The influence of the buying firm on their emerging-country suppliers to implement sustainable environmental practices: A power perspective

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The influence of the buying firm on their emerging-country

suppliers to implement sustainable environmental practices: A

power perspective

Master thesis, Msc in Supply Chain Management University of Groningen, Faculty of Economics and Business

January 25, 2021 PAPAPOSTOLOU CHRISTOS Student number: S4115066 e-mail: c.papapostolou.1@student.rug.nl Supervisor dr. Chengyong Xiao Co-assessor Dr. Esther Metting

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ABSTRACT

Global manufacturing industries are responsible for 20 percent of the world’s CO2 emissions. Various stakeholders put enormous pressures to the firms to reduce these emissions and to adopt environmental practices. In order to respond to these pressures, firms recognize sustainability as a competitive advantage and attempt to implement environmental practices across their supply chain. This study investigates buyer as a key stakeholder and the different sources of power that buyers impose to suppliers to adopt environmental practices in their supply chain. Buyer power lays at the foundation of sustainable supply chain management. This study posits that as buyers exert their power to integrate sustainability into suppliers through mediated and non mediated power, suppliers may perceive and respond differently to buyers’ use of power. The contribution of this thesis is to the stream of environmental sustainability by focusing on buyers’ power, and namely by investigating how buyer’s mediated and non mediated power can influence the implementation of environmental practices on the supply chain, through a multiple case study.

Keywords: sustainability, environmental practices, buyers, mediated power, non mediated

3 TABLE OF CONTENTS

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2.

2.4 Impact of buyer power on SSCM ………... 12

2.5 Research framework ………. 13

3.

4.

4.1 Within case analysis ……… 18

4.2 Cross-case analysis ………. 24

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1. INTRODUCTION

The past several decades, industrialization and globalization have created severe problems for the natural environment (Lindblom & Ohlsson, 2011). Around 35 percent of the total electricity is being consumed by the global manufacturing industry, which is responsible for 20 percent of the world’s CO2 emissions (Dubey et al., 2015). More companies recognize the seriousness of these environmental threats which result in the energy crisis, resource depletion, and climate change (Mardani et al., 2015). In addition, multiple groups of internal and external stakeholders put enormous pressures on the firms to pursue sustainable practices (Dzhengiz & Niesten, 2020). Top management has recognized sustainability as a competitive advantage and attempts to identify the firm’s competencies and capabilities that enhance the firm’s performance

(Dzhengiz & Niesten, 2020). Consequently, companies employed new sustainable strategies and practices across their supply chain (SC) to achieve more environmentally sustainable products and production processes (Pondeville et al., 2013). Various stakeholders can promote the benefits, and alleviate the doubts of the firms about implementing these environmental practices (Zhu et al., 2013). But is this a powerful force for convincing firms to implement environmental practices?

Due to society’s interest in environmental issues, it has become significantly important for the firms to communicate their environmental performance to the stakeholders (Sarkis et al., 2011). Stakeholders can be defined as “any group or individual that can affect or is affected by the achievement of a corporation’s purpose” (Freeman, 2004). The firm’s stakeholders play an essential role in SC (Meixell & Luoma, 2015). Stakeholder demand has a significant effect on the implementation of green management which also improves sustainability performance (Raharjo, 2019). Carter (1998) found that the biggest influence was from downstream members of the SC such as the buyers. A lot of researchers proved that buyer concerns motivate

suppliers to adopt environmental management practices (Delmas & Toffel, 2004). Many suppliers are not notably pressured from environmental pressures but they are considerably pressured from the buyers (Hall, 2014). Buyers have a high bargaining power to pressure companies to produce quality, safe, and environmentally friendly products (Raharjo, 2019). Buyers also take into account social aspects such as workplace safety and working conditions which affect their buying decisions (Ehrgott et al., 2011). This study examined buyers as a key stakeholder due to their power to affect sustainable practices.

5 A lot of criteria have been used to group stakeholders based on multiple dimensions and their influence on the firm’s environmental practices (Sarkis et al., 2011). Among others, Mitchell et al. (1997) classified stakeholders based on three attributes. One of these was power. The authors found that this attribute affects stakeholder salience, which indicates the degree to which stakeholders receive high or low priority. There are several sources of power. Maloni & Benton (2000) categorized the five sources of power as mediated, that includes coercive and reward, and non-mediated, which includes expert, referent and legitimate bases. The extant literature concentrates only on the dominant use of the mediated power (Chen & Chen, 2019) because it allows buyers to leverage supplier’s response to sustainable practices (Touboulic et al., 2014). This thesis inquiries into this gap by investigating the use of both mediated and non-mediated power that the aforementioned stakeholder, the buyer, can impose in the SC.

When considering the shift from supply chain management (SCM) to sustainable SCM (SSCM), large buying companies consider suppliers as strategic partners and they do not intend to exploit their power over their suppliers (Touboulic et al., 2014). Companies are as sustainable as their suppliers that collaborate in the SC (krause et al., 2009). However, large buying firms are under pressure to address environmental practices and therefore exert sufficient pressure on their SC. Suppliers respond differently to buyer’s use of power to adopt and implement sustainable practices (Chen & Chen, 2019). Hall (2014) points out that buying firms should find a way to convince suppliers intervention because dropping them can be expensive and risky.

