost reduction, market
share growth and profit increase. To analyze the
research done by Zhu and Sarkis et al., the researcher
issues a hypothesis:
Hypothesis 4: GSCM practices have a positive
relationship with financial performance.
M. K. Chien; L. H. Shih
388
Samples and analytical methods
A questionnaire survey was sent to those electrical
and electronic companies in Taiwan listed in the top
1000 manufacturers compiled by the Common Wealth
magazine, as well as those that were ISO (International
Organization for Standardization) 14001 certified before
the end of December 2004. The research questionnaires
were sent by mail to the electrical and electronic
companies in Taiwan, located in Hsinchu Science Park,
Central Science Park, Southern Taiwan Science Park,
and Export Processing Zone, which include the
northern, central and southern parts of Taiwan on
December 16
th.
, 2005. The finished questionnaires were
received on February 2
nd.
, 2006. Five hundred copies of
the questionnaire were sent out, with 151 valid and 20
invalid copies received back, as well as 18 returned
empty; hence, the valid response rate was over 30%.
These companies were chosen because the EU WEEE
and RoHS directives have had the most profound effect
on the electrical and electronic companies in Taiwan.
The software SPSS and LISREL (Linear Structural
Relations) were employed to analyze and assess the
hypotheses proposed here.
Tools and parameters
After surveying Sarkis (1998), Sarkis (2001), Purba
(2002), Zhu and Cote (2003), Zhu and Sarkis (2004) and
Brent and Visser (2005), the environmental performance
assessment in the ISO environmental management
system, as well as comments from experts and academics
in the electrical and electronic industry in Taiwan, a
questionnaire, “The relationship between green supply
chain management practices and organizational
performances,” was created as the tool of the present
study. The items in the questionnaire were then taken as
research variables according to the conceptual model of
the study. The operational definitions of the research
variables are shown in Table 1. According to the
methodology of structural equation modeling, the
variables of the present research are described as follows:
Table 1: The operational definitions of the research variables
Variable Operational definition Reference
GSCM practices
Enterprises adopting green manufacturing, green
procurement and other green measures to work with
suppliers to improve products or manufacturing processes
and increase the performance of suppliers and clients.
Sarkis (2001), Zhu and Cote
(2003), Zhu and Sarkis (2004)
Environmental regulations
Environmental regulations and policies as well as
international agreements prompting organizations to
become conscious of the environment.
Sarkis (1998), Sarkis (2003), Brent
and Visser (2005), Papadopoulos
and Giama (2007)
External stakeholders
Any group or individual capable of prompting organizations
to be conscious of the environment, including suppliers,
customers and community stakeholders.
Greenwood (2001), Hervani et al.
(2005)
Environmental
performance
The attainment of an organization’s objectives on
environmental management performance and operational
performance in corporate management.
Sharma and Vredenburg (1998),
Sarkis (2003), Tsoulfas and Pappis
(2006)
Financial performance
The attainment of financial or economic objectives in an
enterprise’s activities.
Purba (2002), Zuu and Sarkis
(2003), Fuentes-Fuentes et al.
(2004)
Exogenous variables
There are two exogenous latent variables in the present
study: environmental regulations and external
stakeholders. The exogenous latent variables of
environmental regulations are reflected in domestic
environmental regulations, government policies on
environmental protection and international environmental
agreements. On the other hand, the exogenous latent
variables of external stakeholders are reflected in suppliers,
customers and community stakeholders.
Endogenous variables
The endogenous latent variables in the present study
are divided into interpretative variables and outcome
variables for the final outcome according to the cause–
effect relation. Interpretative variables adopted in green
supply chain management practices are reflected in two
observed variables, green procurement practices and
green manufacturing practices. Outcome variables include
environmental and financial performance. Environmental
performance is reflected in two observable variables,
environmental management performance and environmental
operation performance, whereas financial performance is
reflected in three observable variables, namely cost
reduction, market share growth and profit increase.
Joint variables
In the present study, a seven-point scale was used
in all questions: 7 for strongly agree, 6 for agree, 5 for
M. K. Chien; L. H. Shih
Basic
information
Item Number Percentage
Sex Male 132 88.0
Female 18 12.0
Age Under 30 14 9.3
31–40 38 25.3
41–50 61 40.7
Over 50 37 24.7
Education Graduate school 18 12.0
University 79 52.7
College 53 35.3
Title General manager 1 0.6
(Assistant) manager 38 25.3
(Assistant)
section head
41 27.3
Environmental
safety officer
42 28
Other 28 18.7
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
389
partially agree, 4 for not applicable, 3 for partially
disagree, 2 for disagree, 1 for strongly disagree. The
point for every joint variable was obtained by dividing
the total points by the number of questions.
RESULTS
Basic data analysis
The basic data of the respondents answering the
questionnaire were first analyzed, by gender, age,
education and title; the results are shown in Table 2.
Males account for 88% of all respondents, mainly
between 41 to 50 years old. Educational backgrounds
are largely university and above (64.7%). The titles of
the respondents are mostly (assistant) section chief
and executive officer in the environmental safety
departments, accounting for 65% of all respondents.
Choice of assessment method
ML (maximum likelihood) of SEM is heavily
influenced by variable distribution properties. If the
absolute of the skewness coefficient of a variable is
larger than 3, this will be considered as extreme
skewness; on the other hand, if the absolute value of
the kurtosis coefficient is larger than 10, the variable
will be considered questionable, and if it is larger than
20, the variable will be regarded as of extreme kurtosis
(Kline, 1998). From Table 3, it can be seen that the
skewness of the present study ranges between –1.51
and 0.01, with its absolute value less than 3, and the
kurtosis ranges from –1.20 to 2.69 with its absolute
value less than 10. The results indicate that the
skewness and kurtosis of the observable variables are
small; consequently, ML can be used to evaluate the
model of the present study.
