An Analysis of Drivers and Barriers to Innovations in Green

Supply Chain Practices in Mexico

Gioconda Quesada, Christian Bailey and Brooks Woodfin

This study identifies the motivations for and barriers to innovations in green
supply chain practices (GSCM). We conducted a survey to collect data on 79
Mexican companies. Analysis of variance (ANOVA) was used to analyze the
data. The results are consistent with our prediction that different levels of
importance of green/environmental issues for the overall company's strategy
display different drivers to implement GSCM practices. However, when we
analyzed the barriers to implementing GSCM practices, we found no
differences. Implications of the results are discussed and suggestions for
further research on the implementation of GSCM are presented.

1. Introduction and Literature Review
Although the subject of sustainability has only gained popularity in the past two
decades, the topic of Green Supply Chain Management (GSCM) can trace its roots
back to the Industrial Revolution. It was during the Industrial Revolution that air
pollution due to industrial activity first became a significant issue. It was also the first
time that specialization of labor was put into action. Adam Smith wrote in The Wealth of
Nations that the division of labor allowed companies to gain a comparative advantage
over one another. "t is the maxim of every prudent master of a family, never to attempt
to make at home what it will cost him more to make than to buy.What is prudence in
the conduct of every Private family, can scarce be folly in that of a great kingdom. With
large corporations specializing in producing a narrow line of products, the need for
supply and distribution channels was needed, thus giving rise to logistics in general.
Much more recently, the concern over the effects that industry has on the environment
led to the development of supply chain management with a focus on environmental
sustainability.
The concept of making the supply chain more efficient became more prevalent with the
advent of modern supply chains in the 20
th
century. Henry Ford used practices such as
lean and just-in-time (JIT) manufacturing in the automotive industry. These strategies
had a goal of avoiding excess inventory that clogged the supply chain. Ford's assembly
line led to more streamlined operation techniques by giving groups of workers very
specialized tasks to move each automobile from one stage of the assembly process to
another (Black, and Phillips 46-51). However, most of the innovations in supply chain
management in the 20
th
century were aimed at reducing waste for economic rather than
environmental reasons. It was not until the turn of the 21
st
century that the term green,
in reference to protecting the environment, gained widespread use and recognition.
There are many different definitions of Green Supply Chain Management (GSCM).
Certain words such as "sustainable and "environmental are used to describe this type
of supply chain management. Sarkis, Zhu, and Lai define GSCM as "integrating
environmental concerns into the inter-organizational practices of SCM including reverse
logistics. Sarkis, Zhu, and Lai have identified nine of the main theories related to
GSCM. These theories include: Complexity, Ecological Modernization, Information,
Institutional, Resource Based View, Resource Dependence, Social network,
Stakeholder, and Transaction Cost Economics (2-5). These theories outline ways in
which the GSCM can be implemented. They also can give direction to those conducting
research in GSCM.
Sustainability, as defined by Kleindorfer, Singhal, and Wassenhove, includes the topics
of environmental management, closed-loop supply chains, and a broad perspective on
triple-bottom-line thinking, integrating profit, people, and the planet into the culture,
strategy, and operations of companies (482). In other words, sustainability is a
comprehensive approach to making a company more "green, in a way that aligns an
organization's profit and environmental goals. Whereas many view sustainability efforts
as benefiting solely the environment, these practices can also benefit companies
economically. A concept that embodies this idea is that of the triple bottom line (3BL).
The triple bottom line is built upon the concerns of the long-term successes of the
companies and the economy, the future of the people, and the future of the planet. A
similar concept, the three Ps, lists people, profit and the planet as the reasons that
companies adopt sustainability practices. Operations or supply chain management has
become increasingly involved in sustainability because of their concerns with profitability
and their relationship with people and the planet (Kleindorfer, Signahl, and Wassenhove
484-5).