This paper aims to acquire an advance understanding of sustainability in SCM by exploring further the perspective of one specific stakeholder and its influence on environmental

sustainability. In this thesis, the stakeholder is the buyer, and our investigation is focused on the role of power in the dyadic exchange relation between the buyer and supplier. Additionally, this thesis advances a holistic perspective to the core questions raised by Boons et al. (2012). The authors note that although a lot of research has been done on power relations within the SC, it remains a relatively fragmented discourage and propose that further research should be done to explore how the various concepts of power induce the adoption of sustainability practices. Specifically, when the buyer demands from the supplier to comply with environmental

requirements, how do suppliers may perceive and respond to these initiatives imposed by the buyer power? Through a multiple case study, this thesis attempts to fill the gap, by exploring the following research question:

6 How does mediated and non-mediated buyer power influence the implementation of sustainable environmental practices in the supply chain?

The rest of the study is structured as follows: The next section discusses the related literature. The third section presents the methodology. Section 4 presents the results and the discussion of the multiple case study. Finally, the last section discusses conclusions, implications,

contributions and the limitations of the study.

2. THEORETICAL BACKGROUND

This section consists of four subsections. The primary purpose of this section is to provide a review of sustainability, an in-depth analysis of environmental practices. In addition, section 2.3 presents a brief review of the various buyer power sources and explores the influence of buyer power on the supplier’s SC.

2.1 Sustainability

Sustainability can be defined as “using resources to meet the needs of the present

without compromising the ability of future generations to meet their own needs” (Golicic & Smith, 2013). Corporate sustainability refers to the management of economic, social and environmental responsibilities across the firm’s operations (Carter & Easton, 2011). In the recent literature, the principle of sustainability has become a key element in SCM due to the ability to monitor the objectives of the economic, environmental and social performance -triple bottom line (TBL)- into its decision-making process (Meixell & Luoma, 2015). The conventional concept of SCM is being transformed to the SSCM by incorporating sustainability dimensions in the TBL performance. The capabilities of SSCM are integrated into core functions of the firm's SC to achieve competitive advantage over the competitors (Khodakarami et al., 2015). Hence, large buying firms intend to extend sustainability to their suppliers.

Environmental dimension includes actions and practices which are associated with the preservation of natural resources, waste minimization and reduced emissions (Krause et al. 2009). Buyers are becoming increasingly aware of environmental issues and prefer to acquire

7 products and services from environmentally-oriented firms. A firm implements environmental practices when it is adopting green products, green research and development and green marketing (Raharjo, 2019). Through green management, firms can gain sustainability and be responsible for the future.

Environmental concerns are an important dimension of social responsibility. Corporate social responsibility (CSR) is concerned with human rights, compliance with legal requirements and respect for the environment (krause et al., 2009). CSR can be defined as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (Mcwilliams, 2016). From a managerial point of view, the definition indicates that organizations need to be ethical, promote a good corporate example, as well as obey the regulations while striving to make profits.

Firms interact with various stakeholders whose goals, demand and benefits are different. As a consequence, the same situation can be interpreted differently. Wood’s framework embraces the economic, legal and ethical expectations of all firm’s stakeholders in order for the firm to meet the requirements of corporate social responsibility (Bansal, 2005). CSR involves three processes: environmental assessment, stakeholder management and social issues

management (Wood, 1991). Environmental assessment refers to the identification of social, economic and environmental issues and the quick reaction accordingly (Bansal, 2005). Through stakeholder management, firms respond to the individual interests of the various stakeholders, other organizations and even the natural environment (Wood, 1991). An important aspect of stakeholder management is to understand stakeholders’ perspectives, personal values and interests and strengthen these relationships with the stakeholders. Social issues management refers to the processes for managing a firm’s responses to social issues (Wood, 1991). Such issues are decisions regarding to not employ child labor, avoid the production of socially uncoverable products and not to collaborate with unethical partners (Bansal, 2005).

Economic dimension encompasses issues of the long-term profitability, job and market creation and competitiveness of the organization (Winter & Knemeyer, 2013). The economic dimension is one core distinction between sustainability and CSR, regarding the decision process

associated with sustainability investments (Closs et al., 2011). In Closs’s framework, the economic dimension can be categorized into categories: internal and external management. The internal management focuses on strategic sourcing practices, continuous improvement and lean approaches. Internal management encompasses practices that reduce operating and total

8 costs and increase productivity (Winter & Knemeyer, 2013). The external management focuses on supplier management and market orientation(Closs et al., 2011). External management includes practices that aim to attract new investors and offer the opportunity for inclusion in socially responsible investment indices (Winter & Knemeyer, 2013)

This study focuses on environmental sustainability in SC. The next section provides an overview of environmental practices and initiatives.

2.2 Environmental sustainability

SC concerns have merged with sustainability needs into the concept of Green supply chain management (GSCM) (Caniato et al., 2012). GSCM can be defined as “integrating

environmental concerns into the inter-organizational practices of SCM including reverse logistics”(Sarkis et al., 2011). Integrating the ‘‘green’’ component into SCM means addressing the influence and relationships between SCM and the natural environment (Caniato et al., 2012). GSCM can be categorized into internal and external practices (Zhu et al., 2013). Internal GSCM practices referred to those practices that can be implemented and controlled

independently by the firm(Zhu et al., 2013). External GSCM practices are defined as those practices that cooperation between the firm and its external stakeholders, such as customers or suppliers is required (Zhu et al., 2013). This study will investigate external GSCM due to buyers’ pressures on suppliers to adopt environmental practices.