Table 2: Analysis of basic data of interviewees
Offending estimate
In the evaluation of model variables, there is unlikely
to be a negative error variance or a very large standard
error, and the standardized coefficient cannot be larger
than 0.95 (Bagozzi and Yi, 1988). As can be seen from
Table 4, all error variances are positive; standard errors
are small, ranging from 0.01 to 0.24, and standardized
coefficients range from 0.50 to 0.95, which is less than
0.95 and lies below the significance level, suggesting
that the effect of offending estimate was absent.
Reliability test
As can be seen from Table 5, the 13 observable
variables’ R
2
are between 0.57 and 0.90, conforming to
the recommendation that the confidence R
2
of an
individual observable variable should be larger than
0.50. Also, the construct reliability of the five latent
variables is between 0.75 and 0.94, complying with the
requirement that the value should be larger than 0.6
(Bentler and Wu, 1993).
Validity test
Convergent validity. The factor loadings (?
1“0
?
13
) of
the observable variables shown in Table 4 range from
0.76 to 0.95, which achieve significance and are higher
than the threshold, 0.45, indicating that all observable
variables can reflect the latent variables constructed.
The extracted average variances of the latent variables
are 0.78, 0.85, 0.81, 0.60 and 0.79, all of which are larger
than 0.5, indicating that the amount contributed to the
latent variables is larger for the observed variables than
for the error in measurements (Bentler and Wu, 1993).
Discriminant validity. The latent variables shown in
Table 6 have all reached the significance level, indicating
that there is a discrepancy between the model in which
the correlation between any two latent variables is set
to be 1.00 and the model in which the correlations for all
latent variables are arbitrarily estimated. This
discrepancy suggests that the correlation between latent
variables can be distinguished, i.e., the discriminant
validity is supported.
Test for overall model fit
The overall model fit is required to adopt at least the
following three fit tests (Bagozzi and Yi, 1988):
Absolute fit test:
1. GFI (Goodness of fit index)
A good fit requires the GFI to be larger than 0.90. The
theoretical model fit of the present study is 0.91,
indicating a good fit.
M. K. Chien; L. H. Shih
Dimension Average SD
Skewness
coefficient
Kurtosis
coefficient
Environmental regulations
Domestic environmental
regulations
5.69 0.90 –0.55 –0.57
Government
environmental policy
5.33 0.73 –0.09 –0.36
International
environmental agreements
5.30 0.80 –0.14 –0.15
External stakeholders
Supplier 5.90 0.64 –0.68 –0.13
Customer 5.84 0.73 –1.51 2.69
Community stakeholders 5.88 0.68 –1.12 1.32
GSCM practices
Green procurement
practices
5.69 0.84 0.01 –0.85
Green manufacturing
practices
5.08 0.67 –0.03 –1.12
Environmental
performance
Management performance 6.19 0.57 –1.19 0.78
Operational performance 6.16 0.67 –0.21 –1.20
Financial performance
Cost reduction 5.41 0.61 –0.34 –0.30
Market share growth 5.41 0.69 –0.21 –0.42
Profit increase 5.72 0.68 –0.96 0.01
Table 3: Averages, standard deviations, skewness coefficients
and kurtosis coefficients of observed variables
Table 4: Estimation of model parameters
Parameter
Unstandardized
parameter
estimate
Standard
error
t-
value
Standardized
parameter
estimate
?1 1.00 - - 0.89
?2 0.88 0.048 18.39 0.95
?3 0.93 0.053 17.54 0.93
?4 1.00 - - 0.86
?5 1.21 0.084 14.35
0.90
?6 1.12 0.078 14.37 0.90
?7 1.00 - - 0.92
?8 0.76 0.067 11.42 0.88
?9 1.00 - - 0.76
?10 1.23 0.24 5.14 0.80
?11 1.00 - - 0.85
?12 1.27 0.083 15.32 0.95
?13 1.13 0.083 13.61 0.86
?1 0.28 0.08 3.39 0.28
?2 0.39 0.12 3.22 0.27
?1 0.29 0.06 4.68 0.51
?2 0.30 0.06 5.12 0.45
?1 0.11 0.02 6.44 0.27
?2 0.10 0.02 4.95 0.19
?3 0.09 0.02 4.92 0.18
?4 0.17 0.03 6.76 0.21
?5 0.05 0.01 3.94 0.10
?6 0.09 0.02 5.33 0.14
?1 0.11 0.04 2.47 0.15
?2 0.10 0.03 3.59 0.22
?3 0.14 0.04 3.78 0.43
?4 0.17 0.06 3.03 0.37
?5 0.10 0.02 6.58 0.27
?6 0.05 0.02 2.87 0.10
?7 0.12 0.02 6.47 0.26
2. RMR (Root mean square residual)
A good fit demands the RMR to be smaller than or
equal to 0.05. The theoretical model fit is 0.046, and
thus it qualifies as a good fit.
3. RMSEA (Root mean square error of approximation)
RMSEA smaller than or equal to 0.05 is considered a
good fit and the theoretical model fit here is 0.06,
indicating that it is a good fit.
Relative fit test:
1. NNFI (Non normed fit index)
NNFI, larger than 0.9 is generally considered acceptable.
The value is 0.97 for the present theoretical model,
indicating that the present model is acceptable.
2. CFI (Comparative fit index)
CFI, larger than 0.9 is generally considered acceptable.
The CFI is 0.97 for the present theoretical model,
indicating that the present model is acceptable.
An empirical study of the implementation of green supply chain management...
390
Parsimonious fit test:
1. PNFI (Parsimony Normed Fit Index)
A PNFI larger than 0.5 is generally considered as a
good model. The value is 0.72 for the present theoretical
model, indicating that the present model is acceptable.
2. PGFI (Parsimony Goodness of Fit Index)
A PGFI larger than 0.5 is generally considered as a
good model. The value is 0.60 for the present theoretical
model, indicating that the present model is acceptable.