Kleindorfer, Signahl, and Wassenhove divide the primary drivers of sustainability in the
supply chain into two groups: regulations and public expectations. The regulatory
drivers of sustainability are: corporate image, regulatory compliance, liability, and
community relations. The public expectations that drive sustainability are: employee
health and safety, customer relations, cost reduction, and quality improvement
(Kleindorfer, Signahl, and Wassenhove 484). These drivers can be derived from the 3
Ps of people, profit, and the planet. Employees want to work for companies that
operate responsibly and are in tune with their health and safety needs. Profit can, in
some cases, be a driver in sustainable practices. It has been argued that strict
environmental standards can force companies to be more innovative and develop more
profitable sustainable technologies (484). For example, by making a production
process more efficient a company can save on energy costs while reducing their
emissions. In the case of the planet as a driver, many of the pressures are external
rather than internal. Pressures from the community and the threat of liability can force
companies to improve their environmental impact. Zhu and Sarkis (2006) also classified
the drivers that motivate green supply chain management practices into: regulations,
marketing, suppliers, competitors and internal factors.
Although there is lots of research in support of GSCM, there are still some organizations
that have become slow to adopt its strategies. There is a gap in the literature for
empirical studies that support theoretical foundations in GSCM. Professor Colin
Coulson-Thomas of the University of Lincoln states that "many corporate boards would
like to contribute to combating environmental challenges and climate change, but they
have yet to identify practical and cost-effective ways of turning their noble aspirations
into concrete outcomes that will help to save the planet ("Should Corporate Boards
Promote Green Purchasing?"). This is likely the main barrier that is preventing
companies from adopting green or sustainable practices. Many companies see the
importance of green practices, but they either do not know how to align those practices
with their current operations or they do not see them as economically feasible.
This paper describes the results of surveys to 79 Mexican companies. This is one of the
first studies to examine the impact of the level of importance assigned to
green/environmental issues in the company's overall strategy and its effect on drivers
and barriers to successful green initiatives. A main goal of this paper is to examine if
differences exist in GSCM drivers/barriers in the different levels of importance of
green/environmental issues assigned at the corporate strategy level: not important,
somewhat important, fairly important, important and very important. The results may
influence the way environmental regulatory policy and corporate environmental policies
are developed in Mexico. Conclusions are drawn from the empirical study.
Based on the literature, the authors present the following two hypotheses:
Hypothesis 1. Mexican companies with different levels of importance assigned to
green/environmental issues in their corporate strategy have different drivers for
implementation of GSCM practices.
Hypothesis 2. Mexican companies with different levels of importance assigned to
green/environmental issues in their corporate strategy have different barriers for
implementation of GSCM practices.
2. Methodology and Research Design
The researchers used a survey instrument completed by the person in charge of
environmental initiatives at the company. The role in the company of the person
responding the questionnaire included director/manager of: logistics, transportation,
supply chain, operations, corporate social responsibility, environmental sustainability,
and marketing, among others. A total of 87 companies responded from an initial
database of 1,500, which corresponds to a response rate of 5.8%. Figure 1 shows
descriptive statistics of demographic information collected for the sample. As can be
analyzed from the charts, there is a good representation of small, medium and large
companies in terms of revenues and number of employees. The researchers analyzed if
the factor size was significant when analyzing drivers and barriers for GSCM, and there
were not significant differences due to size.

Figure 1. Demographic Information for the Sample
The sample shows the following distribution of industries: 33.3% automotive, 15.7%
food, 2% chemicals, 2% defense/aerospace, 15.7% healthcare/pharmaceutical, 19.6%
high-tech/electronics, 5.9% retail/consumer packaged products and 5.9%
transportation/logistics service providers. Mexico's close proximity to the US makes it a
strategic location for the development of Mexican industry sectors such as
manufacturing, aerospace, automotive and electronics. The industries surveyed in this
study represent companies that have struggled to be suppliers of foreign companies in
Mexico, with high levels of exporting. The researchers also analyzed the ownership of
the companies surveyed: 17.2% state-owned, 19.5% FDI (foreign direct investment),
62.1% private sector and 1.1% joint venture.
The questionnaire includes items for drivers and barriers collected from literature and
interviews. After the initial stage of data gathering, the researchers followed the items
validated and tested for reliability by Zhu and Sarkis (2006). Questions were presented
using a 5 point Likert scale. Twenty seven items were used for the construct Drivers for
GSCM, and 21 items were used for the construct Barriers for GSCM. The researchers
performed factor analyses and achieved slightly different results than literature, which
lead to different items, but in all cases, all second-level constructs had at least 3 items.