Firms rely on effective supply management to develop and implement sustainable initiatives that preserve the environment (Carter et al., 2000). The assessment of the successful adoption and implementation of the sustainable practices differs from company to company (Panigrahi et al., 2019). Buysse & Verbeke (2011) grouped the environmental practices, based on the firm’s environmental proactiveness, into three strategies: reactive, pollution prevention and environmental leadership.

Reactive

Reactive strategies are defined as “short-term compliance strategies which do not require the firm to develop expertise or skills in managing new environmental technologies or processes” (Ateş et al., 2012). The major concern of a reactive firm is to comply with the environmental

9 regulations, without going ahead of them (González-Benito & González-Benito, 2005). The commitment of top management is lacking in reactive firms. As a result, there is a misalignment in environmental reporting or employee training and there is no formal environmental

management (Slawinski & Bansal, 2012). Pollution prevention

Pollution prevention strategy includes practices that focus on the constant adaption of the firm’s products and procedures in order to eliminate pollution levels which are beyond the legal

requirements (Buysse & Verbeke, 2003). The difference between this approach and the reactive approach is the pre-planned actions associated with pollution prevention, which indicates some degree of proactivity. Firms implement this strategy internally to achieve usage reduction (Graham & Potter, 2015). Usage reduction refers to the activities which reduce waste, increase recycling, eliminate greenhouse emissions and manage products at end of life (Closs et al., 2011). Waste reduction in the production process is one of the main aims of Lean production (King & Lenox, 2001). The adoption of lean practices can lead inadvertently to pollution reduction.

Another practice of the pollution prevention approach is environmental purchasing (Sarkis, 2003). Environmental purchasing can be defined as purchasing’s involvement in SCM activities in order to expedite recycling, reuse and resource deduction (Carter & Carter, 1998). The purchasing function can adopt these practices by suggesting alternative sources of supply and by using early supply integration. The purchasing function can address the TBL aspects of a firm's performance, by managing suppliers in a sustainable manner (Thomas et al., 2016). Conservation includes initiatives which leverage and reduce reliance on energy, water and other natural resources (Pullman et al., 2009). SC functions are involved in effective conservation. Such an initiative is the reverse supply chain (RSC). RSC refers to the sequence of activities necessary to collect the used product from a customer and either dispose of it or recover value (Kocabasoglu et al., 2007). Through RSC firms can improve their process efficiencies, supply chain design, product design and after-market product sales (Panigrahi et al., 2019).

Proactive

Activities at the beginning of the SC, such as the purchasing of raw materials and the production procedures, through the assembly of a product, have environmental impacts (Hart, 1995). This

10 approach extends pollution prevention by integrating other stakeholders in SC (Graham & Potter, 2015). Proactive Environmental Strategy can be defined “as the set of environmental objectives, plans and procedures of a firm, which go beyond basic compliance to laws” (Ateş et al., 2012). In proactive firms, top management is committed to engaging in environmental reporting, employee training and in formal environmental management (Slawinski & Bansal, 2012). In addition, proactive strategies anticipate new environmental issues and require integration with the suppliers (Ateş et al., 2012). As a result, proactive firms invest in their suppliers in order to integrate those issues across their SC. Moreover, new power plants, investments in products and technology innovations are examples of long payback practices (Slawinski & Bansal, 2012). Wijethilake (2017) declares that firms prefer to proactively integrate sustainability into their strategies rather than merely comply with regulatory requirements. The adoption and implementation of environmental SC practices directly reduce costs (Carter et al., 2000). However, Pullman et al. (2009) found that the implementation of environmental practices in the food industry does not have direct cost improvements. A possible explanation is that environmental practices may reduce some costs, but these savings may be substituted by related cost increases. Although environmental practices in food industries do not have a direct impact on cost performance, they do have on quality (Pullman et al., 2009).

2.3 Buyer power

Power is a key element in SC relationships. Power refers to the ability of a party to influence or leverage another party’s activities (Huo et al., 2019). Power depends on the criticality of

resources and the availability of alternative options to access the same resource (Touboulic et al., 2014). Buyer power can be used to control or even force the supplier to comply with more environmentally sustainable practices. For instance, Wal-Mart clarified that it would not acquire products from suppliers who do not fulfil the greenhouse gas emissions requirements (Chae et al., 2017). The relationship of buyer and supplier is strongly influenced by the power and their dependence (Kähkönen et al., 2015). Resource dependence theory (RDT) is frequently used to explain inter-organizational relationships (Wang et al., 2016). This theory suggests that firms need to acquire resources, tangible or intangible, which are possessed by another firm to operate successfully and gain competitive advantage (Kähkönen et al., 2015). The firms who control critical resources have the power. Power asymmetry indicates the extent to which a party depends on another in SC relationships (Jean et al., 2016). The power asymmetry among

11 the partners exists due to the differences in expertise, size, switching costs, dependence and contract structure which can create risks and challenges for the weaker party (Nyaga et al., 2013). An extension of RDT is Natural RDT (NRDT). This theory suggests that firms which acquire the appropriate resources and capabilities can implement environmentally sustainable practices which enhance the competitive performance (Boakye et al., 2020).

