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Procedia CIRP 26 (2015) 670 676

12th Global Conference on Sustainable Manufacturing

A Strategic Approach to Develop Green Supply Chains

S. Maryam Masoumik, Salwa Hanim Abdul-Rashid*, Ezutah Udoncy Olugu, Raja Ariffin Raja Ghazilla
Centre for Product Design and Manufacturing (CPDM), Department of Mechanical Engineering, Faculty of Engineering, University of Malaya,
50603 Kuala Lumpur, Wilayah Persekutuan, Malaysia

* Corresponding author. Tel.: +60-3-79677625; fax: +60-3-79675317. E-mail address: salwa_hanim@um.edu.my

Abstract

Green supply chain management (GSCM) is a subject of growing interest amongst academics and practitioners. Several studies have been
conducted in the past to evaluate GSCM initiatives and investigate their strategic benefits in terms of environmental performance, financial
payoffs, and competitiveness. However, the factors that should be considered to make these GSCM initiatives strategically beneficial have
rarely been discussed. To develop this field further, based on the institutional theory and natural-resource-based view (NRBV), we have
developed a conceptual model for strategically prioritizing GSCM initiatives. The conceptual model proposed uses a combined application of
the analytical network process (ANP) and structural equation modelling (SEM). It is recommended that future research opportunities expand on
the proposed conceptual model.
2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
2014 The Authors. Published by Elsevier B.V.
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Assembly Technology and Factory Management/Technische Universitt Berlin.
Peer-review under responsibility of Assembly Technology and Factory Management/Technische Universitt Berlin.
Keywords: Green Supply Chain Management; Natural-Resource-Based View; Institutional Theory; Analytical Network Process (ANP); Structural Equation
Modelling (SEM)

1. Introduction pressures and practices. In this respect, there are several

The external pressures from regulators, customers,
suppliers, competitors, community groups and the media
are increasingly forcing organizations to incorporate
environmentally related actions into their business
processes [1]. In todays competitive market, the scope of
these environmental activities goes beyond the firms
borders and involves the whole supply chain from the raw
material supply to product usage and even further to post-
use processes including reverse logistics, product recovery
and recycling [2-5]. In this respect, supply chain managers
encounter a long list of green initiatives that can be
incorporated into the supply chain processes. However, the
problem is that resource constraints do not allow the
implementation of all these initiatives in an effective way
[6]. Hence, managers have to make strategic choices
concerning green supply chain initiatives to gain as many
competitive benefits as possible.
Recently, researchers and practitioners have shown an
increased interest in the topic of green supply chain drivers,
empirical studies in the literature analysing the determinant
factors and their impacts on the development of green
initiatives in supply chains [7-13]. However, these studies
have focused more on external pressures imposed on the
organizations by external stakeholders to develop green
initiatives and neglected the internal factors that are under a
firms control [14]. Although external pressures force the
companies to include several mandatory and regulatory-
driven initiatives in their environmental improvement
programmes, there are numerous voluntary environmental
activities that can be initiated by the companies to provide
them with competitive benefits. This provides the
opportunity for making strategic choices of those green
supply chain practices that can be initiated proactively.
In addition, there has been little discussion in the
literature showing how the external and internal drivers can
interactively affect business managers decisions in
selecting green strategies and initiatives for implementation.
Although by reviewing the literature we can find some
studies on the selection of environmental programme

