DRIVERS FOR GREEN PRACTICES AMONG MANUFACTURERS

IN MALAYSIA: ANALYSIS BETWEEN SMEs AND LEs

Azmawani Abd Rahman1, Khairul Anuar Rusli2, and Jo Ann Ho3

1,3

Faculty of Economics & Management,

Universiti Putra Malaysia (UPM),
Serdang, 43400 Selangor, Malaysia.
Phone:03-89467733
Fax:03-89486188
azar@.upm.edu.my

National Centre of Excellent for Sensor echnology (NEST)

Universiti Putra Malaysia (UPM),
Serdang, 43400 Selangor, Malaysia.
Phone:03-89466461
Fax:03-89486188
anuarusli85@gmail.com
ABSTRACT

Many previous researches reported that environmental

management is commonly adopted by large and
established corporation whom takes green approach as
preference, rather than compliance. This paper focuses
on the influence of firms size (between SMEs and
LEs) on drivers for green practices amongst SME.
Case studies analyses were conducted on 2 SMEs and
2 LEs. Results indicate drivers for green initiative for
SMEs are not different from LEs. The demand to
adopt green initiative may due to the nature of industry
and the product produce which relates to the
requirement by their consumers and the law
enforcement by the government. Firms including the
SMEs can go beyond complying as they see benefits
in terms of economic returns due to possible reduction
* Corresponding Author
1

in
operational
cost
and
improvement
in
competitiveness. The finding from this study is
hopefully able to provide insight for the policy makers
in policy setting towards encouraging more firms to
adopt Green practices.
Keyword: Green Operations, Drivers, Environment, SMEs, Malaysia
Introduction
Environmental issues get the global attention due to increasing
environmental damages like global warming, environmental degradation
and ozone depletion. Globally, various efforts have been done between
countries through various cooperation and agreements to address these
issues. Signatories or parties that joined and ratified the international
agreement towards environmental responsibility will generally adopt them
as local laws, regulations and directives. This has indirectly affect business
operations in terms of complying with the green requirement. Therefore,
sooner or later, firms that have adopted the green supply chain into their
business operations will have an added advantage in comparison to the firms
that are not.
Apart from becoming the political agenda, environmental concern
has become a socio-demographic factor that affect consumer spending
pattern, as they are increasingly aware of the environmental issues.
According to Wisner et al. (2005), customers are increasingly demanding to
know where the products come from, how they are made and distributed,
and what impacts future legislation will have on the products they buy.
Therefore many big corporations nowadays, especially in western world,
have taken initiative to involve in the social and environmental
responsibility along the supply chain of their business. Apart from
complying with the local regulation, it is done voluntarily as an effort to
portray good corporate images, which indirectly enables firms to gain wider
market share.
In order to remain competitive and sustainable in the dynamic
business world today, firms must be aware and responsive to the
environmental issues. Greening the operations have been seen as means to
response to the environmental awareness issues from the perspective of the
practitioner. Green operations along the supply chain management are a
method to design and/or redesign the supply chain which incorporates
recycling and re manufacturing into the production process. This involves
the minimization of a firms total environment impact from the start to the
finish of a supply chain, and also from the beginning to the end of the
product lifecycle (Beamon , 1999). Therefore, a lot of multinational
companies have been making tremendous advances in the environmentally
2

friendly manufacturing. As such, this issue is seen to continue to be an

important research agenda amongst the practitioners and researchers.
Going Green in Malaysia
Green policies and guidelines have been adopted by governments of
developed countries to enhance the realization of sustainable production and
consumption within their own society and at the global level. Majority of
firms in these developed countries have also taken the same approach at the
institutional level thus making green supply chain a concrete reality with
significant impact on trade. Despite the importance of these issues, most of
the studies have been conducted in Western countries, but less is understood
under Malaysian scenario. Understanding green supply chain within the
context of manufacturers in Malaysia is very important as the underlying
values of Malaysian culture need to be considered when adopting western
strategies or any management principles (Zabid, 2004). Values of certain
countries play a significant role in determining and practicing the workforce
culture and influencing the managerial practices (Abdullah, 1992), such as
in green supply chain practices.
Developing country like Malaysia faced great challenges in
ensuring a balance between development and environmental sustainability.
For many organization in this region it is a way to demonstrate their sincere
commitment to sustainability (Bacallan, 2000). Malaysia is one of the most
industrially developed country in the region. Many Malaysian firms
however have yet to grasp the full impact of the environmental emphasis in
the export market. The process can only be done when firms really
understand the main principles, and the compliance of the green initiatives
that happen in the current market. Without this understanding, the
preference for environmentally-sound goods and services may be perceived
more as a barrier for them to compete with firms from other countries.
Pressures and Drivers of Greener operations amongst SMEs in
Malaysia
Small and Medium enterprises (SMEs) are considered the lifeblood
of modern economies. The role of SMEs in supporting the activities of
larger companies in countries like Korea, Japan and Taiwan has successfully
propelled these countries into industrialization. This has made Malaysia
realize that, especially after the economic slowdown during the mid-1980s,
there is a need to promote the growth of these industries (Yusuff et al.,
2005). SMEs were the most affected during the economic downturn, as most
of them had no capacity and capability to deal with a crisis of that
magnitude. In addition, the lack of proper research conducted on these