The concept of power in SC is multidimensional, and it is important to clarify these dimensions. Maloni & Benton (2000) categorized the source of power as mediated/non-mediated,

coercive/non-coercive and economic/non-economic. Non-mediated power is not specifically exercised to influence the other party (Pulles et al., 2014)and include expert, referent and legitimate bases (Maloni & Benton, 2000). Mediated power can be purposefully used by the power party to guide and leverage the other party (Reimann & Ketchen, 2017) which include coercive, reward and legal power (Maloni & Benton, 2000).

Coercive and reward power are the two most well-known sources of mediated power. Coercive power refers to the ability of a firm to punish the other partner if the latter does not comply with the firm’s requirements (Pulles et al., 2014). Blacklist of non-compliant suppliers, the threat of penalties through reduced orders and termination of business relationships are some threats and punishments that buyers can use to force suppliers to comply with sustainability

requirements (Chen & Chen, 2019). On the other hand, reward power refers to the firm’s ability to honor and repay the partner if the latter successfully respond to the firm’s requirements (Pulles et al., 2014). The promise of rewards can motivate suppliers to work according to the buyer’s requirements (Chen & Chen, 2019).

Expert power refers to the partner’s capability to assist the other one in order to perceive the individual goals by sharing knowledge, information and guidance (Sahadev, 2005). Expert power is associated with high levels of cooperation among the channel partners to achieve their mutual benefits. Regulations provide a clear framework for decisions on the market context. Governments develop and publish laws about the procedures and the production of the products, certification of working practices and a wide variety of information and restrictions about the market facilitation (Carstensen, 2008). These regulations assist buyers in reaching an informed, accessible and efficient market context (Carstensen, 2008).

12 The literature in the supply chain has investigated how the various aspects of power influence the supply chain relationships (Nyaga et al., 2013). Chae et al. (2017) explored the relationship between the buyer’s coercive, reward and non-mediated power and supplier’s commitment. The results indicate that there is a positive outcome between the buyer’s reward power and

supplier's relationship commitment while there is a negative effect when the buyer uses coercive power. With respect to commitment, Maloni & Benton (2000) found that expert and referent power -non mediated power- has a remarkable positive influence on the buyer-supplier relationship. On the contrary, legitimate power was found to be negatively related to commitment (Maloni & Benton, 2000).

Pulles et al. (2014) found that buyer’s reward power has a significant positive impact on the supplier’s allocation of both physical and innovation resources and good-willing trust. On the other hand, coercive power does not significantly affect supplier resource allocation. Finally, Nyaga et al. (2013) investigated the relationship between collaborative behavior and the source of power. Nyaga et al. (2013) proved that collaborative behavior is affected by non-mediated, mediated and reward power.

2.4 Impact of buyer power on supplier’s SSCM

Power plays an important role in the SC relationships and different sources of power have contrasting effects on key factors, such as trust, cooperation, commitment, conflict and conflict resolution (Maloni & Benton, 2000). Dominant buyers can use their power to drive sustainability into their SC by transferring the cost of sustainability into the weaker suppliers (Touboulic et al., 2014). However, this can create resistance from the collaborative supplier due to supplier’s weakness to respond to a long-term sustainability strategy. A lot of researchers have warned that the uncontrolled use of power from buyers can evoke perceptions of unfairness from suppliers (Reimann & Ketchen, 2017).

Chen et al. (2019) investigated the impact of coercive and reward power on sustainable supplier management through justice perception. Justice perception influences sustainable supplier management on sustainable performance. The author found that coercive power negatively affects the justice perception while reward power positively affects the justice perception which can help buyers to implement sustainable supplier management. However, reward power does

13 not have a significant impact on justice, so buyers should have a clear understanding of the dependence and be able to determine how the sustainable performance will be influenced by the interlace of power, justice and dependence (Hoppner et al., 2014).

The successfulness of the buyer’s power in achieving the desired supplier attitude depends largely on how the exert of this power can persuade the supplier to maintain its relationship with the buyer (Chae et al., 2017). Chae et al. (2017) investigated the implications of mediated and non-mediated power on supplier relationship commitment. The results indicate that reward power enhances the collaboration and motivates the supplier to sustain a long-term relationship with the buyer.

Sahadev (2005) explored the impact of expert power and key behavioral as well as attitudinal constructs. The outcome of this study implied that procession of expert power led to a more collaborative communication, close cooperation and a more behavioral orientation rather than an outcome orientation. However, the results indicated that there is a lack of linkage between expert power and trust.

2.5 Research framework

Section 2.4 presents insights on the impact of buyer power on the supplier’s SSCM. It is notable that the different sources of buyer’s power have contrasting effects on the supplier’s perspective and their key elements, such as trust, cooperation, commitment, conflict and conflict resolution. So, the question which arises is how do the different sources of power that imposed from the buyer affect the implementation of environmental practices on supplier’s SC? Moreover, we can narrow down the question and explore the mediated and non-mediated sources of power. Prior studies have already explored the effect of mediated power since the use of mediated power lets buyers to purposely leverage supplier’s response to sustainable practices and influence their acts and behavior. This study aims to investigate the impacts of both mediated and non mediated power and how they interplay in influencing supplier’s sustainable environmental practices. Figure 1 illustrates the conceptual framework that will guide the empirical research.

