Faculty of Economics and Business
MSc Thesis Supply Chain Management
How can suppliers’ intangible resources contribute to focal firms’
environmentally sustainable practices?
By
Lars Boerrigter
S3809536
Supervisor / University
dr. C. Xiao / University of Groningen
Co-assessor / University
dr. E.I. Metting / University of Groningen
Word count: 11.846
ABSTRACT
Currently, one of the world’s biggest problems is global warming. Diverse initiatives attempt to counteract global warming. These initiatives are mostly established by governments and NGOs. However, supply chains are a big contributor to this problem. This research aims to contribute to the literature of environmental sustainability. This is done by examining how intangible resources of suppliers can contribute to environmentally sustainable practices of a focal firm. This question is addressed by conducting a multiple case study in which buyer-supplier relationships in the food sector are investigated. The findings of this research show that supplying firms can contribute to a buyer’s environmental sustainability through their human capital by knowledge sharing and providing (for a focal firm) unattainable information, through information capital by certifications and databases & information systems, and through organization capital by an encouraging leadership style, intrinsic motivation, openness in a relationship and organizational alignment. The propositions of this study could provide directions for further research, managerial insights, and could contribute to the existing literature.
Table of content
1. INTRODUCTION ... 5
2. LITERATURE REVIEW ... 8
2.1 Environmental sustainability in supply chain management ... 8
2.2 Resource-based view on environmental management... 9
2.3 Buyer-supplier collaboration in green practices ... 12
2.4 Research framework ... 14
3. METHODOLOGY ... 14
3.1 Research design ... 14
3.2 Case selection / research setting ... 15
3.3 Data collection ... 17 3.4 Data analysis ... 19 4. FINDINGS ... 20 4.1 Environmental practices... 20 4.2 Human capital ... 21 4.3 Information capital ... 23 4.4 Organization capital... 25 5. DISCUSSION... 27
5.1 Contribution of human capital ... 28
5.2 Contribution of information capital ... 30
5.3 Contribution of organization capital ... 31
6. CONCLUSION ... 34
6.1 Theoretical contribution ... 34
6.2 Managerial implications ... 34
6.3 Limitations and further research ... 35
REFERENCES ... 37
APPENDICES ... 46
Appendix A – Invitation interview buying firm ... 46
Appendix B – Invitation interview supplying firm ... 47
Appendix C – Interview guide (buying company / focal firm) ... 48
Appendix D – Interview guide (supplying company) ... 50
ABBREVIATIONS
EMC Environmental Management Capabilities EMS Environmental Management Systems GSC Global Supply ChainGSCM Green Supply Chain Management NGO Non-Government Organization IS Information Systems
IT Information Technology RBV Resource-Based View
1. INTRODUCTION
Currently, global warming is one of the world’s biggest problems caused by environmental misbehavior of mankind. Governments and NGOs are making serious efforts to reverse the trend of climate change with initiatives like the Paris Agreement (United Nations, 2019). Apart from governments and NGOs, supply chains are a significant contributor in fighting and controlling climate change (Matthews et al., 2016). Therefore, firms, operating in those supply chains, experience pressures from multiple groups of stakeholders and society to become more sustainable, which leads to the adaption of sustainable practices within firms. Sustainability practices are related to social issues (e.g. child labor), political issues (e.g. corruption), and environmental issues (e.g. pollution) (Johnson, Howard & Miemczyk, 2014). Stakeholders and society desire, or actually expect, firms to operate in such a way it does not harm the environment (Gallego-Alvarez & Quina-Custodio, 2017). Additionally, Amran et al. (2015) state that businesses are increasingly involving environmentally sustainable activities because of the high number of environmental stakeholders and the pressures exerted by these stakeholders.
Environmental sustainability is defined by Walsh and Dodds (2017, P.1) as “doing business in a way that reduces waste, conserves energy and promotes environmental health – preventing damage to the natural environment.” Besides external pressures from stakeholders, firms also adopt environmentally sustainable practices to gain competitive advantage (Kasim, 2006; Graci & Dodds, 2009; Rettie, Burchell & Barnham, 2014). Firms adopting environmental practices can differentiate themselves from their competitors on products or services, but also create trust among stakeholders (Walsh & Dodds, 2017). On top of that, purchasing from unsustainable suppliers can trigger punitive actions from stakeholders (Hofmann et al., 2014). Other important internal drivers for environmental sustainability are the organization culture (Cambra-Fierro & Ruiz-Benítez, 2011; Ghadge et al., 2017; Uhlaner et al., 2012; Wahga et al., 2017 IN Yadav et al., 2018) and the brand image and reputation (Battisti & Perry, 2011; Cambra-Fierro & Ruiz- Benítez, 2011; Gandhi et al., 2018; Lee, 2009; Revell et al., 2010; Roy et al., 2013 IN Yadav et al., 2018). So, adapting environmentally sustainable practices will lead to intrinsic satisfaction, satisfaction of stakeholders and society, and to competitive advantage.