3. Normed Chi-Square
An index of less than 3 is considered as a good fit. The
value of the present model is 1.51, indicating a good
overall fit. Tests for overall model fit were performed in
order to understand the fit between the observed data
and the hypothesized model (Hu and Bentler, 1999).
DISCUSSION AND CONCLUSION
GSCM is a relatively new green issue for the majority
of Taiwanese corporations. From the perspective of
management, GSCM is a management strategy, taking
into account the effects of the entire supply chain on
environmental protection and economic development.
However, the feasibility of reaching the right balance
between the environmental performance and financial
performance is a serious concern for corporations
implementing GSCM. The present empirical study
investigated the GSCM practices adopted by the OEM-
and ODM-dominated electrical and electronic industry
in Taiwan in response to the EU ROHS and WEEE
directives. The pressures or drives to implement GSCM
M. K. Chien; L. H. Shih
0. 76
0. 45
0. 51
0. 27
0. 28
0. 90
0. 90
0. 86
0. 93
0. 95
0. 89
0. 26
0. 10
0. 27
0. 37
0. 43
0. 22 0. 16
0. 18
0. 27
0. 14
0. 10
0. 21
0. 19
0. 95
0. 86
0. 85
0. 80
Y7
Y6
Y5
Y4
Y3
Y2 Y1
X6
X5
X4
X3
X2
X1
0. 92
0. 88
t=3.39**
t=4.68**
t=3.22**
t=5.12**
Environment al
performance
Environment al
regulation
Financial
performance
External
stakeholders
GSCM
Practices
Dimension R
2
Construct
reliability
Average
variance
extracted
Environmental
regulations
0.91 0.78
Domestic
environmental
regulations
0.73
Government
environmental policy
0.81
International
environmental
agreements
0.82
External stakeholders 0.94 0.85
Supplier 0.79
Customers 0.90
Community
stakeholders
0.86
GSCM practices 0.89 0.81
Green procurement
practices
0.85
Green manufacturing
practices
0.78
Environmental
performance
0.75 060
Management
performance
0.57
Operational
performance
0.63
Financial performance 0.91 0.79
Cost reduction 0.73
Market share growth 0.90
Profit increase 0.74
Latent
variables
Environmental
regulations
External
stakeholders
GSCM
practices
Environmental
performance
Environmental
regulations
1.000
External
stakeholders
0.295
*
1.000
0.000
GSCM
practices
0.798
*
0.225
*
1.000
0.000 0.000
Environmental
performance
0.271
*
0.431
*
0.251
*
*
1.000
0.000 0.000 0.000
Financial
performance
0.396
*
0.399
*
0.267
*
0.265
*
0.000 0.000 0.003 0.000
Table 5: Reliability of observed variables, as well as
construct reliability and average variance extracted of
latent variables
Table 6: Convergent validity and discriminant validity
*P
This study aims to investigate the green supply chain management practices likely to be adopted by the electrical and electronic industry in Taiwan, which is dominated by Original Equipment Manufacturing and Original Designing and Manufacturing manufacturers, after the European Union implementation of the Restriction of Hazardous Substances and Waste Electrical and Electronic Equipment directives.
M. K. Chien; L. H. Shih
Received 29 March 2007; revised 8 May 2007; accepted 2 June 2007
An empirical study of the implementation of green supply chain
management practices in the electrical and electronic industry and their
relation to organizational performances
*M. K. Chien; L. H. Shih
Department of Resources Engineering, National Cheng Kung University, Tainan, Taiwan, No.1, University Road,
Tainan 701, Taiwan
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
ISSN: 1735-1472
© Summer 2007, IRSEN, CEERS, IAU
*Corresponding Author Email: [email protected]
Tel.: +886 8 8647367; Fax: +886 8 8647123
ABSTRACT: This study aims to investigate the green supply chain management practices likely to be adopted by
the electrical and electronic industry in Taiwan, which is dominated by Original Equipment Manufacturing and Original
Designing and Manufacturing manufacturers, after the European Union implementation of the Restriction of Hazardous
Substances and Waste Electrical and Electronic Equipment directives. The relationship between green supply chain
management practices and environmental performance, as well as financial performance, is studied. The approach of
the present research includes a literature review, in depth interviews and questionnaire surveys. The companies in the
electrical and electronic industry approved by the International Organization for Standardization 14001 certification in
Taiwan before December 2004 were sampled for empirical study. The data were then analyzed using statistical package
for the social sciences, and structural equation modelling was used as a path analysis model to verify the hypothetical
construction of the study. The results indicate that the original equipment manufacturing and original designing and
manufacturing manufacturers in Taiwan’s electrical and electronic industry have adopted green procurement and green
manufacturing practices in response to the current wave of international green issues and have generated favorable
environmental and financial performances for the respective companies.
Key words: Green supply chain, environmental performance, green procurement, green manufacturing
INTRODUCTION
With increasing awareness of environmental protection
worldwide, the green trend of conserving the Earth’s
resources and protecting the environment is
overwhelming, thereby exerting pressure on corporations
in Taiwan. The pressure and drive accompanying
globalization has prompted enterprises to improve their
environmental performance (Zhu and Sarkis, 2006).
