The impact of stringent buyer environmental requirements on environmental performance of supply chains
Creators: name: Shumon, Rezaul
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350903
subject: Logistics

description: The recent move towards environmental sustainability around the world has forced firms to adopt environmentally sustainable practice in their operations along the supply chain. The environmental requirements from large firms have become more stringent in terms of deadline, level of strictness, and complexity in implementation when they pass to the next tiers of suppliers towards the end of the chain. This is because of such factors as uncertainty around environmental regulation change, the nature of buyer-supplier relationships, bounded rationality and opportunism. Changes in buyer environmental requirements have made it necessary to investigate how and to what extent supplier firms adopt these environmental requirements from their buyers. This research therefore aims to extend the recent and growing body of research through understanding the concept of 'stringent buyer environmental requirements' and investigating its impact on organisation's environmental performance through developing supplier environmental capability. To explore and understand the concept of stringent buyer environmental requirements, transaction cost economics theory is employed, while dynamic capability framework is used to explain the role of supplier environmental capability. Although a quantitative survey is the prominent method used in this study, a qualitative pre-test has also been conducted to discuss and confirm the items or dimensions of the constructs. Using survey data from the Bangladesh Ready-Made Garment (RMG) industry and employing Structural Equation Modelling (SEM) technique, this study investigates how the stringent environmental requirements from customers around the world impact the environmental performance of suppliers in the supply chain. Results demonstrate that stringent customer environmental requirements positively influence suppliers to develop their capability, while that capability itself facilitates the translation of stringent customer environmental requirements into desired environmental performance. Furthermore, buyer-supplier relationship quality positively impacts suppliers' environmental capability development while also influencing the strength of the relationship between stringent buyer environmental requirements and capability development. This research establishes the evidence for relatively new concept of stringent customer environmental requirements, and develops a unique theoretical framework, which demonstrates the relationships between the surrounding critical determinants. Results could be of interest to future researchers and managers in understanding the dynamics of environmental requirements and gaining vital insights to adopting these unpredictable changes into their systems. Although the Bangladesh RMG industry is exposed to most of the country's environmental regulations, still data may not reflect all the possible variations in environmental requirements. Future research could investigate stringent buyer environmental requirements in the context of multi-tier supply chains, exploring how these requirements may impact when it passes to the subsequent members upstream in the supply chain. The findings from this research substantiate the fact that the Bangladesh RMG industry is improving in its environmental practices and is developing environmental capability in accordance with buyer requirements. This is supported by the evidence that a) seven out of ten top environmentally friendly companies certified by LEED (Leadership in Energy and Environmental Design) belong to the Bangladesh RMG sector, and b) the export level within the sector has also increased significantly in last ten years.