Professional Documents
Culture Documents
1.1 Introduction
In 2011, McKinsey conducted a survey with executives that showed the relation between
sustainability and business. It revealed that more and more businesses are actively engaging in
sustainability practices not only to improve or benefit the companys reputation but to also add
value and improve the processes of the business. The result of the survey revealed that
companies are pursuing sustainability through the reduction of energy and resource use,
improving employee retention and motivation, committing to research and development into
The most common way of moving towards sustainability based on the survey was to
reduce the energy being consumed by the business in its operations, where 63% of respondents
claimed that they are currently taking that action. Next to that is the reduction of waste from
operations where 61% proclaimed that they are engaged with this initiative. Furthermore,
sustainability has slowly been integrated into the strategic planning of the firms particularly in
setting it in the mission, vision, and values of the company, external communications, and
company culture. Garnering 67%, 60%, and 59% respectively from survey respondents
(McKinsey, 2011).
In an another more recent survey conducted by Nielsen in October 2015 with 30,000
online consumers from 60 different countries, it showed that roughly 66% of global respondents
are willing to pay more for products and services that have other values added to them. Half of
the 66% are influenced by key sustainability factors such as being natural or organic, come from
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Personal values are not becoming more important than the benefits that one will be awarded such
The survey also enumerates the different drivers of purchasing by consumers for global
respondents wherein brand trust is at the top with 62%, followed by perceivable health and
wellness benefits at 59%, and made from fresh, organic, and natural ingredients at 57% wrapping
up the top 3 among the drivers. Other drivers in the study include from brand known as
environmentally friendly 45%, from brand known for its social value 43%, with environmentally
friendly packaging 41%, from brand with community commitment 41%, and saw TV ad about
social/environmental good of brand 34% (Nielsen, 2015). But what does it mean to be
sustainable?
Sustainability, to the general population, is known as the ability to meet present needs
without hindering or compromising the ability of future generations to meet their needs, this is in
accordance with the Brundtland report of 1987 headed by Gro Harlem Brundtland (Brundtland
Commission, 1987). The revised definition that will apply to businesses is now the ability to
meet present corporate needs without compromising the ability to meet future needs of the
company as based on the definition provided in the Brundtland Report pioneered in 1987. Since
businesses have a strong influence on consumers, use up the most resources, and produce the
most waste collectively, it is just fitting that these businesses should be at the forefront of leading
In the Philippines, sustainable development programs were established since the 1980s
through the drafting of the Philippine Strategy for Sustainable Development in 1987. The
strategy was to attain economic growth while protecting the resources and diversity in the
country and overall environmental quality (Tarradell, 2004). The trends of globalization and
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international standard compliance has helped sustainability awareness rise in the past few years.
In 1992, President Fidel V. Ramos established the Philippine Council for Sustainable
Development to ensure that the sustainable development goals and initiatives would be
incorporated in the countrys plans, programs, and policies. To this day, the council has been
plans for the Philippines to stay abreast with trends (Philippine Council for Sustainable
Development, 2015).
The Philippines pledged to the United Nations that by 2030 the country will have
achieved the 17 sustainable development goals that the UN released in late 2015. As of 2015, the
Philippines had a poverty rate of 26.3% and ranks 115th out of 187 countries in the Human
Development Index (Human Development Report, 2015). Most of the sustainability actions
being made in the Philippines are geared towards the environmental dimension of sustainability
as the country is rich with natural resources. In the 1990s, the PA21 or A National Agenda for
Sustainable Development for the 21th Century. In this agenda, it lists down the various actions
taken by the government and its partners towards sustainability in various fields and aspects such
as agriculture, labor force, environment, infrastructure, etc. (PA21 National Report, 2012).
Ranking study conducted by Schieler and Scholten (2015). The country has consistently been in
the lower half of such sustainability studies despite its steady and growth in terms of the
economy. For the country to keep up with all the other countries, it must commit to the
formulation and adoption of sustainability plans and actions and keep up with the global trends.
In the case of EMS Components Assembly, Inc. it must keep up with the trends occurring within
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The Global Electronics Industry is divided into two classifications in terms of
up for 71.6 % of the industry, while the Electronics Manufacturing Services makes up the
remaining 28.4% as of the year 2011 (Marketline, 2012). These refer to the production of
semiconductors and electronic components that include resistors, capacitors, passive filters,
inductors, light-emitting diodes (LEDs), printed circuit boards (PCBs), batteries, and other
related products (Market line, 2012). Companies that focus on the testing, manufacturing,
distributing, and repairing of electronic components and concern themselves with the assembly
of electronic components fall under the Electronics Manufacturing Services industry, also known
as, Electronics Contract Manufacturing. From the year 2007 to 2011, the global electronics
industry had an annual compound growth rate of about 2.6% producing up to USD 531.5 Billion
(Marketline, 2012).
Many of the EMS firms are found in the Asia-Pacific which makes up 71.2% of the
geographic market segmentation followed closely by the Americas at 14.9% and then Europe
with 10.8% while the remaining 3.1% is composed of companies based in countries not
belonging to the regions (Market line, 2012). Companies under the services mentioned above are
usually subcontractors hired by other companies that are looking to outsource certain processes
to achieve a specific goal. A few examples of these goals are lowering costs, increasing quality,
decreasing the need for tangible resources such as plant, property, and equipment, and decreasing
the need for a workforce to produce such a product or render such a service by delegating these
tasks to an external entity (Wei & Arnell, 2006). The development of the Electronics
Manufacturing Industry came about as an answer to the numerous human resources issues and
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inflexibility of companies who were handling the large-scale product runs in their in-house
assemblies. This put a strain on smaller companies that only had limited product runs. Other
companies that operate in this industry are electronics companies that have their own
manufacturing capabilities and companies that offer electronics manufacturing services to other
companies.
The manufacturing of electronic products requires a wide array of inputs and raw
materials. Most of these inputs are metals, mineral oil, and plastics aside from the fabricated
components. Majority of the companies in the industry have supply chain management networks
around the world to enable them to acquire high quality inputs at the lowest possible cost
property and equipment needed to manufacture these products. This helps mitigate the threat of
new entrants into the market. One of the reasons why this industry has an intense rivalry within it
is due to the number of firms that are already competing that have strong financial positions.
Another is that the industry is quite fast-paced due to the rate of innovation and technological
growth (Marketline, 2012). An idea today can be obsolete tomorrow or already done by a
competitor. Hence, most companies either diversify or to outcompete one another by lowering
the cost of the production of their products and, in relation, their prices. A few trends within the
industry are the involvement in solar power, printed electronics, and the Green Campaign or the
call to be a more environmentally-friendly industry as the resources used are quite extensive and
In the Philippines, based on historical data from 2000 to 2010, the electronics
industry has consistently accounted for more than 50% of the total exports of the country (NSO
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& DTI, 2010). In 2010, 61.18% of the Philippines total exports consisted of electronic products
(NSO, 2010). This gives an average of about 64.58% for the period of 2000 to 2010. Investments
in the electronics industry of the Philippines were also on a steady increase through the years,
apart from the years 2008 and 2009 when the global monetary crisis hit. In 2010, it was recorded
that a total of USD 2.27 Billion was invested into the electronics industry of the Philippines (BOI
& PEZA, 2011). As of 2010, the electronics industry has created and provided over 500,000 jobs
keeping the Philippines at the top spot as supplier of knowledge-based jobs and workers globally
(SEIPI, 2011). One of these companies that provide jobs for the people is EMS Components
Assembly, Inc.
EMS Components Assembly, Inc. is a company that is clearly part of the electronics
industry in the Philippines as it offers electronics manufacturing services, in the form of Full
Turnkey Business Solutions that include sourcing, Enterprise Resource Planning system,
Facilities Management, Training, and Organizational Support, to customers that want and need
to outsource production and assembly processes to save money, improve quality, or for various
other reasons. It is privately-owned, meaning that it is not publicly traded in the stock market,
therefore, all capital is raised internally to carry on the business and for business investments.
Because it is a privately-owned company, it has a harder time raising the money it would need to
Because of the business model that EMSCAI has as a subcontracting firm, its ability to
source inputs from suppliers is hampered because its customers are the ones that provide all
inputs and raw materials for the project or alternatively, EMSCAI must source supplies and
inputs from a pre-set or pre-approved list from the customer. This affects the companys ability
to fully manipulate the profit margin due to the lack of options to decrease cost. One of the
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reasons why customers have a pre-approved list of suppliers is because in the electronics
industry, there are certain certifications and requirements that a supplier or company must have
Another weakness is that the company tends to rely on a single brand customer. In its
founding in 2004, EMS Components Assembly, Inc. started manufacturing products for
Integrated Microelectronics, Inc. This contract was awarded to EMSCAI due to IMIs incapacity
to fill such a large order and meet the demand in time, the company had to outsource its
operations. For several years, EMSCAI only catered to one customer. When IMI finally caught
up with the demand with their in-house manufacturing capabilities, it pulled out off EMSCAI
forcing the company to look for a new customer. This brought in Toshiba and the production of
It was only in 2012, after the last waves of the economic downturn of 2008 finally
subsided, that the business started to build up its customer base to include 9 companies in total.
This came about as the company was integrating sustainability further into its daily operations to
add to their existing systems and programs to begin compliance with other potential customers
and later to the Electronics Industry Code of Conduct as the industry standard. However, despite
the diversification and the customer base that it has at present, about 50% of the annual revenue
is still derived from operations and jobs for Toshiba. Should the company pull out its operations
from EMSCAI, the business would suffer and cannot immediately balance out and compensate
for the loss. This poses a large threat to the company as it will greatly affect its ability to generate
profit and continue with the business should it rely on the remaining 8 customers that make up
the other half of the revenue collectively. In line with this, the proponents endeavor to further
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study the connection between the involvement in sustainability efforts to the financial
This research aims to identify the various systems, structure, and strategies in place at
EMSCAI geared towards sustainability that can influence the long-term corporate financial
performance of the company. Sustainability has become an integral part of a business in the
sense that it does not only pertain to the longevity of the organization, but rather, takes on a more
holistic view addressing the triple bottom line. The company chosen, EMSCAI, has been in
operation for over 11 years and has ever since geared itself towards sustainability and continues
to add more programs and actions to help improve the companys overall performance. These
actions allow the company to adhere to the requirements of their customers as an EICC
compliant firm.
In line with this the study will address the main problem of:
influence and affect the long-term corporate financial performance of EMS Components
Assembly, Inc.?
Research Questions:
4. What are the various stakeholder reactions to the sustainability performance of EMSCAI
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5. Is there a relationship between the sustainability performance of EMSCAI for the period
6. In what way does the sustainability performance of EMSCAI for the period 2011-2015
sustainability systems, structure, and strategies that it currently has in place to attain greater
sustainability performance?
In line with the problem statements stated above, the proponents developed a list of
General Objective
The general objective of the study is to identify the sustainability performance of EMS
Components Assembly, Inc. through the analysis of its strategies, structure, and systems, and to
determine whether this involvement in sustainability can aid in the improvement of long-term
Specific Objectives
In accordance with the general objective, the study also aims to achieve the following
specific objectives:
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To determine the existence of sustainability systems in EMSCAI such as Quality
To identify the how many functions and departments in the company are engaged or
EMSCAI.
To determine what programs and actions have been developed and implemented as part
To identify how the sustainability performance measures and stakeholder reactions can
Assembly, Inc. and determine the association between this and its long-term corporate
financial performance.
actions that the company must further its long-term corporate financial performance.
Through the internal audit and external environment analysis results of EMS Components
Assembly, numerous opportunities, threats and internal weaknesses were revealed which
performance. In line with this, the study will benefit primarily EMS Components Assembly, Inc.
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the electronics industry and the academe along with future researchers that would want to further
this line of study. The following will benefit from the study conducted by the proponents:
1. The managers of EMSCAI, as the study will allow them to analyze and assess their
sustainability efforts and idenfity its effects on their corporate financial performance. It will also
allow them to formulate new sustainability goals and strategies, systems, and structures to
achieve those goals to improve their financial performance through the involvement in
sustainability.
2. The customers and suppliers of EMSCAI will benefit from this study as they will be
assured of the EICC compliance and sustainability efforts of the company given that EICC
compliance is a requirement for most brand companies in the industry. It will also promote
3. The employees of EMSCAI will also benefit from this study. It will familiarize them with
the strategies, systems, and structures in place in the organization that are geared towards
4. For the electronics industry, the research, specifically the framework developed in this
study, could also be used to help other companies assess their strategies, structure, and systems
and determine any changes needed to be done to attain and improve their sustainability
performance.
researchers will benefit from this study. The university can benefit from this study, as it will
serve as a learning tool and source of new knowledge and information for the students regarding
sustainability and business. A copy of this thesis will be kept in the library of the De La Salle
University to allow students to use it as a guide and basis for future studies. The proponents will
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create a more holistic assessment by identifying and analyzing the systems, structure, and
strategies in place in a company. Future researchers can also take this approach in other
industries or with other companies to develop a more inclusive array of topics of sustainability.
The limitations of the study are as follows, first, it is a case study on EMS Components
Assembly, Inc. located in 17-A Technology Ave. Laguna Technopark Bian, Laguna,
Philippines. The case research design will be used to establish a connection between the drivers
of sustainability and the corresponding performance variables used in the theoretical framework.
In the case research design, pattern matching, as recommended by Yin (2009) will be used. After
collecting all necessary information, the analysis process starts with examining primary data. The
case research design is preferred in examining contemporary events, when the relevant behaviors
cannot be manipulated.