Consequently, corporations have shown growing
concern for the environment over the past ten years
(Sheu, et al., 2005). The pressure on corporations to
improve their environmental performances comes from
globalization rather than localization (Sarkis and
Tamarkin, 2005). Increasing environmental concern has
gradually become part of the overall corporation culture
and, in turn, has helped to reengineer the strategies of
corporations (Madu, et al., 2002). To reduce the
environmental impact of the waste of electrical and
electronic equipment (WEEE), the EU implemented the
waste electrical and electronic equipment (WEEE)
directive in August 2005. The primary goal of the WEEE
directive is to reduce environmental damage by reusing
and recycling electrical and electronic equipment, by
which the volume of waste electrical and electronic
equipment, and thus the capacity for handling it, can be
reduced. On the other hand, the ROHS (Restriction of
Hazardous Substances) directive prohibits electrical and
electronic equipment containing lead, mercury, cadmium,
hexavalent chromium, polybrominated biphenyls (PBB)
and polybrominated diphenylethers (PBDE). Of the two
directives described above, one stresses recycling, reuse
and recovery and the other defines the restrictions on
the substances used. According to the statistics of
Taiwan customs, the total electrical and electronic
products exported from Taiwan to the rest of the world
within the scope of the WEEE directive amounted to
US$ 25.8 billion in 2005. Consequently, corporations in
Taiwan have to include the two directives into the design
and production of products and have responded by
M. K. Chien; L. H. Shih
384
adopting GSCM (green supply chain management)
practices. Green supply chain management, also known
as ESCM (environmental supply chain management)
or SSCM (sustainable supply chain management)
(Seuring, 2004), combines green purchasing, green
manufacturing/materials management, green
distribution/marketing and reverse logistics (Sarkis,
2005). The aim of corporations implementing GSCM is
to enhance environmental and financial performance;
however, the scope of GSCM practices is very wide
and includes internal environmental management,
external GSCM, investment recovery and eco-design
or design for environmental practices (Zhu and Sarkis,
2004). This study aims to investigate the GSCM
practices likely to be adopted by the electrical and
electronic industry in Taiwan, which is dominated by
OEM (original equipment manufacturing) and ODM
(original designing and manufacturing) manufacturers,
after the European Union implementation of the ROHS
and WEEE directives. The aims of the present research
are to discuss the issues that can be summarized as
follows:
1. The major external factors affecting GSCM practices
adopted by the electrical and electronic companies in
Taiwan;
2. The GSCM practices adopted by the electrical and
electronic companies in Taiwan in response to the green
issue and;
3. The relationship between the GSCM practices
adopted by the electrical and electronic companies in
Taiwan and organizational performance.
MATERIALS AND METHODS
Fig. 1 shows the research framework of GSCM
practices in the present study, in which the
relationships between environmental regulations,
external stakeholders, GSCM practices, environmental
performance and financial performance will be
discussed through a literature survey, and hypotheses
relating these variables will be developed.
Description of GSCM practices
To meet international expectations and demand for
environmental protection, some Taiwanese companies
have already implemented GSCM practices. ACER, for
example, has established a green product supply chain
management system, including green product
specification, green products compliance data, an
auditing management mechanism, and a green
procurement system (ACER, 2005). The environmental
management in TSMC covers environmental
accounting, life cycle assessment, green procurement
and reduction of greenhouse emissions. The company
has also implemented measures to ensure that no
prohibited substances as defined by the EC are present
in their products (TSMC, 2005).
Fig. 1: the research framework of GSCM practices in the present study
Financial performance
.Cost reduction
.Market share growth
.Profit increase
Environmental performance
.Management performance
. Environmental policies and
measures
. Approval rate of the management
system
. Improvement in community
relations and corporation image
.Operational performance
. Performance in using
energy/resources
. Reduction of emission
. Waste disposal
H3
H4
GSCM practices
.Green procurement practices
. Establishing a control list of
environmentally hazardous substances
. Profiles for raw materials containing no
prohibited substances
. Assessment tables for the environmental
management of suppliers
. Green product approval data
. An auditing mechanism for green
management
.Green manufacturing practices
.Green design
. Manufacturing of green products
. Recovery and reuse of used products
. Green products standards
Environmental regulations
.Domestic environmental
regulations
.Government environmental
Policy
.International environmental
agreements
External stakeholders
.Suppliers
.Customers
.Community stakeholders
H1
H2
M. K. Chien; L. H. Shih
385
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
Apart from meeting the demands of its clients, ASUS
has also taken initiatives to understand the difficulties
faced by its suppliers and provide them with necessary
information and services. ASUS also provides their
suppliers with ASUS e-Green for registration and
evaluation to ensure the capability of suppliers through
the mechanism of a part approval process. Finally, the
company has established an auditing mechanism for
the green management system to ensure that their
suppliers conform to green management, thus
establishing incentive and elimination mechanisms for
green procurement. In summary, ASUS promotes green
engineering by implementing green design, green
procurement, green production, green marketing and
green services in order to conserve natural resources.
To ensure that its export to the European market is
unhindered, TATUNG established a green supply chain
to meet the demands of its clients’ green procurement
standard and the EU ROHS directive. Consequently,
its upstream suppliers are requested to provide a
guarantee, evaluation report and inspection of
hazardous substance management, to assess the
suppliers and strengthen the existing supply chain, in
order to be able to supply its downstream clients with
products conforming to the green procurement
standard and the EU ROHS directive (TATUNG, 2005).
UMC has established a control list of environmentally
hazardous substances and profiles for raw materials
containing no prohibited substances, as well as having
developed an environmental management table to
evaluate the environmental protection performance of
its suppliers. The company has also included suppliers’
environmental information into its e-management of
suppliers and provides necessary training to relevant
personnel to enhance their awareness of environmental
protection (UMC, 2004). According to Zhu and Sakis
(2006), Li, et al. (2006) and Walton, et al. (1998), the
green supply chain practices adopted by companies in
Taiwan in response to green issues and experts’
opinions can be divided into green procurement
practices, including establishing a control list of
environmentally hazardous substances, profiles for raw
materials containing no prohibited substances,
assessment tables for the environmental management
of suppliers, green product approval data, and an
auditing mechanism for green management, and green
manufacturing practices, which include green design,
manufacturing of green products, recovery and reuse
of used products and green products standards.