2212-8271 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Assembly Technology and Factory Management/Technische Universitt Berlin.
doi:10.1016/j.procir.2014.07.091
 S. Maryam Masoumik et al. / Procedia CIRP 26 (2015) 670 676
alternatives using the analytical hierarchy process (AHP),
the decision factors included in their models are more
pertinent to the operational level rather than the strategic
level.
Regarding this gap in the literature, this study attempts to
develop a decision framework for prioritizing green
initiatives while considering the strategic factors affecting
the decision. These strategic factors include external factors
in terms of the pressures from external stakeholders, and
internal factors in terms of the firms intent to gain
competitive advantages through adopting green strategies
and firms key resources as enablers for effectively
implementing these strategies.
2. Background of study
Several attempts have been made to evaluate and
prioritize the environmentally related practices [15-17]. So
far, however, these studies paid more attention to the
operational level of decision-making rather than the
strategic level.
In order to develop a strategic green supply chain, the
strategic factors that influence the priorities of green
strategies and initiatives should be considered while
planning to implement environmental improvement
programmes. To explore the decision factors for the
strategic prioritizing of green supply chain initiatives we
searched for theories that could help us to explain both the
deterministic and voluntarism behaviours of the companies
in adopting environmental strategies. We found that the
institutional theory and natural-resource-based view
(NRBV) are two theories that are widely applied in our
research area and are suitable for our purpose.
2.1. Institutional theory
Previous studies emphasized the relationship between
the pressures from the external stakeholders and the extent
to which the companies implement environmental-related
practices. [7-9, 18, 19]. Based on the institutional theory,
the pressures of external stakeholders cause companies to
make institutional isomorphic changes [20].
According to the literature, there are four main
institutional pressures driving the companies to improve
their environmental performance: regulatory pressures [8, 9,
18, 21, 22], customer pressures [10, 18, 23], competitor
pressures [14, 18, 21], and society pressures [10, 20].
2.2. Natural-resource-based view
The natural-resource-based view (NRBV) [23] is an
expanded version of the resource-based view (RBV) that
relates a firms key resources and competitive advantages to
its relationship to the natural in terms of its environmental
performance resulting from adopting the green strategies.
The green strategies introduced in the NRBV include
pollution prevention, product stewardship, and clean
technology.
671
2.2.1. Competitive advantages
Gaining competitive advantages is a strategic factor that
motivates companies to take proactive environmental
actions [6, 10, 24]. According to the NRBV, environmental
strategies can provide companies with three types of
competitive values cost reduction, reputation and
legitimacy, and future positioning.
2.2.2. Key resources
The impact of a firms key resources on the successful
implementation of environmental strategies has been
investigated by several studies [19, 25-28].
According to the NRBV, there are three main types of
key resource required for green strategy adoption:
continuous improvement, stakeholder integration, and
disruptive change.
2.2.3. Green strategies
The NRBV comprises three interconnected green
strategies, namely, pollution prevention, product
stewardship, and clean technology.
Pollution prevention takes incremental improvement
actions to reduce the waste and emissions associated with
the companys current operations emissions reduction.
Product stewardship is a more integrated approach than
pollution prevention and extends the environmental actions
beyond the firms internal boundaries to that of suppliers of
raw materials to distributors and end-users. This strategy
incorporates the environmental improvement into every
stage of a products life cycle.
The clean technology strategy refers to dramatic
environmental change beyond a companys existing
products and business models. The companies adopting this
strategy try to innovate their product and process design to
gain the benefits from the future market opportunities.
2.3. Green supply chain initiatives
In accordance with previous studies [29, 30], we
categorized the green supply chain initiatives into five main
operational areas: eco-product design, greening upstream,
greening production, greening downstream, and greening
post-use.
Eco-product design involves initiatives relating to the
design of products for environmental objectives, including
reuse, recycling, and waste and emission reduction.
Greening upstream involves initiatives, such as green
purchasing and collaboration with suppliers in
environmental improvement programmes.
Green production initiatives comprise the optimization
of manufacturing processes to reduce waste and emissions.
Greening downstream deals with green environmentally
related improvement of transportation activities, green
packaging, and collaboration with customers in
environmental objectives.
Greening post-use refers to the environmentally related
actions at the products end-of-life. It involves activities
such as material recycling and product recovery.
672 S. Maryam Masoumik et al. / Procedia CIRP 26 (2015) 670 676

3. Research methodology

In developing the conceptual model for prioritizing the

green supply chain initiatives, this study underwent three
main stages. Goal: Strategically
prioritizing GSCM
First, we reviewed the literature to determine the factors initiatives
affecting the business managers decisions to implement the
green supply chain initiatives. In this step, our consideration Institutional pressures
was devoted to two theories that dominate the literature on
green supply chain drivers and practices, namely, the
Regulatory Customer
institutional theory and the natural-resource-based view pressures pressures
(NRBV).
Second, we used the concept of the analytical network Competitor Society
process (ANP) modelling to structure our decision pressures pressures
Key resources
framework. ANP is a more general form of the analytical
hierarchy process (AHP) technique that was developed to
prioritize the alternatives in a decision problem, by
Stakeholder Continuous
formulating the problem as a hierarchic structure consisting integration improvement
of a goal, criteria, and alternatives [31]. Rather than the Competitive
hierarchic structure, the ANP formulates the decision Disruptive values
problem as a network consisting of clusters and elements in change
these clusters. Representation of the decision problem in a
network structure allows the mutual relationship between Cost reduction Reputation &
the decision clusters or elements among the different levels legitimacy
and a two-way relationship between the elements at the
Green Future
same level indicating the inner dependencies between the
strategies positioning
elements within a cluster [32]. Considering the complexity
of the decision environment in this study, the ANP is a
suitable technique and has been applied by several Pollution Product
researchers in this field [16, 17, 33]. prevention stewardship
Finally, we proposed a procedure for obtaining the
relative intensities of the decision factors required for Clean
solving the ANP problem, through conducting an empirical technology
study, which we analysed using structural equation
modelling (SEM). SEM is a second-generation statistical GSCM initiatives
method that has several advantages in comparison with the
traditional methods, such as multiple regression analysis.
Eco-product
One of the most important features of SEM is its ability to design
simultaneously test the relationships between the multiple
variables as a structural model and the relationship between Greening Greening
a latent variable and its indicators as a measurement model upstream production
[34]. Recent research in the green supply chain has made
increasing use of SEM to examine the causal relationship Greening Greening
downstream post-use
between the green initiatives and their performance [29, 35-
37].

