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Interorganizational Antecedents And Determinants Of Environmental Purchasing: An International Comparison

Author(s):

Craig R. Carter, Ph.D.
Craig R. Carter, Ph.D., Assistant Professor, University of Wisconsin, Eau Claire, WI 54702-4004, 715/836-3207

82nd Annual International Conference Proceedings - 1997 

Environmental purchasing consists of purchasing's involvement in activities that include recycling and reuse of materials. Despite the potentially important role that the purchasing function can play in a firm's environmental activities, virtually no research has been performed to date which examines the factors that impact environmental purchasing. A large-scale survey is conducted which examines the external (interorganizational) factors that drive and constrain environmental purchasing, and compares the environmental purchasing activities of American and German managers.

Environmental issues are becoming increasingly important to American firms. For example in 1993, companies in the U.S. spent $124 billion complying with a raft of environmental regulations. In that same year, the market for environmentally friendly products grew to over $200 billion. And, in a recent study by Monczka and Trent, purchasing managers' second highest rated future concern was the impact of environmental regulation on purchasing activities.

The purpose of this study was to identify the forces from outside of the organization (i.e. regulations, suppliers, external customers, etc.) that are driving and constraining environmental purchasing. Environmental purchasing consists of purchasing's involvement in activities that result in recycling, reuse, and resource reduction. This includes purchasing recycled materials, buying packaging that is of lighter weight, buying reusable containers, and asking suppliers to commit to waste reduction goals.

Most of the prior research that has examined environmental purchasing was based on anecdotal evidence or at best, a relatively limited number of case studies. This literature indicated that the primary external driver of environmental purchasing was government regulation. In addition, the literature suggested that downstream members of the supply chain, including retailers and consumers, should be a significant driver. Finally, competitors and suppliers were also identified as potential external forces which could impact environmental purchasing.

The reviewed literature also suggested that there were two external factors that could act as constraints to environmental purchasing if not present. The first is an adequate level of quality of environmentally friendly inputs. Environmentally friendly inputs are defined as purchased materials and inputs which facilitate either resource reduction, reuse, or recycling activities. The second factor was an adequate level of coordination between buyers and suppliers of environmentally friendly inputs. The literature indicated that environmental purchasing activities could be hampered without sufficient communication and cooperation with suppliers.

Finally, the reviewed literature suggested that European firms in general and German firms in particular should be involved in environmental purchasing activities to a significantly greater extent than their American counterparts. However, no empirical test of this assertion had ever been made.

Large scale surveys of 1) American and 2) German purchasing managers were conducted to empirically determine which of the above factors drive and constrain environmental purchasing. The American sampling frame was analyzed to investigate the drivers and constraints of environmental purchasing. The statistical analyses of the data provided by survey respondents lead to some interesting insights.

A surprising finding was that regulation was not found to be a key driver of environmental purchasing. Instead, downstream channel members and consumers were identified as being the primary interorganizational impetus to environmental purchasing. One possible explanation for this finding is that many of the regulations are being applied uniformly to companies, and serve as a base level or hurdle that companies must meet, rather than explaining significant variation in levels of environmental purchasing above and beyond the minimum level of compliance.

Another possibility is that in some cases, regulations may even hinder environmental purchasing. For example, one respondent commented, "The FDA has not given approval for recycled materials to be in contact with food products. Therefore, virgin materials are required for all food contact."

These findings suggest that purchasing managers will need to have an increased awareness of consumers, retailers, and other downstream channel members such as distributors. The firms should not focus entirely on lobbying efforts and working with government agencies to establish regulations. Instead, attention should also be directed towards the output sector in terms of increasing public relations and green marketing activities and establishing closer relations with retailers and distributors.

The strong influence of the output sector on environmental purchasing also suggests the need for increased coordination within the firm, between purchasing and materials managers on the inbound side, and distribution and marketing managers on the outbound side. When implementing environmental purchasing activities, firms must take a value-chain perspective where, at the minimum, the purchasing department coordinates closely with marketing, in order to better assess the forces that are being exerted by downstream members of the supply chain and to work more closely with these groups.