Green procurement
Purchasers can improve the environmental
performance of products and services by expressing
environmental preferences through so called “green
procurement” (Faith-Ell, et al., 2006). Carter, et al. (1998)
defined environmental purchasing as consisting of
purchasing involvement in activities that include the
reduction, reuse and recycling of materials. The
procurement or purchasing decisions will have an
impact on the green supply chain through the purchase
of materials that are either recyclable or reusable, or
have already been recycled (Sarkis, 2003).
Green manufacturing
Pursuing the green manufacturing of products is
very beneficial in the alleviation of environmental
burdens. Green manufacturing is a manufacturing mode
designed to minimize the environmental impact in the
manufacturing processes of products (Tan, et al., 2002),
and the adoption of green manufacturing helps to
reduce waste and pollution (Hui, et al., 2001).
Environmentally responsible manufacturing processes,
GSCM practices, and their many related principles have
become important strategies for companies to achieve
profit and increase market share objectives by lowering
their environmental impact and enhancing efficiency
(Zhu and Sakis, 2006).
Research hypothesis
External factors affecting GSCM practices:
The drives or pressures upon companies to
implement GSCM include regulations, marketing,
suppliers, competitors and internal factors (Zhu and
Sarkis, 2006). The pressure of environmental protection
does not come solely from the demands of regulations;
consumers and clients also exert pressure on companies
(Hall, 2000). Standards, regulations and competition
have together prompted organizations to become more
aware of any consequences for the environment
(Sarkis, 1998). On the other hand, the regulatory,
organizational, community and media stakeholders
have prompted companies to conduct environmental
management (Henriques and Sadorsky, 1996).
Environmental regulations and external stakeholders
are considered the major factors affecting GSCM
practices according to Zhu and Sarkis (2006), Hall (2000),
Sarkis (1998) and other experts.
Environmental regulations
Traditionally, system theory stresses the effects of
M. K. Chien; L. H. Shih
386
An empirical study of the implementation of green supply chain management...
external systems on the decisions and behavior of an
organization; external systems include regulations, the
law, professional standards, interest organization and
social belief (Oliver, 1991). System theory also
characterizes the effects of external pressure on
organizational structure (Meyer, et al., 1987).
Environmental regulations is considered to include
domestic environmental regulations, government
environmental policies and international environmental
agreements according to Zhu and Sarkis (2006), Hall
(2000), Sarkis (1998) and other experts.
Domestic environmental regulations
Domestic environmental regulations prompt
companies to adopt relevant strategies and practices
to enhance their environmental performance. Domestic
regulations and corporations’ environmental missions
are the two main sources of pressure (Zhu and Sakis,
2006). Furthermore, the major drive for corporation
environmental awareness is increasing the role of
government regulations (Handfield, et al., 1997).
Government environmental policy
The public’s increasing environmental conscience,
the statutory requirements due to government policies
and regulations, and pressure from organized groups
are traditionally considered to be the factors that sway
companies towards adopting a green manufacturing
or environmental management system policy (Hui, et
al., 2001). Environmental policy targeted directly at
emissions will still typically provide the most important
single element of a cost-effective environmental policy
strategy (Jaffe, 2005).
International environmental agreements
Although domestic environmental regulations
seem to have a greater and more immediate effect on
eco-design than the type of economic policy incentive
currently associated with WEEE (Gottberg, et al.,
2006), many companies and the government are also
being influenced by international environmental
agreements, such as the Kyoto agreement, the Climate
Change Treaty and the Montreal Protocol (EIC, 2005).
The EU WEEE directive attempts to tackle the growing
quantity of WEEE by making producers responsible
for the costs of the collection and recycling of their
products at the end of usable life (Gottberg, et al.,
2006). Based on the above arguments, a hypothesis
can be made as follows:
Hypothesis 1: Environmental regulations have a
positive relationship with GSCM practices
External stakeholders
Stakeholder theory did not enter the domain of
business management until Freeman published his
book, Strategic management: A stakeholder approach,
in 1984. Stakeholders, in the wider definition, include
any group or individual who can affect or is affected
by the corporation (Greenwood, 2001). External
stakeholders affecting GSCM include customers,
suppliers, the community, regulators and non-
governmental organizations (Hervani, et al., 2005).
According to Hervani, et al. (2005), Henriques and
Sadorsky (1996) and Hall (2000), as well as other experts,
major external stakeholders of GSCM practices are
considered to include suppliers, customers and
community stakeholders.
Suppliers
Suppliers contribute to the overall performance of a
supply chain, and poor supplier performance affects the
performance of the whole chain (Sarkar and Mohapatra,
2006). Supplier–manufacturer relationships are
considered important in developing a sustainable
competitive advantage for the manufacturer (Sheth and
Sharma, 1997; Cannon and Homburg, 2001). Screening
of suppliers for environmental performance has now
become a key deciding factor in many organizations
(Clark, 1999).
Customers
Customer demands have now become the most
important type of external pressure (Doonan, et al., 2005).
To obtain more sustainable solutions, the environmental
properties of products and services must meet customer
requirements (Zhu and Sarkis, 2006). In the U.S.A., an
estimated 75% of consumers claim that their purchasing
decisions are influenced by a company’s environmental
reputation, and 80% would be willing to pay more for
environmentally friendly goods (Lamming and Hampson,
1996). Consequently, the influence of the natural
environment organizational decisions not only affects
the organization that makes the decision, but also its
customers and suppliers (Sarkis, 2003).
Community stakeholders
Community stakeholders are defined as people who
are not necessarily involved in the partnership formation
M. K. Chien; L. H. Shih
387
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
but who have knowledge of the community and the
organization (Nelson, et al., 1999). If health impacts and
sustainable solutions are to be identified with
confidence, it is essential that community perspectives
are adequately represented and that they influence
decision-making (Kearney, 2004). It has been shown that
community stakeholders have the ability to influence
society’s perception of a firm (Henriques and Sadorsky,
1996). Based on the literature review by Greenwood et
al., the researcher’s hypothesis is as follows:
Hypothesis 2: External stakeholders have a positive
relationship with GSCM practices.