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Figure1 Conceptual Framework

3. METHODOLOGY

3.1 Research design

This study aims to provide an in-depth understanding of how buyer mediated and non mediated power is used to influence the adoption of sustainable initiatives in SC. Specifically, the focus will be on the supplier’s perspective. An exploratory, qualitative approach is used to develop an understanding of how suppliers perceive and respond to the environmental initiatives and requirements imposed by their buyers. An exploratory approach is used, when the facts are underdeveloped and the theoretical constructs need further identification and investigation (Huq et al., 2016). Qualitative research typically provides a wide range of detailed information derived from a smaller sample and fewer cases (Saha & Darnton, 2005).

A multiple case study was adopted for this research for the following reasons. First of all, it provides a better understanding and wider exploration of the research question than a single case study (Eisenhardt & Graebner, 2007). This enables us to explore if different sources of buyer power were used to influence the adoption of environmental practices in SC and to

understand the various perceptions and the possible behavioral change of suppliers. In addition, the use of multiple case study is considered as the most proper research design because several interviews of individuals are collected. This strengthens the external validity of the results (Huq et al., 2016). In our study, three different cases are examined; one buyer-supplier

15 dyad, one buyer and one supplier. Secondly, the nature of the research question requires

qualitative data to investigate the impact of these sources of buyer’s power on suppliers. Last but not least, case study research is appropriate to explore a real-life phenomenon in depth

(Yin, 2009). Multiple case study typically provides a stronger base for theory building and explanation due to the examination of sequential phenomena over time (Huq et al., 2016).

Data collected by three different firms, which are operating in the energy field, and by the firm’s suppliers who are informed that they need to adopt environmental practices across their SC. Thus, the unit of analysis in each case is each supplier, in order to investigate how the supplier perceives the buyer power on the implementation of environmental practices and how they are responding.

3.2 Case selection

The study research field focuses on three different firms in the energy industry and their three suppliers. The buyer-supplier dyad, the supplier and the buyer constitute the empirical setting of this research. Table 1 illustrates the criteria which were used to select the companies. All firms are operating in the energy sector and their goal is to implement sustainable environmental practices across their SC. The selection of the supplier for each company was not based on how compliant they are or achieve desirable results. So, the selection of the suppliers based on the strategic importance that they have in terms of share supply and the relational history with the company. Specifically, I choose suppliers who cooperate with the companies for more than five years. Also, their share of supply was at least 20%. I assume that the years of collaboration indicates a good relationship between the buyer and supplier. Therefore, I expect that the buyer can use non-mediated power to influence the supplier, on the basis of the good relationship. On the other hand, a big share of the supply indicates that the buyer is a strategic partner and I expect that both mediated and non-mediated power can be used.

Company Industry Environmental Practices

Years of collaboration

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A Energy Yes >5 >25%

B Energy Yes >5 >20%

C Energy Yes >5 >40%

3.3 Data collection

I conducted semi-structured interviews with representatives of the firm’s suppliers. The

interviews occurred between November and December of 2020. The total number of interviews in this study is four. Sustainable and purchasing managers were selected since they are

responsible for the implementation of environmental practices. Through the interviews, I gathered data on how suppliers deal with sources of power deriving from the buyer. A case study protocol was developed (Appendix A), based on the literature review, in order to guide our data. This protocol contained general rules and procedures that were followed during the

interviews, allowing for comparability of answers(Yin, 2009). Also, Excel was used to organize and save the collected data from the interviews in order to be more easily traceable. This improves the reliability of the study.

The interviews were divided into several parts (Appendix B). The first part was of general interest and it aimed to learn more about the company, the tasks, beliefs and personal goals of the interviewee and insights about the current environmental practices that the firm implements. The second part included questions about the environmental goals that the firm and the buying firm are willing to achieve and how these can be sustainable. The third part is focused on the relationship between the buying firm and the supplier. This part aimed to investigate what type of power is used and how do suppliers perceive this power. The final part had questions about the influence of the aforementioned type of power that has on their supply chain and how do they respond to it.

The interviews were conducted via Google meets, due to the Coronavirus pandemic, and each one lasted around 1 hour. After each interview, the main findings were summarized immediately and the emerging topics were investigated in the following interviews. All interviews were

17 recorded, after the permission of the interviewees and subsequently were transcribed. All data and information were held under strict confidentiality due to commercial sensitivity. E-mails sent for further clarifications and feedback. To achieve triangulation of methods, additional

information gathered by reviewing archival documents (industry sector reports, written reports about the firm) will be collected. Finally, this master thesis is evaluated by two supervisors.

3.4 Data analysis

In the process of analysis and interpretation of the data collected, I gradually transitioned from an inductive to a deductive approach. The aim of the inductive approach is to produce a new theory from the data since little discussion exists in the literature (Eisenhardt & Graebner, 2007). This study explored and add to the theory of how mediated and non-mediated power influence the supplier’s environmental practices. A deductive approach was used to identify and present existing theory and empirical evidence (Gioia et al., 2013), such as buyer power and pollution proactiveness. The final findings were delivered to the interviewees and their colleagues in order to increase the validity of data (Long & Johnson, 2000).

The key findings from the interviews were summarized immediately after the end of each meeting. By coding the data, patterns and major concepts were identified within each case and then continued to the comparison across the cases. Three cases were analyzed. One buyer-supplier dyad was treated as one case, one buyer and one buyer-supplier were the remains.