4. Conceptual model

Based on the institutional theory and natural-resource-
based view (NRBV), we consider three clusters of decision
factors for prioritizing green strategies.
The first cluster consists of the elements of institutional
pressures, namely, regulatory pressures, market pressures,
competitive pressures, and society pressures, The strategic
factors associated with institutional pressures that are
external to companies force them to implement some
determinant environmental-related activities that are usually
homogenous in the same industry.
Fig. 1. ANP model for prioritizing green supply chain initiatives
The second cluster refers to the firms competitive
values in terms of cost reduction, reputation and legitimacy,
and future positioning. The strategic factors of competitive
advantages expected by the companies can motivate them
to incorporate several voluntary green initiatives in their
environmental improvement programmes. These voluntary
green practices can provide the companies with competitive
advantages.
The third cluster relates to the firms key resources,
namely, continuous improvement, stakeholder integration,
 S. Maryam Masoumik et al. / Procedia CIRP 26 (2015) 670 676 673

and disruptive change. This decision factor can help

managers to make more realistic decisions in launching 1. Perform pairwise comparison
green initiatives with achievable performance targets. 2. Obtain the relative intensities of
Considering these three clusters, by involving a win-win clusters IP, KR, & CV and their
approach, the firms green strategies are prioritized. The elements with respect to companys
win-win approach implies that while the firm is trying to business strategy
satisfy the requirements of external pressures, it also
considers the requirements for achieving the competitive
1. Conduct an empirical study
values, and optimum usage of the firms key resources.
2. Evaluate path coefficient in SEM
After determining the priorities of the green strategies, 3. Calculate the relative intensities of
the green supply chain initiatives are prioritized by the elements in cluster GS with
considering their importance for improving the firms respect to the elements in clusters IP,
performance associated with the green strategies. KR, CV, & GI and vice versa
Fig. 1 shows the ANP model, including the decision
factors, and their relationship. There are mutual
relationships between the decision factors and green 1. Construct a supermatrix
strategies. As an example, the relationship from top to down 2. Compute the importance of
between the clusters internal resource and green strategy elements in clusters GS, and GI
implies the importance of each green strategy in optimizing
the usage of a particular resource, and the relationship from
down to top indicates the importance of each resource in
adopting a particular green strategy. The internal loop in the 1. Evaluate the measurement
model in SEM
cluster green supply chain initiatives implies the mutual
2. Obtain the relative weights for
relationship between the initiatives, meaning that an
the measures of every element
improvement in performance in a particular green initiative in cluster GI
can be influenced by the improvement in performance in
another green initiative.
Fig. 2 shows the procedure for solving the ANP model
presented in this study. 1. Take the firms manager response
regarding the scores of the
To obtain the relative intensities of the clusters
performance measures for every
institutional pressures (IP), firms key resources (KR), and
element in cluster GI
firms competitive values (CV), and their elements with
2. Compute the performance of every
respect to a firms business strategy, pairwise comparisons element in cluster GI
are proposed in the procedure. The questionnaires for
pairwise comparisons are given in Appendices A, B, C, and
D.
To calculate the relative intensities of the elements in the 1. Perform Importance-Performance analysis
clusters green strategy with respect to the elements in the 2. Computing the priorities
clusters institutional pressures, key resources, competitive
values, and green supply chain initiatives and vice versa, Fig. 2. The procedure for prioritizing green initiatives
the procedure suggests conducting the empirical study using
SEM. The structural model for testing the relationship
between the decision factors, green strategies and green IP1
initiatives is illustrated in Fig. 3. The structural model IP2
includes several path coefficients associated with the IP3
relationship between the elements in the clusters presented IP4
GI1
in the ANP model. By calculating the path coefficient, we CV1 GS1 GI2
can obtain the total effect of an independent variable on a CV2 GS2 GI3
dependent variable, and, subsequently, the relative CV3 GS3 GI4
GI5
intensities of the elements. Tables 1, 2, and 3 show
examples for calculating the relative intensities based on the KR1
KR2
path coefficient. SmartPLS [38] can be used to evaluate the KR3
path coefficient.
After obtaining all relative intensities of clusters and Fig. 3. The structural model
elements in the ANP model, the importance of green
strategies and green supply chain initiatives will be
computed by forming the supermatrix. The software Super
Decisions [39] can be applied to make the computation and
obtain the limiting priorities.
674 S. Maryam Masoumik et al. / Procedia CIRP 26 (2015) 670 676