To collect both the quantitative and qualitative data, a survey will be conducted among
top and middle managers to gather information on strategy, systems and structure implemented
for the period 2011-2015. The performance measures have been translated into a likert scale to
allow for the quantitative analysis of the data to be done, the paper will also be based on
interviews conducted with top, middle, and junior managers and supervisors, and secondary
sources of data such as journals, books, and the like. The proponents aim to identify the
relationship between the sustainability performance of EMSCAI and its long-term corporate
financial performance using a single embedded case study research wherein data will be
collected from several informants, in this case the managers and supervisors in the company,
company reports, and secondary data and an analysis will be conducted to determine how all the
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data collected relate to one another and to the framework (Yin, 2003). The single embedded case
study allows for multiple sub-units of analysis and the integration of qualitative and quantitative
methods of data collection and analysis into one case study (Yin, 2003). The proponents will
only utilize firm-level data gathered from with EMSCAI representatives to limit the data and to
The questionnaire will be completed by managers that have been in the company for at
least 5 years acting as representatives assessing the company. The need for the managers to have
been in the company for at least 5 years as they are able to recall, assess and analyze the
sustainability strategies, systems, and structures that transpired in the last five years helped in
The survey data will also be triangulated with document reviews specifically for the
sustainability performance, which will be based on the archive of financial and sustainability
performance data for the year 2011 to 2015. The proponents will analyze the quantitative data to
allow them to determine the outlier responses of the survey and then follow-up with the
interviews to validate them to gather more insight on the quantitative data. This approach is in
line with Creswells method of qualitative study (2009). This study will utilize the mixed method
Certain measures of sustainability have been excluded from the original frameworks used
as a basis of the operational framework of this paper. The reason behind is that they either do not
apply to the company or are inconsistent individual level data that cannot be used as firm level
data is utilized in this study. The exclusion of these measures entails that a complete assessment
of the company cannot be made in terms of the original frameworks. The use of firm level data
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and the exclusion of individual level data means that instead of surveying or interviewing each
employee and member of the company, only managers will be surveyed and interviewed. This
will hinder the proponents from obtaining a more holistic and detailed view of the sustainability
efforts of the company and assessing whether all individuals in the organization are taking part in
Lastly, the survey and qualitative data collection will be done from September 2016 to
December 2016, while the final write up of the study will be made from January 2017 to March
2017. This will give the proponents approximately three trimesters to complete the study
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CHAPTER 2: REVIEW OF RELATED LITERATURE
Sustainability has become an integral part of a business in the sense that it does not only
pertain to the longevity of the organization, but rather, takes on a more holistic view addressing
the triple bottom line. Many companies are actively integrating sustainability principles into their
businesses, according to a McKinsey report in 2011 and they are doing so by pursuing goals that
go far beyond earlier concern for reputation managementfor example, saving energy,
developing green products, and retaining and motivating employees, all of which help companies
capture value through growth and return on capital. In the sixth survey of executives on how
their companies understand and manage issues related to sustainability, this result show that,
since 2011, larger shares of executives say sustainability programs make a positive contribution
issues play out over the long term. Its easier for companies where they are core concerns to
understand trends and make strategic bets in advance of consumer preferences, stakeholder
pressure, or regulation. Most companies creating value through sustainability look first to
improving returns on capital, which often means reducing operating costs through improved
natural-resource management (Dow Chemicals, 2011). The fact that some industries are
management of sustainability across industries. This carries over to value creation. Overall, the
relationship between sustainability and quantifiable value is still somewhat unclear, executives
indicate: about one-third of respondents say they dont know how much sustainability initiatives
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In this case, the research has a need to identify the importance of sustainability systems,
structure, and strategies in place at a company geared towards sustainability, and how the
sustainable performances can influence the long-term corporate financial performance of the
company.
The current levels of global production and consumption are expending 50% more
natural resources than ecosystems regenerate (OShea, Golden & Olander, 2013; Trucost, 2013;
Patala et. al., 2016). In addition to increased awareness of the resource constraints we face
(Rockstrm et al., 2009), uncertainty and reputational risks of potential supply chain disruptions
drive the sustainable business agenda (Patala et al., 2016). Despite numerous interventions by
standards in factories, poor working conditions, low wages, excessive work hours, and
Today, organizations across the world face incessant financial, regulatory, competitive,
and stakeholder pressure to incorporate sustainable practices in their supply chains to minimize
and limit the negative impact to environment and society (Mathiyazhagan et al., 2014; Diabat et
al., 2014; Jain et al., 2012; Jindal & Sangwan, 2013; Shaharudin et al., 2015; Tippayawong et al.,
2015).
As a result, firms need to operate in both socially and environmentally responsible ways
while maximizing stakeholder value (Evans & Sawyer, 2010). Recognizing this, organizations
are adjusting and improving operational performance on environmental and social management
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in correspondence to standard compliance. Organizations are trying to develop processes and
conduct, green supply chain management and lean production, to sustain their competitive
advantage (Cabral et al., 2012; Gunasekaran & Spalanzani, 2012; Haleem et al., 2012; Hsu et al.,
potential for reducing long-term risks associated with resource depletion, fluctuations in energy
costs, product liabilities, and pollution and waste management. On the other hand, Sikdar
(2003) defines it within the triple bottom line approach, defining it as a wise balance among
economic development, environmental stewardship, and social equity. The term sustainability
refers to the pursuit of economic, environmental, and social performance, also known as the
The electronics industry is a setting where one might expect higher degrees of labor and
environmental standards. It is one of the largest and fastest growing manufacturing sectors,
characterized by disaggregated production networks across the globe (Locke & Samel, 2012).
Corporations producing brand hardware define the product, as well as its design and
development, outsourcing its production to contract manufacturers (Liu et al., 2015). Fluctuating
consumer demand and shortening product life cycles have produced a volatile manufacturing
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Global electronic brands have reorganized their supply chains to optimize efficiencies
and minimize financial and reputational risks. A multitude of legal environmental and labor
demands and regulations, growing public interest in environmental protection and the employers
obligation to treat their staff responsibly has forced companies to adopt sustainable supply chain
management concepts (Wittstruck & Tueteberg, 2011). Jayaram and Avittathur (2015) notes that
it is the increasing importance of ecological concerns that has forced regulatory bodies to
(Govindan et al., 2013), Thai (Ninlawan et al., 2010) and Taiwanese (Shang et al., 2010)
electronics industries, changes have been driven by strengthening regulations. Indian markets on
the other hand, experience strong customer and competitive pressure (Luthra et al., 2016).
Workers in the electronics manufacturing and assembly factories can be exposed to toxic
metals, solvents, acids, and other hazardous chemicals (LaDou, 2006). Electronics manufacturers
are eliminating harmful elements of their products (Tseng et al., 2013) and aligning processes to
allow for product recycling (Shang et al., 2010) to meet standards passed by the European Union
in 2006. The European Union passed the Waste Electrical and Electronic Equipment (WEEE)
and Restrictions of Hazardous Substances (RoHS) regulations. The RoHS prohibits the sale of
electronic products that contain heavy metals such as lead, cadmium, mercury, chromium,
polybrominated biphenyls flame retardants and polybrominated diphenyl ethers (Marques et al.,
2013). On the other hand, the WEEE defines a framework of requirements for the treatment and
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Because of the complexity of supplier networks, environmental (Liu et al., 2015) and
labor (Locke & Samel, 2012; Raj-Reichert, 2012) considerations in the supply chain have
become strategic from a focal firm perspective. In todays competitive environment, firms must
maintain competitiveness while at the same time conform with regulations (Luthra et al., 2016;
Tseng & Chiu, 2013), requiring organizations to lessen the negative impacts of their supply
network of interconnected businesses involved in the ultimate provision of product and service
packages required by end customers. Carter and Rogers (2008) extends that definition to the
concept of sustainability. Wittstruck and Tueteberg (2011) uses the definition of Carter and
Rogers (2008) who describes sustainable supply chain as the strategic achievement and
company and its value network. Risk and compliance management provide the foundation for
this definition. Sustainable supply chain management activities generally cover from sourcing
raw materials to consumer consumption, as well as reverse logistics to create a closed loop
performances towards achieving production, quality and economic goals (Iraldo et al., 2009).
Despite the necessity to balance the three aspects of the triple bottom line of
sustainability (Seuring & Muller, 2008) in developing a sustainable supply chain (Kumar &
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Rahman, 2016), most researchers focus on the environmental and economic aspect, creating the
Green supply chain management is used in various literature (Patala et al., 2016; Shang et
al., 2010; Tippayawong et al., 2015) is used to define a firms competence involving supply
chain management on environmental performance. According to Shang et al., (2010), there are
six green supply chain management dimensions in the electronics industry, particularly the
marketing, green supplier, green stock, and green eco-design. These dimensions are echoed by
Tippayawong (2015) in his study of the green supply chain management in the Thai electronics
industry.
Govindan et al. (2013) identifies three practices in cooperation with consumers and
suppliers for green supply chain management: cooperation with consumers for eco-design,
cooperation with customers for cleaner production, and cooperation with suppliers for green
packaging. Luthra et al. (2016) segments green supply chain into six practices, namely green
design, green purchasing, green production, green management, green marketing and green
logistics practices. Green design practices are used to reduce ecological impact of products
during its consumption life cycle (Eltayeb et al., 2011; Luthra et al., 2016). Green product and
process design incorporates many processes such as green raw materials, use of cleaner
technology processes, as well as use of reverse logistics (Luthra et al., 2016). Growing
reusability, and non-use of hazardous materials in their existing purchasing strategy (Hsu & Hu,
2010; Govindan et al., 2015). Green production is the application of environmentally and
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(Baines et al., 2012; Govindan et al., 2015). Green management supplements sources of
information, allowing managers to make sustainable decisions (Pane Haden et al., 2009). Green
or desires with least negative impacts on the natural environment (Singh & Pandey, 2012). Green
logistics integrates the movement of products along the supply chain with environmental and
social considerations (Grant et al., 2013). Reverse logistics include recycling, reusing, and
remanufacturing (Gunasekaran & Spalanzani, 2012; Kannan et al., 2012; Mangla et al., 2013;
(Gunasekaran & Spalanzani, 2012; Tseng, 2013; Subramanian & Gunasekaran, 2015). Green
reduced emissions (Kang et al., 2010; Luthra et al., 2014). Green marketing may improve the
organizations profitability and competitiveness (Lee & Huang, 2011; Chen et al., 2012), and
enhances corporate image, product image, and corporate reputation (Ko et al., 2013). Better
packaging and rearranged loading pattern can reduce materials usage, increase space utilization
in the warehouse and in the trailer, reducing the amount of handling required (Ninlawan et al.,
2010). An efficient transportation and distribution system saves overhead costs and improves
The global volume of electronic waste is driving more companies to join multilateral
business-to-business recycling network contracts to ensure secure waste disposal (Wittstruck &
Tueteberg, 2011). Ninlawan et al. (2010) found that Thai green manufacturing activities such as
hazardous substance control, use of energy-efficient technology, 3R and waste minimization can
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lead to lower raw material costs, production efficiency gains, reduced environmental and
Due to cost-oriented outsourcing, external stakeholders expect the focal buying firm to
assure socially and ecologically sound production in their suppliers sites (Foerstl et al., 2010).
Irresponsible supplier behavior may be projected into the buying firm. Thus, suppliers are
required to adhere to social and ecological standards to mitigate supply chain risk.
Sustainable supply chain management can only be achieved with the active participation
of suppliers and customers (Awasthi & Kannan, 2016; Luthra et al., 2016; Jabbour et al., 2014).
Despite most literature focusing on green supply chain management, many authors note that
social factors are important for its implementation (Sarkis et al., 2011; Zhu et al., 2012;
Gunasekaran et al., 2014; Ketikidis et al., 2013; Wang and Sarkis, 2013; Yusuf et al., 2013).
With growing awareness and concern for environmental and social issues, organizations are
disclosing complete information about their operations impact on the environment and society
compliance, and include assessment and monitoring measures (Jiang, 2009; Foerstl et al., 2010).
Govindan et al., (2013) found that environmental audit for suppliers audit management
has more driving power than dependence power, indicating that this practice is essential to the
industry. Zhu and Sarkis (2006) argued that environmental auditing supplier evaluation is not as
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important as other practices, but the findings of Govindan et al., (2013) show that auditing of
suppliers has more driving power than cross-functional cooperation, environmental compliance
Buying firms therefore put intense pressure on their suppliers for improved
improving the manufacturers or buying firms competitive advantage (Govindan et al., 2013;
Hsu et al., 2013; Meena & Sarmah, 2012; Bommel, 2010; Carter & Rogers, 2008; Liu et al.,
2015).
was primarily driven by the fulfilment of consumer requirement and compliance to regulations.
Foerstl et al., (2010) identifies three key methods to lessen supplier sustainability risk exposure:
non-consideration, supplier development, and phase-out. Agan et al. (2014) notes that supplier
selection and development are crucial processes for successful sustainable supply chain
management. Kumar and Rahman (2016) identifies three tasks in developing a sustainable
review.
suppliers from entering the supply base (Agan et al., 2014). Without structured supplier
assessment, management of supplier sustainability can only be achieved randomly (Foerstl et al.,
2010). New suppliers entering the selection process must comply with sustainability standards
(Tang, 2006; Foerstl et al., 2010, Liu et al., 2016). Shortlisted suppliers will then be audited on
site by either internal or external experts (Foerstl et al., 2010). For example, Thai computer parts
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manufacturers purchase materials or parts only from green partners who satisfy environmental
quality standards and pass an audit certifying that it follows environmental regulations, and
considers suppliers who acquire ISO 14000 and OHSAS 18000, and finally, select suppliers who
control hazardous substances within the company standards and obtain certificates (Ninlawan et
al., 2010). Supplier selection positively affects the triple bottom line of the company (Meena &
Supplier development is the preferred option by companies for established suppliers, and
provides further competitive benefits to the buying firm (Foerstl et al., 2010; Reuter et al., 2010).
There are three levels in supplier development: cooperation, coordination, and integration
between buyers and suppliers (Jabbour & Jabbour, 2009; Buyukozkan & Cifci, 2010; Kumar &
Rahman, 2016). Unless violations are grave, existing suppliers are given the opportunity to
improve their conditions within determined time frame (Foerstl et al., 2010). Supplier
development positively affects the environmental and social sustainability of the supply chain
(Meena & Sarmah, 2012; Mitra & Datta, 2014), but Govindan et al., (2014) and Silvestre (2015)
found that it is not positively linked to the economic sustainability of the supply chain.
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The initiation of sustainability into the firms processes need emotional and economic
commitment of the top management (Govindan et al., 2015; Wittstruck & Tueteberg, 2012;
Luthra et al., 2016; Kumar & Rahman, 2016). Zhu and Sarkis (2006) pointed out that the
(Luthra et al., 2016; Hu & Hsu, 2010; Yusuf et al., 2013; Bai et al., 2015).