2014). However, prior studies have focused on exploring how the focal firm can influence suppliers regarding sustainable activities (Bai and Sarkis, 2010; Fu et al., 2012; Dou et al., 2014, 2015 IN Liu et al., 2018). Usually, buyers exert power on their suppliers to engage them in environmentally sustainable activities (Terpend & Ashenbaum, 2012). The other way around, the influence of suppliers on focal firms, is barely researched. The literature so far has provided limited insights into the mechanisms through which suppliers can contribute to the focal firm’s environmental practices (Pagell & Wu, 2009; Vachon & Klassen, 2008). Zutshi and Sohal (2003) state that the suppliers’ role should not be underestimated and overlooked. The involvement of suppliers can make the change towards a more environmentally sustainable supply chain successful. Besides, prior studies have provided ample evidence on how firms can engage their suppliers in environmentally sustainable activities (Golicic & Smith, 2013; Sancha et al., 2016), and that there is a linkage between a firm’s overall business performance and environmental practices (Klassen and Whybark, 1999; Zhu and Sarkis, 2004; Reuter et al., 2010; Hollos et al., 2012 IN Tate, Ellram & Dooley, 2012). Additionally, Klassen and Vachon (2008) researched the impact of environmental collaborative activities on manufacturing performance. The following inter-organizational interactions between supply chain members were investigated: shared information planning, joint environmental goal-setting, and collaboration to reduce environmental impact. Klassen & Vachon (2008) found that suppliers benefit most from collaboration regarding green practices. Accordingly, this research aims to fill in this gap, and will focus on the supplier and its contribution to the focal firm’s environmentally sustainable activities.
focus on the resources of a focal firm (Hoffman et al., 2012). Therefore, the focus of this thesis is on intangible resources of suppliers who influence a focal firm’s environmental practices, providing a new perspective in this research area, and therefore addressing a gap in the literature. Human capital (Fernández et al.,1999; Vachon & Klassen, 2008), information capital (Kaplan & Norton, 2004; Hall, 1992; Fernández et al.,1999), and organization capital (Hall, 1992; Howard-Grenville & Hoffman, 2003; Petrick et al., 1999) are intangible resources found to have an influence on sustainable practices within a company. This thesis aims to find out how these suppliers’ intangible resources contribute to the focal firm’s environmentally sustainable practices. This leads to the following research question:
How can suppliers’ intangible resources contribute to focal firms’ environmentally sustainable practices?
To answer this research question a multiple case study is conducted. Since the supplier’s perspective is underexplored, this paper aims at theory building, which makes it exploratory of nature. Through interviews, which is the primary data collection method, this study explored how suppliers’ resources contribute to focal firms’ environmentally sustainable practices. Seven persons in a (managerial) sales or purchasing position were interviewed in order to collect data. Interviewing offers the flexibility of gathering complete and detailed information, which is useful in an explorative research setting (Karlsson, 2016). Transcripts of the interviews are analyzed by conversing them into codes. The coding steps of Strauss and Corbin (1990) are used since this is a widely adopted coding method in case studies. Firstly, open-codes, secondly, axial codes, and thirdly, selective codes are formed. A buyer-supplier dyad is the unit of analysis, therefore key managers from both perspectives were interviewed. Interviews with the suppliers were focused on their valuable resources, sustainability practices, and buyer-supplier relationship. Interviews the buyers were focused on suppliers’ resources that influence their sustainability program, sustainable programs within the firm, and buyer-supplier relationship. The Fast-Moving Consumer Goods (FMCG) sector is in the empirical setting of this thesis. Firstly, because suppliers (co-packer) are highly involved in product development with their buyers (Van der Valk & Wynstra, 2005). Additionally, sustainability is a highly relevant issue in the FMCG sector (Rueda, Garret & Lambin, 2017).
this field of literature is identified and addressed by focusing on the intangible resources of suppliers, and how these resources contribute to focal firms’ environmental sustainability. Hence, the results of this thesis show a comprehensive review on the fact that suppliers’ intangible resources contain elements that positively influence a focal firm’s environmental practices. Besides theoretical implications, this research could be of value for supplying and buying managers, since in this report the intangible resources - which is an abstract concept - that contribute to a focal firm’s environmental practices are identified. For managers, this clarifies and improves the ability to identify these resources at a supplying firm. This study can motivate buying and supplying managers in order to communicate openly and clearly about eco-friendly initiatives and strive towards a common goal; being environmentally sustainable.
The remainder of this thesis is structured as follows. Firstly, literature is examined to find contemporary concepts from existing research. These concepts provide a base for the research and the research framework. Secondly, the research methodology is presented. Here, the research design, collection, and analysis are presented. Then, the findings are presented, followed by the discussion. Lastly, the main conclusion and the suggestions for further research are presented.
2. LITERATURE REVIEW
The first section introduces a general concept of environmental sustainability and environmental practices. Secondly, the RBV is introduced and the link between the RBV and environmental management is discussed. Also, the resources which will be focused on in this thesis are introduced. Lastly, the buyer-supplier relationship in green practices is explained.
2.1 Environmental sustainability in supply chain management
chain management (SSCM) can be found in the literature. In this paper the definition of Seuring and Muller (2008, p.1700) is used to describe SSCM: “The management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development, i.e., economic, environmental and social, into account which are derived from customer and stakeholder requirements”. The definition emphasizes, in the scope of sustainability, that not only a company should be sustainable but its whole supply chain.
The focus of this paper will be on the environmental pillar due to the ever-increasing importance of managing environmentally sustainable practices. Environmentally SSCM is also known as green supply chain management (GSCM). SSCM and GSCM are two different terms since GSCM encompasses only the environmental pillar of sustainability while SSCM encompasses all three pillars (economic, social, and environmental). Currently, organizations are minimizing their environmental footprint already due to their intrinsic motivation (Kasim, 2006; Graci & Dodds, 2009; Rettie, Burchell & Barnham, 2014), or due to external pressures of stakeholders, NGOs, or society (Matthews et al., 2016; United Nations, 2019). However, recent studies revealed that more comprehensive knowledge is needed in order to gain environmental benefits in the long-term throughout the supply chain (Danese et al., 2018; Mckinsey, 2020; Vachon & Klassen, 2008; Zhu et al., 2012). Future environmentally sustainable practices should therefore be extended throughout entire supply chains, and therefore should be extended inter-organizationally (Carter & Easton, 2011). Firms and supply chains that ought to be environmentally responsible should come up with new ways of collaborating in terms of technologies, relationships, and trainings (Kovacs, 2008).
