Int. J.

Production Economics 140 (2012) 330–340

Contents lists available at SciVerse ScienceDirect

Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

Sustainable supply chain management (SSCM) in Malaysia: A survey

Suhaiza Zailani a,n, K. Jeyaraman a, G. Vengadasan a, R. Premkumar b,1
a
Graduate School of Business, Universiti Sains Malaysia 11800, Penang Malaysia
b
Faculty of Business and Management, AIMST University, Kedah, Jalan Bedong – Semeling 08100, Bedong, Kedah, Malaysia

a r t i c l e i n f o a b s t r a c t

Article history: As a developing country, Malaysia has moved from an agriculture-based economy to an industrialized
Received 16 July 2010 economy in which manufacturing is considered to be the highest contributor towards environmental
Accepted 7 February 2012 concerns. These concerns push firms into seriously considering the environmental impact while doing
Available online 25 February 2012
their business. The implementation of sustainable supply chain management (SSCM) is a key enabler
Keywords: that could push organizations to focus on alleviating environmental issues, and providing economic and
Practices social benefits. This study investigates the extent of implementation of sustainable supply chain
Outcomes management practices (environmental purchasing and sustainable packaging). The study also exam-
Sustainable supply chain ines the outcomes of these practices on sustainable supply chain performance. A survey via mail was
Developing country
carried out among 400 manufacturing firms in Malaysia. Factor analysis of the survey data resulted in
Malaysia
four categories of outcomes (environmental, economic, social and operational). The study found that
environmental purchasing has a positive effect on three categories of outcomes (economic, social and
operational), whereas sustainable packaging has a positive effect on environmental, economic and
social outcomes. The results have empirically proven that SSCM practices have a positive effect on
sustainable supply chain performance, particularly from the economic and social perspective. Thus,
firms need to collaborate in advocating sustainable supply chain management (SSCM) practices as a
route for firm’s commercial success rather than as a moral obligation.
& 2012 Elsevier B.V. All rights reserved.

1. Introduction Additionally, organizations are facing increasing global community

inquiries through media and non-governmental organizations
There is a rapidly increasing awareness in industry that today’s (NGOs) pertaining to the sustainability aspect of their development
supply chains are flawed. To date, many manufacturing companies (Sarkis, 2001). According to Porter and Kramer (2006), companies
create waste and pollution and are threatening the existence of life are increasingly expected to extend their sustainability efforts
on earth. Consequently, these challenges and pressures push firms beyond their own operations to include those of their suppliers
to seriously consider the environmental impact while doing their and to meet their customer’s sustainability expectations. Forward
business. As the population of the world increases and resource thinking companies are already taking steps to develop sustain-
availability decreases, companies are starting to realize that supply ability within their supply chains.
chains must be re-designed (Carter and Jennings, 2002). From the According to Carter and Jennings (2002), the supply chains
companies perspective, they must portray the environmentally need to be closed-looped, environmentally friendly and conserve
friendly image of products, processes, systems and technologies, and use as few resources as possible. Thus, many researchers
and the way business is conducted (Vachon and Klassen, 2006a). claimed that the future of supply chain management is sustain-
Recent developments in the world economic climate create ability (Carter and Jennings, 2002, 2004; Murphy and Poist, 2002;
uncertainty in the business environment, which creates the Penfield, 2009). McKone-Sweet (2004) claimed that companies
necessity for organizations to look at reconstructing and restruc- are under pressure to improve the social and environmental
turing to enhance their strategy to sustain the business and standards wherever they can exert their influence, for instance,
profitability while remaining competitive in the marketplace. at their suppliers and further along the supply chain. Most
of these pressures focus on the outsourcing activities from
large Western firms that source input from low cost manufac-
n
Corresponding author. Tel.: þ04 6533888x2786. turers and service providers in developing countries by ignoring
E-mail addresses: shmz@usm.my (S. Zailani),
dr_kjraman@usm.my (K. Jeyaraman), venga@yahoo.com (G. Vengadasan),
the social and environmental deteriorating issues with respect
prem@aimst.edu.my (R. Premkumar). to supporting the short-term profitability of the organizations
1
Tel.: þ604 4298000/8038; fax: þ604 4298007/8008/8009. (Leenders et al., 2006).