Concurrent to previous literature (Bouzon & Govindan, 2014; Gunasekaran et al., 2014;
Mathiyazhagan et al., 2014; Zhu et al., 2016), external influence and expected benefits of
performance review (Gunsekaran et al., 2015; Hartmann & Germain, 2015; Hartmann et al.,
David (2011) defined strategic management as the art and science of formulating,
its objectives. The definition further implies, strategic management focuses on integrating
and information systems to achieve organizational success. The term strategic management in
this text is used synonymously with the term strategic planning. The latter term is more often
used in the business world, whereas the former is often used in academia. Sometimes the term
25
strategic management is used to refer to strategy formulation, implementation, and evaluation,
with strategic planning referring only to strategy formulation. The purpose of strategic
management is to exploit and create new and different opportunities for tomorrow; long-range
There are 5 possible strategic areas a company could pursue; these strategic areas are
further divided into 16 strategic actions. The 5 general strategic areas are Integration, Defensive,
integration develop for firms to gain control over distributors, suppliers, and/or competitors.
integration strategy by establishing Web sites to directly sell products to consumers; background
strategy can be especially appropriate when a firms current suppliers are unreliable, too costly,
or cannot meet the firms needs; Horizontal integration refers to a strategy of seeking ownership
of or increased control over a firms competitors. One of the most significant trends in strategic
management today is the increased use of horizontal integration as a growth strategy. Mergers,
acquisitions, and takeovers among competitors allow for increased economies of scale and
Intensive strategy is further divided into market penetration, market development, and
product development. Market penetration is seeking to increase market share for present
products or services in present markets through greater marketing efforts. This strategy is widely
26
used alone and in combination with other strategies. Market penetration includes increasing the
items, or increasing publicity efforts; Market development involves introducing present products
or services into new geographic areas; Product development is a strategy that seeks increased
There are two general types of diversification, related and unrelated. Businesses are said
to be related when their value chains possess competitively valuable cross-business strategic fits;
businesses are said to be unrelated when their value chains are so dissimilar that no
also pursue defensive strategy: retrenchment, divestiture, liquidation. Retrenchment occurs when
an organization regroups through cost and asset reduction to reverse declining sales and profits.
divestiture. Divestiture often is used to raise capital for further strategic acquisitions or
businesses that are unprofitable, that require too much capital, or that do not fit well with the
firms other activities. Divestiture has also become a popular strategy for firms to focus on their
core businesses and become less diversified; Selling all a companys assets, in parts, for their
tangible worth is called liquidation. Liquidation is a recognition of defeat and consequently can
27
After a strategy is developed and executed, an evaluation could be carry out to assess the
strategy. And Sustainability systems, programs and actions are evaluated because strategy can
strategy evaluation forms an essential step in the process of guiding an enterprise (Rumelt,
1980).
guarantee that it will work. One can, however, evaluate it for critical flaws. Richard Rumelt
offered four criteria that could be used to evaluate a strategy: consistency, consonance,
Consistency means that a strategy should not present inconsistent goals and policies.
There are 3 key indicators to measure if a strategy is consistent or not. First, if problems in
coordination and planning continue despite changes in personnel and tend to be issue rather than
people based, they are probably due to inconsistencies in strategy. Second, if success for one
organizational department means, or is interpreted to mean, failure for another department, the
operating problems continue to be brought to the top for the resolution of policy issues, the basic
Consonance refers to the need for strategists to examine sets of trends, as well as
individual trends, in evaluating strategies. A strategy must represent an adaptive response to the
external environment and to the critical changes occurring within it. Measurements could be
28
based on the sale growth, provision of value added for the customer, adaption to changes and
latest trends.
Feasibility means a strategy must neither overtax available resources nor create
unsolvable sub problems. The financial resources of a business are the easiest to quantify and are
normally the first limitation against which strategy is evaluated. It is sometimes forgotten,
Advantage means that a strategy must provide for the creation and/or maintenance of a
competitive advantage in a selected area of activity. Competitive advantages normally are the
result of superiority in one of three areas: (1) resources, (2) skills, or (3) position.
In recent years, corporate strategies have taken shape in the form of various sustainability
strategies. According to Biekers and his co-authors wider interpretation, a special emphasis is
given to the statement that corporate strategies must meet the expectations of the companys
present and future stakeholders without making any crucial compromises in terms of skills and
Kerekes and Kindler (1997) came up with a more accurate formulation, according to
which sustainability strategy puts an emphasis on such responsible corporate activities that
regard the issue of sustainability as development and growth opportunities for the company, and
as such, they are enforced in all fields of activity. The essential condition for the success of
sustainability strategies is how companies can resolve the contradiction between economic,
social and environmental interests as well as to create corporate interests in resolving them. To
meet the requirements imposed by this condition, a conscious strategy planning is needed that
29
In the pioneering empirical studies written by Dyllick et al (1997) and Bieker et al
(2002), competitive environmental strategies were classified based on the company's strategic
orientation and strategic behaviour. The orientation of a strategy can be classified by which one
of the two prominent actors of the companys external stakeholders, either the market or the
public, is in the centre of the companys strategy. While market-oriented strategies are designed
to satisfy market needs in a better way, the main purpose of public-oriented strategies is to
comply with societal expectations to the highest possible degree. In terms of behaviour, Szigeti
(2004) and Vgsi (2004) make a distinction between the possible strategies of organizational
behaviour based on two defining characteristics: strategies can be reactive and proactive.
Reactive strategies give response to legal and economic changes later in time, they are
characterized by follow-up reactions. On the contrary, proactive strategies take the opportunities
provided by sustainable development as a challenge and exploit them to strengthen their strategic
position.
Introverted or Risk Mitigation Strategy - focus on legal and other external standards
concerning environmental and social aspects to avoid risks for the company;
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These strategy types describe generic possibilities to deal with the challenge of
sustainability, e.g. with different environmental and social aspects of business activities
indicates that this strategy focuses on a very low standard of sustainability. A company following
the introverted strategy concentrates on the essentials such as conformity and compliance which
is already a key factor with any strategy, although it includes sustainability-related rules and
guidelines; it does not go deeper into the sustainability issue. No specific sustainability aspect
can be determined to be proportionately important for this strategy, whereas the profile of the
sustainability strategy is mostly based on the poor maturity level of sustainability aspects.
On the other hand, extroverted strategy can be differentiated between the conventional
and the transformative approach. Due to their different focuses it seems meaningful to discuss
communicating its sustainability commitment to society as well as differentiating itself from the
competitors and to increase its credibility. Therefore, it seems meaningful to engage more in
sustainability that it is obliged to do by law, making it level 2, as well as the appropriate level.
Nevertheless, in the extroverted strategy, the responsibility for corporate sustainability is often
located in the PR or communication department, which increases the risk of green-washing in the
case of limited cooperation between the communication department and other corporate
31
cartel, health and safety and collaboration to improve the relationship and working together with
The other type of extroverted strategy according to Baumgartner and Ebner (2010) is the
strategy is the same as that of conventional extroverted strategy. However, it aims at positively
influencing the basic conditions of corporate sustainability. A company following this strategy is
a driver for corporate sustainability in society and gains therefore much higher credibility. On the
other hand, it is also necessary to assure through the implementation of sustainability a high
maturity in internal sustainability aspects. The maturity level over all aspects is generally one
level higher than in the conventional extroverted strategy. Again, most important are society-
related aspects (those that have major impact (positive) on society and those for which society
internal measures, focusing on cost efficiency and very well-defined processes. Therefore, the
sustainability aspect processes is the most important within this strategy and should represent
an outstanding maturity. Within this strategy, commitment is especially crucial in the investment
in appropriate technology, sophisticated health and safety for employees and above all ecological
sustainability. Also, the measures must be derived to analyses and to increase the processes and
are not much focused on in conservative strategy; society-related issues are less important.
Visionary Strategy or Holistic Visionary strategies can be divided into conventional and
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become a market leader in sustainability issues. The two strategies are similar; they differ from
each other in the question of motivation and orientation. The conventional visionary strategy is
very much oriented towards its impact on the market, whereas the systemic visionary strategy
combines outside-in and inside-out perspectives to achieve a unique competitive position, but
company.
visionary strategies is very high, mostly on a high sophisticated level. Only for some aspects
does a lower level (3) seem to be sufficient, too, as in processes and purchase, in no controversial
activities or in corporate citizenship, as these have not enough directed impact to affect the
In contrast to the conventional strategy, for companies following the systemic visionary
strategy it is important to show in all sustainability aspects very good results, as the company
must show stakeholders and market its sustainability commitment, and moreover to be active in
sustainability strategies and their occurrence in maturity. It becomes obvious that each maturity
level stands for a specific sustainability strategy. (Baumgartner & Ebner, 2010)
Sustainability strategy, specific aspects can also be identified that are crucial for the
implementation of the strategy. It is important to mention that the profiles show the minimum
may occur that, depending on the industry, on the size of the company or on other basic
33
conditions, some sustainability aspects are more important than others so that the sustainability
profile changes towards these aspects, or that further sustainability issues are relevant, which
In practice, many consider sustainability certification is a key strategy for a supplier firm
to pursue (Kumar & Rahman, 2016). Sustainability standards and certifications are voluntary,
usually third party assessed, norms and standards relating to environmental, social, ethical, safety
issues (Kumar & Rahman, 2016). It is a symbolic demonstration of sustainability (Patala et al.,
(Ballantyne et al., 2011; Frow & Payne, 2011). Certifications and standards are a necessary part
of the core value of the electronics industry, and sustainability certifications demonstrates a
performance advantage over competition without the necessary certifications (Patala et al., 2016;
of supply chain wide activities (Wittstruck & Teuteberg, 2012). Industry specific standards give
decision makers concrete sustainability items that the organization must redesign processes for
(Wittstruck & Teuteberg, 2012). To manage supply chains in developing countries, large global
corporations located in developing countries developed industry wide code of conducts (Liu et
al., 2015). Various industry associations have drawn up corporate code of conduct to provide
guidance to members. Corporate resources are, and capacities are usually insufficient to
investigate every supplier in person, and in turn, forcing them to rely on industry wide
assessments (Liu et al., 2015). Through intra-industrial collaboration, the resources for
sustainable required sustainable supply chain management are shared, and the burden of
suppliers to respond to multiple demands is reduced (Liu et al., 2015). In the electronics industry,
34
external pressure to improve its labour conditions gave rise to the Electronics Industry
information and learning orientation (Agan et al., 2014). Bai and Sarkis (2010) categorizes green
survey of Thai electro-electronic companies (Wagner, 2007), means for supplier development
include creation of a database of environmental products, requesting product reports, and support
sustainability programs and sustainability staff (Ruedig & Metzger, 2013). Kiron et al. (2012)
explores internal drivers to sustainability and notes the importance of having an organizational
structure that embeds sustainability into business processes. Companies should leverage
sustainability concerns throughout the organization (Epstein & Buhovac, 2010). For example, at
United Parcel Service of America, Inc. (UPS), a global shipping company, health and safety
managers are placed in each business unit to implement strategic safety initiatives.
corporate objectives and strategic intents (Sellitto, 2011). The Business for Social Responsibility
Aldama et al. (2009) found that these alternatives were still found in practice, concluding that
structure is the driver for organizational change towards integrating corporate responsibility.
35
However, when there is misalignment, structure is likely to become a factor or resistance to
sustainability integration.
To identify the the current functions that support sustainability, the Business for Social
1. Which departments, functional areas, business units or groups (formal or informal) have
3. What is the scope or role of each group? Roles might include one or more of the
following: 1. Develop CSR strategy, 2. Design CSR policy and programs, 3. Implement
CSR activities, 4. Coordinate CSR efforts, 5. Communicate about CSR internally and
groups?
Aldama et al. (2009) created a questionnaire to describe what companies are doing to
integrate the corporate responsibility in their organizational structures. The questionnaire was
applied to a small sample using companies public information and company websites.
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There is a consensus that there should be sustainability focused persons who have
influence over the companys strategic planning (Park, 2008). The researchers Almeda et al.
(2009) noted the emergence of sustainability focused positions such as the Chief Executive
Officer. The Chief Sustainability Officer not only manages the integration of sustainability into
the organization, but also risk management responsibilities (Griffiths & Perera, 2007). However,
the role of the executive suite is to govern, not to manage, so they must delegate.
coordinating, and intensifying sustainability activity (Ruedig & Metzger, 2013). The best
practice for those with sustainability roles is the facilitation and coordination of sustainability
programs to improve the organizational performance (Smith, 2011; Tripoli, 2010; Epstein,
2010). Managing measurement, tracking, and reporting are also key responsibilities for
Haugh & Talwar (2010) notes that sustainability should not be restricted to the company
leaders and senior managers, and that there needs to be collaboration across the different
business functions. Concurrent to that, Ruedig and Metzger (2013) found that close collaboration
with related functions such as Environmental, Health & Safety (EHS) or Quality Management
(QM) blur the defining boundaries of sustainability staff. Sustainability staff implement
initiatives, relying on others to collect data and for technical implementation. EHS forms the
including but not limited to energy and water efficiency, and waste management.
Management system standards form a framework for the development and application of
good management practices in organizations around the world. In the manufacturing setting,
37
quality standards (QMS/ISO 9001) gave rise to the development of environmental and social
system standards (Majstrovic & Marinkovic, 2011; Mezinska et al., 2013). Managers must
existing organizational culture (Mezinska et al., 2013; Wittstruck & Tueteberg, 2011). The
electronics industry hinges on the implementation of quality standards, and was early adopters of
strategic decisions for the competitiveness and longevity of the business (Rebelo et al., 2016).
Additionally, proper health and safety practices are of key importance to manufacturing sites
(Raj-Reichert, 2013). The three most often practiced standards are QMS, EMS (ISO 14001),
and OHSAS 18001 (Majstrovic & Marinkovic, 2011; Rebelo et al., 2016). Mezinska et al.,
(2013) considers clear understanding of the responsibility of businesses to the environment and
Environmental and social sustainability must and could be inherent to all business
process, from procurement to production to sale. Khanna et al. (2010) provides the following as
synergies (Govindan et al., 2013), common objectives across management systems, improvement
of corporate image, and the reduction of third-party audits. External pressure, resulting from its
business context, is the main reason for implementing integrated management systems in small
and medium enterprises (Rebelo et al., 2016; Karapetrovic & Casadesus, 2009). Large and
multinational companies specify supplier requirements for quality that must be met. Hence, most
often, supplier firms are required to implement quality management systems (QMS),
environmental management systems (EMS), health and safety management systems (OHSAS),
social responsibility management systems (SRMS), and risk management (RM) (Rebelo et al.,
38
2016). These standard management systems help organizations achieve balanced sustainability,
considering the environmental, social, and economic needs of its internal and external
stakeholders.