2.2 Resource-based view on environmental management
The identification of intangible resources gives managers an easier task of managing a firm’s competitive strategies, since intangible resources are valuable and could lead to competitive advantage (Kaplan & Norton, 2004). Kristandl and Bontis (2007) tried to define intangible resources based on the RBV used in academic research and practical implications, and combined those insights. The intangibility expresses that the resources are physical, non-financial, have a finite life, and are not included in financial statements (Kristnadl & Bontis, 2007). However, in order to include intangible resources in financial statements, these resources need to be distinguished from other resources, need to be an identifiable result of transactions, and need to be associated with a firm’s products or services (Kristnadl & Bontis, 2007). Intangible resources can be classified into two categories, namely the relationships category, and the knowledge category (Greco et al., 2013). The relationship category, also known as social capital, is linked to a firm’s stakeholders, for example, its managers, but also its buyers and suppliers (Sveiby, 1997 IN Greco et al., 2013). The knowledge category includes human resources and the intellectual property of a firm (Nonaka, 1994).
limited amount of research conducted in this field. On top of that, most of these articles are focused on the resources of the focal firm acting as buying firm (Hoffman et al., 2012).
firm (Galpin et al., 2015; Petrick et al., 1999). The extent of the impact of these suppliers’ intangible resources on buying firms is yet unknown and will be examined in this thesis. These resources are expected to influence external organizations and their environmentally sustainable programs, and therefore will be the focus of this thesis.
2.3 Buyer-supplier collaboration in green practices
Kim and Choi (2015) provide basic constructs of a relation; these are commitment, trust, information sharing, relational norms, and conflict resolution. Information sharing and commitment in a buyer-supplier relation ought to have a positive influence on a buyer-supplier relation and on environmental sustainability (Gaulandris & Kalchschmidt, 2015; Krause et al., 2007; Vachon & Klassen, 2008). Within a buyer-supplier relationship, strong mutual commitment is a key element for successful long-term relationships (Kim & Choi, 2015). Commitment between two parties over an extended time is ought to be important within a buyer-supplier relationship (Ellram & Hendrick, 1995). Morgan and Hunt (1994, p.23) define relationship commitment as “an exchange partner believing that an ongoing relationship with another is so important as to warrant maximum efforts at maintaining it; that is, the committed party believes the relationship is worth working on to ensure that it endures indefinitely”. In most relationships, buyers have a more powerful position and make use of this advantage. Buyers can utilize their power on suppliers in many ways, which is called a competitive relationship (Kim & Choi, 2015). On the other hand, in the literature, relations are described as cooperative relationships. It emphasizes collaboration and openness between buyer and supplier (Wu & Choi, 2005). In such a relationship both parties are considered as strategic partners and work towards a mutual goal; which could be environmental sustainability (Chan et al., 1990; Hartley et al., 1997 IN Wu & Choi, 2005).
perspective a close relationship and being close to the technology increases the level of innovation. Therefore, suppliers can be seen as an important channel for developing and acquiring resources regarding environmental sustainability.
A buyer-supplier relationship could be an important source of resource acquisition for buyers. The role of suppliers should not be underestimated or overlooked (Zutshi & Sohal, 2003). However, literature has provided limited insights into how suppliers could contribute to the focal firms’ environmental practices by environmental collaboration (Pagell & Wu, 2009; Vachon & Klassen, 2008). Vachon and Klassen (2008, p.301) define environmental collaboration as: “the direct involvement of an organization with its suppliers and customers in planning jointly for environmental management and environmental solutions.” In the literature, there is information on how a supplier could influence a focal firm’s environmental practices. Sancha et al., (2016) discuss that commitment of a supplier to a relationship has a positive influence on a focal firm’s environmental practices. Additionally, Pagell et al., (2007) argue that using less packaging material by a supplier positively influences a focal firm’s environmental performance. These are valuable insights; however, these insights do not generally state which intangible resources contribute to a focal firm’s environmental practices. This means that existing literature on suppliers’ influence on a focal firm’s environmental practices is scarce.
(Chan et al., 1990; Wagner and Krause, 2009). Opposingly, it is underexplored how a supplier can influence or develop a focal firm.
2.4 Research framework
Geffen and Rothenberg (2000) and Tyre and von Hippel (1997) argued that suppliers could be an important stakeholder for focal firms when engaging in environmental practices. Besides, green intangible resources could lead to a sustainability-based competitive advantage (Touboulic & Walker 2015). However, it is underexplored how the discussed intangible resources could contribute to the focal firms’ environmentally sustainable practices. Figure 1 graphically presents the conceptual model of this study, intending to address the underexplored field in the literature.
FIGURE 1 Conceptual model
3. METHODOLOGY
In the methodology section the research design, research setting, data collection, and data analysis are conducted.
3.1 Research design
validity of the research (Yin, 2014). Besides, to get an in-depth insight and an answer to a ‘how’ question, an explorative case study would be most appropriate (Karlsson, 2016). Data is collected from multiple sources; interviews are conducted with both buyers and suppliers. The unit of analysis of this thesis is a buyer-supplier dyad. However, the data collection was somewhat disturbed because of the Covid-19 pandemic. The government forced people to work from home, which influenced the willingness to cooperate with the research. Therefore, it was not possible to collect data from both perspectives within a buyer-supplier dyad. Within the researcher’s power, the cases in table 2 were willing to provide data. Nevertheless, buyers and suppliers are interviewed. However, the interviewees are not referring to the same buyer-supplier dyads. The buyer-suppliers are interviewed in order to find out the resources they possess and how their resources have contributed to their buyers’ environmental practices. The buyers are interviewed concerning their environmental practices and which resources of suppliers have influenced these practices.