The question used to split our sample for comparison purposes reads as "How
important are green/environmental issues to your company's overall strategy?.
Respondents answered using again a five point Likert scale: Not Important (5.3%),
Somewhat Important (24.3%), Fairly Important (23.1%), Important (23.7%) and Very
Important (23.7%). The researchers performed individual t-tests for differences between
"not important and "somewhat important. No differences were found; therefore, to
avoid sampling error due to small sample size, the researchers merged the first
categories as one: Not Important/Somewhat Important.

$0-$823,000
47%
$823,001-
$1,646,100
7%
$1,646,101-
$3,292,200
million
2%
$3,292,201-
$8,230,520
million
9%
More than
$8,230,521
million
35%
Annual Revenue (US $)
Less than 100
42%
101-250
15%
251-500
8%
501-1000
9%
More than 1001
26%
Number of Employees
3. Discussion of Findings
The researchers compared drivers and barriers for implementing GSCM among
different levels of support for environmental issues at the strategic level. Analysis of
Variance (ANOVA) was used to perform comparisons among groups. When differences
were found, individual tests for homogeneity of variances were performed. If equal
variances were found, then, we used Tuckey HSD item comparisons. In the case of
unequal variances, we chose to use Tamhane's test for item comparisons.
1. Drivers for GSCM
The drivers were divided into four categories: regulations, marketing, suppliers, and
internal factors. By dividing the drivers into these categories, a comparison can be
made between groups of related drivers.
For those companies responding "Not important/Somewhat important" or "Fairly
mportant" to the question "How important are green/environmental issues to your
company's overall strategy?", the driver category with the highest average score was
Regulations. For those companies responding "Important" or "Very Important", the
category with the highest average score was Internal Factors. This is potentially a very
important distinction. Responders who cited environmental issues as not being
important or fairly important are driven more by government regulations than by any
other factor. These companies do what they need to in order to ensure the legality of
their operations and products, but do little beyond that. By contrast, the responders
citing environmental issues as being more important are primarily driven by internal
factors such as their company's "environmental mission". Companies that place a
larger emphasis on environmental issues are more likely to be driven by intrinsic
motivations for environmentally friendly operations, whereas companies with less
emphasis on environmental issues are driven more by extrinsic motivation, like the
threat of governmental lawsuits or fines.
On average, the mean scores of each category of drivers increased moving from "not
important/somewhat important" responders to "very important" responders, which
supports Hypothesis 1 (Mexican companies with different levels of importance assigned
to green/environmental issues in their corporate strategy have different drivers for
implementation of GSCM practices). The higher importance a responder's company
places on green/environmental issues, on average, resulted in a higher value of
individual drivers for such initiatives. For example, in the category of Internal Factors,
the mean scores for the drivers moved from 3.40 to 3.88 to 4.29. to 4.63 as you go from
"not important/somewhat important" responders to "very important responders." It is
likely that the responders whose companies place more importance on green initiatives
are likely to view them more positively. These drivers are likely the reason that they
adopted such initiatives and place such importance on them. In contrast, responders of
companies who place less importance on these initiatives as a whole had lower mean
scores on individual drivers. This could result from a corporate culture that does not
stress or value green initiatives.
There was one exception where the mean score of a category did not increase moving
from "fairly important" responders to "important" responders. The mean score for the
Regulations drivers decreased from 4.40 to 4.27 when moving from "fairly important"
responders to "important" responders. This is partly due to the trend that Regulation
drivers were the highest mean score for "not/important and "fairly important
responders. One possible reason that the "fairly important responders rated regulatory
drivers higher than "important responders is because they scored those drivers in
relation to those from other categories, to which they attributed lower mean scores.
Again we see the possibility that companies placing lower priority on green initiatives
are motivated primarily by laws set by the government and other regulatory agencies
more than any other driver. Companies, like those with "important responders are
more motivated by the Internal Factors, which had a mean score of 4.29 (versus 4.27
for Regulation drivers).
