Frame of Reference
The theoretical framework for this thesis will be presented in this chapter. First of all, the general concept of sustainable procurement will be introduced, which focuses on the first research question followed by environmental, social and economic three dimensions. Secondly, as the most important activity throughout the whole practices of sustainable procurement, selection of supplier will be presented in the second section. Thirdly, based on the sustainable procurement practices, the corresponding (drivers) focusing on the second research question will be illustrated. Lastly, an overview of existing theories about the previous practices and drivers for Chinese enterprises implementing sustainable procurement will be presented.
The United Nation Environment Programme (UNEP) pointed out that sustainable procurement is « not only simply about being « green », but also about taking social responsibility, environment balance buying procedures and economically sound solutions in business purchasing practices » (Muthugala, S.; Nayagam, N.,2012). Walker & Brammer (2009, p. 128) also stated that sustainable procurement is consistent with the principles of sustainable development, such as ensuring a strong, healthy and just society, living within environmental limits, and promoting good governance ». When analyzing its impact on sustainable purchasing and supply chain environment, sustainable procurement is required to encompass the concept of the Triple Bottom Line (hereafter TBL) (Ghadimi, Azadnia, Heavey, Dolgui & Can, 2015). TBL is a paradigm for sustainable development that is closely connected with the development to meet the need of present and future generations, based on three dimensions: environmental, social and economic (Figure 2) (Meehan, J. & Bryde, D., 2011). The on-going sustainability tendency encourages companies to convert their focus on traditional economic objectives into the TBL approach, which simultaneously accounts for economic, environmental and social performance in procurement process (Hollos, Blome, & Foerstl, 2012).
Environmental Dimension in Procurement
According to Meehan & Bryde (2011), practices of sustainable procurement focus exclusively on environmental dimension of TBL, due to the complexity of translating sustainability into procurement. Esfahbodi, Zhang, Watson & Zhang (2017) also stated that the nature of sustainable procurement is environmentally friendly, which contributes to facilitating the development of environmentally friendly products and services. Several researches came up with three common purchasing approaches in response to sustainability in procurement, which are comprised of resource reduction, product reuse and recycling (Ageron et al., 2012).
Environmental practices are related to resource consumption and the influence on the physical surroundings (Marshall, McCarthy, Heavey & McGrath, 2014), aiming at lowering the level of waste and emissions. Environmental practices highlight these issues in the procurement processes, from the selection criteria of suppliers to the determination of contractual conditions to continuous monitoring and evaluating suppliers (Handfield, Walton, Sroufe & Melnyk, 2005). In this sense, manufacturing firms want to expect the demand from their suppliers for raw materials or needed components, which integrate the attribute of sustainability into the manufacturing and operation processes. Hence, a proper assessment of suppliers is required when considering the issue regarding environmental sustainability (Ghadimi et al., 2015).
In addition, Ed Cross (2013) held the view that companies should build cooperative relationships with suppliers or other environmental organizations. For example, companies should enhance supplier’s awareness towards the TBL attributes, and at the same time take trainings and technical support for these suppliers in improving the green awareness and green performance, such as product modification and green design (Ghadimi et al., 2015). Meanwhile, Meehan & Bryde (2011) mentioned that it may works if firms seek to cooperate with suppliers in reducing materials’ toxicity or the amount of packaging used in supplied products by suppliers regarding environmental procurement performance. Consequently, there must be a proactive commitment among suppliers towards environmental management practices.
Recently, there are growing considerations with regard to the relationship between environmental practices in procurement management and business performance. According to Ferri & Pedrini (2018), four main green-purchasing affected relationships have been proposed, including companies’ environmental performance, firms’ competitiveness, economic performance and the risk to the organizations. In fact, no matter the reasons for the environmental consideration in procurement practices are driven by whether the response to stakeholders’ expectation or the guarantee of sustainable access to key resources, both of these two motives aims to enhance firm’s competitive advantages and performance (Ferri & Pedrini, 2018).
Social Dimension in Procurement
In the aspect of social dimension in procurement, Ghadimi et al. (2015) mentioned that the social issues such as human rights, workers’ health and security issues are being acknowledged by many manufacturing organizations continuously. Manufacturing organizations also need to consider the issue of social responsibility in the combination between their organizations’ metrics and environmental criteria. Thus, corporate social responsibility (hereafter CSR) becomes one of the important concepts when practicing supply chain management, which contain sustainable procurement operations (Ghadimi, et al, 2015).