3.2 Case selection / research setting
Companies in the manufacturing industry are faced with substantial pressures to engage in environmentally sustainable activities (Johnson, Howard & Miemczyk, 2014). Society and stakeholders exert pressure on these firms and perform punitive actions when environmental misbehavior is published (Hofmann et al., 2014). Additionally, most organizations in the manufacturing industry have already adopted environmentally sustainable practices to improve their environmental performance (Sarkis, 2005). Given the previous, the manufacturing sector would be an interesting audience to investigate.
Hereafter, a selection of companies is made by determining the sector, since the manufacturing sector traverses a lot of different sectors. In this thesis, the FMCG sector is examined because it is known that suppliers in this sector are highly involved in product development in collaboration with their buyers (Van der Valk & Wynstra, 2005). Moreover, sustainability is a highly relevant topic in the FMCG sector (Rueda, Garret & Lambin, 2017), which makes this industry suitable for conducting this study.
faces pressure from stakeholders and society related to environmental sustainability (Glover et al., 2014).
Additionally, another prerequisite of case selection is the engagement of the organization in environmental practices. This applies to both buyers and suppliers. Beforehand, criteria were not set up in order to differentiate between different environmentally sustainable practices (e.g., reduction of emissions, sustainable sourcing, usage of renewable energy, etc.), but sustainability reports were read to ensure the selected cases were involved in environmentally sustainable practices. Additionally, when contacting potential interesting companies (by phone or e-mail), the scope of the research was explained (appendix A for buying firms, appendix B for supplying firms) to help the interviewee understand the research better in order to ensure the firms would provide valuable data.
Data is collected from both buyer and supplier perspectives. However, it should be emphasized that none of the interviewed buyers and suppliers were forming a buyer-supplier dyad. The interviewees were in positions in which they have interaction with other organizations (all interviewees were in purchasing or sales departments). Interviewing the persons in a responsible position with interaction with other organizations provided the opportunity to gather comprehensive knowledge about the subject. Therefore, the reliability of the data increased. Data from both perspectives allows understanding the similarities and dissimilarities between cases (Baxter and Jack, 2008). The interviewees in the buying (focal) firms were procurement or sustainability managers, who were expected to possess relevant information. Regarding the supplying firms, the interviewees were selected on having close ties with the focal firm, which were usually persons from a sales department.
TABLE 1 Overview of cases
Company Sector Type of product Buyer/supplier Job description Duration (min) A FMCG Coffee & tea Buyer Procurement manager 63
B FMCG Soup & sausages Buyer/supplier1 Procurement manager 56
C FMCG Chocolate Buyer Sustainable program
manager
50
D FMCG Vegetables Buyer Director agriculture,
procurement, and sustainability
45
E FMCG Potatoes Buyer Category procurement
manager
62
F FMCG Vegetables Supplier Industrial sales director 53
G FMCG Packaging
material
Supplier Purchaser (category manager)
40
3.3 Data collection
The data of this research is qualitative and is gained by seven semi-structured interviews. Semi-structured interviews offered the flexibility of gathering complete and detailed information while there is a possibility to gather information not included in the interview protocol (Karlsson, 2016). Since the literature does not provide much data about which resources explicitly contribute to a focal firm’s environmental practices, a semi-structured interview provided the freedom to explore different insights in this underexplored field. Besides, secondary data (sustainability reports) are consulted. Secondary data increases the construct validity by enabling data triangulation (Yin, 2014).
To ensure a valid and reliable research, an interview protocol is conducted. An interview protocol ensures all topics are covered during an interview (Karlsson, 2016). The interview protocol (included in appendix C for buying firms and appendix D for supplying firms) describes in detail how the interview should be conducted. For instance, if another researcher would conduct the interviews, they should follow the same procedure (Yin, 2014).
1 Company B is both buyer and supplier since the company is selected as focal firm, but during the interview it
The interview consists of multiple sections and these are explained hereafter. The first section consists of general questions about the company and the role of the interviewee in the company. These are ‘easy’ questions to make the setting comfortable for both the interviewee and interviewer. The second section contains questions about sustainability. It reveals the interviewees’ general perspective on sustainability and which sustainable practices are performed within the firm. The next section includes questions about the collaboration either with the buyer or supplier. Subsequently, questions about how sustainability is related to the buyer or supplier are asked. Thereafter, elaborating on the previous answers, suppliers are asked what their valuable resources are regarding environmental sustainability. It seemed difficult to capture intangible resources. Therefore, to help the interviewees, a short explanation about intangible recourses was provided since it became clear interviewees needed some help in understanding intangible resources. So, human capital, information capital, and organization capital were introduced. Besides, the suppliers are asked which resources they do not possess but do perceive as important. Regarding buyers, questions are asked about which resources of suppliers they consider important in terms of environmental sustainability. The environmental practices of the focal firm, and how the suppliers’ resources could have influenced or helped the development of these practices are addressed during the interview.
Complete anonymity of the interviewees is guaranteed, so they could speak freely without thinking about the consequences of their statements. The interviews had an average length of 50 minutes. Three interviews were conducted via a phone call and four interviews were conducted via a video call. The interviews were performed in Dutch since this was the mother tongue of all interviewees. Additionally, this would minimize misunderstandings and misinterpretations of questions and answers. Before the start of the interviews, permission was asked to record the interview, to which all interviewees agreed. The recordings facilitated the transcription process, which was documented in a Word file. At the end of the interview, it was offered to send the transcript to the interviewees to avoid misunderstandings.