Atlas.ti was used to code the transcribed data. In vivo codes were used to code the data in first order and second order. In the first order analysis, variances and similarities were identified by attempting to maintain close to the narratives of the interviewee (Gioia et al., 2013). There were 105 1st _{code categories which was arose from the four interviews. In the second encoding order,} existing theories from the literature were connected with the 1st _{code categories; there were} developed 26 codes.

4. FINDINGS

In this section, the key findings were summarized from the three cases. The different sources of buyer power are illustrated in Table 4.1. The findings were structured based on the literature

18 review which was defined earlier. A detailed analysis of the buyer power is presented, followed by the supplier response and the impact on the supplier’s SSCM.

CASE BUYER POWER SHARE OF SUPPLY

Case 1 Legitimate power 25%

Case 2 Coercive power 30%

Case 3 Expert power 40%

Table 4.1: Source of power

4.1 Within-Case Analysis

Case 1: The buyer, in this case, is a huge oil and gas company and it is a leader in

environmental policies. Supplier considers this buyer as a key partner due to their long

relationship and buyer’s big share on supplier’s turnover. The buyer clearly has legitimate power over the supplier. The requirements of the buyer always focus on buyer’s compliance with the current regulations and subject to specific environmental certifications. Sometimes, it was an unwritten law that suppliers should obtain environmental certifications, even if the regulations weren’t clear about these procedures or was about to be implemented. ISO 14000 was an environmental policy that the supplier should have implemented otherwise, the buyer didn’t cooperate with the supplier.

‘’ Law also enforces you if you have processes that are chemically and not unfriendly to the environment you have to implement ISO. So that came and I think is a regular regulatory measure….

for environmental specification it's a period that it was an unwritten law that you know, you need that. Otherwise, we're not going to work with you. If you're not adapt to this environmentally policy

now, of course, it's much much much stricter now, they tell you, you know in the face you have to have this environmental regulation or you're not working with us? You cannot work. We will not

buy from you’’. (supplier)

On the other side, the buyer wants to be informed about the procedures and the materials that the supplier is using. Documentation, quality procedures, policy declarations and a certain number of certifications are some of the buyer’s requirements. All these requirements are included in the environmental policies which are implemented by the governments. The buyer

19 demands these policies not only to comply with the laws but also to differentiate from the

competition and enhance his prestige.

“We are actually being informed about the upholding procedures, the quality procedures that were adapted accepted and certified very well. Where the material is from, where are the residual

material, how is cleaned up, which are thrown away. Where is shipped?

Supplier needs to have a certain amount of certification. We need to know that because we are huge company and image is prime directive. We wanted to differentiate ourselves from the competition.

Yeah, it's like a different status. You know, it's like a higher status. It's like having a problem but now I'm certified for everything. So basically, we want to tap a higher-level Marke. We use these

certifications as a competitive advantage to sell “(buyer)

The environmental proactiveness of both the buyer and the supplier can be characterized as reactive. I found evidence that although they are willing to be more environmentally sustainable, they only implement environmental practices which comply with the government regulations:

“Unfortunately, I haven't seen any specific until this moment. In the company that I'm in. Any specific policy towards sustainability environmentally and well journalist sustainability many matter in any form, even though they have an adapted outline thousand. I haven't seen a policy that

would reflect that so I cannot comment on that.” (buyer)

The response of the supplier in these law enforcements and buyer’s requirements was to accept and implement the environmental policies. They were also willing to change their quality

procedures, their working structures and to adapt to this new policy.

“We accepted we're going to do. We were actually we were thinking about even beforehand of implementing this in addition because we knew that it's going to be a new law. We started preparing the quality procedures the working instruction how to organize the manufacturing how

to organize the processes to envelop this to adapt this so when there was a specific requirement that if you want to test a specific Market you need to have that. We went in we implemented of course implementing. This is a process of usually a year. from start to the beginning” (supplier)

20 Buyer’s legitimate power negatively affects the supplier’s justice perception, trust and influence the supplier’s value. The supplier was very nervous and there was a sense of unfairness. Such a finding indicates that legitimate power has a negative effect on the reinforcement of buyer supplier relationship.

‘’Of course, it affects my justice. In a situation where you are where you cannot tell them to go away. But yeah, of course, there is huge company. But this is business. But do they do piss me off? Yeah,

sometimes especially when you know, you know. They will torture you then and do this do that waste your time and then go and buy something that is two times more expensive and don’t have all

the certifications that we have.’’ (supplier)

Although the buyer can influence the supplier’s value, the supplier is not willing to sacrifice his company’s value for one supplier.

“the values they can influence this they can influence your values. But that depends on you. you know that depends on you, of course, I've seen a lot of people that are very easy at sacrificing the values of the company for a buyer just to get the buyer “

Case 2: The second case presents a different source of buyer power; coercive power. In this

case, the supplier is a well-known oil and gas company and is a leader in the energy industry. This supplier cooperates with big buyers who exert coercive power on the supplier. Buyers put enormous pressures on the supplier to reduce the usage of plastics.