Table 1. The total effect of institutional pressures on green strategies Future research is required to validate the proposed
resulting from evaluation of the path coefficient in SEM conceptual model by conducting the empirical study and
testing the ANP model with several real case studies.
GS1 GS2 GS3 There are also some opportunities for researchers to
IP1 P1141* P1142 P1143 SumRaw1 explore this conceptual model in more detail:
IP2 P1241 P1242 P1243 SumRaw2 x The list of the decision factors offered in this study is
derived from the review of the academic literature.
IP3 P1341 P1342 P1343 SumRaw3
This list can be completed by conducting the
IP4 P1441 P1442 P1443 qualitative research amongst practitioners who are
Sumcolumn1 Sumcolumn1 Sumcolumn2 experts in this research area.
*
P1141= The value of path coefficient between the variable IP1 and the variable GS1 x The measures for evaluating the performance of
green supply chain initiatives have been proposed
Table 2. The relative intensities of green strategies (GS) with respect to based on the various academic literature on green
regulatory pressures (IP1) supply chain. These measures can be customized for
the particular industries by studying the
Element Weight environmental reports of the leading companies in
Pollutionprevention(GS1) =P1141/SumRaw1 each industry.
Productstewardship(GS2) =P1142/SumRaw1
Cleantechnology(GS3) =P1143/SumRaw1 Acknowledgements

Table 3. The relative intensities of regulatory pressures (IP) with respect to The authors would like to extend their appreciation to
pollution prevention strategy (GS1) the Malaysian Ministry of Higher Education for the
Exploratory Research Grant Scheme (Grant no. ER033-
Element Weight 2011A) that made this study and paper possible.
Regulatorypressure(IP1) =P1141/
Sumcolumn1 Appendix A. Cluster comparisons with respect to
Customerpressures(IP2) =P1241/ companys business strategy
Sumcolumn1
Competitorpressures(IP3) =P1341/ Accordingtoyourcompanysbusinessstrategyandpolicies,pleasemake
Sumcolumn1 a pairwisecomparisonconcerning theclusterswhileplanningthe
Societypressures(IP4) =P1441/ environmentalstrategicplan
Sumcolumn1 Cluster Intensity Cluster
9 7 5 3 1 3 5 7 9
Finally, an importance-performance matrix analysis Responding Achievingthe
(IPMA) [34] will be performed to obtain the ultimate tothefirms firms
priorities of green supply chain initiatives. Appendix E external competitive
shows the green initiative measures. The relative weights of pressures values(CV)
the measures can be obtained by evaluation of the (IP)
measurement model in SEM using the dataset that will be Responding Optimumuseof
generated in the empirical study. tothefirms available
external resources(KR)
5. Conclusion and research implications pressures
(IP)
In this study, we proposed a conceptual model for Achieving          Optimumuseof
developing the strategic green supply chain. This thefirms available
conceptual model proposed a procedure for strategically competitive resources(KR)
prioritizing green supply chain initiatives by simultaneous values(CV)
analysis of the importance and performance.
The term importance refers to the significance of the Appendix B. Comparisons with respect to companys
green supply chain initiatives with respect to the firms business strategy in competitive values cluster
priorities for adoption of green strategies. The term
performance relates to the current level of the firms Accordingtoyourcompanysbusinessstrategyandpolicies,pleasemake
environmental improvement achievement. a pairwisecomparisonconcerning theelementsforachievingthefirms
In order to obtain the strategic importance of green competitivevalues,whileplanningthe environmentalstrategicplan
supply chain initiatives, the consideration is devoted to Element 9 7 5 3 1 3 5 7 9 Element
making the link between empirical studies and the approach Cost Reputation&
of quantitative decision-making modelling by using a reduction legitimacy(CV2)
combined application of the analytic network process (CV1)
(ANP) and structural equation modelling (SEM).
 S. Maryam Masoumik et al. / Procedia CIRP 26 (2015) 670 676 675