(Yin, 2009). The secondary data helped to get a more extensive knowledge of the discussed topics.
3.4 Data analysis
statements are divided into seven dimensions. Ultimately, a coding tree is conducted in which the qualitative data is shown in a schematic way (appendix E).
After having developed a coding tree for the data, the analysis took place. Within-case analysis is conducted to find an answer to the research question per case. Eisenhardt (1989) argues that this step is crucial to get familiar with each case on its own. Additionally, a cross-case analysis is executed to search for cross-case patterns, which is considered a key step in case-research (Karlsson, 2016). Here, computing and searching for similarities or differences between the cases is most effective. The purpose of cross-case analysis is to find more generalizable patterns.
4. FINDINGS
In this section, the findings of the analysis of seven cases are presented. This section starts with a short introduction on the findings on the environmental practices that were implemented for developing sustainable supply chains. Hereafter, the interview data is presented based on the three categories of intangible resources: human capital, information capital, and organization capital.
4.1 Environmental practices
During the case selection, all organizations were assessed on their involvement in environmental sustainability. It turns out that each company is involved in environmental sustainability in a different way. By analysing the data on a cross-case basis it is found that most companies were focussed on CO2 and waste reduction. A buyer comments: “So we focus our sustainability program on CO2 emissions and reducing waste.” (case 5). Another interviewee backs this: “We are working on a new strategy, in which we have 3 focus points. That is, zero waste, the other is reducing co2 emissions and the third is a balanced diet.” (case 4).
you often have to invest. So, you have to spend money to earn it back later.” Contradictory, only one company (company B) saw environmental sustainability as an expense. This company was committed to environmental sustainability because of external pressures. As the interviewee stated: “As a supplier, our buyer also has a sustainability strategy. So, we have to work according to their sustainable practices. So, we have sustainable raw materials in our soups and sausages.” Hereafter the interviewee added: “[Company B] is more likely to think that it will cost money rather than make money.” So, in six of the seven cases, there is intrinsic motivation to adapt environmentally sustainable practices, in contrast to one case where an environmental strategy is adapted through external pressures. As a result from the interviews, it can be seen that companies who are intrinsically motivated are more engaged in environmentally sustainable practices than companies who are not intrinsically motivated.
4.2 Human capital
The desire to strive for a more sustainable supply chain/world does not only come from the focal firm’s perspective. Although, it is generally assumed that the focal firm has to educate its suppliers regarding sustainable issues (Ndubisi et al., 2005). However, the data from the interviews show that there is a strong interaction between both parties about how to cope with sustainable issues. Environmentally sustainable practices are suggested by both buyers and suppliers. The intangible resource human capital of suppliers is assessed on how it could influence a buying firm’s environmental practices.
receiving suggestive environmentally sustainable ideas from suppliers. Generally, company A does not force suppliers to cooperate. Instead, they collaborate with the supplier in order to achieve a higher environmentally sustainable performance. In the interview, multiple environmentally sustainable initiatives suggested by the supplier were discussed. These initiatives are picked up carefully and are being assessed on its feasibility. To illustrate: “Yes, we also receive sustainable ideas from suppliers. My packaging colleagues, for example, have those kinds of contacts. And then those ideas are offered to us.” (case 1). So far, for company A suppliers’ initiatives have resulted in more sustainable coffee packaging material, green energy supply, and bio-degradable coffee cups.
Additionally, company A describes that their suppliers are collaborating reciprocally to strive for environmental sustainability. This is achieved by collaborating without the intervention of company A. Nevertheless, the collaborating suppliers are developing sustainable initiatives on behalf of company A since both suppliers possess expertise and valuable knowledge. Through the aggregation of knowledge an environmentally sustainable initiative emerged. “We have an external supplier for coffee in football stadiums, and we have a supplier for plastic coffee cups. (...) They merged their knowledge and expertise and conducted a technically sustainable initiative to be more sustainable. (...) And ultimately our company’s name is on that product.” (case 1).
own technologies. They asked if we could develop this together. Then we talk to such a supplier and develop it further. Ultimately, we have to guarantee them that we will eventually buy it.” (case 1). Here, it is evident that the knowledge of a supplier and the resources of a buyer led to an environmentally sustainable product; bio-degradable coffee capsules.
A motive for buying firms to engage in collaboration regarding environmental sustainability is access to knowledge. Generally, from a buyer’s perspective, the knowledge of a supplier is very specific and contains knowledge they normally cannot obtain. Suppliers are a valuable source of knowledge and have other accesses to valuable information than the focal firm has. Occasionally, suppliers have access to information a focal firm cannot obtain. From a buyer’s perspective: “Yes, they have the local know-how. And they know regulations from the Ivorian government. That's something valuable we get something out of, because they are in a network from the government. (…) So, I think that's very important as a source for [company C] to have what we cannot possess ourselves.” (case 3). From the supplier’s perspective this can be seen as well. Suppliers know they possess knowledge that could be valuable for a focal firm. As stated by the sales director of company F: “We were early adapters (environmental sustainability), so we certainly had an influence. We have a certain specialism in organizing cultivation for the frozen vegetable industry. Across Europe, we have a certain amount of specialist expertise in this field.” (case 6). Another example is the collaboration with NGOs of a supplier of company C. Through this collaboration company C collects knowledge which they normally could not collect. The ‘coops’ (suppliers of company C) obtain knowledge, techniques, and technologies from other firms or organizations, which are valuable for company C. These knowledge, techniques, and technologies regarding environmental sustainability were otherwise hard to obtain for company C. To illustrate: “The suppliers also often come up with innovations that we are not yet familiar with. Some coops (suppliers) work with other NGOs and other large companies, who are bringing new techniques or technologies to the table.” (case 3). It is noticeable that this phenomenon only is observed at focal firms of which suppliers are geographically located distantly.