Organizational performance
Performance is a measure for assessing the degree
of a corporation’s objective attainment (Daft, 1995).
Corporations adopting GSCM practices may generate
environmental and business performances (Walton, et
al., 1998; Zhu and Cote, 2004). A green supply chain, for
example, can improve environmental performance
(reducing waste and emissions as well as increasing
environmental commitment) and competitiveness
(improving product quality, increasing efficiency,
enhancing productivity and cutting cost), thereby
further affecting economic performance (new marketing
opportunities and increasing product price, profit margin,
market share and sale volume; Purba, 2002). According
to Walton, et al. (1998), Zhu and Cote (2004) and Purba
(2002), as well as other experts, organizational
performance is considered to include environmental and
financial performance.
Environmental performance
Environmental performance is defined as the
environmental impact that the corporation’s activity has
on the natural milieu (Sharma and Vredenburg, 1998).
Environmental performance indicators consists of OPI
(operative performance indicators) and MPI
(management performance indicators): OPI are related
mainly to materials’ consumption, energy management,
waste and emission production, and evaluation of real
environmental aspects of organizations, whereas MPI
mainly concerns the administration’s efforts, measures,
and contribution to the overall organization’s
environmental management (Papadopoulos and Giama,
2007). GSCM stresses more than just improving
environmental performance; the implementation of green
supply chain management can ensure that the
corporation itself and its suppliers conform to
environmental regulations. Effective management of
suppliers can reduce transaction costs and promote
recycling and reuse of raw materials. Also, the production
of waste and hazardous substances can be cut,
preventing corporations from being fined as a result of
violating environmental regulations. Consequently, the
relevant handling and operational cost involved can be
further reduced and, in the mean time, the efficiency of
using resources can be enhanced (Sarkis, 2003).
Furthermore, adopting a sustainable approach can
produce less waste and use more recycled material,
thereby using energy, water and by-products in a more
efficient way (Tsoulfas and Pappis, 2006). Following the
above discussions, the present study considers
environmental performance to include two dimensions:
management performance (environmental policies and
measures, the approval rate of the management system,
and the improvement in community relations and
corporation image) and operational performance (the
performance in using energy/resources, the reduction
of emission, and waste disposal). After the above
analyses, the researcher makes the following
hypothesis:
Hypothesis 3: GSCM practices have a positive
relationship with environmental performance.
Financial performance
Environmental protection activities can have a
positive effect on a corporation’s financial performance.
GSCM can cut the cost of materials purchasing and
energy consumption, reduce the cost of waste treatment
and discharge, and avoid a fine in the case of
environmental accidents (Zhu and Sarkis, 2004). A
sustainable approach can lead to internal cost saving,
open new markets and find beneficial uses for waste
(Tsoulfas and Pappis, 2006). Environmental
munificence has a positive effect on financial
performance (for example, growth in profits, sales and
market share) (Fuentes-Fuentes, et al., 2004). Financial
performance is defined here as cost reduction, market
share growth and profit increase. To analyze the
research done by Zhu and Sarkis et al., the researcher
issues a hypothesis:
Hypothesis 4: GSCM practices have a positive
relationship with financial performance.
M. K. Chien; L. H. Shih
388
Samples and analytical methods
A questionnaire survey was sent to those electrical
and electronic companies in Taiwan listed in the top
1000 manufacturers compiled by the Common Wealth
magazine, as well as those that were ISO (International
Organization for Standardization) 14001 certified before
the end of December 2004. The research questionnaires
were sent by mail to the electrical and electronic
companies in Taiwan, located in Hsinchu Science Park,
Central Science Park, Southern Taiwan Science Park,
and Export Processing Zone, which include the
northern, central and southern parts of Taiwan on
December 16
th.
, 2005. The finished questionnaires were
received on February 2
nd.
, 2006. Five hundred copies of
the questionnaire were sent out, with 151 valid and 20
invalid copies received back, as well as 18 returned
empty; hence, the valid response rate was over 30%.
These companies were chosen because the EU WEEE
and RoHS directives have had the most profound effect
on the electrical and electronic companies in Taiwan.
The software SPSS and LISREL (Linear Structural
Relations) were employed to analyze and assess the
hypotheses proposed here.
Tools and parameters
After surveying Sarkis (1998), Sarkis (2001), Purba
(2002), Zhu and Cote (2003), Zhu and Sarkis (2004) and
Brent and Visser (2005), the environmental performance
assessment in the ISO environmental management
system, as well as comments from experts and academics
in the electrical and electronic industry in Taiwan, a
questionnaire, “The relationship between green supply
chain management practices and organizational
performances,” was created as the tool of the present
study. The items in the questionnaire were then taken as
research variables according to the conceptual model of
the study. The operational definitions of the research
variables are shown in Table 1. According to the
methodology of structural equation modeling, the
variables of the present research are described as follows:
Table 1: The operational definitions of the research variables
Variable Operational definition Reference
GSCM practices
Enterprises adopting green manufacturing, green
procurement and other green measures to work with
suppliers to improve products or manufacturing processes
and increase the performance of suppliers and clients.
Sarkis (2001), Zhu and Cote
(2003), Zhu and Sarkis (2004)
Environmental regulations
Environmental regulations and policies as well as
international agreements prompting organizations to
become conscious of the environment.
Sarkis (1998), Sarkis (2003), Brent
and Visser (2005), Papadopoulos
and Giama (2007)
External stakeholders
Any group or individual capable of prompting organizations
to be conscious of the environment, including suppliers,
customers and community stakeholders.
Greenwood (2001), Hervani et al.
(2005)
Environmental
performance
The attainment of an organization’s objectives on
environmental management performance and operational
performance in corporate management.
Sharma and Vredenburg (1998),
Sarkis (2003), Tsoulfas and Pappis
(2006)
Financial performance
The attainment of financial or economic objectives in an
enterprise’s activities.