0925-5273/$ - see front matter & 2012 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2012.02.008
 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340 331

There are numerous definitions of the terms ‘Sustainable Supply performance for sustainable supply chain. Section 3 addresses the
Chain’ and ‘Supply Chain’. For example, Leenders et al., 2006 stated methodology and Section 4 discusses the findings from the data
that the supply chain considers the interactions between a business analysis. Finally, Section 5 relates the conclusions, implications and
and its customers and suppliers. They urged that a sustainable poses questions for future research, thereby fulfilling the purpose of
supply chain – the management of raw materials and services from the paper.
suppliers to manufacturer/service provider to customer and back
with improvement of the social and environmental impact – be
explicitly considered. Although in the past supply chain management 2. Literature review
only focused on the efficient and responsive system of production
and delivery from the raw material stage to the final consumer, 2.1. Sustainable supply chain management (SSCM)
currently, environmental issues in the supply chain are significantly
growing, which is partly due to the wider debate on how industry According to Dyllick and Hockerts (2002), SSCM is comprehended
meets the challenges of sustainability (Seitz and Wells, 2006). as the integration of sustainable development and supply chain
Pressure from various stakeholders present a great challenge for management whereby sustainable development is often described
supply chain managers in integrating sustainable practices in as containing three dimensions – integrating environmental, social
managing their supply chains. A sustainable supply chain demands and economic issues for human development – which also affects the
that practices like environmental friendly packaging, return of end- corporate strategy and action. Although the field of SSCM is con-
of-life and used products to the producer as well as the eco friendly sidered quite new, interest in SSCM has been growing rapidly over
handling of returns, recycling, remanufacturing and adequate waste the years. Seuring and Martin (2008) identified and reviewed 191
disposal are enabled and are deemed to be important elements (Zhu papers and found that the economic and environmental aspects of the
et al., 2005). However, some of the key challenges in adopting the supply chain are by far the dimensions that are the most studied
sustainable practices that are related to issues, such as price among the papers reviewed (73.3%), and that papers integrating
competition and responsiveness, are of prime importance making sustainable dimensions only started to appear from 2002 onwards.
the adoption of sustainable practices a daunting task. Sikdar (2003), who takes a ‘‘macro-viewpoint’’, which includes
Carter and Mol (2006) stated that Asia is heavily emphasizing the social, environmental, and economic aspects, defined sustain-
sustainability despite the difference in views concerning corporate ability as ‘‘a wise balance among economic development, environ-
social responsibility and sustainability between Europe and Asia. In mental stewardship, and social equity’’. Reviews of different
the context of Malaysia, Zailani et al. (2009) studied the key drivers elements related to supply chain sustainability suggests that SSCM
of sustainable supply chain management. However, Eltayeb and can be linked to green design, inventory management, production
Zailani (2009) researched the level of the adoption of a green supply planning and control for remanufacturing, product recovery, reverse
chain among ISO 14001 certified manufacturing firms within logistics, waste management, energy use and emissions reduction
Malaysia, whereas this paper is interested in determining the extent (Ramudhin et al., 2009). Carter and Rogers (2008) defined SSCM as
of the involvement of Malaysian companies in the sustainable the strategic, transparent integration and achievement of an orga-
supply chain. This paper will focus on the practices of a sustainable nization’s social, environmental, and economic goals through the
supply chain within an organization and their relationship with the systemic coordination of key inter-organizational business processes
performance of a sustainable supply chain. for improving the long-term economic performance of the indivi-
The body of this paper comprises five sections. This paper starts dual company and its supply chain.
with this introductory section, which provides a general idea Teuteberg and Wittstruck (2010) proposed the ‘‘House of
about the research topic and gaps of the study. Section 2 reviews Sustainable Supply Chain’’ (Fig. 1), built on the three dimensions
the literature related to a sustainable supply chain, practices and of the Triple Bottom Line, which are viewed as the key pillars

Fig. 1. House of SSCM.