4.3 Information capital
When taking environmental sustainability into account, a lot of value is attached to the transparency of every product and process, in other words: traceability is of great value. Traceability and transparency of a product or process creates trust among customers. Therefore, these two concepts are carefully captured in certifications. All interviewed companies, among which suppliers, adopted EMS in their business, which is considered a part of information capital. In particular, certifications are used as EMS. From a supplier’s perspective, certifications are useful tools to assess whether their internal processes are well-designed regarding environmental sustainability and whether their products are eco-friendly. This could be drawn from the following quote: “Because data from the local farmers is recorded in certificates, the products are traceable, and we know where it comes from. This traceability of [product] runs from the African country to our factory. This traceability enhances our sustainability practices.” (case 3). Additionally, certifications could lead to new sustainable initiatives. To illustrate from case 6: “But the [certification] also gives us new insights and we can use our extensive knowledge to make inventions that will benefit our customers. So, it also brings something good.” (case 6). From this quote, it is also evident that buying firms benefit from information capital from suppliers.
Certifications are mostly audited and issued by external parties which increases the reliability and credibility of the certificates, and therefore the reliability of the sustainable practices. To illustrate, company A and D both established their own sustainable certificate. However, these did not last long since they were not acknowledged by other parties. Over time they had to adopt and cooperate with alternative, acknowledged, certifying organizations since these were more credible and widely adopted by the broader audience. As a result, a supplier with certified environmentally friendly products and processes is considered valuable, since these suppliers are transparent, and certificates are widely adopted by buying firms and their customers (sustainability report company C). So, buying parties are increasingly relying on certifications if it concerns environmental sustainability. These certified organizations offer the buyers a transparent, broadly accepted, and cost-effective way of assessing and auditing environmentally sustainable practices. This implies that certifications are a valuable resource to possess as a supplier.
is engaged in environmental sustainability. Therefore, for company E the data of suppliers are considered as valuable. If a supplier could not provide data about their processes or products, company E believes that one could not claim that it operates environmentally friendly. To illustrate: “I think data is ultimately the most valuable. That we simply have easy insight into what they (supplier) consume, how much they consume, what they can contribute and what not.” (case 5). For this reason, information capital is positively related to the environmental practices of a buying firm.
Additionally, company E considers suppliers of IS as a supplier which contributes positively to their environmental practices. “So, we do have suppliers specifically for sustainability systems that provide certain systems that we use. (…). We consider them suppliers. Because of them, we have data at our disposal that makes our processes and products even more sustainable.” (case 5). An example of a system that improved environmental sustainability is a program that calculates optimal truck routes. The system is purchased to save costs, but a favorable side effect appeared; it is very environmentally friendly. “Routes are automatically planned according to the most logical route to save costs. (…) What the program actually says, is the most sustainable route.” (case 5). The core business of company E is not developing IT systems or EMS, but they want to behave in an environmentally sustainable manner. Therefore, company E considers suppliers of IS as valuable suppliers that positively influence the firm’s environmental practices.
4.4 Organization capital
culture. “It has become a real part of our culture through years of experience. You'll see that again.” (case 6).
The interviewee of company C likes to see from suppliers that they are intrinsically motivated to be involved in environmentally sustainable practices. “Intrinsic motivation is important for sustainability. So, you have all kinds of business cultures, and this is expressed in different ways. (…) What we see is that intrinsic motivation, instead of economic motivation, has a positive influence on other parties to be sustainable.” (case 3). This is a good example of the intrinsic motivation of a company influencing the practices of up- and down-stream partners. Company C is a somewhat extraordinary organization regarding sustainability. Their main goal is striving for a more sustainable world instead of making profit. The interviewee stated: “We would be very happy if next year [company C] is halved but if the volume of fair trade worldwide is tripled, then our goal is achieved. I don't think any other company will see that as something positive, but [company C] will.” (case 3). Through the strategy of Company C, the company transfers their sustainable view on partner organizations. From a supplier’s perspective as well, intrinsic motivation is found to be contagious to a buying firm. To illustrate from the sales director of company F: “If you work with a certain passion and show ambition and leadership, then you take the lead in the fight. That is what we have been doing for the past 10 years. This is when other companies will start following you.” (case 6).
It is observed within company F that their engagement in environmental sustainability at an early stage has led towards a leadership role. Within organization capital leadership is perceived as important. Well-executed leadership could motivate employees and even other firms regarding environmental sustainability. This is exactly what we observe in company F. From the interview with company F, it was noted that passion and ambition are contagious for buyers. To illustrate: “All over Europe we have a certain expertise in this area. You could say that we are leading in sustainability, which is why many parties want to work with us. Think of customers, but also of educational institutions.” (case 6). Collaborations of company F have led to many environmentally sustainable practices at buying firms (e.g., smart farming, development of information system).
to close collaboration and open information sharing, the buyer and supplier are able to execute practices more efficiently and more environmentally sustainable. The supplier of company A provides expertise in a field company A barely has any knowledge of. This resulted in a successful implementation of an on-sight (green) power plant. To illustrate: “A very nice example of cooperation is the power plant in [place], which has been established in cooperation with a third party so that we can burn our own coffee residue there. And that's a 100 percent green energy.” (case 1). Moreover, in every case, the interviewee is fully aware that climate change is a global issue and that not one single firm can solve this problem. Therefore, openness regarding collaboration and information sharing is helpful to solve this problem.