In 2004, the Catholic Agency for Overseas Development released a report entitled Clean
up your computer: Working conditions in the electronics sector. The report revealed unsafe and
plants of IBM, HP and Dell in Mexico, Thailand, and China. In response to this, several brand
name firms and key contract manufacturers, led by HP, developed an industry wide code which
covers labor, health and safety, environmental management, management systems, and ethics
(Raj-Reichert, 2013).
The Electronic Industry Citizenship Coalition (EICC) was established in 2004 by eight
leading electronics firm to improve the working conditions within and environmental impact of
their suppliers through an industry wide code of conduct. EICC-affiliated firms require their
suppliers, as well as contract manufacturer plants, to comply with the EICC Code of Conduct.
Originally, the code was intended to raise awareness, clarify expectations, and enable better
assessment of supplier practices. In 2005, the EICC partnered with the Global e-Sustainability
Initiative (GeSI) to develop a self-assessment questionnaire for suppliers that would be used as a
basis for audits and performance improvements. An industry wide assessment tool, the EICC
SAQ offers an efficient tool to identify risks for both customers and suppliers (Liu et al., 2015).
The code was initially implemented individually by each EICC member, but they have since
39
made quick progress to coordinate efforts to reduce audit fatigue among suppliers and eliminate
As of 2016, the EICC is comprised of more than 100 electronics companies with a
combined annual revenue of more than $4.5 trillion, and directly employs over 6 million people.
In addition to EICC members, there are thousands of Tier 1 suppliers to those EICC members.
The most recent version (Version 5.1) became effective January 1, 2016.
The EICC is a key governance technique for the electronics industry, establishing
standards to ensure safe working conditions, that workers are treated with respect and dignity,
and that business operations are environmentally responsible and conducted ethically (EICC,
2016). The code should be regarded as a total supply chain initiative, requiring at the minimum
that the next tier suppliers must comply with the code (EICC, 2016).
The code is made up of five sections: Labor, Health and Safety, Environment, Business
The EICC guidelines on labor applies to all workers, including temporary, migrant,
student, contract, direct employees, and any other type of worker. The section for labor lists that
employment must be freely chosen, prohibits child labor, sets maximum working hours per
week, details a guideline on how to determine wages and benefits, human treatment, non-
discrimination, and respect for the freedom of association (EICC, 2016). This is measured by the
employee retention rate, employee turnover, employee complaints, presence of labor unions,
number of women and minorities holding management positions, average salaries and wages
given, zero child labor, limited or maximum number of overtime rendered by employees, etc.
(ISO, 2016).
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The EICC section on health and safety lists standards for occupational safety, emergency
preparedness, occupational injury and illness, industrial hygiene, physically demanding work,
machine safeguarding, sanitation, food and housing, and health and safety communication
(EICC, 2016). The section used the OHSAS 18001 and International Labor Organization
Guidelines on Occupational Safety and Health as reference, and calls for the use of management
systems such as OHSAS 18001 to address health and safety risks. The section also recognizes
that a safe and healthy work environment enhances the quality of products and services,
consistency of production, and worker retention and morale. The section also highlights ongoing
worker input and education as essential to identifying and solving health and safety issues. A few
examples of metrics for occupational health and safety are the presence of safety protocols,
safety orientations and trainings, number of incidents or injuries given a specified period,
adherence to proper attire or prescription of safety attire and accessories, employee retention,
employee complaints, sanitation process, food preparation, clean restrooms or bathrooms, and
The EICC section on environmental lists standards for environmental permits and
reporting, pollution prevention and resource reduction, hazardous substances, wastewater and
solid waste, air emissions materials restrictions, storm water management, and energy
consumption and greenhouse gas emissions. The section used the ISO 14001 and the Eco
Management and Audit System as reference. The first statement of this section indicates that
standard deals with the amount of pollution that the company contributes to the environment,
proper waste segregation and disposal, recyclable waste compared to common waste, the amount
41
of energy consumed by the company, investments in environment friendly or energy saving
To meet social responsibilities, the EICC upholds the highest standards of ethics
property, fair business, advertising and competition, protection of identity and non-retaliation,
responsible sourcing of materials, as well as privacy (EICC, 2016). A few ways to ascertain that
a company is being ethical is through the assessment of the way that they do business, have there
been any fines or penalties imposed on the company, have there been any cases against the
company, and does the company disclose all pertinent information regarding the product to the
Additionally, the code requires its participants to adopt to management systems, ensuring
compliance with applicable laws, regulations and customer requirements related to operations
and products, conformance to the code, and identification and mitigation of operational risks
(EICC, 2016). The management system should also facilitate continuous improvement (EICC,
2016). The management systems must contain the following elements: company commitment,
management accountability and responsibility, legal and customer requirements, risk assessment
and risk management, improvement objectives, training, communication, worker feedback and
participation, audits and assessments, corrective action process, documentation and records, as
Liu et al, (2015) conducted the first empirical study that analyzes environmental
measures based on the EICC Code adoption. The researchers distributed questionnaires modeled
on the SAQ to 106 Tier 1 supplier-manufacturing facilities of a Taiwanese computer firm, with
42
response rate of 59%, and majority of the respondents from China and Taiwan. The researchers
found that product type and number of employees offer some indication of expected
environmental performance, while location alone does not. The researchers noted that purchase
managers who select suppliers in the electronic industries can benefit from identifying risks from
EICC SAQ, and it enables supply managers to understand the level of environmental practices.
Based on the literature the following approaches were identified for assessing and
An evaluation using a set of indicators is the oldest approach to measuring and evaluating
corporate sustainability.
Epstein & Buhovac (2010) stated that sustainability performance can be measured
through inputs, processes, and outputs. Performance measures based on inputs allows for a more
environmental, and financials. For processes and outputs, however, these are typically used to
monetary terms to allow for the analysis of costs and benefits. Furthermore, to have a thorough
43
view and evaluation of a companys sustainability, the performance measures regarding strategy,
structure, management systems, programs, and actions should also be considered and noted.
The inputs considered in performance measures are the external context, internal context,
business context, and human and financial resources. External context encompasses all macro-
environmental factors that affect the company for example, pollution standards, non-
discrimination standards (Epstein & Buhovac, 2010), accounting standards, law compliance,
customer requirements compliance, etc. For the internal context, this refers to those relative to
the micro-environment or the happenings within the company, therefore the existence of a
corporate code of conduct and management system, as well as environmental and/or social
competitor benchmarking is considered (Epstein & Buhovac, 2010). The business context
involves the daily activities of the company to carry on its business, usually involving
competition within the industry it is part of and geographic diversity of production (Epstein &
Buhovac, 2010).
Lastly, human and financial resources concerns human capital and monetary resources
such as money available for employee training, money committed to Research and Development
on more effective energy conservation efforts (Epstein & Buhovac, 2010), average overtime per
worker, average days off per worker per week, percentage of migrant direct labor, average
number of overtime hours per month, average wage, average tenure, attrition per month or year,
The processes concerned are leadership, strategy, structure, and systems, programs and
44
sustainability issues and number of hours that management dedicates for volunteer work.
Strategy, on the other hand, concerns itself with the percentage of suppliers that have
Many authors emphasize that corporate performance should not be viewed only because
of economic results arguing that the assessment should include non-financial indicators (Kaplan
and Norton, 1996, 2001; Carroll, 2000; Waddock and Smith, 2000) that focus on intangible
assets and consider relationships with employees, customers and other stakeholders. Numerous
indicators have been developed in the past twenty years which measure the corporate
environmental, social and governance factors into their activities and, ultimately, measuring the
impact of their activities on their environment (Artiach et al., 2010; Labuschagne et al., 2005).
The Balanced Scorecard Institute has developed a Strategic Management Maturity Model
that describes the evolution of performance management and measurement. At one extreme,
grouped into categories that are of interest primarily to an organizations managers and
measures, and offer little strategic insight into the way an organization creates value for its
customers and other stakeholders. Most sustainability metrics, including GRI reports, fall into
this category. At the other extreme, a strategic performance scorecard system is an organization-
wide integrated strategic planning, management, and measurement system. These strategy-based
scorecard systems align the work people do with corporate vision and strategy, and communicate
45
strategic intent throughout the organization, and externally to interested stakeholders (Rohm &
Montgomery, 2010).
In the article by Docekalov and Kocmanov, the process of designing the Complex
Performance Indicator (CPI) was broken down to five steps. In the first step the basic set of
environmental, social, economic and CG key performance indicators (KPIs) was created. The
second step aimed at reducing the number of KPIs which was achieved by removing duplicate
information by way of correlation analysis and, further, by way of factor analysis to minimize
the information loss of original KPIs. Weights were assigned to the KPIs in the third step
because various indicators have varying importance in companies, they have different impacts on
the complex performance and assigning weights to the KPIs will bring them closer to reality. It
was also necessary to establish benchmarks for the reduced set of KPIs to quantify the gaps in
the corporate sustainability performance. In the last step, aggregation methods were used to
synthesise KPIs into a single composite indicator measuring the complex corporate performance.
The CPI model was designed and tested on real data. The data were obtained by way of a
questionnaire survey. To collect data in an efficient way the questionnaire was designed to verify
Researchers have investigated the effects of CSR not only on the financial market, but
also on the product market. Those studies that have focused on the effects of CSR on product
market or consumer behavior (Murray & Vogel, 1997; Brown & Dacin, 1997; Ogden & Watson,
46
1999; Manaktola & Jauhari, 2007; Singh et al., 2008). Some research has demonstrated that CSR
reasonably enables a firm to expand its product market, differentiate a product from its
competitors, and build unique brand reputation (Menon & Kahn, 2003; Bloom et al., 2006).
Brand equity and improved customer satisfaction driven by CSR initiatives give competitive
advantages to the firms, which results in increased sales as well as in increased profitability
There is little argument that corporations have a responsibility to society. However, there
is considerable debate as to whether firms socially responsible behavior is consistent with the
wealth- or value maximizing interests of investors. Prior research has extensively investigated
the CSR activities and CSR disclosure behavior of firms and their effect on investor behavior
and firm value. Specifically, researchers have investigated whether superior CSR quality could
result in various capital market benefits for firms, such as increased market return, decreased cost
of capital, reduced information asymmetry, and improved risk management. These capital
market benefits help directly to improve the value of the firm, both in the short term as well as
the long run. The extant literature claims that strong positive associations exist between CSR and
stock market performance, measured in terms of stock returns, market capitalization, and market
to book (Caroline, 2013). The benefits of CSR, such as increased employee productivity,
enhanced brand value and corporate reputation, and increased regulatory support, carry over into
future periods. So, superior quality CSR performance positively affects the value of the firm, not
only in the short term, but also in the long run (Eccles et al., 2013).
47
In addition to capital market and product market benefits, the literature has also revealed
that strong CSR performance can result in employee benefits. Different CSR provisions, such as
meeting labor union demands, providing better healthcare and retirement benefits, and paying
wages above the market level, help to increase employee productivity. Improved employee
productivity, job satisfaction, and employee motivation lead to better operating performance
(Banker and Mashruwala, 2007). Better operating performance results in higher profitability as
CSR also enables firms to avoid costly government imposed fines. Especially in highly
regulated industries, CSR has been found to promote better relations with regulators (Freedman
& Stagliano, 1991; Shane & Spicer, 1983). Brown et al. (2006) have documented that firms with
good CSR performance are also more likely to receive positive media coverage and favorable
treatment from policymakers. The authors have used an original database that includes firm-level
data on dollar giving, giving priorities, governance, and managerial involvement in giving
programs. Their results also have provided support for the theory that philanthropic giving
enhances shareholder value. Overall, the literature shows the evidence that firms with superior
quality CSR performance receive favorable treatment from the regulators and favorable coverage
from the media, that help to build corporate branding and improve firm reputation (Malik, 2015).
Corporate Sustainability Model. Among the important stakeholder groups are employees who
choose whether to work for the company, customers who choose whether to buy the products,
investors who choose whether to invest in the company, or government officials who choose
48
whether to increase or decrease regulation and enforcement. Corporate financial performance can
reactions to sustainability performance. In either case, costs and benefits associated with
sustainability strategy must be measured and incorporated into management decisions. Benefits
of sustainability actions often come from cost reductions related to new manufacturing
technologies, green products, reduced material storage and handling costs, reduced waste
disposal, decreased employee turnover, etc. In addition, benefits can be related to positive and
improved relations with stakeholders. For example, favorable press mentions, or cause-related
performance and send a positive message to customers, financial analysts and investors.
Examples of costs are the cost of compliance with legislation, investment costs, and various
Baseline information forms the basis for all subsequent measurements, so that the system
can measure improvement from the starting point on various elements of the framework.
Collecting initial baseline information may be challenging work, especially for those elements
that have not been previously measured (such as measuring the impact of a company on society).
But such initial efforts are critical to the success of sustainability initiatives. Fortunately, various
tools and techniques are available to measure the various aspects of sustainability performance.
As more and more companies are gearing themselves towards green initiatives and
sustainable action plans, it is becoming more apparent that there are changes that occur once
49
these actions are taken. Businesses are being pressured by its stakeholders to become more
sustainable and engage in acts and programs that would help improve the reputation of the
company through the likes of corporate social responsibility (Mathiyazhagan et al., 2014), but to
see what these entail for the company and how they will benefit from all these efforts and the
extra money that they will have to put in, a cost-benefit analysis is usually done. In most cases
there is an investment to be made and as with investing, money is involved. Financial managers
are then tasked to weigh the financial consequences of these investment decisions in line with
their respective environmental and social impacts. (Epstein & Yuthas, 2012) For a business to
determine what the costs and benefits of investing in sustainability will be, we must first
Some businesses are hesitant to adopt sustainability initiatives and practices due to the
cost of investment. (Aragon-Correa & Rubio-Lopez, 2007; Paraschiv et al., 2012; Peters &
Zelewski, 2013) These added costs for investments usually occur at the beginning of the
(recruitment).
However, there are some researchers that state that there is cost reduction involved in
corporate sustainability, but it is promoted in the long run. (Schaltegger, 2011; Ganescu, 2012;
Baumgartner, 2014) Investments are always a trade-off as you give up one thing to acquire
another which will hopefully give more than what you put in. In the case of sustainability, you
are investing in positive impacts on society, the environment, and the economy. (Patala et al.,
2016) Several articles have argued that corporate sustainability is a way to add value to a
50
company and create a competitive advantage. (Ganescu, 2012; Peters & Zelewski, 2013; Stead &
Stead, 2013). Other ways to reduce costs are through waste management and resource allocation.