companies makes it difficult for government to understand the difficulties

they face (The-Star, March 27, 2009).
The Malaysian government, through Small and Medium (SME)
Corporation has provided various incentives to help SMEs prosper in
business. From the grants to assist business start-ups, grants for product and
process improvement, to the funding related to environmental impact such
as Green Technology Fund. While policies have contributed to the
expansion of SMEs, they still have to face a number of difficulties in their
development. For example, their small size may constraint them form
achieving economies of scale and adoption of organizational functions like
training, market intelligence, logistic and technology. Competition that
relates more to innovation and upgrades than price require improvements to
products, processes, technologies, and production, exert great pressure on
SMEs as they usually lack the resources to meet these needs effectively.
As such, with the increasing concerns about environmental issues
and sustainability for industries, whether SMEs can survive and prosper
under such pressure remains an interesting topic to explore theoretically and
practically. As such, this paper will discuss the current pressures and drivers
of GSCM among SMEs manufacturers in Malaysia. The literature suggests
that different types of drivers have different relative level of importance for
the firms to practice the GSCM (Rao, 2002). Drivers for SMEs may be
different from LEs due to the differences in finances, infrastructure, human
resources, and market. Through the identification of the related driver for
SMEs, it is hope that understanding beyond this issues can be achieved.
Research of drivers, pressures, and antecedents for adoption and
improvement in environmental performance arises from a number of
stakeholders. There are some explanations why firms were interested to be
involved in GSCM activities. Different firms may have unique reasons to
engage in GSCM practices. Teruyoshi, Utsumi and Matsui (2006) classified
that into 3 major reasons. The first reason was compliance as many
manufacturers only want to do business with those who met the
environmental regulations. Second, to comply with the needs of the market
and customers that prefers eco-products. The third reason was to improve
competitiveness so that firms can have a good position in the market (An et
al., 2006). But the motivations that are summarized were arguable and not
conclusive. It is believed that motivations for firms to engage in GSCM can
also come from another stakeholders perspective.
The next section
discussed the results from the case analysis from 2 SMEs and 2 LEs that are
certified with the ISO14001.

Case Analysis
Firm A manufacture high quality print inks including varnishes,
solvent ink and water based ink for the printing and packaging industry
using modern machinery and state-of-the-art equipment. The firm is
committed to fostering long lasting customer relations by giving their best in
sales support and quality assurance in all of their products. Firm A offers a
wide product range to serve the printing and publishing industry. They also
have a wide marketing and sales network covering Peninsular Malaysia and
they focus on research and development of new ink formulations to meet
customers needs, maintain competitive pricing for high quality products,
provide a quick response to customer enquiries and have fully equipped
laboratory facilities at their factory. Firm A adopted green practices to meet
worldwide customers needs and demands since customers nowadays tend,
and prefer, to do business with a company that has ISO 14001 certification
or any other environmental standard that verifies them as an eco-friendly
company. Firm A acknowledge that green practices, can be another value
added for the company to survive in the challenging market today. Almost
30 competitors that offered the same product range as Firm A, but only 6 of
them have the ISO 14001 certification, thus it makes a difference between
them in the eye of customers perceptions. Furthermore, when the
Department of Environment (DOE) checked Firms A premises, they would
not have any problem since they have to comply with all the specifications
needed by the authority body. Top management of Firm A also gave full
support and commitment in emphasizing the importance of green practice
implementation in Firm A. Thus, the green process becomes easier
especially in budget allocation annually.
Firm B manufacture high quality solder products. It also provides
total soldering solutions to electronics and electrical and automotive
manufacturing companies. The main factor for Firm B to get involved in
green initiatives was their customer requirements. In business dealings with
their customers, they have to comply with all the specifications and
requirements needed by their customers such as the composition of certain
substances in the products. This initiative was believed not only to maintain
the current customers but also to attract more potential customers to do
business with them. In addition, to export and initiate business in other
regions, especially in western and developed countries, Firm B has to meet
the regulations in respect of environmental matters. Indeed, some of their
customers set ISO 14001 certification as the basic requirement before they
proceed with any business proposal. Within the company, Firm B focuses
more on in practicing pollution prevention activities. As such, they
maximize the usage of materials in the production process in order to
minimize waste within the process. For example, Firm B re-used plastic