Barriers for GSCM
The barriers were divided into four categories: supply chain, suppliers, economic, and
internal. By dividing the barriers into these categories, a comparison can be made
between groups of related drivers.
When the barriers were divided based upon companies responding "Not
important/Somewhat important" or "Fairly mportant" to the question "How important are
green/environmental issues to your company's overall strategy?, no significant
differences were found like there were with the drivers. Because of this, the different
categories of responders were grouped together in order to analyze differences among
the barriers. In contrast to the drivers, a low mean score represents a strong barrier to
the adoption of green practices, whereas a high mean score represents a weak barrier.
The category that was perceived to be the largest barrier to the adoption of green
practices was the economic category. Many businesses are concerned that such
practices are either too expensive (mean = 1.74), or that it will take them far too long to
receive a return on their investment (mean = 1.98). These two measures were two of
the three lowest mean scores, meaning that they are strong barriers. If a company has
not adopted green practices (or has not fully developed them), it is likely that economic
reasons are what are preventing them to do so. This barrier was strongest among "very
important responders, which could mean that after adopting some green practices they
are aware of how costly they can potentially be.
Barriers relating to the supply chain and suppliers were among the higher scoring
barriers, signifying that they were not perceived by the responders as strong barriers to
the adoption of best practices in green supply chain management. The three barriers in
these two categories made up three of the four "weakest barriers. Suppliers are
typically not the reason why a company would fail to adopt greener supply chain
management procedures.
The "weakest perceived barrier was "We aren't convinced the green trend will continue
beyond the next few years, with a mean score of 3.02. n fact, this was the barrier with
the highest mean score for each of the four categories of responders. The general
consensus is that the so-called "green movement is something that is here to stay in
the future. If there is something preventing companies from adopting greener practices,
it is not the perception that the movement will no longer be popular in the future.
The strongest perceived individual barrier to adopting green practices was "the cost is
perceived as too high, with a mean score of 1.74. This barrier was the lowest scoring
barrier in all responder categories except for "not important/somewhat important
responders. For most companies the costs associated with greener supply chain
practices is what prevents them from either adopting them or further developing them.
For companies who place lower importance on "green/environmental issues, it is not
their main barrier. For those companies, the strongest perceived barriers are "we don't
have any one person strongly driving the process internally (1.57) and "we don't have
enough people driving the process internally (1.50). Whereas other companies were
limited in terms of funds, these companies that place lower importance on
environmental issues lack the leadership necessary to implement green practices. The
fact that they have little guidance and leadership in relation to green practices also
could explain why environmental issues are either "not important or only "somewhat
important in their company's overall strategy.
4. Conclusion
Although there is lots of research in support of GSCM, there are still some organizations
that have become slow to adopt its strategies. The study shows that although there
might be interest in becoming greener, there is a perception that there are not currently
cost-effective practical solutions for companies to become greener. The results should
be cautiously interpreted, and generalized. The survey of the study is showing results
for 87 Mexican companies. The results show support for the hypothesis that Mexican
companies with different levels of importance assigned to green/environmental issues in
their corporate strategy have different drivers for implementation of GSCM practices.
Specifically, the mean scores of each category of drivers increased moving from "not
important/somewhat important" responders to "very important" responders. It is likely
that the responders whose companies place more importance on green initiatives are
likely to view them more positively. Again we see the possibility that companies placing
lower priority on green initiatives are motivated primarily by laws set by the government
and other regulatory agencies more than any other driver.
The second hypothesis was not supported: Mexican companies assigned the same
rating to the barriers of implementing GSCM practices, regardless of their ranking of the
importance of green/environmental issues in their corporate strategy. The category that
was perceived to be the largest barrier to the adoption of green practices was the
economic category. Many businesses are concerned that such practices are either too
expensive or that it will take them far too long to receive a return on their investment.