Source: Teuteberg and Wittstruck, 2010.
332 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340

necessary to keep the building in balance whereas risk and practice in this study due to the fact that packaging influences
compliance management form the building’s foundation. SSCM and has a presence across the supply chain pipeline – purchasing,
also requires the establishment of values and ethics throughout inbound, outbound and even reverse logistics – whereby it plays a
the organization, an efficient and flexible ‘‘green’’ IT environment significant function in the context of both consumer packaging
as well as the alignment of corporate strategy focusing on sus- and industrial packaging. The following subsections discuss the
tainable development. By taking these measures, it will effectively two practices in more detail.
protect the network against environmental and social threats
and risks.
2.2.1. Environmental purchasing
2.2. Sustainable supply chain management practices According to Jimenez and Lorente (2001), environmental
purchasing considers the issue of sustainability in their purchas-
Carter and Jennings (2002), from their research on logistics ing of inputs on top of the traditional purchasing criteria, which
social responsibility (LSR), examined the processes related to only focuses on cost, quality, and delivery. According to Eltayeb
purchasing, transportation, packaging, warehousing and reverse (2009) and Hamner (2006), the following are based on a summary
logistics and defined six topics to classify LSR – environment, of the literature on green purchasing activities between the buyer
ethics, diversity, working conditions and human rights, safety, and supplier:
philanthropy and community involvement. Subsequently, other
research within the context of sustainable supply chain prac- 1. Product content requirements: buyers specify that purchased
tices, such as Environmental Purchasing, linked traditional products must have desirable green attributes, such as
purchasing activity with the environmental management ele- recycled or reusable items.
ment (Zsidisin and Siferd, 2001). While Deakin (2001) focused 2. Product content restrictions: buyers specify that purchased
on Sustainable Transportation, defining it as transportation that products must not contain environmentally undesirable attri-
meets mobility needs while preserving and enhancing human butes, such as lead, CFCs, plastic foam in packaging materials.
and ecosystem health, economic progress, and social justice for 3. Product content labeling or disclosure: disclosure of the envir-
now and the future. onmental or safety attributes of purchased product content.
In addition to the above, Carter and Jennings (2002) also 4. Supplier questionnaires: asking suppliers to provide information
discussed sustainable warehousing, which includes activities, about their environmental aspects, activities and/or management
such as terminal and warehouse location, proper storing and systems.
disposing of hazardous materials, donation of excess or obsolete 5. Supplier environmental management systems: requesting sup-
inventory to local communities, and training to safely operate pliers to develop and maintain an environmental management
forklifts. Sustainable Packaging was defined by James et al. system (EMS) though buyer does not require supplier to certify
(2005a) as packaging that adds real value to society by effectively the system.
containing and protecting products during movement across the 6. Supplier certification: buyers require suppliers to have an EMS
supply chain; is designed to use materials and energy efficiently; that is certified as fully compliant with one of the recognized
is made up of materials that are recycled continuously and does international standards, such as ISO 14001 from the Interna-
not pose any risks to human health or ecosystems. Another tional Organization for Standardization (ISO), and the Eur-
sustainable supply chain practice is Reverse Logistics; De Brito opean Union Eco-Management and Audit Scheme (EMAS).
(2003) considered Reverse Logistics as a process that guarantees 7. Supplier compliance auditing: buyers audit suppliers to determine
the use and re-use (efficiently and effectively) of the value put their level of compliance with environmental requirements.
into products.
Purchasing is at the beginning of the value chain, thus, a firm’s Based on the above, supply managers must consider the
environmental efforts will not be successful without integrating ultimate disposition of the materials and components that enter
the company’s environmental goals with purchasing activities. the firm. Carter et al. (2000) suggested that these life-cycle issues
Purchasing can contribute to a firms overall environmental goals need to be considered as part of the purchasing and procurement
and undertakings in a number of ways (Carter et al., 2000). In process, and ask upstream members of the supply chain to commit
addition, purchasing can identify packaging that can be more to waste reduction goals and to design and provide the purchasing
easily recycled or reused leading to a significant environmental firm with the materials and components identified through the
impact, as packaging materials account for the largest portion of design for disassembly and life-cycle analysis. Bjorklund (2010)
the municipal waste stream (Min and Galle, 1997). However, advocated that increasing strategic importance of the purchasing
Ciliberti et al. (2007) carried out an empirical research on the function has increased the discussion on the contribution of
extent of adoption of sustainable supply chain management purchasing to decrease the impact on the natural environment
practices within Italian companies and found that 56% of the and concluded that purchasing could actually be a more powerful
companies practice Environmental Purchasing, 20% of the com- change agent than any other corporate function. Carter et al. (2000)
panies practice sustainable transportation, 17% practice reverse claim that environmental purchasing has a positive effect on firm
logistics, 6% for sustainable packaging and only 1% practice performance in relation to net income and the cost of goods sold.
sustainable warehousing. Zsidisin and Siferd (2001) provided a more holistic definition of
Sarkis (1999) defined the supply chain as a system Environmental Purchasing, which is also applied in this research:
that includes purchasing and inbound logistics, production and ‘‘Environmental purchasing for an individual firm is the set of
distribution (outbound logistics and marketing) and reverse purchasing policies held, actions taken, and relationships formed in
logistics. Based on the above definition, purchasing plays a key response to concerns associated with the natural environment. These
role at the beginning of the value chain and inbound activities in concerns relate to the acquisition of raw materials, including
determining the environmental impact and the high level of supplier selection, evaluation and development, suppliers operations,
adoption on Environmental Purchasing among companies. In this in-bound distribution, packaging, recycling, reuse, resource reduc-
study, Environmental Purchasing is selected as one of the sustain- tion and final disposal of the firm’s products’’. Based on the above
able supply chain management practices. Sustainable packaging review of the literature, environmental purchasing practices by
is selected as the next sustainable supply chain management manufacturing companies can achieve multiple benefits including
 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340 333