containers rather than throw them away directly. In addition, Firm B

recycles their excess solder and tries to reuse it as raw materials. Green
purchasing and eco design has become one of the main activities in Firm B.
They were amongst the pioneers in the solder industry to develop lead free
solders for the conservation of the environment. The usage of hazardous
materials is also reduced from time to time depending on customer
requirements. The green practices helped Firm B to reduce the consumption
of hazardous materials directly and lead to a reduction of environmental
degradation indirectly.
Firm C produce various capacitors for electronics, electrical
apparatus and power utilities. Their main customers are mostly Japan based;
companies such as TDK, Hitachi, Sony and Toshiba. Firm B participated in
green practices because they perceived it as one of the marketing strategies
for the company. Previously, Firm C focused more on the domestic and
Japanese market, but nowadays they have shifted their focus to European
countries as their main target market. For the European market, every
company needs to comply with Restriction of Hazardous Substances
direction (RoHS) especially in the raw materials used for certain products.
For Firm C, they had to stop using plumbum (Pb) as it was one of the six
banned materials listed in RoHS. Therefore by going green, Firm C believed
that they can penetrate and attract more customers from the European
countries. Moreover, since their parent company is from Japan, they are
very strict and precise in the production process and emphasize green
practices as their main priority. The parent company provides Japan Article
Management (JAM) for each of their subsidiaries to conform with.
Firm C introduced and implemented several activities that lead
towards minimizing environmental problems such as selecting their
suppliers properly and monitoring their suppliers in purchasing activities in
order to make sure no hazardous materials are included within the
production process. In addition, Firm C also segregates their production
waste to ensure the disposal process becomes easier. In the production
house, Firm C has its own insulator machines that control the temperature of
all machines within the area. By doing this, they managed to reduce the
amount of energy used and save the cost of the electricity at the same time.
Internally, every bulb used in the factory is an eco-friendly bulb which uses
less energy and releases less heat. As a result of these green practices, Firm
B managed to reduce, energy used, waste, and minimize consumption of
hazardous materials.
Firm D manufactures of springs, shock absorbers, seats, radiators,
plastic and interiors. All of the manufacturing units in Firm D have their
own ISO 14001 certification which is seen as a sign of commitment to make

a difference in achieving a clean manufacturing environment. The driving

factors for Firm D to get involved in green practices were customer
requirements and marketing strategy. At the initial stage, most of their
customers were Original Equipment Manufacturers (OEM) export
customers. These group of customers requested Firm D to have ISO 14001
certification in the first place before they agreed to have business activities
with them. As an international automotive parts manufacturer, the green
commitment of the global market urged them to be greener in their
production. For example, as the suppliers for Toyota, they must follow the
guidelines in Toyota Green Purchasing Guidelines (TGPG) which required
Firm D to have Substances of Concern (SOC) management in their plant.
Suppliers are asked to use returnable boxes for supplying products.
This effort is to ensure that the suppliers will return and collect the boxes
and therefore help to minimize waste in Firm D. Moreover, in dealing with
suppliers, the purchasing department will check and verify that the
shipments from suppliers were free from hazardous materials in accordance
with Substance of Concern (SOC) management guidelines. Internally, Firm
D replaced the use of plastic bags with boxes for disposal purposes. To
enhance the participation of every employee in the company to go green,
Firm D had already launched a 3R campaign (re-use, recycle, reduction) to
promote environmentally friendly practices within the organization. Using
less plastic bags has promoted a better and healthy working environment to
all staff in Firm D. At the end of supply chain process, Firm D managed to
reduce the number of complaints and products returned by their customers.
The decreased consumption of hazardous materials also helps Firm D focus
on their business production without need to worry about legislative action
by the authorities. Table I provides a summary of the firms profiles and
brief case analysis.
TABLE I: Summary of Firms Profile and Case Analysis

Firm A
Respondent
(Designation)
Year
Established
No of
Employees

Factory
Manager

Firm B
Operations
Senior
Executive

Case Studies
Firm C
Engineering &
Production
Manager

Firm D
Quality
Senior
Executive

1979

1989

1990

1982

88

65

795

238

Main
Products
ISO14001
Certified
Drivers for
GSCM

Printing Ink

Solder
Products

Capacitors

Shock
absorbers,
interiors and
plastic

2008

2004

1998

2003

Customer
requirement;
competitiveness;
regulations;
management
commitment

Customer
requirement;
competitiveness;
regulations;