Epstein and Yuthas (2012) developed an enhanced model of the traditional cost-benefit
analysis. Instead of just considering the programs and activities, operational performance, and
monetary benefits and cost, they add sustainability performance and stakeholder reactions to the
mix to make it a model for sustainability. Sustainability programs pertain to the actions taken
towards sustainability initiatives, while operational performance deals with the outcomes
resulting from the sustainability programs. Sustainability performance, on the other hand, deals
with the results that relate to the impact on society and the environment. Monetary costs and
benefits, as is commonly known, refers to the financial results of the initiatives, and lastly,
Stakeholder Reactions which quite literally deals with the reactions of the stakeholders to the
complex, and the cost over life of the facility is usually much greater than the conventional
facilities (Cooperman, 2013). These projects need policy supports such as tax credits, debt
financing, equity and structured equity to subsidy part of the development costs to attract private
investors (Cooperman, 2013). Cooperman (2013) provides examples of banks such as Barclays
and Wells Fargo that have financed clean energy projects. And there is a rise in community
focused banks that provide environmental focused loans (Cooperman, 2013). Alternatively,
social impact bonds have been introduced in some countries to finance infrastructure projects
(Lu et al., 2015). Social impact bonds are funding provided by private investors, on the condition
that the government will pay the principal and interest only if the project achieves the expected
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Kumar and Rahman (2016) states that the management plays a huge role in the selection
of the initiatives and programs based on the benefit that these would give the company combined
with the pressures from stakeholders. The chosen programs are then measured through an impact
analysis on the economy, society, and the environment. It is imperative that the top management
remain engaged in the endeavor for them to motivate the stakeholders to move towards
sustainability and keep up the initiatives that were chosen and put in play. It is also necessary to
create good ties with the suppliers as a sustainable business starts with its supply chain, which in
a smaller scale starts with the supplier itself. One way of attracting suppliers and customers is
through the advertisement or the publication of the green practices of sustainability efforts that a
company employs such as a sustainable supply chain (Wittstruck & Teuteberg, 2012).
Sustainability in general is defined as the ability to meet the present needs without
compromising the ability to meet future needs. Applying this to a business will turn it into
Corporate Sustainability meaning that it is the ability to meet present needs of the businesses
without compromising the ability to meet future needs of both the direct and indirect
stakeholders (Lozano, 2012). Organizations that integrate the environmental and social policies
into their business models represent a modern corporation that considers its financial
performance, environmental and social impact, long-term approach to maximize profits, active
stakeholder management, and more developed measurement and reporting systems (Eccles et al.,
2011). However, it is not enough to have a few initiatives here and there, for a business to
progress towards sustainability, the business must have a holistic approach which considers all
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three dimensions of economic, social, and environmental (Baumgartner & Ebner, 2010;
Baumgartner, 2014; Lozano, 2015). There have been numerous papers that analyze the
assets(ROA), return on equity (ROE), return on sales (ROS), or earnings per share (EPS).
Market-based measures include market value, market return, and Tobins Q. (Lu & Taylor,
2016).
Lu and Taylor (2016) points out that on the one hand, one stream of sustainability studies
have examined the association between corporate social performance and corporate financial
performance. The empirical results are generally mixed. On the other hand, another stream of
sustainability studies has focused on the relationship between environmental performance and
financial performance. One group of researchers has documented that the high environmental
performance of firms increases firms financial performance. Another group of researchers has
relationship between corporate sustainability performance and financial performance exist. Meta-
analytic procedures can help find factors that moderate the relationship between corporate
sustainability performance and corporate financial performance. The whole dataset is split into
several pairs of subsets. Then the generalized least squares (GLS) analysis for the moderator
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effects was performed. Before running GLS, outliers were examined by calculating Huffcutt and
Arthurs (1995) sample-adjusted meta-analytic deviancy (SAMD) statistic. The final dataset for
moderator analysis includes 198 effect sizes. The results showed that in addition to the positive
performance, other moderators also contribute to the CSP-CFP relationship. Traditional literature
The electronics industry mainly refers to consumer electronic goods and is fairly a young
industry, having only been in existence since the 20th century due to technological advancements
and expansion of capabilities and resources. The electronics industry is a collective of companies
that produce and manufacture electronic goods. Under this industry is the electronic
manufacturing services. These are the companies that design, assemble, produce, and test
electronic components for original equipment manufacturers. The companies under these
services are usually contracted by other companies. According to the Philippine Economic Zone
Authority (PEZA), as of the year 2013 there were approximately 420 firms in the electronics
industry in the Philippines where majority were Japanese, American, and Korean firms. It has
been the top export earner in the country for the past decade and a primary player in the foreign
currency pool.
It is an industry that is currently worth billions of dollars as more and more people are
adapting more technology into their lives. Consumer electronics are made for everyday use
mostly for productivity, entertainment and communication mediums. They help make life easier
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as they eliminate certain actions and wastes. They also help make processes more efficient and
effective, making them faster and more reliable than the old ways of doing things. The industry
Services. Below is the list of the services for each and the percentage that it takes in the
electronics industry according to the National Statistics Office for the year 2012:
1. SMS 77%
Components/Devices (Semiconductor)
2. EMS 23%
Office Equipment
Consumer Electronics
Telecommunication
Communication/Radar
Medical/Industrial Instrumentation
Automotive Electronics
Solar
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The strength of rivalry in the electronics industry is strong as there are many electronics
manufacturing and assembly service providers out there, not necessarily just in the Philippines,
but also outside the country. The biggest competitor for EMSCAI is China in general because it
is common knowledge that labor is cheapest there, therefore, most manufacturing and assembly
jobs are being outsourced to China. Other countries also have more advanced technology that
help speed up the manufacturing processes. Having more advanced technology also allows
companies to produce various products and allows them to expand their capabilities and capacity
In an industry such as electronics, one that is growing so fast with innovative technology
being developed every day, companies participating in this industry struggle to stay ahead of one
another. Take Apple and Samsung for example, they are both manufacturers of smartphones,
which is under the electronics industry. They try to outdo one another on features, design, and so
many other aspects of their smartphones just to gain market share and increase their revenues. In
EMSCAIs situation, their competitors are brands who manufacture their own products or
outsource them to other countries to cut costs. Another reason why rivalry is strong is because
there are many players in the industry, there are many firms that offer almost the same
capabilities as EMSCAI to the same market. The most convenient way to entice customers to
pick you as a supplier is to offer them attractive prices for your services and competing with the
likes of China with their lowest labor rates is a great challenge for smaller countries and
companies. Microchips and electronic circuit boards are hardly differentiated, making products
The electronics industry is very volatile. If there is an economic downturn like that of
which occurred in the year 2009, the industry will falter, and market values and orders will
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decrease. Electronics are not a basic need for people, therefore, it will be one of the first things
people will cut down on. Big companies, specifically, customers and suppliers, tend to lay off
people and discontinue certain production processes, which will in turn result in less volume and
The threat of new entrants into the industry is weak because of the need for a high
amount of capital to enter the market successfully and even more money to continue operations.
The use of massive equipment and need for an enormous number of human resources results in
the need to have a large working space or manufacturing site. Customer loyalty also plays a part
because companies who already have a supplier for electronics manufacturing cannot easily
switch suppliers because of their large volume orders that need to be filled to make the products
that they offer to the market. It is also difficult to foster relationships with suppliers if you do not
have a sizeable enough company that will place orders that meet the minimum requirement for
the supplier.
The competition from substitutes is weak because it is a service that is being provided
even though it is product that is being produced. The electronic parts that are being made by the
company are done using the specifications of the customer, this means that the items are not
ready-made. Also, with the large volumes of orders that a customer usually places, it is difficult
for them to just get up and switch to another service provider. For the buyers or customers to
determine whether the substitute products have better quality, performance, or other attributes,
they will have to ask for a sample to be made for them according to their specifications.
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Making a sample is difficult to do because most electronics manufacturing companies
employ mass production and do not find it economical to spend as much time negotiating and
designing a product to just make one of it to show as a sample. Furthermore, it is also a risk on
the customers part for giving their designs for their specific electronic part because the company
can leak or use their design for other customers with only making a few minor alterations.
Switching suppliers also increases the costs that the company will incur, again due to the large
volume of orders.
Bargaining power of suppliers is strong because the suppliers of the components and
materials to be used in production are the buyers themselves. They can negotiate prices knowing
that EMSCAI does not source its own materials and components yet. The buyer also has certain
specifications and design needs that are already fulfilled by the components that they already
have on-hand and will pass on to the company for the electronics manufacturing and assembly
service.
The bargaining power exhibited by the buyers is strong because the customers of
EMSCAI provide the materials to be used in the manufacturing and assembly. EMSCAI has yet
to start sourcing materials on its own but will do so in the future. The buyers can negotiate the
price for the service that EMSCAI will provide them based on the materials to be used, length of
time it will take to make the product, and budget restraints of the buyer. Initially, the company
gives a quotation to be approved by the customer, if the customer is not satisfied with the
quotation then renegotiation of the contracts will be done, and a new quotation will be provided.
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The company gives importance to strategic customers/partners when making quotations
but if they are still unsatisfied with the best offer then the company will not push down costs to
the desired amount at the expense of the quality of the product, which is what differentiates them
from other electronics manufacturers. The identity of the customers also brings prestige to the
list of customers of EMSCAI because it can bring in more business for them if others see that big
foreign customers
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Increased demand for industry standard
compliant suppliers
EMS Components Assembly, Inc. is a 100% Filipino and family-owned company that
was incorporated in 2004 by Francis Ferrer, known in the industry as the Father of Philippine
Technopark, Laguna, Philippines. EMSCAI was a result of a challenge, while Francis Ferrer was
companies were downsizing to cut expenses and to save money. Mr. Ferrer took it upon himself
to open his own establishment to save the jobs of those people, to show that the Filipino people
are worth investing in, and to make a company competitive to China. EMSCAI started out with
about 90 employees in 2004 and presently, according to the the President of EMSCAI, Mr. Perry
Ferrer, as of January 2016, EMS Components Assembly, Inc. has approximately 2,500
employees, most of which are female. It is a subcontracting firm for some of the major players in
the industry by providing the human labor along with training, facilities, utilities, and
management expertise to its customers. EMSCAI also extends assistance to their customers to
acquire all the necessary paperwork and registrations, as well as certifications needed to carry
The company has received certifications from PEZA (Philippine Economic Zone
Authority), DOLE (Department of Labor and Employment), ISO 9001:2008, and is SEC
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registered CS200400731. As of 2014, the companys revenue was derived from 60% electronic
parts, 15% from consumer electronics, 5% from semiconductors, 2% for automotive, and 19%
from others.
An experienced and capable workforce is vital to EMSCAI as they are a service provider
and are very labor intensive, that is why all the production operators that are being hired by the
company go through extensive training to ensure the performance and quality they will provide
the company and its customers. Training exemplifies an eye for detail, productivity, motivation,
preciseness, knowledge of due process, and safety. It is also vital to have a visionary
management that can lead the company towards a profitable future allowing the company to
grow and expand. Mancomm and Strategic Planning sessions take place every month and per
quarter respectively, to adjust or create new plans for the rest of the year and to forecast for the
succeeding years. Mr. Francis Ferrer has been in the electronics industry for more than 20 years
and is a prominent name in the industry. It also helps that he is on the PEZA (Philippine
Economic Zone Authority) board. He also used to be the president of Integrated Microelectronics
Incorporated, making him a vital source of information and direction as he understands the
EMSCAIs customers include brand names such as Toshiba, Nikkoshi, Manila AMC,
Integrated Microelectronics, Inc., Tescom, and several others. These customers have been with
the company for years and are a great asset to EMSCAI as the association with them shows that
the company provides high quality manufacturing as the customers themselves strive for the best.
several well-known brands in the industry. To be able to do this, EMS has the latest high-end
Surface Mount Technology Machines. This enables the company to produce better quality, faster
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delivery lead-time, and competitive cost. Surface mount technology (SMT) is a method for
producing electronic circuit where the components are attached directly to the printed circuit
boards. With this, the company can become more efficient, effective and competitive.
This endeavor helps attract more customers as they want to follow in the footsteps of
some of the biggest names in the industry and a step towards garnering market share is to have
the same service provider to ensure that the quality of their products matches up to the quality of
the products of leading brands. The company also prides itself in superior customer service as it
provides production and workforce stability, allows extensive use of engineering tools to
improve yield, it has a shorter ramp to production, there is a technology transfer or replication of
manufacturing of the customer to the workers of EMSCAI, protects intellectual property through
regulatory requirements for the customer. Inside the company, people treat each other as family,
management believes that everyone should be included and there should be no factions to be one
team and to move as one team towards one goal, which is to become a globally competitive
One of the reasons why EMSCAI has grown to the size that it is today and is still
improvement through innovation. Each year, the company holds an Innovation Challenge where
employees propose of ways to improve an activity or situation or status in the company. A few
examples of these are elevated soldering equipment to make it easier on the posture of the
employee using the equipment, switching to LED lights and inverter air conditioners to save on
shave of a few seconds of time for each assembly which eventually will add up and save money
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as well as increase the possible volume of production. Another reason for the growth and the
high retention rate of the company is because top management keeps their employees in mind
and makes it a point to give back to them through profit-sharing and incentives. The Human
Resources department also prepares a few periodic Corporate Social Responsibility programs
that employees join on a voluntary basis aside from those of which that assist in the ethical and
The company has several corporate social responsibility practices that are overseen and
implemented by the human resources department. For ensuring ethical strategy, honorable and
ethical operations, they are Bureau of Internal Revenue (BIR) and Securities Exchange
Commission (SEC) registered and their financial statements are audited by SyCip, Gorres,
Velayo, & Co., which conducts audits according to the Philippine Standards on Auditing. They
have an internal Total Quality Management team that analyzes and evaluates the processes being
done in the company and determines how to lessen or eliminate defects. The companys ISO
certifications along with local government and customer awards and recognitions, allow it to
comply and exceed quality standards and expectations. There is also an internal corporate affairs
department that ensures that all actions of the company and the people in the company are legal
and ethical.
Supporting charitable causes is another way that EMSCAI gives back to the community.