“Buyers feel the pressure immediately and because they are the ones who want to sell their products through supermarkets Etc so that they apply the pressure on us. So you see the pressure through the kind of the press and you Environmental Group, of course also approach our company

directly”

Moreover, the company’s’ environmental strategy goes beyond basic compliance with the regulations. The top management and everyone in this company are concerned about the environmental impact and they adopt pollution prevention strategies to eliminate plastic usage. Environmental sustainability constitutes a competitive advantage of the company which always pursues to be ahead of the competition. In addition, the company invest in new facilities to

21 upgrade their procedures and working structures and anticipate to new environmental

challenges. The results indicate that the environmental proactiveness of the firm strengthens and improve the image and the status of the firm. Firm’s environmental proactiveness can be charactered as proactive:

“We've done a lot of work around Plastics. So the company is investing in large facility in Pennsylvania in the US. So currently the company is not a large producer of plastic and we will become a pretty significant one with this project in Pennsylvania where we make polyethylene so a

lot of strategy work and I basically let the refresh of our overall strategy for chemicals, which is a gross business for the company and so we did a lot of work around sustainability and Plastics. And in the company a kind of at all levels including at the kind of our board level people were concerned

because I mean we're very investing billions in a kind of a new facility in Pennsylvania.”

Although, the supplier is not a producer of a large amount of plastics and supplier’s

environmental proactiveness is a head of the competition, is investing in a large facility in order to eliminate the plastics. This investment aligns the dominant role that the company aims to attain in the industry with their environmental sustainability goals. Buyers threaten the supplier that they will stop their cooperation if the supplier don’t meet their requirements. As such, buyer demand supplier’s commitment by making public announcements.

“One of the ways they try to influence companies it's also by making public announcements. After they make public announcements about their strategy where they're having Etc. So if they make a

certain commitment, and I think they have the power to do and it's just like hey, well we've committed to do this. How are you going to help? And then they may not give you the business. I mean at the end today, of course the company lives by selling more products for a higher prices to companies. And if they threaten to take their business away because they don't think you're kind of

sustainable enough.”

Supplier’s response to these pressures is usually based on his willigness to sustain the cooperation with the buyer and to generate value. These threatens motivate the supplier to make the whole supply chain more sustainable and incentivized the implementation of more specialized practices. Besides the investment in a new facility that has already been made, another response to these pressures are the collaborations between the supplier and startup

22 companies. These collaborations aim to differentiation and to create new technologies to face plastic waste:

“As long as you think kind of what companies ask is reasonable and understandable. You may not like it. But then you can still kind of work together on it… Yeah, so by working with those small kind

of startup companies and giving them basic and uptake commitments working with them that you get the right quality and you can really help to get that value thing going as well. And so it's more at

completely yellow side of the value chain than our company traditionally place but if our company and the chemicals industry in general doesn't solve it the pressure to use less Plastics will only

increase”

Finally, the exert of coercive power affects the supplier’s trust, mutual understanding and commitment. This indicates that coercion negatively affects the buyer-supplier relationship and deteriorates the integration between them:

“Well, I think with those large companies. I mean trust and mutual understanding are the key factors that affected. I mean at the end of the day business is always between people. And so if people don't work well together or don't understand each other without trying to understand each

other. And then the business falls apart actually.”

Case 3: The final case presents another non mediated power; expert power. In this case, the

buyer represents a small company which supply marine solutions for oil and gas companies. Company’s main drivers are social and environmental values and it’s strategy aim to provide sustainable and green solutions. Due to the company’s small size, suppliers haven’t exerted any pressure from the buyer. However, the buyer seeks to cooperate with suppliers that offer green solutions and products:

“So we we will either Generally, that's just about selecting the right suppliers. We're not usually changing what our suppliers do we're just finding the suppliers that are offering the Green

Solutions if you like”

It is noticeable that the CEO and everyone who work in this company is committed to the environmental values and they put effort to implement and adopt green practices.

23 They use sustainable recycled materials manufacturing processes, integrating their suppliers and investing in projects which aim to eliminate energy. The finds clearly demonstrate that the environmental proactiveness of the company is proactive:

“like just say that we're very committed to being part of the green economy. Um, and and I think we've done a lot with win win industry and try to support that. We had another thing that we invested years ago on on Energy Efficiency for housing sector about half a million pound a few years ago for making domestic houses or commercial premises more energy efficient by sending

two technicians in an adjusting lots of things and lighting and things so we've done projects like that. So, I think we are very committed to Developing things and supporting projects which are

about the green economy”

Sharing the environmental values and motivating the supplier to use green materials and products are two main initiatives that the buyer address to the supplier. When the supplier fails to adapt to a new environmental practice, detail instructions and guidelines are sent by the buyer. This allows the buyer to integrate suppliers early in the new environmental practise and reinforce their relationship:

“I think that's just changing there again. They usually just following our instructions. So we just give them drawings will ask them to find new suppliers or sometimes we'll find the supplier for them

and just say this company can supply this material. Here's the new drawings. We'll just tell them what to do. So they just follow instructions. We sometimes monitor them. Yeah, if it’s needed, we

may send one of our employee to monitor their procedures and help them.”

Supplier’s willingness to execute buyer’s instructions indicates his positive reaction on the buyer’s expert power:

“Okay, I just said the suppliers generally do whatever our request is. They tend to accept it if it's a reasonable request which usually is. And if there's a cost involved they pass the cost on to us.”