Organizational alignment is considered important to influence a buying firm’s environmentally sustainable practices. When a buyer and supplier are both adopting environmentally sustainable practices, their targets should be aligned. This fosters information and knowledge sharing about particular practices. From the buying firm it becomes evident that suppliers are selected regarding their environmental sustainability in the supplier selection phase. From a procurement manager: “In the end, we have to make the same environmental agreements with our suppliers that we have within [company A], and we also select on that basis.” (case 1).
5. DISCUSSION
resources and declared that these certainly influence the focal firm’s environmental practices. However, for the interviewees it was difficult to answer on which environmental practices these resources have a direct influence. By way of illustration: all interviewees from buying companies stated that suppliers possessed valuable knowledge (human capital) about environmentally sustainable practices which they could utilize. Yet, from a buyer’s perspective, few environmental practices were mentioned on which human capital had an influence. In the succeeding part, the impact of intangible resources on a focal firm’s environmentally sustainable practices are discussed and the corresponding propositions are presented. The propositions arise from the findings in combination with existing literature.
5.1 Contribution of human capital
Suppliers’ human capital is found to be influencing the focal firm’s environmental practices beneficially. Evidently, in 6 out of 7 cases the interviewees indicated that suppliers possess valuable knowledge about environmentally sustainable practices. According to the interviewees, sharing this knowledge has a positive influence on the environmental practices of a focal firm. Companies did not provide clear examples of practices on which knowledge has a direct influence. Lai et al. (2015) worked on a study regarding information sharing in environmental practices. This study found that sharing information with suppliers positively
influenced the environmental performance of the firm who shared the information. Additionally, focal firms can improve a supplier’s environmental sustainability by sharing knowledge and expertise (Sancha et al., 2019). Lai et al. (2015) did not focus on the performance outcomes of a buying firm that receives the knowledge. However, in this thesis is found that the receiving firm (the buying company) benefits from the supplier’s knowledge. With the supplier’s expertise and knowledge, sustainable initiatives can be developed. This information can vary from using environmentally friendly material to energy-efficient processes. Knowledge about green innovations provides a focal firm with new insight in how to become more environmentally sustainable. This is in line with the findings of Chin et al. (2015), since they discuss how GSCM can contribute to an enhanced sustainability performance. However, it is found that the supplier’s knowledge is valuable under a certain condition; it has to be merged with a buying firm’s resources in order to transform the knowledge into environmental practices. To clarify, it is found that the supplier’s knowledge on its own does not improve a focal firm’s environmental sustainability; integration with a buying firm’s resources is required. Moreover, Hoegl and Gemuenden (2001) found that contributions of knowledge and skills from both parties enhance their capability and motivation in generating ideas, design manufacturing processes, and develop products. According to the previous, a proposition is developed:
Proposition 1a: Suppliers’ knowledge and expertise can contribute to a focal firm’s environmental practices through ‘merging’ suppliers’ knowledge with a focal firm’s resources.
distance between the buying and supplying firm. This phenomenon leads to the following proposition:
Proposition 1b: The human capital from geographically distant suppliers contains information and knowledge, gathered from other (local) organizations. This information is hard to obtain for focal firms but may positively contribute to their environmental practices, when receiving it from suppliers.
5.2 Contribution of information capital
Certificates of products and processes ensure environmental sustainability throughout a supply chain by improving the traceability of a product or process. Certifications ensure a focal firm that the products and processes of a supplier are properly established regarding environmentally sustainable aspects (e.g. green purchasing, energy-efficient processes). Delmas (2000) argues that stakeholder involvement in certification is valuable. It is found that the adoption of certifications can provide operational efficiencies which in turn can lead to competitive advantage of a firm (Delmas, 2000). Besides, there is strong evidence that the involvement of stakeholders has a positive influence on environmental practices. However, Delmas (2000) does not discuss the supplier’s role as a stakeholder in certifications. Additionally, Aguilar and Vlosky (2007) discuss certifications as a resource to identify the environmental impact of a product and the motives to improve current systems. In order to increase the traceability of a product or process, the supplier’s role in certifications is neglected in these articles, which leaves a gap in the literature. The findings of this research contribute to this unexplored part of literature, by finding that buying firms benefit from the increased traceability of products and processes by means of suppliers who are involved in sustainable-certified products and processes. This leads to the following proposition:
Proposition 2a: Suppliers’ certifications increase the traceability of products and processes, which in turn positively contributes to the focal firm’s use of environmentally sustainable products.
performance, which turns out to be positively related. However, Malhotra et al. (2013) and Wang et al. (2015) do not discuss what the role of suppliers is in green IS / IT. This research contributes to this gap, since it is found in the findings section that organizations consult suppliers in order to obtain green IS, since most focal firms are not capable of developing green IS themselves. Therefore, focal firms indicate that suppliers of these IS are positively influencing a focal firm’s environmental practices. To illustrate: an organization benefitted both economically and environmentally from an optimal route planning system (obtained through a supplier): economically since the system generates the shortest route in order to save fuel costs and time, and environmentally since the system generates the shortest route which reduces emissions. Therefore, it is proposed that:
Proposition 2b: Focal firms who deploy suppliers to implement information systems (IS) for economic reasons, fortuitously benefit from this environmentally as well.
5.3 Contribution of organization capital
Proposition 3a: An encouraging leadership style of suppliers contributes to the engagement of buying firms in environmentally sustainable practices.