Visiting homes for the aged like Bahay ni Maria, conducting outreaches in public schools and
orphanages such as Elsie Gaches, pioneering blood drives to donate to the Philippine Red Cross,
house construction in partnership with Habitat for Humanity, medical missions in provinces, and
donations to disaster stricken areas are some of the charitable causes that EMSCAI has focused
on in the past few years. Uniquely, the company has a scholarship program called the Bridge
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Project or the FIF Scholarship Program. It aims to bridge the gap between education and
employment. The program is offered to the relatives of the employees of any of the companies
under the EMS Group of Companies that have worked there for at least a year and the applicants
are in their 3rd or 4th year in high school or are taking vocational courses. After they complete
their studies, they will be employed by the company if they pass and the requirements that
EMSCAI imposes.
EMSCAI also cares for the environment. Within the company they follow the reduce,
reuse, recycle program and they also have the paper initiative wherein they have strategically
placed boxes where scratch paper with only one side used is placed for it to be used again to
utilize both sides of the paper. Employees undergo environment protection orientations when
they are first hired and later throughout their stay in the company to teach them how to be
responsible and to start at home by doing simple and minor alterations in their lifestyle and
practices. There are also tree planting activities and mangrove planting activities through
partnerships with schools and local government units. River clean-ups such as the Pasig River
are also being done by the employees of the company. Proper waste segregation is also observed
and a monthly target of 60% recyclable waste compared to common waste produced is set.
stands for Standardize, Systematize, Sweep, Self-discipline, and Safety in the workplace. This
teaches the employees to be neat and responsible for their actions and for their time in the
company. There is also a cadetship training program where employees are trained to become
supervisors and managers as top management believes that they should invest in their people. A
performance monitoring sheet keeps people on their toes and makes sure that they are motivated
and productive throughout the year and to help address problems and concerns that their
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employees might have. Orientations for health and safety are also being given as well as full
annual physical exams that are mandated and paid for by the company. Leadership and
motivational seminars help employees become more passionate about their work as there will
always be the opportunities for promotions and recognitions for their efforts. Profit sharing
works as a good recruitment tool. If an employee successfully refers another employee into the
company, they will get a small commission as a form of gratitude. Parties and other events are
also held for the employees as EMSCAI is not all about work. In Christmas parties, for, example,
as it is the end of the year, employees are rewarded for attendance, loyalty, and exemplary
performance to serve as examples and role models for their fellow employees.
Since its establishment, EMSCAI has always hired female production workers from age
18 to 27 years old, however, certain exceptions have been made. For example, if an applicant has
been a production worker for multiple companies, but over the age limit it is under the discretion
of the interviewer to accept the applicant based on past performance and employer endorsements.
In management and administration, both males and females are accepted even those who have
disabilities such as deafness or partial blindness are not discriminated upon. The company has
given jobs to over 2,500 people and collectively as a group (EMS Group of Companies) has over
15,000 employees as of July 2016. The company also does not only hire Filipinos, although it
gives great emphasis to Filipino workers as it was built on fostering the skills of the Filipino
people, Japanese businessmen also work in the company as consultants, engineers, and trainers
this is due to the close ties between the Ferrers to the Japanese executives as Japan is one of the
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To be an excellent solutions provider among globally competitive electronic manufacturing
services.
To achieve globally competitive status through partnership and constant innovation in: quality,
There are certain values, philosophies, and ideologies that their employees should embody to be
productive and to uphold the image of the company. Those values, philosophies, and ideologies
are mainly:
Efficiency and excellence, which means that they strive to be excellent in all aspects of
what they do through continuous improvement, innovation, and upgrading their technical
within the company so that no key information is withheld from the necessary
departments.
66
Adaptability to changing needs is almost a requirement in the technology and electronics
industries because they are greatly affected by technological advancements that lead to
certain processes to become obsolete. Other factors that affect the industry are
STRENGTHS WEAKNESSES
67
employee - management Customers supply raw materials and
communication inputs
2004
EMS Components Assembly, Inc. (EMSCAI) is one of the few fully Filipino, family, and
privately-owned companies left in the Philippines. It also emphasizes the need to have quality
products and services at competitive prices to attract and retain its customers through continuous
improvement in all processes and and providing facilities, labor, and organizational management.
The company also provides Technical Education and Skills Development Authority (TESDA)
accredited training to its production operators to achieve quality manual assembly capabilities
using high technology machines and processes such as the Surface Mount Technology machines
that allow higher volumes of production in massively less time than manual soldering. Due to its
standards, EMSCAI is able to address the health and safety of its workers as there have been no
major accidents and injuries since its founding in 2004, they also have a zero defects initiative
that has been achieved for numerous months but is not consistent as there are multiple factors
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systems, and occupational health systems also aids in addressing any related concerns
particularly with employees and the community where the company operates in. Certain Best
Practices in place such as the open-door policy, flat organizational structure, streamlined
governance system, and Ugnayan Sessions where employees can bring forth any concern they
may have about the company, its people, or the community and environment helps EMSCAI
focus on pressing matters to improve the workplace environment and positively impact its
surroundings.
However, due to its being a privately-owned company with over 2,500 employees, it is
difficult for EMSCAI to raise the funds needed in case there are new projects to be executed or if
there are new equipment or technologies to be purchased therefore, they must turn to bank loans.
It also hampers the companys ability to reach more customers and to expand globally as this
would need a stronger global presence and brand recognition along with the capital required to
fulfill those orders should they arise in the future. The company also does not have any
bargaining power regarding the price of the raw materials and inputs as these are being provided
by the customers or regulated by the customers through a set list of acceptable suppliers, which
in turn partially sets the profit margin quite low due to the costs incurred. In line with this, more
companies are requiring their suppliers to be EICC compliant or compliant to any requirements
and standards that they so choose. This pressures companies to realign their goals and to come
up with new strategies and actions that would best fit the requirements and standard fulfillment
needed or asked for by the customer. Through the acquisition of new customers and retention of
old customers, the business will thrive and generate more profits to be used in other activities or
for expansion and increase brand reputation and recognition. To obtain funds for investment in
SMT machines which are increasing in demand and to purchase more advanced equipment to
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improve productivity and efficiency or to aid in the global expansion of the company, EMSCAI
can opt to have an Initial Public Offering and become a publicly traded company. The downside
to this is that the company will then have to answer to outside investors instead of those directly
As it is, it is hard to penetrate the electronics industry due to to the high capital
investment needed for plant, property, and equipment, as well as the highly skilled labor force
necessary. High utilities costs are also typical in this industry as numerous machines are used in
production. The electronics industry is one that is heavy on international relations as most
companies are multinational or publicly traded which presence all over the world. Inputs are also
imported while the outputs are exported to other countries, therefore making EMSCAI reliant on
global trends and international trade relations aside from the laws and regulations governing this
industry. It is also no secret that in some government agencies, there is apparent graft and
corruption that may hinder the ethical manner of which people would carry out their business.
Hopefully, this will be mitigated by the current president. However, as President Duterte is
against corruption, he is also moving towards ridding the country of contractualization which is a
part of the culture in the electronics industry especially where production operators are
concerned due to their project-based hiring. This poses a threat to the hiring process as well as
leading to increased costs to regularize employees and provide the necessary compensation and
benefits.
EMS Components Assembly, Inc. operates with a subcontracting type of business model
wherein they are the suppliers of training, facilities, management, and human labor to their
70
clients to manufacture the electronic components being outsourced to them. The company can
provide these services in-house or if the client prefers it, all operations can be done in the
principal place of business of the client or in a specified location stipulated in the contract
between the parties. The clients of EMSCAI are large businesses that have their own
manufacturing capabilities but choose to outsource to mainly cut costs. These businesses provide
all the necessary inputs and raw materials for EMSCAI to use in the manufacturing of their
electronic components and products. This is due to the highly specified and differentiated
products that they intend to create therefore, the supplies to be used cannot come from just any
supplier.
In addition, there are also set standards and certifications that the suppliers must be
compliant to be awarded with the business from these clients, this shortens the list of possible
candidates for suppliers considerably to ensure that the product will have the highest level of
quality achievable. Because of this, the managers at EMSCAI make it a point to ensure that the
company maintains its ISO 9001:2008 certification for quality and its compliance to the
Electronics Industry Citizenship Coalition (EICC) code of Conduct which is the standard to be
upheld by companies within the industry in the fields of Labor, Health and Safety, Environment,
This type of business model is not uncommon in the electronics industry. To illustrate, a
simple supply chain is provided below to show how the operation is outsourced and how the
suppliers supply both the EMS Providers and the Original Equipment Manufacturer.
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Original
Component EMS
Equipment
Suppliers Providers
Manufacturer
As seen above, the component suppliers provide inputs to the EMS providers and the OEMs. In
the case of EMSCAI the component suppliers can be either the customers themselves or
suppliers that were pre-approved by the customer. This fact means that EMSCAI has no choice
but to pay whatever cost is associated with the inputs as the parts are highly specialized and
differentiated to give the customer company a competitive advantage from other players in the
market. This caps off the profit margin of EMSCAI as they cannot significantly lower costs of
inputs.
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TESDA accredited training, innovation driven, high technology and manual labor combination
General Administration
Francis and Perry Ferrer, father and son duo
Family and Filipino-owned private company
corporate financial performance use secondary sources in the form of different sustainability
indices, such as the Dow Jones Sustainability Index, NASDAQ OMX Stockholm, Kinder
Lyndenberg, and Domini, and ASSET4 ESG index as proxy. Another method used by prior
research is the construct of new indices and scales to collect own primary data by using surveys
or by analysing public corporate reporting. Semi-structured interviews are done on the firm level,
most often with a company representative. Data gathered from the interviews are then
performance and financial performance. The relationship between sustainability and financial
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Measurement and evaluation of corporate sustainability is traditionally done using an
evaluation using a set of individual indicators that are designed and arranged to form a tie
analysis. In quantitative researches that explore the relationship using multiple indicators, further
exploration using qualitative methods are not done. Researches that use qualitative methods as
the primary method are more often used to identify best case practices, and to describe the
current state of sustainability the organization, and does not use quantitative data analyses such
Hassin et al., (2012) recommends that more attention should be given to industry specific
research on sustainability. There are several researches on the sustainability practices of the
electronics industry, with the bulk of the literature focusing on green practices. Sustainable
supply chains and compliance with sustainability standards are done from the perspective of the
buying firm, and no in-depth qualitative analysis has been done from the perspective of the
supplier firm. Most of the companies used for empirical analysis and case studies were in
Taiwan, China, Brazil, Thailand, and Malaysia. The Philippine electronics industry is still vastly
under researched. Additionally, the lack of indices and the lack of formal sustainability focus in
the Philippines mean that data is only available within the firm.
The proponents aim to establish the sustainability performance and long term corporate
financial performance using correlation analysis, and conduct a qualitative evaluation of the
sustainability strategy, structure and systems. Sustainability strategy and systems will evaluate
using an interval scale, specifically a likert scale. The proponents would also use collect data
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from all members of the top and middle management as opposed to a single representative to get
more objective data, and to identify gaps in perception. This information will be treated to a
Currently, EMSCAI does not have supplier bargaining power, half its revenue is
generated from a single brand customer that may pull out at any time, and it faces some
difficulties in raising capital. As the practice in the industry is for that customers source the
supplier, the firm cannot change or negotiate with the suppliers to offer lower prices. While
direct material costs may not be lowered, and direct labor costs are set by law, EMSCAI can seek
to improve its profit margin by lowering overhead costs by improving operating performance
(Malik, 2015). The company may mitigate the impact of the major customer pulling out by
ensuring high customer satisfaction, increasing the sales from its other clients, and parallely, by
seeking new customers (Malik, 2015). One of the most crucial elements to raising capital is its
attraction value to potential investors or creditors. The company applies for credit within the
Philippines where sustainability is not criteria. However, if the company does decide to apply for
credit from big international firms, sustainability performance is decision criteria (Malik, 2015).
Furthermore, cost of capital is also lower in sustainable companies as financial firms perceive
them to have lower risks (Malik, 2015). Investors are also more likely to invest in a sustainable
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CHAPTER 3: THEORETICAL FRAMEWORK
The Corporate Sustainability Model was developed by Epstein (2008) to help managers
organizations sustainability performance. It builds on a previous work, Epstein & Roy (2001),
providing clearer and more definite elements of the input function. More specifically, the model
enhances the understanding of the role of various drivers in sustainability, the causal relationship
among the various actions, the impact of sustainability actions on sustainability performance, the
reactions of various stakeholders, as well as the impact on financial performance (Epstein &
Buhovac, 2010). Input considerations significantly affect the choices a corporation makes
regarding formulation and implementation of sustainability actions (Epstein & Buhovac, 2010).
76
Inputs may sometimes act as constraints to improved corporate sustainability, but
managers have significant ability through leadership and the formulation and implementation of
various processes including sustainability strategy, structure, actions, and systems to effect
performance that is the effect of the corporate activity on social, environmental, and economic
fabric of society. Positive and negative stakeholder reactions affect corporate financial
performance.
Epstein and Buhovac (2010) notes that manufacturing companies focus more on
environmental and health issues, while service-oriented companies emphasize more on the social
aspects of sustainability.
Epstein and Widener (2010) uses the model, using a case wherein stakeholders believe
that there is a trade-off between energy development and protection of wildlife to understand
inform decision making. Epstein and Buhovac (2010) further elaborates on the model,
highlighting the need for leadership, culture, and people to support sustainability
implementation. Epstein et al., (2015) explores how large, complex and for-profit organizations
are simultaneously managing social, environmental, and financial performance. The research
notes that managers recognize the financial value of stakeholder reactions to social and
environmental performance.