enhanced supplier engagement, reduced cost and minimized envir- operations reference (SCOR) model (SCOR, 2005) was one of the
onmental impact, which could subsequently lead to a sustainable notable key SCP metrics, which was developed by the Supply
supply chain performance. Chain Council. The SCOR model is based on five distinctive
process categories – plan, sources, make, deliver and return.
The SCOR performance metrics goes beyond the concerns of
2.2.2. Sustainable packaging
only achieving supply chain effectiveness but also incorporates
James et al. (2005a) described that packaging directly con-
meeting customer requirements and improving supply chain
tributes to the success of the product in the supply chain whereby
efficiency by minimizing cost, reducing lead time and improving
it enables efficient distribution of products, and reduced environ-
quality. SCOR metrics encompass other measures, such as respon-
mental impact of product spoilage and waste. However, packa-
siveness, flexibility, reliability or quality, and asset management.
ging has an environmental impact that is not sustainable in the
It is stated that relying on cost measures alone would not provide
long-term, such as consumption of non-renewable resources,
a truthful picture of supply chain performance (Chen and Paulraj,
generation of air emissions in production, transport and use,
2004). In the context of Sustainable Supply Chain Performance,
and production of solid waste requiring disposal in landfill.
the measurement is more towards how well the supply chain
According to Kooijmann (1996), the benefits of sustainable
activity or practices undertaken by the organization cut across the
packaging might be obvious from an environmental perspective,
three facets of sustainability, which are the economic, environ-
such as reduced waste and resource conservation, as well as the
mental and social aspects. The social and environmental supply
economic and social benefits.
chain activities that lie at the intersection with the economic
Verghese and Lewis (2007) argued that, typically, when goods
bottom line are defined as sustainable. Following are some of the
pass through the industrial supply chain the associated packaging
potential advantages from the sustainability perspective based on
waste is often a forgotten or ignored by-product that is poorly
the intersections of the supply chain practices between economic,
managed and eventually leads to litter, poor recycling and
social and environmental performance.
unnecessary waste to landfill. These phenomena are further
aggravated by poor communication and lack of sense of respon-
 Cost savings due to reduced packaging waste (Carter and
sibility among supply chain partners, which limits the potential
Rogers, 2008; Mollenkopf et al., 2005; Rosenau et al., 1996).
for improved packaging solutions that can simultaneously meet
 Ability to design for reuse and disassembly (Carter and Rogers,
the functional needs of the supply chain’s operating environment
2008; Christmann, 2000; Hart, 1995; Shrivastava, 1995c).
and reduce the environmental impact and supply chain costs.
 Reduced health and safety costs, and lower recruitment and
According to Jahre and Hatteland (2004), packaging plays a
labor turnover costs resulting from safer warehousing and
significant role in a large integrated system that involves many
transportation and better working conditions (Carter and
actors throughout the supply chain, including materials handling,
Rogers, 2008; Brown, 1996; Carter and Stevens, 2007).
inbound logistics operations, purchasing, manufacturing, ware-
 Lower labor costs – better working conditions can increase