Purba (2002), Zuu and Sarkis
(2003), Fuentes-Fuentes et al.
(2004)
Exogenous variables
There are two exogenous latent variables in the present
study: environmental regulations and external
stakeholders. The exogenous latent variables of
environmental regulations are reflected in domestic
environmental regulations, government policies on
environmental protection and international environmental
agreements. On the other hand, the exogenous latent
variables of external stakeholders are reflected in suppliers,
customers and community stakeholders.
Endogenous variables
The endogenous latent variables in the present study
are divided into interpretative variables and outcome
variables for the final outcome according to the cause–
effect relation. Interpretative variables adopted in green
supply chain management practices are reflected in two
observed variables, green procurement practices and
green manufacturing practices. Outcome variables include
environmental and financial performance. Environmental
performance is reflected in two observable variables,
environmental management performance and environmental
operation performance, whereas financial performance is
reflected in three observable variables, namely cost
reduction, market share growth and profit increase.
Joint variables
In the present study, a seven-point scale was used
in all questions: 7 for strongly agree, 6 for agree, 5 for
M. K. Chien; L. H. Shih
Basic
information
Item Number Percentage
Sex Male 132 88.0
Female 18 12.0
Age Under 30 14 9.3
31–40 38 25.3
41–50 61 40.7
Over 50 37 24.7
Education Graduate school 18 12.0
University 79 52.7
College 53 35.3
Title General manager 1 0.6
(Assistant) manager 38 25.3
(Assistant)
section head
41 27.3
Environmental
safety officer
42 28
Other 28 18.7
Int. J. Environ. Sci. Tech., 4 (3): 383-394, 2007
389
partially agree, 4 for not applicable, 3 for partially
disagree, 2 for disagree, 1 for strongly disagree. The
point for every joint variable was obtained by dividing
the total points by the number of questions.
RESULTS
Basic data analysis
The basic data of the respondents answering the
questionnaire were first analyzed, by gender, age,
education and title; the results are shown in Table 2.
Males account for 88% of all respondents, mainly
between 41 to 50 years old. Educational backgrounds
are largely university and above (64.7%). The titles of
the respondents are mostly (assistant) section chief
and executive officer in the environmental safety
departments, accounting for 65% of all respondents.
Choice of assessment method
ML (maximum likelihood) of SEM is heavily
influenced by variable distribution properties. If the
absolute of the skewness coefficient of a variable is
larger than 3, this will be considered as extreme
skewness; on the other hand, if the absolute value of
the kurtosis coefficient is larger than 10, the variable
will be considered questionable, and if it is larger than
20, the variable will be regarded as of extreme kurtosis
(Kline, 1998). From Table 3, it can be seen that the
skewness of the present study ranges between –1.51
and 0.01, with its absolute value less than 3, and the
kurtosis ranges from –1.20 to 2.69 with its absolute
value less than 10. The results indicate that the
skewness and kurtosis of the observable variables are
small; consequently, ML can be used to evaluate the
model of the present study.
Table 2: Analysis of basic data of interviewees
Offending estimate
In the evaluation of model variables, there is unlikely
to be a negative error variance or a very large standard
error, and the standardized coefficient cannot be larger
than 0.95 (Bagozzi and Yi, 1988). As can be seen from
Table 4, all error variances are positive; standard errors
are small, ranging from 0.01 to 0.24, and standardized
coefficients range from 0.50 to 0.95, which is less than
0.95 and lies below the significance level, suggesting
that the effect of offending estimate was absent.
Reliability test
As can be seen from Table 5, the 13 observable
variables’ R
2
are between 0.57 and 0.90, conforming to
the recommendation that the confidence R
2
of an
individual observable variable should be larger than
0.50. Also, the construct reliability of the five latent
variables is between 0.75 and 0.94, complying with the
requirement that the value should be larger than 0.6
(Bentler and Wu, 1993).
Validity test
Convergent validity. The factor loadings (?
1“0
?
13
) of
the observable variables shown in Table 4 range from
0.76 to 0.95, which achieve significance and are higher
than the threshold, 0.45, indicating that all observable
variables can reflect the latent variables constructed.
The extracted average variances of the latent variables
are 0.78, 0.85, 0.81, 0.60 and 0.79, all of which are larger
than 0.5, indicating that the amount contributed to the
latent variables is larger for the observed variables than
for the error in measurements (Bentler and Wu, 1993).
Discriminant validity. The latent variables shown in
Table 6 have all reached the significance level, indicating
that there is a discrepancy between the model in which
the correlation between any two latent variables is set
to be 1.00 and the model in which the correlations for all
latent variables are arbitrarily estimated. This
discrepancy suggests that the correlation between latent
variables can be distinguished, i.e., the discriminant
validity is supported.
Test for overall model fit
The overall model fit is required to adopt at least the
following three fit tests (Bagozzi and Yi, 1988):
Absolute fit test:
1. GFI (Goodness of fit index)
A good fit requires the GFI to be larger than 0.90. The
theoretical model fit of the present study is 0.91,
indicating a good fit.