These two measures were two of the three lowest mean scores, meaning that they are
strong barriers. The general consensus is that the so-called "green movement is
something that is here to stay in the future. If there is a limitation preventing companies
from adopting greener practices, it is not the perception that the movement will no
longer be popular in the future. The strongest perceived individual barrier to adopting
green practices was "the cost is perceived as too high. The fact that they have little
guidance and leadership in relation to green practices also could explain why
environmental issues are either "not important or only "somewhat important in their
company's overall strategy.
In summary, there should be more company awareness that the green movement is not
necessarily more expensive. In fact, if done correctly, it could save companies some
money by eliminating waste.







Table 1. Comparison of GSCM drivers in Mexican companies for different levels of importance of environmental/green issues at
corporate strategy



Mean Std.Dev. Mean Std.Dev. Mean Std.Dev. Mean Std.Dev. F-Statistic p-value 1 and 2 1 and 3 1 and 4 2 and 3 2 and 4 3 and 4
REGULATIONS 3.62 1.739 4.40 0.997 4.27 0.836 4.35 0.908 1.79 0.156
Central governmental envi ronmental regul ati ons 3.64 1.823 4.36 0.929 4.30 0.869 4.31 1.176 1.26 0.292
Regi onal envi ronmental regul ati ons 3.62 1.850 4.50 1.019 4.36 0.757 4.23 1.283 1.42 0.244
Products potenti al l y confl i ct wi th l aws 3.85 2.035 4.36 1.216 4.15 1.377 4.48 1.029 0.76 0.521
MARKETING 3.44 1.630 3.88 1.013 4.13 1.082 4.51 0.802 3.30 0.024* 0.726 0.253 0.019* 0.897 0.271 0.545
Export demand 3.69 2.213 3.86 1.562 3.81 1.650 4.19 1.447 0.40 0.752
I mprove sal es to forei ng customers 3.62 2.142 3.71 1.383 4.00 1.625 4.29 1.575 0.69 0.562
Country's envi ronmental awareness 3.31 1.702 4.00 0.877 4.23 1.107 4.84 0.523 7.38 0.000* 0.301 0.046* 0.000* 0.904 0.060** 0.122
Establ i shi ng company's green i mage 3.15 1.625 3.93 1.207 4.46 0.706 4.69 0.644 8.66 0.000* 0.169 0.001* 0.000* 0.351 0.077** 0.813
SUPPLIERS 3.15 1.586 3.89 1.108 3.95 1.085 4.36 0.792 3.81 0.013* 0.297 0.148 0.006* 0.999 0.543 0.481
Suppl i er's advances i n devel opi ng envi ronmental l y fri endl y goods 3.08 1.977 4.36 1.277 4.08 1.256 4.60 0.724 4.67 0.005* 0.045* 0.095** 0.002* 0.910 0.931 0.419
Envi ronmental partnershi p wi th suppl i ers 3.15 1.951 3.64 1.151 3.42 1.349 4.19 1.302 2.24 0.090
Suppl i er's advances i n provi di ng envi ronmental l y fri endl y packages 3.00 1.871 3.57 1.342 4.13 1.191 4.33 1.124 3.59 0.017* 0.677 0.073** 0.017* 0.601 0.291 0.939
Maki ng sure that the suppl i ers wi l l remai n i n busi ness (busi ness conti nui ty) 3.38 1.938 4.00 1.468 3.79 1.062 4.32 0.871 1.94 0.130
INTERNAL FACTOR 3.40 1.750 3.88 1.133 4.29 0.837 4.63 0.540 5.30 0.002* 0.590 0.052 0.002* 0.616 0.099 0.583
Company's envi ronmental mi ssi on 3.38 1.609 3.93 1.269 4.12 0.881 4.69 0.821 5.08 0.003* 0.553 0.193 0.002* 0.950 0.128 0.201
I nternal Mul ti nati onal pol i ci es (subsi di ari es or di vi si ons of a mul ti nati onal fi rm) 3.54 1.941 3.86 1.703 4.25 1.327 4.81 0.833 3.29 0.025* 0.929 0.431 0.030* 0.826 0.141 0.440
Potenti al l i abi l i ty for di sposal of hazardous materi al s 3.46 2.066 4.00 1.109 4.50 1.063 4.87 0.619 5.16 0.003* 0.625 0.053** 0.002* 0.576 0.099** 0.643
Cost for di sposal of hazardous materi al s 3.62 1.938 3.93 1.141 4.29 1.083 4.45 1.028 1.64 0.187
Cost of envi ronmental fri endl y goods 3.38 2.022 3.79 1.122 4.13 1.076 4.42 0.992 2.37 0.077** 0.838 0.319 0.066** 0.850 0.398 0.822
Cost of envi ronmental fri endl y packages 3.00 1.958 3.79 1.369 4.23 1.152 4.45 1.121 3.91 0.012* 0.427 0.050* 0.008* 0.769 0.415 0.931
*Significant at alpha=0.05 **Significant at alpha=0.10
a
1=Not Important/Somewhat Important; 2=Fairly Important; 3=Important; 4=Very Important (How important are green/environmental issues in your company's overall strategy?)