The quality of environmentally friendly inputs and the level of coordination between buyers and suppliers of these inputs were posited to act as constraints to environmental purchasing. The statistical analysis showed a lack of coordination was indeed determined to be a significant constraint to environmental purchasing activities. The survey questions that defined vertical coordination fell along a continuum of possible buyer-supplier relationships that included long- terms contracts and partnerships. This finding suggests that purchasing managers need to form closer relationships with suppliers of environmentally friendly materials in order to assure a certain supply, and in order to perform more progressive environmental activities such as design for disassembly.

The statistical results suggest that in combination with the other factors, quality does not have a significant impact on the level of environmental purchasing activities. An examination of the mean values of the four survey questions used to measure quality (Table 1) confirms this idea. All four of the means are above 3.0, indicating that at least a moderate level and consistency of quality exists for environmentally friendly inputs. If in fact acceptable levels of environmentally friendly products already exist, then poor quality should not act as a constraint. Instead, it would then be the other factors that were examined that are driving and constraining environmental purchasing.

Table 1: Mean Values for the Quality Construct

Variable
Mean
Standard Deviation
Environmentally friendly products conform to standards at least as well as standard products
3.26
0.82
Environmentally friendly products that we purchase are less durable than alternative, standard products (a)
3.27
0.83
The quality level of environmentally friendly products is lower that those of standard products (a)
3.28
0.82
The quality of environmentally friendly products is sometimes less than what we expected (a)
3.02
0.84

Note: The Quality questions were measured on a 5 point Likert scale, where 1=Strongly Agree and 5=Strongly Disagree (a) These items were reverse coded


Finally, the data from the American and German samples were statistically compared to determine whether and where significant differences existed. A multivariate t-test indicated that a significantly higher overall level of environmental purchasing activities exists in German versus American companies. In addition to the overall level of environmental purchasing activities, individual activities were also examined.

Table 2 shows the group means for each of the survey questions that were used to assess environmental purchasing. The results shown in the table indicate that significant differences exist for each of the environmental purchasing activities, with the exception of the lightweighting of packaging.

One possible explanation for the insignificant difference between American and German firms on this activity is that the lightweighting of packaging in Germany has reached a point where the marginal costs of further decreasing the amount of packaging approximate the marginal benefits. As a result, purchasing managers in Germany began to focus on other environmental purchasing activities, where greater benefit could be derived.

Another possible explanation is that package lightweighting might be one of the easiest and most obvious activities to focus on. If this is the case, then most American purchasing managers began their environmental activities by purchasing lighter weight packaging and are either still concentrating on this activity, or are just beginning to emphasize other environmental purchasing activities. The fact that the mean value of package lightweighting for American firms (3.06) is higher than the means of any of the other environmental purchasing activities lends credence to this idea.

In conclusion, the primary driver of environmental purchasing activities appears to be pressures from retailers and consumers, while government regulations probably only assure a base level of activity associated with compliance. While the quality of environmentally friendly materials could act as a constraint to environmental purchasing, the quality level of these materials (on average) appears to be sufficient such that they are not constraining environmental purchasing activities. A lack of sufficient coordination with suppliers of environmentally friendly inputs can act as a constrain, however. Thus, buyers may need to form closer relations with these suppliers, by establishing partnerships and enlisting the help of suppliers during the design stage of environmentally friendly products.

Finally, with the exception of the light weighting of packaging, German firms are far more involved in environmental purchasing than their American counterparts. Future research should examine the factors that are driving the higher levels of environmental purchasing that are present in Germany. Future research is also needed to examine the internal, company-specific factors that are influencing environmental purchasing, such as the presence of top management support and adequate employee reward and incentive systems.

Table 2: Results of International Comparison of Environmental Purchasing Levels

Currently, our department...
Mean:
German Firms
Mean:
American Firms
Univariate F Ratio
Significance
Purchases recycled packaging
3.56
2.88
38.53
p<.0001
Purchases packaging that is of lighter weight
3.20
3.06
1.35
p=.2458
Uses a life cycle analysis to evaluate the environmental friendliness of products and packaging
2.44
1.85
28.93
p<.0001
Participates in the design of products for disassembly
2.76
1.86
52.61
p<.0001
Asks suppliers to commit to waste reduction goals
3.38
2.19
102.86
p<.0001
Participates in the design of products for recycling or reuse
2.73
2.09
28.63
p<.0001

Note: The Environmental Purchasing questions were measured on a 5 point Likert scale where 1=To No Extent and 5=To a Very Great Extent. The Wilks Lambda value for the overall difference in means was .7896 (p<.0001).


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