housing, transportation, and retailing.
motivation and productivity, and reduce the absenteeism of
supply chain personnel (Carter and Rogers, 2008; Holmes
2.3. Outcomes of sustainability supply chain management et al., 1996; McElroy et al., 1993).
 Proactively shaping future regulation – companies that proac-
In this paper, outcomes are defined as the positive results or tively address environmental and social concerns can influ-
consequences that are actually realized from the adoption of ence government regulation when this regulation is modeled
sustainable supply chain management practices. Organizational after a company’s existing production and supply chain pro-
performance refers to how well an organization achieves its cesses, leading to a difficult-to-replicate competitive advan-
market-oriented goals as well as its financial goals (Li et al., tage for companies and their suppliers (Carter and Rogers,
2006). Zhu et al. (2005) contended that inter-firm linkage, which 2008; Carter and Dresner, 2001).
is facilitated by proximity, could lead to improvement in envir-  Reduced costs, shorter lead times, and better product quality
onmental performance whereas the relations with suppliers aid associated with the implementation of ISO 14000 standards,
the adoption and development of innovative environmental which provide a framework for environmental management
technologies. These, coupled with the interaction of the customer systems (Carter and Rogers, 2008; Hanson et al., 2004;
and suppliers’ staff, partnership agreements and joint research Montabon et al., 2000; Tibor and Feldman, 1996).
and development can lead to improvements in environmental  Enhanced reputation – engaging in sustainable behavior can
performance. make an organization more attractive to suppliers and custo-
In the context of supply chain performance (SCP), the short- mers (Carter and Rogers, 2008; Ellen et al., 2006), to potential
term objectives of SCP are primarily to increase productivity and employees (Carter and Rogers, 2008; Capaldi, 2005), and
reduce inventory and cycle time, while the long-term objectives to shareholders (Carter and Rogers, 2008; Klassen and
are to increase market share and profits for all members of the McLaughlin, 1996).
supply chain. Financial metrics serve as a tool for comparing
organizations and evaluating an organization’s behavior over This paper will measure the possible contribution of the two
time. Supply chain performance has indeed become an important key Sustainable Supply Chain Management (SSCM) practices of
source of sustainable advantage in many industries due to the Environmental Purchasing and Sustainable Packaging and how
increase in global competition from the supply chain perspective well they intersect with the Economic, Environmental and Social
(Hoole, 2005). Organizations should focus on the overall supply aspects from a supply chain perspective and the extent of
chain performance as this is a direct indication of the firm’s contribution of these SSCM practices toward Sustainable Supply
performance (Olhager and Selldin, 2004), which means that Chain Performance.
supply chain management has a dual role – to improve individual
firm performance and also the overall supply chain performance 2.4. Theoretical foundation
(Mentzer et al., 2001; Li et al., 2006). In terms of measuring
Supply Chain Performance, although there are several established The degree of vertical integration between SSCM practices in
metrics, such as Balanced Score Card (BSC), the supply chain contributing toward sustainable supply chain performance can be
334 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340