Appendix B. Continued Appendix E. Continued

Cost          Future 3.Designofproductsforreuse,recycling,orrecoveryof

materials/components.
reduction positioning
4.Designofproductstoavoidorreduceuseofhazardousmaterialin
(CV1) (CV3) productsorintheirmanufacturingprocesses.
Reputation          Future 5.Designofproductstoavoidorreduceemissionsduring the useofthe
&legitimacy positioning product.
(CV2) (CV3) 6.Productdesignconsideringproductlifecyclecosts.
Greeningupstream
Greenpurchasing
Appendix C. Comparisons with respect to companys 1.Useofenvironmentally friendlyrawmaterials(recyclable/renewable)
business strategy in internal resources cluster inproducts.
2.Substitutionofpollutingandhazardousmaterials/parts.
Accordingtoyourcompanysbusinessstrategyandpolicies,pleasemake 3.Reducingscarceresourceusageinproducts.
Greensuppliermanagement
a pairwisecomparisonconcerning theelementsforoptimumuseoffirms
1.Supplierselectionconsideringenvironmentalcriteria.
resources,whileplanningthe environmentalstrategicplan
2.Providingsupportforsupplierstoestablishandimplementtheirown
Element 9 7 5 3 1 3 5 7 9 Element greenprogrammes
Continuous Stakeholder 3.Collaborationwithsuppliersforplanningandimplementinggreen
improvement integration initiatives
4.Drivethesupplierstoincreasetheirenvironmentalresponsiveness
(KR1) (KR2)
Greeningproduction
Continuous          Disruptive 1.Optimizationofmanufacturingprocessestoreducesolidwastes.
improvement change(KR3) 2.Optimizationofmanufacturingprocessesforreducedconsumptionof
(KR1) material.
Stakeholder          Disruptive 3.Optimizationofmanufacturingprocessesforreducedconsumptionof
energy.
integration change(KR3)
4.Optimizationofmanufacturingprocessestoreducewaterwastes.
(KR2) 5.Optimizationofmanufacturingprocessestoreduceairemissions.
6.Optimizationofmanufacturingprocesstoreducenoise.
7.Processdesignfocusedonusingrenewable/recyclablematerials.
Appendix D. Comparisons with respect to companys 8.Processdesignfocusedonusingrenewableenergy.
business strategy in external pressures cluster 9.Recyclingofmaterialsinternallyinthecompany.
Greeningdownstream
Greendistribution
Accordingtoyourcompanysbusinessstrategyandpolicies,pleasemake 1.Ecolabellingofproducts.
a pairwisecomparisonconcerning theelementsforrespondingtothe 2.Environmentalimprovementinpackaging.
firmsexternalpressures,whileplanningthe environmentalstrategicplan 3.Changeformoreenvironmentallyfriendlytransportation.
Element 9 7 5 3 1 3 5 7 9 Element Greencustomermanagement
1.Providinginformationtoconsumersonenvironmentally friendly
Regulatory Customer
products.
pressures pressures(IP2) 2.Cooperationwithcustomers forproductecodesign.
(IP1) 3.Cooperationwithcustomersforcleanerproduction.
Regulatory          Competitor 4.Cooperationwithcustomersforgreenpackaging.
pressures pressures(IP3) 5.Cooperationwithcustomersforusinglessenergyduringproduct
transportation.
(IP1) 
6.Cooperationwithcustomersforenvironmentalfriendlyuseof
Regulatory          Society products.
pressures pressures(IP4) Greeningpostuse
(IP1)  Productrecovery
Customer          Competitor 1.Collectingusedproductsfromcustomersforrecycling,reclamation,or
reuse.
pressures pressures(IP3)
2.Returningproductstosuppliersforrecycling,retainingofmaterials,or
(IP2)  remanufacturing.
Customer          Society 3.Recoveringfromusedordefectiveproducts/components(i.e.
pressures pressures(IP4) remanufacturing,repair,rework,orrefurbishing).
(IP2)  4.Recyclingfrom EndofLifeproducts/components.
Packagingrecovery
Competitor          Society
1.Collectingusedpackagingfromcustomersforreuseorrecycling.
pressures pressures(IP4) 2.Returningthepackagingofsuppliers'productstothemforreuseor
(IP3)  recycling.
3.Recyclingofpackages.
Investmentrecovery
1.Useofrecycledmaterialsorused/recoveredcomponentsinnew
Appendix E. Green initiative performance measures products.
2.Useofrebuiltorremanufacturedpartsforthepurposeofaftersales
Ecoproductdesign services.
1.Designofproductsforreducedconsumptionofmaterials. 3.Saleofscraporusedmaterials.
2.Designofproductsforreducedconsumptionofenergy. 4.Saleofrecycledmaterialsorrecoveredparts.
676 S. Maryam Masoumik et al. / Procedia CIRP 26 (2015) 670 676

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