Roy et al., (2013) uses a variation of the model on SMEs that are simultaneously
pursuing quality and environmental objectives. The study sample comprised of two groups: those
with ISO 9000 only, and those with both ISO 14000 and ISO 9000. The study identifies the
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significant differences between the two group in terms of specific motivations and resources,
types of initiatives implemented, and elements of operational performance. Henri et al., (2013)
environmental performance. Henri et al., (2016) found that environmental costs reflect an
executional aspect aimed at managing, controlling and optimizing costs for a given
environmental strategy, but also a structural aspect based on their influence on the firms cost
structure in terms of product design, raw materials used, and operational process design. Ruedig
and Metzger (2013) uses the model as a foundation to analyze how sustainability staff provide
organizational impacts. Lozano (2015) provides a holistic perspective on the different corporate
sustainability drivers, using the Epstein and Roy (2001) model to identify how companies
improve sustainability performance, and how managers can identify, manage, and measure the
drivers to sustainability. Ameer and Othman (2011) uses the Epstein and Roy (2001) model in
approaching their study, which tests the hypothesis that superior sustainability practices result in
Figure 3.2 depicts the operational framework for the research study The Relationship
Between Sustainability Performance and Long Term Corporate Financial Performance: A Case
Study on EMS Components Assembly, Inc. The current and past performance in terms of
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This research aims to determine if EMSCAIs involvement in sustainability practices,
particularly in its strategies, structure, and systems, affected the long term corporate financial
performance of the company. The theoretical framework has been condensed to highlight the
variables indicated in the main research problem. Stakeholder reactions has been retained as a
moderating variable between sustainability performance and long term corporate financial
performance.
corporate financial performance of the company, the theoretical framework has been condensed
to highlight the variables indicated in the main research problem. Stakeholder reactions has been
retained as a moderating
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Figure 3.2 Operational Framework
variable between sustainability performance and long term corporate financial performance. To
establish a relationship between the sustainability performance and long term corporate financial
performance, the proponents will determine the companys environmental performance, social
consumption of recycled materials and raw materials, fuel consumption, waste production,
products and services for which the health and safety of customers is evaluated during their life
violations of the Code of Ethics. Economic performance will be determined based on the
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companys cash fllow and return on assets, while performance on corporate governance will be
determined based on the companys contributions to political parties, politicians, and related
corporate governance, percentage of achieved strategic goals, and the total number of sanctions
for noncompliance with laws and regulations. Long term corporate financial performance is
based on the three profitability ratios return on assets, return on investment and return on equity,
and the four liquidty ratios rapid liquidity, current liquidity, quick liquidity, and general liquidity.
Data for these variables will be collected from the companys archive of documents. All
sustainability performance and long term corporate financial performance indicators, based on
Docekalov and Kocmanov (2016) and Santis et al. (2016), were retained since these are
The research does not only aim to establish a relationship between sustainability
performance and long-term corporate financially performance, but to also identify what actions
and their corresponding maturity level are being done by the company that results in the
systems in place, all necessary aspects of each component are indicated in the operational
framework. The proponents will be profiling the sustainability stategy of the company based on
the respondents assessment of the maturity level of the companys actions on innovation
resources including recycling, emissions into the air, water or ground, waste and hazardous
waste, biodiversity, environmental issues of the product, corporate governance, motivation and
incentives, health and safety, human capital development, ethical behavior and human rights, no
controversial activities, no corruption and cartel, and corporate citizenship, how the company
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distributes roles, responsibilities and accountabilities of sustainability issues in the company, the
responsibility, legal and customer requirements, risk assessment and risk management,
improvement objectives, training, communication, worker feedback and participation, audits and
assessments, corrective action process, and documentation and records. Data for these variables
will be collected through surveys and interviews. All aspects of sustainability strategy, structure,
and systems, as per Baumgartner and Ebner (2010), Aldama et al. (2009), and EICC (2016),
EMSCAI does not have supplier bargaining power, half its revenue is generated from a
single brand customer that may pull out at any time, and it faces some difficulties in raising
capital. To improve on its weaknesses and eliminate its threats, the company needs to improve its
operating performance, and gain brand value. Operating performance may be determined by
measuring the employees productivity and operational efficiency. Customer satisfaction, sales,
and customer retention are indicators of brand value. Sustainability performance improves the
operating performance and is a value proposition for companies (Patala et al., 2016). Strategy,
structure and systems guide the actions a company undertakes to improve its sustainability
The research question requires the evaluation of past and current performance, and thus,
the operational framework was developed by identifying the information that is already available
in the company.
The input block of the corporate sustainability model (which includes the external
context, internal context, business context, and human and financial resources), along with the
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leadership function, is not included in the operational framework for this research since they are
considered antecedents for sustainability strategy. Sustainability programs and actions are
derived from the sustainability strategy, and are already evaluated during sustainability strategy
assessment. Thus, the sustainability programs and actions function has been compacted into the
sustainability strategy function. Feedback loops form a critical element of the sustainability
systems, and have therefore been collapsed within the function of sustainability systems.
Sustainability strategy, structure and systems are grouped together, as it forms part of the
aspects as defined by Baumgartner and Ebner (2010). The results from the initial evaluation
allows one to identify the sustainability strategy profile being used by the company: Introverted,
Extroverted, Conservative, and Visionary. The standard of sustainability across the four
strategies ranges from low to high, with the introverted as the lowest, and visionary as the
functions with sustainability roles, responsibilities, and accountabilities (Aldama et al., 2009).
(including policies, goals, procedures, and review processes) to assure proper management of
sustainability. Management systems form a crucial part of the Electronics Industry Citizenship
Coalition Code of Conduct, and evaluates the existence of an adequate and effective
sustainability system across items such as: company commitment, management accountability
and responsibility, legal and customer requirements, risk assessment and risk management,
improvement objectives, training, communication, worker feedback and participation, audits and
assessments, corrective action process, documentation and records, and supplier management.
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From the point of view of the selected company for our case study, supplier management is
irrelevant. In its business model, the companys customers source the supplier themselves.
Supplier management therefore lies with the customer rather than EMSCAI and have thus been
seventeen key performance indicators into a single value, which integrates the environmental,
categorised into capital market benefits, product market benefits, employee benefits, and
regulatory benefits. Capital market benefits are measured using stock market performance, stock
returns, cost of capital, market returns, and market to book value. The selected company for the
proponents case study is a private corporation, and is unlisted on the stock market. Therefore, it
does not realize capital market benefits, and the category has been removed from the operational
framework.
Product market benefits are composed of favorable customer feedback, increased sales,
improved customer retention, and increased brand equity. As a business to business firm, the
selected company for the proponents case study does not measure brand equity, and the item has
Indicators for employee benefits include employee morale, health care and retirement
benefits, paying wages above the market level, employee productivity, job satisfaction, employee
retention, and employer reputation. Healthcare and retirement benefits, as well as paying wages
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above the market level are not stakeholder reactions and have been removed from the operational
framework. Rather, they are sustainability actions, and are already considered in the evaluation
of sustainability strategy. Employee morale, job satisfaction, employee motivation, and employer
reputation are individual level indicators. To maintain consistency of using firm level indicators
across the operational framework, the proponents did not include them in the operational
framework.
Regulatory benefits include less government fines, certificates and awards, as well as tax
exemption. As there is no clear and formal government regulation lessening government fines
and exemption of taxes due to sustainability performance in the Philippines, the items have been
Long term corporate financial performance can be evaluated using profitability and
liquidity ratios (Santis et al., 2016). A firms performance may be explained by a firm's behavior
could be explained using market indicators, but accounting data is considered less noisy, since it
indicates what is happening in the firm (Lopz et al., 2007). A business can be considered in a
good economic situation when it has an appropriate balance between its profitability and
liquidity goals. Favorable long term corporate financial performance means better profitability
and liquidity. Thus, the researchers should see an increase in the profitability ratios such as
Return on Assets, Return on Investment, Return on Equity, and liquidity ratios such as Rapid
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Proposition 1: Sophisticated sustainability strategy, structure, and systems performance leads to
Proposition 7: Increasing stakeholder reactions leads to increasing long term corporate financial
performance.
financial performance.
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Assumption 1: External influences and expected benefits are drivers of leadership commitment
Assumption 3: Organizations that can achieve positive performance across all four factors
(economic, social, environmental and corporate governance) are more sustainable. (Docekalov
processes is more effective way to embed sustainability into the organization rather than creating
Assumption 6: Improving operating performance, increasing sales and profit, and reducing risks
Assumption 7: The electronics industry has more environmental and labor standards (Locke &
Samel, 2012).
and noncompliant suppliers do not enter the supply base (Agan et al., 2014).
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3.5 Operational Definition of Terms
Accountability - The reporting and accountability relationships for sustainability related issues.
Audits and assessments - Periodic self-evaluations to ensure conformity to legal and regulatory
requirements, the industry standard and customer contractual requirements related to social and
environmental responsibility.
Cash Flow - The ecoKPI1 variable, whose formula is [net increase/decrease in cash/annual value
added] 100.
Certificates & awards - Number of certificates and awards given by a regulatory body.
Communication - Process for communicating clear and accurate information about firms
management.
Conservative or Efficiency Strategy - The firm puts focus on eco-efficiency and cleaner
Consumption of recycled materials and raw materials - The enviKPI1 variable, whose
formula is [total annual consumption of recycled materials and raw materials/total annual
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Contributions to political parties, politicians and related institutions - The cgKPI1 variable,
added] 100.
Corrective action process - Process for timely correction of deficiencies identified by internal
Current Liquidity - How much the company has in assets for every monetary unit of liability,
Documentation and records - Creation and maintenance of documents and records to ensure
Economic Performance - Measured through the Economic Performance Indicator (EcoI = 0.708
ecoKPI1 + 0.292 ecoKPI2 [%]), composed of cash flow and return on asset.
Environmental costs - The enviKPI4 variable, whose formula is [total annual environmental
(EnviI = 0.186 enviKPI1 0.265 enviKPI2 0.279 enviKPI3 0.270 enviKPI4 [%]),
composed of consumption of recycled materials and raw materials, fuel consumption, waste
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Expenditures on identifying and ensuring customer satisfaction - The socKPI4 variable,
added] 100.
Extroverted or Legitimizing Strategy - The firm puts focus on external relationships and
Fuel consumption - The enviKPI2 variable, whose formula is [total annual fuel
General Liquidity - How much the company has in assets for every monetary unit of liability,
improve the firms social performance, including a periodic assessment of firms performance in
Introverted or Risk Mitigation Strategy - The firm puts focus on legal and other external
standards concerning environmental and social aspects to avoid risks for the company to achieve
sustainable operations.
Legal and customer requirements - A process to identify, monitor and understand applicable
Liquidity Ratios - The degree to which assets can quickly and reliably be converted to cash,
primarily using Rapid Liquidity, Current Liquidity, Quick Liquidity, and General Liquidity as
metrics.
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Long Term Corporate Financial Performance - This refers to financial performance in terms
associated programs. Senior management reviews the status of the management system on a
regular basis.
Number of complaints received from stakeholders - The cgKP2 variable, whose formula is
[total number of complaints received from stakeholders per year/total number of CG members]
100.
Percentage of achieved strategic goals - The cgKPI4 variable, whose formula is [number of
achieved strategic objectives for the period/total number of strategic objectives for the period]
100.
Percentage of products and services for which the impact on the health and safety of
customers is evaluated during their life cycle - The socKPI3 variable, whose formula is
[number of products and services for which the impact on the health and safety of customers is
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evaluated during their life cycle with the aim to improve them/total number of products they
produce] 100.
Indicator (CGI = 0.066 cgKPI1 0.267 cgKPI2 0.085 |benchmark cgKPI3 | + 0.322
cgKPI4 0.260 cgKPI5 [%]), composed of contribution to political parties, politicians and
CG, percentage of achieved strategic goals and total number of sanctions for noncompliance with
Product Market Benefits - The effects of sustainability performance on the product market or
customer behavior, measured in terms of: customer satisfaction, sales and cstomer retention.
Profitability Ratios - A set of metrics, primarily Return on Assets, Return on Investment, and
Return on Equity, which illustrates how well a firm is using its resources to earn income.
Quick Liquidity - The part of the short-term activities that can be redeemed using the most
liquid assets, calculated by dividing the sum of current assets, inventory, and current receivables
Rapid Liquidity - The part of the current liabilities that can be immediately paid by the
company's cash flow, calculated by dividing cash flow from operations by current liabilities.
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performance.
Responsibility - The various sustainability issues and activities that each department or unit
covers.
Return on Assets - The return generated by every monetary unit applied in a company,
measured by dividing net income by the total assets. Alternatively, when used to calculate
Return on Equity - Evaluates the income generated with the total investment made, calculated
Risk assessment and risk management - Process to identify the labor practice and ethics risks
associated with firms operations. Determination of the relative significance for each risk and
implementation of appropriate procedural and physical controls to control the identified risks and
Role - Roles might include one or more of the following: (a) develop sustainability strategy, (b)
design sustainability policy and programs, (c) implement sustainability activities, (d) coordinate
sustainability efforts, (e) communicate about sustainability internally and externally, and (e)
Social Performance - Measured through the Social Performance indicator (SocI = 0.095
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|benchmark socKPI5 | 0.225 socKPI6 [%] ), composed of percentage of employees covered
by collective agreement, occupational diseases, percentage of products and services for which
the impact on the health and safety of customers is evaluated during their life cycle, expenditures
on identifying and ensuring customer satisfaction, waste discrimination and violation of the code
of ethics.
performance, either positive or negative, that result in a short term or long-term benefit for the
firm.
Indicator (CPI = 0.045 enviKPI1 0.065 enviKPI2 0.068 enviKPI3 0.066 enviKPI4
0.018 cgKPI1 0.074 cgKPI2 0.024 |benchmark cgKPI3 | + 0.089 cgKPI4 0.072
cgKPI5 [%] ), which considers all four elements of corporate performance: environmental
governance.
Sustainability Strategy - This refers to the selected strategy wherein a company can gain
sustainable operation.
Sustainability Structure This defines the functional areas, departments, business units, and
other formal or informal groups with sustainability responsibilities, roles, and accountabilities.
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Sustainability Systems - The utilization of management systems approach (including policies,
Total number of sanctions for noncompliance with laws and regulations - The cgKPI5
variable, whose formula is [total number of sanctions for noncompliance with laws and
Training - Programs for training managers and workers to implement firms policies, procedures
and improvement objectives and to meet applicable legal and regulatory requirements.
Violations of the Code of Ethics - The socKPI6 variable, whose formula is [number of cases of
Visionary or Holistic Sustainability Strategy - The firm puts focus on sustainability issues
within all business activities. Competitive advantages are derived from differentiation and
Wage discrimination - The socKPI5 variable, whose formula is [average wage of men/average
Waste production - The enviKPI3 variable, whose formula is [total annual waste
of and obtain feedback on sustainable practices and conditions and to foster continuous
improvement.
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CHAPTER 4: METHODOLOGY 3
The proponents of this research will conduct a survey and interview with the top
managers, middle managers, junior managers, and supervisors of EMS Components Assembly,
Inc., a company under the EMS Group of Companies. The company is in 17-A Technology
Avenue Laguna Technopark Bian, Laguna. The data collected from the survey will be used for
the quantitative analysis while the data from the interviews will be used for the qualitative
analysis.
It is a qualitative research, which is normally concerned with words rather than numbers.