associated with the Transaction Cost (TC) theory. According to 3. Methodology

Mighell and Jones (1963), vertical coordination includes all ways
of harmonizing the successive vertical stages of production and 3.1. Research design
marketing. The market-price system, vertical integration, con-
tracting, cooperation singly or in combination are some of the The population frame for the study consists of manufacturing
alternative means of coordination. Williamson (1975) stated that firms in Malaysia. Li et al. (2006), however, stated that supply
transaction costs are important because they affect the organiza- chain practices tend to be more prominent among large sized
tion of economic activity or ‘‘vertical co-ordination’’ and firms companies. This implies that large sized companies tend to
attempt to acquire resources at a low cost and in a stable manner. emphasize supply chain related practices as opposed to smaller
In addition to the above, Arminas (2004) stated that when firms sized companies. Thus, the majority of the respondents for this
become increasingly dependent on scarce and valued resources, it study are large manufacturing companies or multi National
will result in a tendency to increase coordination with other Corporations operating in Malaysia. These firms are expected to
members of the supply chain, such as acquiring access to strategic have a high rate of adoption of environmental, safety and human
supplier technologies and knowledge by forming supplier part- rights initiatives. The minimum requirement for a sample is one
nerships and strategic alliances. Thus, in the context of supply variable to ten respondents (Hair et al., 2006), thus, a respondent
chain management there is always some kind of vertical coordi- size of 106 is considered sufficient for this study. Stratified
nation for any activity to take place. Based on the literature random sampling is used in this study.
review in the previous sections, the study identifies various The unit of analysis of the study is the individual firm. Since, the
variables and dimensions of the main constructs of the study, study combines issues related to sustainability focusing on the
which are sustainable supply chain management practices and environment, economic and human rights aspects with business
their outcomes. Fig. 2 shows the theoretical framework. aspects of supply chain, the most appropriate respondent will be
Bjorklund (2010) stated that the increased focus on the the Supply Chain, Purchasing and Material Packaging representative
purchasing function has increased the discussion on the contribu- of the firm. Thus, the questionnaire will be addressed to the Supply
tion of purchasing in reducing the impact on the natural environ- Chain, Purchasing and Material Packaging personnel who are usually
ment and concluded that purchasing could actually be a more from logistics operations, purchasing or the material engineering
powerful change agent than any other corporate function. In department of the firm.
addition, the results from Carter et al. (2000) show that environ-
mental purchasing has a positive effect on firm performance in 3.2. Survey instrument
relation to net income and cost of goods sold. This implies that
with environmental purchasing being at the very front of the The primary data were gathered through a questionnaire
value chain means it possesses characteristics that can influence survey. Questionnaires are considered an efficient method to
the organization supply chain performance from a sustainable collect data from the respondents, especially when the researcher
perspective. knows what is required and how to measure the variables of
Twede (1995) commented that managing packaging waste is a interest. The questionnaire is divided into five sections with a total
costly task, especially to collect, reuse or even recycle those of 76 items. A 5-pointLikert scale from Low Extent (1) to High
wastes, due to the variety of materials and small quantities that Extent (5) is used to measure the extent of the sustainable
make up the packaging waste. In addition, James et al. (2005a) development related practices within the organization. Specifically,
suggested that besides ensuring the successful movement of the the items for Sustainable Supply Chain Management Practices on
product across the supply chain, sustainable packaging must Environmental Purchasing were adopted from Carter et al. (2000).
ensure the reduced environmental impact of product spoilage Items for Sustainable Supply Chain Management Practices on
and waste. The reduction in waste and environmental impact Sustainable Packaging were adapted from Kooijmann (1996).
derived from sustainable packaging can have a direct influence on All of the items for Environmental Purchasing and Sustainable
the sustainable supply chain performance of the organization. Packaging were initially validated by three managers working in
Based on the above, the following hypotheses are postulated: multinational companies. It is believed that this process is deemed
necessary to suit the measurements with the context of Malaysia.
H1. Sustainable Supply Chain Management Practices positively For the outcomes, the questions were designed using a 5-point
affect Sustainable Supply Chain Performance Likert scale from Strongly Disagree (1) to Strongly Agree (5) to
measure the effect of the sustainable supply chain practices on
the organization supply chain performance. The questionnaire
H1a. Environmental Purchasing positively affects Sustainable
model for Sustainable Supply Chain Performance was adapted
Supply Chain Performance
from Harmon and Cowan (2009).

H1b. Sustainable Packaging positively affects Sustainable Supply

Chain Performance 4. Data analysis

4.1. Profile of the companies

A total of 400 questionnaires were mailed to the respondents.

Environmental H1a Although, overall, 109 completed questionnaires were received,
Purchasing only 105 responses were considered usable as four of the res-
Sustainable
Supply Chain ponses were incomplete. The findings show that about 44.8% (47)
Performance of the firms employ more than 1500 employees, followed by
Sustainable
16.2% (17) with 501 to 1500 employees, 26.7% (28) firms with
Packaging
H1b 50 to 500 employees and 12.4% (13) firms with less than 50
employees. Approximately 60% (63) of the firms are fully owned
Fig. 2. Theoretical framework. by a foreign company, 21.9% (23) of firms are joint ventures
 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340 335