Item Comparison
a
Only when differences are found
(p-values)
Not Important/
Somewhat Important
n=14
Fairly Important
n=14
Important
n=27
Very Important
n=32
ANOVA
(p-value) ITEMS

Table 1. Comparison of GSCM BARRIERS in Mexican companies for different levels of importance of environmental/green issues at
corporate strategy


Mean Std.Dev. Mean Std.Dev. Mean Std.Dev. Mean Std.Dev. F-Statistic p-value 1 and 2 1 and 3 1 and 4 2 and 3 2 and 4 3 and 4
The cost i s percei ved too hi gh 2.29 1.380 1.44 0.527 1.56 0.727 1.83 0.924 1.50 0.227
Payback peri od i s percei ved as too l ong 2.29 1.113 1.44 0.527 1.94 0.680 2.18 0.883 2.02 0.124
I t i s percei ved to negati vel y i mpact our suppl y chai n effi ci ency 2.57 1.272 2.00 1.309 2.62 0.961 2.38 1.044 0.56 0.645
We don't have enough knowl edge to start the process 2.38 1.302 1.88 1.126 1.75 1.000 2.10 1.165 0.64 0.595
We don't have the support of our partners and/or servi ce provi ders to start the process 2.14 1.345 1.67 1.118 2.75 1.065 2.47 1.328 1.66 0.190
t >^W 2.67 1.366 2.00 1.195 2.59 1.121 2.47 0.915 0.61 0.613
Management has not made thi s a top pri ori ty for transportati on and l ogi sti cs 1.71 1.254 2.11 0.928 1.75 0.775 2.44 1.149 1.62 0.197
We don't have any one person strongl y dri vi ng the process i nternal l y 1.57 1.134 1.75 0.886 1.76 0.903 2.26 1.195 1.12 0.349
We don't have enough peopl e dri vi ng the process i nternal l y 1.50 1.225 1.88 0.835 1.94 1.063 2.53 0.943 2.01 0.127
I t's just not hi gh enough on our l i st of pri ori ti es 1.83 1.329 1.89 0.928 2.33 0.907 2.81 1.047 2.26 0.095
We aren't seei ng the customer demand necessary to justi fy i t 1.83 1.169 2.00 0.707 2.24 0.903 2.47 1.020 0.94 0.431
We aren't convi nced the green trend wi l l conti nue beyond the next few years 2.67 1.366 2.50 1.195 2.94 1.237 3.57 0.938 1.81 0.161
We don't bel i eve our customers wi l l pay a premi um i f we add green as USP 1.67 1.211 1.78 0.667 1.88 0.993 2.81 1.109 3.54 0.022* 0.046*
*Significant at alpha=0.05 **Significant at alpha=0.10
a
1=Not Important/Somewhat Important; 2=Fairly Important; 3=Important; 4=Very Important (How important are green/environmental issues in your company's overall strategy?)
b
1=Big Barrier; 2=A Barrier; 3=Somewhat a Barrier; 4=The opposite is True of our Company
Item Comparison
a
Only when differences are found
(p-values)
BARRIERS (b)
Not Important/
Somewhat Important
n=14
Fairly Important
n=14
Important
n=27
Very Important
n=32
ANOVA
(p-value)
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