In the terms of CSR, it can be defined as “the voluntary integration, by organizations, of social and environmental concerns in their commercial operations and in their relationships with interested parties” (Ghadimi, et al, 2015). Carter and Jennings (2002) proposed the following categories as important aspects of the social dimension: ethics, diversity, working conditions, human rights, safety, philanthropy, and community involvement. As Cruz (2013) stated that CSR is always a matter of great concern, which can also be stated in corporate missions and value statements. When speaking of the socially responsibility in supply chain management, a firm’s reputation and long-term success would be affected significantly if there is no consideration about social factors, such as the worker’s health and safety issues, even along with stakeholder engagement.
On the other hand, as Ferri & Pedrini (2017) mentioned, the integration of the social dimension into procurement management relate to ensuring suppliers’ compliance with stakeholders’ expectations which relates to the health and safety requirements. In addition, the practitioners and academics should focus on the socially oriented policies and practices that aim at the firms’ protection, emphasizing the socially responsible procurement’s contribution which can enhance stakeholders’ satisfaction and reduce risk mitigation (Ferri & Pedrini, 2017). For instance, by providing training and educational opportunities to those employed (Meehan & Bryde, 2011). Thus, in the terms of drivers to this aspect, the decision to comprise social considerations into the aspect of purchasing management is affected more by pressure that comes from stakeholders and the desire for protecting company than by internal considerations of potential (Ferri & Pedrini, 2017).
Economic Dimension in Procurement
There are a growing number of companies that adopt proactive approach and implement sustainable procurement management, because they have already realized the benefits generating from socially and environmentally responsible procurement practices, and thus to contributing to enhance firms’ competitive advantage (Sarkis, Zhu & Lai, 2011). Through eco-efficiency in production process, high-level in product quality, generation of new revenue in markets and better public reputation, theses economic benefits may be found from better or unique resources and capabilities (Reuter, Foerstl, Hartmann & Blome, 2010).
In general, the economic dimension in sustainable procurement can be analyzed from three aspects as follow: competitiveness, financial performance, risks mitigation; while the integration of both environmental and social dimension in sustainable procurement management help explain how these three aspects develop particularly (Ferri & Pedrini, 2017).
As Vilanova, Lozano & Arenas (2009) mentioned, the competitiveness can be regarded as a multidimensional concept about the long-term performance of a firm compared to its competitors. There are five items proposed as the variables to enhancing competitiveness by Rao and Holt (2005), consisting of new market opportunities, product price increase, profit margins, sales, and market share. From suppliers’ perspective, the suppliers who intend to participate in sustainable supplier development programs can gain more profit and returns out of their investments in these types of programs. As mentioned in the “environmental sustainability” part, Ghadimi, et al, (2015) also stated that a good green supplier selection model could help the company reduce the environmental and legal risks and boost the competitiveness of this company. In addition, the suppliers which can commit to the manufacturer’s sustainable development programs and incorporating sustainability into their corporate agenda can gain more orders and as the result gain more competitive advantages (Ghadimi, et al, 2015). However, Xia, Zu & Shi (2015) from the perspective of social dimension in procurement management, considered that improvement in suppliers’ living and working conditions are capable of contributing to competitive advantages.
1.2 Problem Discussion
1.3 Purpose and Research Questions
2 Frame of Reference
2.1 Sustainable Procurement
2.2 Sustainable Supplier Selection
2.3 Drivers of Sustainable Procurement
2.4 Sustainable Procurement in China’s Enterprises
3 Research Methodology
3.1 Introduction to Research Methodology
3.3 Research Design
3.4 Data Collection
3.5 Data Analysis
3.6 Research Quality
4 Empirical Findings
4.1 Company Background
4.2 Company A
4.3 Company B
4.4 Company C
4.5 Company D
4.6 Company E
4.7 Company F
4.8 Company G
4.9 Company H
4.10 Company I
4.11 Company J
4.12 Company K
4.13 Company L
5 Data Analysis
5.1 Current Practices for Sustainable Procurement
5.2 Perspective of Drivers for Sustainable Procurement
6.1 Result Discussion
6.2 Theoretical and Managerial Implications
6.3 Limitation and Weakness
6.4 Further Research .
List of References
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Sustainable Procurement in Supply Chain focusing on Chinese Family Business in Manufacturing Industry