Qualitative researches allow the proponents to understand the social reality in its own terms and
provide insightful descriptions of the individual and interactions with the environment (Gubrium
& Holstein, 1997). The proponents chose qualitative research to have a deeper understanding of
why, what and how a company undertakes corporate sustainability and will provide the
proponents more flexibility and opportunities to get a clear and broad knowledge. To determine
the relationship of sustainability performance and long term corporate financial performance
requires operational links to be traced over time, rather than mere frequencies or incidence. Due
to the exploratory nature of our research problem, the proponents will be conducting a single-
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A case study tries to understand why a decision, or a set of decisions were made, how
they were implemented, and its results (Schramm, 1974). The case study method is preferred in
examining contemporary events, but when the relevant behaviors cannot be manipulated. A case
study design, analogous to a single experiment design, meeting all the conditions, can extend the
According to Yin (2013), case study strategy has five components: the studys questions,
its propositions which reflect on a theoretical issue, its unit(s) of analysis (the event, entity, or
individuals noted in the research questions), the logic linking the data to the propositions, and the
The first step is to identify a study question. The question should have substance and
form, and focus on substantively critical issues (Yin, 2013). The form of the question provides an
integral clue regarding the appropriate research method to be used. A case studys questions are
more probing in nature, and are how or why questions asked about a contemporary set of
events over which the researcher has little or no control (Yin, 2013). The second component, the
study proposition is a statement of something that would be examined within the scope of the
study. These propositions should reflect an important theoretical issue, and it provides a starting
search point for relevant evidence (Yin, 2013). The proponents study question is Does the
involvement in sustainability, particularly strategy, structure, and systems, influence and affect
the long-term corporate financial performance of EMS Components Assembly, Inc.? The
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Proposition 2: Sophisticated sustainability strategy, structure, and systems performance
The third component, a studys unit of analysis, defines what the case is. A case may
accurate specification of primary research objectives. Information about the unit of analysis
would be collected, and should be specific time boundaries to define the beginning and end of
the case (Yin, 2013). The case should be a real-life phenomenon, and not an abstraction such as a
topic, argument, or hypothesis (Yin, 2013). Subsequently, the proponents need identify the key
resource persons, prepare letters of introduction and requests for assistance, establish rules of
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confidentiality, and actively seek opportunities to revisit or revise the initial research design. A
case study may involve more than one unit of analysis when attention is given to a subunit or
subunits (Yin, 2013). A case study with multiple sub-units of analysis is called embedded case
study design. Embedded case study design integrates quantitative and qualitative methods into a
single research study. The proponents have selected EMS Components Assembly, Inc.s during
the period of 2011 to 2015 as our unit of analysis, and the endorsement letter may be found in
Appendix C. Top and middle management form one sub-unit of analysis, while junior managers
Analytic techniques such as pattern matching, explanation building, logic model, time-
series analyses, and logic models are used to link data to propositions or purpose (Yin, 2013). In
a within case study analysis, case study data is digested as a direct reflection of the initial case
study proposition or purpose. The proponents will be using pattern matching to link data from
the two sub-units of analysis, top and middle management, junior managers and supervisors, and
secondary data.
Certain principles are must be observed in any data collection effort in doing case studies:
multiple sources of evidence or evidence from two or more sources that converge on the same
facts or findings, a case study database or a formal assembly of evidence distinct from the final
case study report, and a chain of evidence or explicit link among the questions asked, the data
collected, and the conclusions drawn (Yin, 2013). To comply with the first principle, the
proponents will triangulate facts and findings from top and middle managers, company reports,
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Descriptive research involves data that describe events and then organizes, tabulates,
depicts, and describes the data collected (Glass & Hopkins, 1984). Descriptive studies aim to
find out what is, so observational and survey methods are frequently used to collect descriptive
data (Borg & Gall, 1989). It reduces a large mass of raw data to manageable form. It reports
summary data such as measures of central tendency including the mean, median, mode, deviance
from the mean, variation, percentage and correlation between variables. This research method
uses in-depth narrative descriptions in organizing data into patterns that emerge during analysis.
The proponents will be using narrative descriptions that have been placed on an interval scale to
evaluate the case companys past and current sustainability strategy, structure, and systems.
These responses, along with hard data collected from the company, will be subjected to measures
variables from the same group of subjects. It provides empirical evidence suggesting whether
two or more variables are related (Yin, 2013). While it does not establish causal relationships, it
contributes to a deeper understanding of the variables being studied and their relationship. The
design has two forms, relational and prediction (Cooper, Schindler & Sun, 2003). As the research
problem only aims to determine whether relationships between the variables sustainability
strategy, structure, and system, sustainability performance, stakeholder reaction and long term
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Respondents
This study targets the top management and middle management of EMS Components
Assembly, Inc. They were chosen as the target population as the data that will be used for the
analysis need to be firm-level and not individual level. Respondents will evaluate sustainability
strategy, structure and systems based on their own assessment of the companys implementation
of such. The use of firm-level data in this study is for consistency with the framework and the
data analysis to be applied. Firm level data will also be collected for sustainability performance,
stakeholder reaction, and long term corporate financial performance. Additionally, one of the
qualifications is that the respondents must have been with the company since 2011, as the data
needed from the respondents require them to recall information from the past five years. The
Supervisors
Executive 2 0 0 2
Finance 1 1 3 5
Operations 1 5 0 6
Information Technology 1 1 4 6
Business Development 1 2 0 3
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Purchasing and Logistics 1 2 1 4
Human Resources 1 0 5 6
Corporate Affairs 1 1 0 2
Total 11 13 16 39
The proponents of the research will not be utilizing any sampling technique as a census
will be used instead. All the top and middle managers, as well as all junior managers and
supervisors of EMS Components Assembly, Inc. will be interviewed and will answer a survey by
the proponents. This is done to allow the proponents to collect firm-level data to be consistent
with the framework and the data to be collected. The proponents aim to receive at least an 80%
The research instrument, an interview guide, is in Appendix B. The first part of the
interview guide includes the demographic information of the person being interviewed. It also
serves as a screening section, as the instrument will only be served to middle and upper
management. The first set of independent variables of the operational framework calls for the
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Part 1 of the interview guide, sustainability strategy evaluation, was adopted from
Baumgartner and Ebner (2010). The 19 aspects of sustainability that can occur in a firm is rated
Part 2 of the interview guide, sustainability structure evaluation, was adapted from
Aldama et al., (2009). The interview guide adopts the third section of the questionnaire
developed by Aldama et al., (2009). The questions are open ended, and asks about the
to understand the key features of the company, how deep the strategic discussion and
implementation of sustainability related issues has been so far, how this discussion has been
converted into structural and functional practices, and finally, how this has been incorporated
into systems, as well as evaluation and remuneration practices through scorecards. Some
questions that were repetitive were removed, and some questions have been edited to prevent
Part 3 of the interview guide, sustainability systems evaluation, was adapted from the
EICC Gap Analysis (2016). To be consistent with the first part of the interview guide, questions
were rephrased and the four-level maturity rating scale of beginning, elementary, satisfying, and
sophisticated was used. The source questionnaire included 6 sections: general, labor, health and
safety, environment, ethics, and management system. Various questions under each section was
evaluated on conformance with the EICC Code of Conduct, using labels such as conformance,
risk of nonconformance, major (violation), minor (violation), out of scope and not applicable.
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Parts 4 to 6 of the research instrument requires hard data from 2011-2015, and will be
collected by the proponents from company reports. Part 4 asks for the values of the individual
complex performance indicator, or sustainability performance. Part 5 asks for the input of values
of stakeholder reaction indicators, as operationalized in the framework from Malik (2015). Part 6
asks for the input of values recommended by Santis et al., (2016) that indicate long term
Two parts of the research instrument, Part 1 and 3, are in likert form. Likert-type scales
are used when individuals attempt to quantify constructs which are not directly measurable
(Gliem & Gliem, 2003). These two parts were placed in an editable portable document format,
and delployed via e-mail to various persons who hold positions in either top and middle
management, junior management positions or hold supervisory roles. The proponents received
answered pre-test instruments from 20 respondents, across different companies and industries.
Validity and reliability are two fundamental elements in the evaluation of the research
instrument (Nunally & Bernstein, 1994). Validity is the extent to which an instrument measures
what it is intended to measure. Reliability is concerned with the ability of the instrument to
Calculating alpha is the frequent practice in research when multiple item measures of a
concept or construct are employed. Cronbachs alpha measures the strength of internal
consistency of a set of scale or test items (Cronbach, 1951). It is computed by correlating the
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score for each item with the total score for each observation, and then comparing that to the
variance for all individual item scores; where refers to the number of scale items, refers to the
variance associated with item, and refers to the variance associated with the observed total score.
It is thus a function of the total number of items in a test, the average covariance between pairs of
items, and the variance of the total score. If items in a test are correlated with each other, the
value of alpha is increased. The length of the test may also affect the value of alpha.
Cronbachs alpha is expressed as a number between 0 and 1. The closer the alpha
coefficient is to 1.0, the greater the internal consistency of the items in the scale. George and
Mallery (2003) provides that an alpha value of more than 0.9 is excellent, a value more than 0.8
is good, more than 0.7 is acceptable, more than 0.6 is questionable, more than 0.5 is poor, and an
.957 32
The computed Cronbachs Alpha is more than 0.9. Following the rule of thumb, Part 1
The following table displays the correlations between each item and the total score from
the questionnaire:
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Item-Total Statistics
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Q15 76.90 388.095 .877 .954
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Q31 76.65 404.239 .656 .956
The values in the column labelled Alpha If Item Deleted are the values of the overall
alpha if that item was not included in the calculation. The overall alpha is 0.957, so all values in
this column is around the same value. Removing an item with an alpha value that is greater than
the total value increases Cronbachs alpha. Removing Q10 or Q18 will raise the Cronbachs
alpha value to 0.958, while removing Q1 will the Cronbachs alpha value to 0.959. Removing
Q1 will raise the Cronbachs alpha value to 0.960. Since the increase in the Cronbachs alpha
value if any item is removed is only 0.01 to 0.03, the proponents will be retaining all question
Descriptive statistics are used to describe the basic features of the data in a study. They
provide simple summaries about the sample and the measures. Together with simple graphics
analysis, they form the basis of virtually every quantitative analysis of data and are used to
present quantitative descriptions in a manageable form. The study will utilize central tendencies
which include mean, median, mode of the five-year financial performance data as well as the
mean, median, mode of the five-year data on the sustainable performance of the company. The
study will also utilize frequency distribution to summarize the evaluations of top and middle
level managers regarding their perception of the sustainable strategy, system and structure of the
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company. The frequency distribution table will help the proponents determine what the actual
maturity levels of companys sustainability strategy aspects and sustainability sytem aspects are
The group will use Pearson correlation method to correlate the variables of the study,
variables. The Pearson product-moment correlation coefficient (r) is a measure of the strength of
the linear relationship between two variables. Pearsons r can range from -1 to 1, and an r of -1
variables (Cooper, Schindler & Sun, 2003). In this study, the correlation will be done to relate
different variables of the study such as the sustainability strategy, structure and systems and link
Pattern Matching is a tool used in qualitative data analysis, it is concerned with the
comparison or the matching of a measure and a hypothesis or assessing two patterns and
determining whether they are the same or different (Yin, 1984). Robert Yin (1984) believes that
pattern matching is an ideal tool for case studies. There are two types of patterns, non-equivalent
dependent variables design and non-equivalent independent variables design. For the
independent variable design, pattern matching is limited to the testing of the propositions for the
characteristics of a case. Every proposition will be treated as an expected pattern that specifies
values of variables that can be either independent or dependent to be observed in a case through
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a sample to determine whether the proposition is true (Hak & Dul, 2009). In this paper, a census
will be used and not a sample as there are only a handful of managers to be surveyed and
obtaining a sample size of this will yield too small a number to survey. The pattern matching in
single method is deemed insufficient to solve rival causal factor problems (Denzin 1978; Patton
1990; De Vos 1998). Triangulation in research is a process where the researcher seeks to verify
the data or finding through determining whether the independent measures agree with it or
contradict it (Miles & Huberman, 1994). According to Miles and Huberman (1994), there are 5
kinds of triangulation, mainly, data source, method, researcher, theory, and data type. For this
specific study, the proponents will be utilizing triangulation for data source, method, and data
type in collecting and analyzing the data. For data source, the proponents will be acquiring hard
data from the company regarding the various sustainability performance measures and the
verify answers. For method, surveys and interviews will be conducted, and the use of secondary
data from documents, articles, and other studies will be used. Lastly, for data type, there will be a
In this research, the proponents will be utilizing a mixed method of data analysis which
involves both quantitative and qualitative, the reason for this is that the study will be incomplete
or insufficient if only the hard data was analyzed. The proponents collected hard data from the
company regarding the sustainability performance measures and a survey will be conducted
among the managers of the company that have been working there for at least 5 years to be
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consistent with the data gathered. Given this, the proponents will use pattern matching and
Table 4.4 illustrates the various propositions of the study along with the various levels of
management in EMS Components Assembly, Inc. To fill up the table, the data gathered from the
top managers, middle managers, junior managers, and supervisors to identify whether the
quantitative and qualitative data match with one another. After which, data gathered from the
research conducted by the proponents and the findings from the review of related literature will
be placed under the secondary data column. For the analysis column, the proponents will
compare all findings and identify the gaps and the overlaps in the data to see whether there are
consistencies or commonalities between the data gathered from the company, through the survey
and interviews with management, with the data findings from all secondary sources. Essentially
an analysis within each column per proposition will be made if an analysis across the various
Proposition 1:
Sophisticated sustainability
strategy, structure, and
systems performance leads
to increasing sustainability
performance for the period
2011-2015.
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Proposition 2:
Sophisticated sustainability
strategy, structure, and
systems performance leads
to increasing environmental
performance for the period
2011-2015.
Sophisticated strategy,
structure, and systems
performance leads to
increasing social
performance for the period
2011-2015.
Proposition 3:
Sophisticated strategy,
structure, and systems
performance leads to
increasing social
performance for the period
2011-2015.
Proposition 4:
Sophisticated sustainability
strategy, structure, and
systems performance leads
to increasing economic
performance for the period
2011-2015.
Proposition 5:
Sophisticated sustainability
strategy, structure, and
systems performance leads
to increasing performance
on corporate governance.
Proposition 6: Increasing
sustainability performance
leads to increasing
stakeholder reactions.
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Proposition 7: Increasing
stakeholder reactions leads
to increasing long term
corporate financial
performance.
Proposition 8: Increasing
sustainability performance
leads to increasing long
term corporate financial
performance.
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