24 “I think it affects trust. When you have power in your relationship you have to use it responsibly because if you want to maintain people’s trust and commitment, I think is about the way you exert

that and I lightly see this in communication”

4.2 Cross-Case Analysis

With respect to buyer power, the findings clearly show that buyers’ exercise of power affect the supplier’s SSCM. The results demonstrate that both legitimate, coercive and expert power affect key relational factors. Specifically, the findings suggest that legitimate and coercive power negatively affect trust. Both in case 1 and 2, buyers demand from the suppliers to comply with the government regulations and their requirements respectively. Suppliers, from both cases, dedicate effort and joint resources and investments to meet buyer’s requirements. In case 1, the supplier changes the procedures and the working structures to obtain the certification. In case 2, the supplier collaborates with startup companies to achieve plastic reduction in a shorter period of time.

In both cases, the suppliers respond immediately without reacting. Moreover, both suppliers were aware and take the initiative to implement environmental practices before the exercise of the buyer’s power. In the first case, the supplier was aware of the new law and intended to comply with it. In the second case, the supplier was invested in new facilities. So, there is an expectation of relational continuity, trust and mutual commitment. However, buyer power negatively affects trust in both cases. The suppliers had a feeling of uncertainty, that even if they comply with the buyer’s demands, they weren’t sure if the buyer will continue to collaborate with them.

Another interesting insight is that the exploitation of buyer power affect suppliers in which buyer contribute to a big share of their turnover. The buyers from the first and third case support this and indicate that they are quite influential to these suppliers. In all the cases, buyer power motivates suppliers to accelerate the adoption of environmental practices. The suppliers wanted to generate value and to differentiate from the other suppliers. In the first case, the supplier acquires certifications which are not compulsory from the regulations, in order to prove his environmental friendly procedures and to differentiate from the other suppliers. In case 2 and 3,

25 the suppliers proactively integrate sustainability into their strategies to generate value and new green technologies and products. The results indicate that the suppliers are eager to become more environmentally sustainable. However, buyer power affects negatively supplier’s justice perception in case 1 and mutual commitment in cases 2 and 3.

5. Discussion

This study explores the influence of buyer power on the supplier’s environmental sustainability and provides further evidence of the impact of buyer power on supplier SSCM. Power is an effective tool in the SC and the explicit role and impact of power remain vague (Maloni & Benton, 2000). The findings provide important practical and theoretical implications for the exercise of legitimate, coercive and expert power.

First, the study indicates that buyers exert their power in order to drive environmental sustainability in its SC. Suppliers reaction to this power was to accept and implement the requirements of the buyers immediately. There were not any additional indications in the study, that exercise of buyer power affects the supplier’s response and compliance to buyer’s

requirements. Especially, in the second case, the use of coercive power motivates the supplier to directly engage in sustainability initiatives. However, there was a negative impact on the supplier’s commitment. This finding is line with the results of (Chae et al., 2017), who demonstrate that coercive power has a negative impact on the supplier’s commitment.

Second, the results imply that expert power enhance the collaboration and communication between the buyer and the supplier. This finding provides further evidence to the work of Nyaga et al. (2013) proved that collaborative behavior is affected by non-mediated power. Buyer’s willingness to invest in suppliers enhance their collaborative communication and cooperation (Sahadev, 2005). Buyers are willing to assist, train and share information with the supplier in order to produce green products and develop green technologies. While there is a positive link between expert power and collaborative communication and cooperation, the results do support that there is a negative impact of expert power on trust. Sahadev (2005) explained this negative impact that may be caused by external uncertainty.

26 Finally, this study explores another non-mediated power, legitimate power. Buyer demand from the supplier to adopt environmentally responsible behaviors and modify their practices to ensure environmental legitimacy. By complying to the regulations, suppliers attest the alignment of their environmental practices with the buyer demands. The findings indicate that suppliers dedicate effort and time to obtain environmental certifications but it does not ensure the continuation of the collaboration with the buyer. This sense of unfairness affects the supplier’s justice

perception. So, the legitimate power affects the supplier’s justice perception.

6. Conclusion

The contribution of this thesis is to the stream of environmental sustainability by exploring the different source of buyer power and the impact on supplier’s SSCM. Revisiting the research question, the main findings of this study in the light of supply chain management are presented. With regard to the research question “How does mediated and non-mediated buyer power influence the implementation of sustainable environmental practices in the supply chain?” the results strengthen the findings of previous researches.

In addition, this study combines the different dimensions of mediated and non-mediated buyer power in one empirical study. This led to very interesting results. For instance, although

coercive power negatively affects the justice perception of the supplier, the later was compliant with the buyer’s requirements. Another increasingly interesting insight was that, while there is a positive association between expert power and collaborative communication and cooperation, there is a negative linkage between expert power and trust. This research supports the view that buyer power is an influential tool for sustainability. Buyer power motivates the suppliers to engage in environmentally sustainable practices and aims to make the whole SC more sustainable.

6.1 Limitations and further research

The thesis has several limitations that can provide an opportunity for further research. First, the analysis should investigate buyer-supplier dyad. Due to commercial sensitivity and business confidentially, I manage to explore only one buyer-supplier dyad. In addition, this study

27 buyer power, such as reward and referent power. Finally, the results can not be generalized due to the limited number of cases and the adoption of multiple case study (Gong et al. 2018). Despite these limitations, I do believe that this thesis makes meaningful contributions to the extant literature.

Much more work is needed to further investigate the impact of buyer power. First, I selected companies who operate in the energy field. The effects od buyer power could be greatly explored to other industries, such as the food industry, where the environmental impact is higher. The analysis could also include more stakeholders, such as customers, and investigate how the power exercised between the stakeholders and what’s the impact on the whole SSCM.

28

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