Customer
requirement;
regulations;
management
commitment

Customer
requirement;
marketing
strategy

Discussion and conclusion

The result from the case comparison indicates that meeting the
customer requirement as one of the most important drivers for both SMEs
and LEs. Crotty (2007) highlighted that demand from customers has
influenced firms to apply processes that lead to expected sustainability and
environmental outcomes. Business customers from countries like Japan, the
US and European often put pressure to their suppliers to comply to the
environment requirement (Anbumozhi & Kanda, 2005). This signify that
regardless of the company size, meeting the customer requirements can be
one of the major drivers for firms adopting the green initiative in their
operation.
Three out of four firms under study indicates legislation and
regulation as one of the important drivers for them adopting the green
initiative. Previous research have indicate that environmental regulations
and law that needs to be complied with by the manufacturers before can sell
their products are the most important drivers in green initiatives adoption
(Murphy et al., 1996; Rao, 2002; Zhu and Sarkis, 2004; Eltayeb et al.,
2010). Result from the case comparison indicates that this may always be
the case especially for LEs. This signifies that for LEs, adopting green may
have gone beyond complying the rules and regulation. For both SMEs under
study indicates complying the regulations as the important drivers for them
adopting the green initiative.
It is interesting to note that this study found that the management
commitment is an important driver for adopting green initiative for both

SMEs and LEs. This indicate that although SMEs often expected to be lack
of resources and capabilities due to its small size, it has not limits the SMEs
from adopting green initiative especially when the awareness and
commitment sparks from the internal management. Based on the result of
the study, it can be concluded that drivers for green initiative for SMEs are
not different from LEs. The demand to adopt green initiative may due to the
nature of industry and the product produce which relates to the requirement
by their consumers and the law enforcement by the government. Firms
including the SMEs can go beyond complying as they see benefits in terms
of economic returns due to possible reduction in operational cost and
improvement in competitiveness.
References

Abdullah, A. (1992). The Influence of Ethnic Values on Managerial

Practices in Malaysia. Malaysian Management Review, 27(1), 3-15
An, H. K., Teruyoshi Amano, Utsumi, H., & Matsui, S. (2006). A
framework for Green Supply Chain Management complying with
RoHS directive. Paper presented at the Corporate Responsibility
Research Conference. Ireland.
Anbumozhi, B. & Kanda, Y. (2005). Greening the production and
supply chain in asia: is there a role for voluntarily initiatives? IGES
Kansai Research Center Discussion Paper, KRC-2005, No 6E.
available online: http://www.iges.or.jp
Bacallan, J. J. (2000). Greening the Supply Chain. Business and
Environment, 6(5), 11-12.
Beamon, B. M. (1999). Designing the Green Supply Chain. Logistics
Information Management, 12(4), 332-342.
Crotty, J. (2007). Greening the Supply Chain? The Impacts of Take Back
Regulations on the UK Automotive Sector. Journal of Environmental
Policy and Planning, 8(3), 219-234.
Eltayeb, T. K., Zailani, S., & Ramayah, T. (2010). Green Supply Chain
Initiatives Among Certified Companies in Malaysia and Environmental
Sustainability: Investigating the Outcomes. Resource, Conservation and
Recycling, 55(2), 495-506.

Murphy, P. R., Poist, R. F., & Braunschwieg, C. D. (1996). Green

Logistics: Comparative View of Environmental Progressives, Moderates
and Conservatives. Journal of Business Logistics, 17(1), 191-211.
Rao, P. (2002). Greening the Supply Chain: A New Initiative in South East
Asia. International Journal of Operations and Production Management,
22(6), 632-655.
The Star. (2009) Article on March 27. Available at www.thestar.com.my.
Wisner, J., Leong, G. K., & Tan, K.-C. (2005). Principles of supply chain
management. South-Western College Publications.
Yusuff, R. M., Lo, W. C., Hashmi, M. S. J. (2005). Advanced
Manufacturing Technologies in SMEs. CACCI Journal, 1, 1-11.
Zabid, A. R., Sambasivan, M., & Abd Rahman, A. (2004). The Influence of
Organizational Culture on Attitudes Toward Organizational Change.
Leadership & Organization Development Journal, 25(2), 151-169.
Zhu, Q., & Sarkis, J. (2004). Relationships between Operational Practices
and Performance among Early Adopters of Green Supply Chain
Management Practices in Chinese Manufacturing Enterprises. Journal of
Operations Management, 22, 265-289.

10