M. K. Chien; L. H. Shih
Dimension Average SD
Skewness
coefficient
Kurtosis
coefficient
Environmental regulations
Domestic environmental
regulations
5.69 0.90 –0.55 –0.57
Government
environmental policy
5.33 0.73 –0.09 –0.36
International
environmental agreements
5.30 0.80 –0.14 –0.15
External stakeholders
Supplier 5.90 0.64 –0.68 –0.13
Customer 5.84 0.73 –1.51 2.69
Community stakeholders 5.88 0.68 –1.12 1.32
GSCM practices
Green procurement
practices
5.69 0.84 0.01 –0.85
Green manufacturing
practices
5.08 0.67 –0.03 –1.12
Environmental
performance
Management performance 6.19 0.57 –1.19 0.78
Operational performance 6.16 0.67 –0.21 –1.20
Financial performance
Cost reduction 5.41 0.61 –0.34 –0.30
Market share growth 5.41 0.69 –0.21 –0.42
Profit increase 5.72 0.68 –0.96 0.01
Table 3: Averages, standard deviations, skewness coefficients
and kurtosis coefficients of observed variables
Table 4: Estimation of model parameters
Parameter
Unstandardized
parameter
estimate
Standard
error
t-
value
Standardized
parameter
estimate
?1 1.00 - - 0.89
?2 0.88 0.048 18.39 0.95
?3 0.93 0.053 17.54 0.93
?4 1.00 - - 0.86
?5 1.21 0.084 14.35
0.90
?6 1.12 0.078 14.37 0.90
?7 1.00 - - 0.92
?8 0.76 0.067 11.42 0.88
?9 1.00 - - 0.76
?10 1.23 0.24 5.14 0.80
?11 1.00 - - 0.85
?12 1.27 0.083 15.32 0.95
?13 1.13 0.083 13.61 0.86
?1 0.28 0.08 3.39 0.28
?2 0.39 0.12 3.22 0.27
?1 0.29 0.06 4.68 0.51
?2 0.30 0.06 5.12 0.45
?1 0.11 0.02 6.44 0.27
?2 0.10 0.02 4.95 0.19
?3 0.09 0.02 4.92 0.18
?4 0.17 0.03 6.76 0.21
?5 0.05 0.01 3.94 0.10
?6 0.09 0.02 5.33 0.14
?1 0.11 0.04 2.47 0.15
?2 0.10 0.03 3.59 0.22
?3 0.14 0.04 3.78 0.43
?4 0.17 0.06 3.03 0.37
?5 0.10 0.02 6.58 0.27
?6 0.05 0.02 2.87 0.10
?7 0.12 0.02 6.47 0.26
2. RMR (Root mean square residual)
A good fit demands the RMR to be smaller than or
equal to 0.05. The theoretical model fit is 0.046, and
thus it qualifies as a good fit.
3. RMSEA (Root mean square error of approximation)
RMSEA smaller than or equal to 0.05 is considered a
good fit and the theoretical model fit here is 0.06,
indicating that it is a good fit.
Relative fit test:
1. NNFI (Non normed fit index)
NNFI, larger than 0.9 is generally considered acceptable.
The value is 0.97 for the present theoretical model,
indicating that the present model is acceptable.
2. CFI (Comparative fit index)
CFI, larger than 0.9 is generally considered acceptable.
The CFI is 0.97 for the present theoretical model,
indicating that the present model is acceptable.
An empirical study of the implementation of green supply chain management...
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Parsimonious fit test:
1. PNFI (Parsimony Normed Fit Index)
A PNFI larger than 0.5 is generally considered as a
good model. The value is 0.72 for the present theoretical
model, indicating that the present model is acceptable.
2. PGFI (Parsimony Goodness of Fit Index)
A PGFI larger than 0.5 is generally considered as a
good model. The value is 0.60 for the present theoretical
model, indicating that the present model is acceptable.
3. Normed Chi-Square
An index of less than 3 is considered as a good fit. The
value of the present model is 1.51, indicating a good
overall fit. Tests for overall model fit were performed in
order to understand the fit between the observed data
and the hypothesized model (Hu and Bentler, 1999).
DISCUSSION AND CONCLUSION
GSCM is a relatively new green issue for the majority
of Taiwanese corporations. From the perspective of
management, GSCM is a management strategy, taking
into account the effects of the entire supply chain on
environmental protection and economic development.
However, the feasibility of reaching the right balance
between the environmental performance and financial
performance is a serious concern for corporations
implementing GSCM. The present empirical study
investigated the GSCM practices adopted by the OEM-
and ODM-dominated electrical and electronic industry
in Taiwan in response to the EU ROHS and WEEE
directives. The pressures or drives to implement GSCM
M. K. Chien; L. H. Shih
0. 76
0. 45
0. 51
0. 27
0. 28
0. 90
0. 90
0. 86
0. 93
0. 95
0. 89
0. 26
0. 10
0. 27
0. 37
0. 43
0. 22 0. 16
0. 18
0. 27
0. 14
0. 10
0. 21
0. 19
0. 95
0. 86
0. 85
0. 80
Y7
Y6
Y5
Y4
Y3
Y2 Y1
X6
X5
X4
X3
X2
X1
0. 92
0. 88
t=3.39**
t=4.68**
t=3.22**
t=5.12**
Environment al
performance
Environment al
regulation
Financial
performance
External
stakeholders
GSCM
Practices
Dimension R
2
Construct
reliability
Average
variance
extracted
Environmental
regulations
0.91 0.78
Domestic
environmental
regulations
0.73
Government
environmental policy
0.81
International
environmental
agreements
0.82
External stakeholders 0.94 0.85
Supplier 0.79
Customers 0.90
Community
stakeholders
0.86
GSCM practices 0.89 0.81
Green procurement
practices
0.85
Green manufacturing
practices
0.78
Environmental
performance
0.75 060
Management
performance
0.57
Operational
performance
0.63
Financial performance 0.91 0.79
Cost reduction 0.73
Market share growth 0.90
Profit increase 0.74
Latent
variables
Environmental
regulations
External
stakeholders
GSCM
practices
Environmental
performance
Environmental
regulations
1.000
External
stakeholders
0.295
*
1.000
0.000
GSCM
practices
0.798
*
0.225
*
1.000
0.000 0.000
Environmental
performance
0.271
*
0.431
*
0.251
*
*
1.000
0.000 0.000 0.000
Financial
performance
0.396
*
0.399
*
0.267
*
0.265
*
0.000 0.000 0.003 0.000
Table 5: Reliability of observed variables, as well as
construct reliability and average variance extracted of
latent variables
Table 6: Convergent validity and discriminant validity
*P