From the findings section it appears that suppliers’ intrinsic motivation (ambition and passion) in environmental sustainability is infectious for buying firms, which raises the thought that suppliers with an intrinsic motivation to behave in an environmentally sustainable way, influence the environmentally sustainable practices from a buying firm beneficially. By way of illustration: a supplier is showing enthusiasm and optimism about environmental sustainability, which makes the company appealing to buying firms. Therefore, these intrinsically motivated suppliers are more likely to be involved in a collaboration with a buying firm. Eventually, this will indirectly lead to engagement of the buying firm in more environmentally sustainable practices. From the focal firm’s perspective, this is also observed in the data. There is evidence that intrinsic motivation works beneficially on other parties. Additionally, buying firms indicate that intrinsic motivation is a desirable quality of a supplier regarding environmental sustainability. Ryan and Deci (2000, p.56) define intrinsic motivation as: “the doing of an activity for its inherent satisfaction rather than for some separable consequence”. This definition does not specifically imply that an intrinsically motivated supplier’s aim is influencing others. However, this is a beneficial incidental of intrinsic motivation. From the psychological research area evidence exists that intrinsic motivation positively fosters work engagement (Shu, 2015). Applying this psychological evidence to the provided data of the interviewees, the following proposition emerged:
Proposition 3b: A supplier’s intrinsic motivation to be environmentally sustainable positively influences a buying firm to adopt environmentally sustainable practices.
sharing leads to increased environmental sustainability and increased engagement of a buying firm in environmentally sustainable practices. Viio and Grönroos (2014) found that if a buyer communicates openly towards a supplier, the chance is higher that a supplier is willing to adapt to buyers’ insights. This leads to efficient collaboration and the obtainment of higher goals. Yet, it is not investigated how suppliers’ openness influences buyers’ level of adaptation. Combining the insights of the literature with the data from the findings section, the following proposition can be set up:
Proposition 3c: The ‘openness’ of suppliers regarding sharing knowledge, innovations, data, etc. could lead to an increased environmental performance of a buying firm.
According to the findings, organizational alignment is important for the environmentally sustainable practices of a buying firm. This can be substantiated by the fact that buyers initially look for alignment in the environmental insights and practices of a supplier. If there is the same way of thinking, the buyer is inclined to collaborate with such an ‘aligned’ supplier sooner than with an ‘unaligned’ supplier. When both the buyer and the supplier adopt the same view on a particular case, information sharing, and collaboration is tended to occur more often. Information sharing and good collaboration, on its turn, influence environmentally sustainable practices positively, because of a synergistic way of fostering the knowledge of particular practices. To illustrate: when both parties believe in the same environmentally sustainable initiatives, they are eager to collaborate towards a common goal. This collaboration makes higher achievements possible, since buyers depend on suppliers and vice versa. Lawrence and Lorsch (1967) and Yan and Dooley (2013) found that alignment of goals facilitates coordination and encourages cooperation, which implies it is favourable for both parties. Comparing the results of the previously mentioned studies with the results in this case suggests that organizational alignment on environmental initiatives improves environmentally sustainable practices of a buying firm. Therefore, the following proposition is conducted:
6. CONCLUSION
This research aims at answering the research question: “How can suppliers’ intangible resources contribute to focal firms’ environmentally sustainable practices?”. Hereafter an answer to the research question will be provided followed by the managerial implications. Finally, limitations and future research will be discussed.
6.1 Theoretical contribution
To enrich existing literature, this research aims at providing new insights into how suppliers could contribute to a focal firm’s environmental practices. It was already found that collaboration between buying firms and their suppliers positively influences the environmentally sustainable performance (Klassen & Vachon, 2008; Paulraj et al, 2014). However, there is a lack of literature regarding the influence of intangible resources of a supplier on focal firms’ environmental practices. The intangible resources are identified following the RBV (Barney, 1991). By analyzing the data, collected from semi-structured interviews and existing literature, it is plausible to say that all three intangible resources contain elements that positively contribute to a focal firm’s practices. Therefore:
• Suppliers’ human capital can contribute to a focal firm’s environmentally sustainable practices by sharing knowledge and expertise about green practices and innovations, and by sharing knowledge that is hard to obtain for a focal firm.
• Information capital can contribute through certifications of suppliers’ products and processes which in turn increase the traceability of products and processes, and through sharing eco-friendly data management and information systems.
• Organization capital can contribute through suppliers’ encouraging leadership style, suppliers’ intrinsic motivation, the ‘openness’ regarding knowledge sharing, and through buyer-supplier alignment.
Based on the findings, a set of propositions is developed in order to delineate how the suppliers’ intangible resources contribute to a focal firm’s environmentally sustainable practices.
6.2 Managerial implications
evaluate whether these resources are present in the supplier’s organization. This ability is needed in order to judge the collaboration suitability of the supplier. Besides using these criteria during the selection of suppliers, the resources can also be evaluated on existing suppliers. Secondly, several types of sharing knowledge and information (e.g. open and clear communication) can contribute to the environmentally sustainable practices of the buying firm. The findings of this study can motivate buying and supplying managers into open and clear communication about green practices in order to have a congruent goal and use their expertise and knowledge synergistically. Overall, this study implies the influence of suppliers on the environmentally sustainable practices of focal firms. This means that for both the supplier and the focal firm the findings of this study give insight into the buyer-supplier relationship. These insights may help both parties with improving their understanding of buyer-supplier interaction regarding environmentally sustainable practices.
6.3 Limitations and further research
from interviews, lasting on average 50 minutes. This time frame limits the researcher in both the number of questions that can be asked and the extensiveness of the interview. It is hard to estimate the amount of time needed for data collection, but according to the time frame of the whole research, a 50-minute time frame was considered appropriate for the interviews of this research.
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