between local and foreign, and 18.1% (19) are fully Malaysian defined that sustainable supply chain management practices
owned firms. In addition, 66.7% (70) of the firms are part of a will lead to only one outcome of sustainable supply chain
larger organization in line with the foreign and joint venture performance. However, the results from factor analysis show
ownership of the firms as shared above, while 33.3% (35) of the four different factors for the outcomes. A review of the literature
firms are not part of a larger organization. on green supply chain initiatives by Zhu and Sarkis (2004)
In the context of manufacturing sectors, as expected, 68.6% stated that the possible outcomes of green supply chain manage-
(72) firms belong to the electrical and electronics (E&E) industry, ment can be categorized as the economic and environmental
which is the largest manufacturing sector in Malaysia; 9.5% (10) outcome.
of the firms belong to the paper products and printing sector; 5.7% However, Kassinis and Soteriou (2003) derived intangible out-
(6) belong to the machinery and equipment sectors; 4.8% (5) of come as another type of outcome of green supply chain initiatives.
firms fall under the chemical sector and 3.8% (4) of firms belong These categories of outcome were compared with the sustainable
to the pharmaceutical sector. Food and Beverage, Textiles and supply chain management outcome proposed by Carter and Rogers
wearing apparel sectors consist of 1.0% (1) firms each for both (2008) who categorized outcomes of sustainable supply chain as
sectors. Based on the firm age, 42.9% (26) of the firms have existed environmental, economic and social outcome. Referring to the
in Malaysia for more than 26 years; followed by 10.5% (11) of question items derived from the SCOR model and by citing the
firms between 21 and 25 years; 19% (20) of firms with an age of supply chain performance metrics by Gunasekaran et al. (2004)
16 to 20 years; 10.5% (11) firms between 11 and 15 years; 16.2% who termed the key metrics as operational outcomes, this study
(17) firms between 5 and 10 years; and only 1.0% (1) of firms have uses four factors of outcome – economic, environmental, social and
been in existence for less than five years. operational outcomes – which are directly aligned with sustainable
supply chain performance.
4.2. Goodness of measures Varimax rotation was used to validate that there are four
constructs that are distinct in sustainable supply chain perfor-
In this study, factor analysis was used to validate whether the mance. The results showed four solutions with eigenvalues
items in each section loaded into the expected categories. In greater than 1.0 and the total variance explained was 79.95%.
addition, Cronbach’s alpha was used to assess the internal con- The KMO measure of sampling adequacy is 0.832 indicating
sistency or homogeneity among the items. sufficient intercorrelation, while the Bartlett’s Test of Sphericity
was significant (Chi square¼1.1243, p o0.001). This result con-
firms that the construct is unidimensional and factorially distinct
4.2.1. Factor analysis for sustainable supply chain management
and that all the items used to measure a particular construct are
practices
loaded on four factors.
Factor analysis with Varimax rotation was done to validate the
dimensionality and appropriateness of the measurement scale.
With eigenvalues greater than 1.00 the total variance explained 4.3. Modified research framework and hypotheses
was 70.63%. The KMO measure of sampling adequacy was 0.896
indicating sufficient intercorrelation while the Bartlett’s Test of Based on the result of factor analysis for sustainable supply
Sphericity was significant (Chi square¼ 1.2603, p o0.001). There chain performance, four variables were added to the study on
were 14 questions on sustainable supply chain management Outcome, categorized as Operations, Environmental, Social and
practices and two factors were extracted (Table 1). Economic. The theoretical framework of the study has been
modified to reflect the changes in the variables. The modified
4.2.2. Factor analysis for sustainable supply chain performance framework includes four outcomes instead of one outcome as
Table 2 shows factor analysis for the sustainable supply conceptualized in the original framework. Fig. 3 presents the
chain performance or outcomes. The initial theoretical framework modified theoretical framework.

Table 1
Factor analysis for sustainable supply chain management (SSCM) practices.

Items Items no. Factor

EP SP

Environmental purchasing
Purchases recycled packaging. EP1 .907 .263
Purchases packaging that is of lighter weight. EP2 .920 .204
Participates in the design of products for disassembly. EP4 .891 .211
Participates in the design of products for recycling or reuse. EP6 .861 .241
Uses a life-cycle analysis to evaluate the environmental friendliness of products and packaging. EP3 .897 .174
Asks suppliers to commit to waste reduction goals. EP5 .882 .136
Sustainable packaging
Effectively recovered and utilized in biological and industrial cradle-to-cradle cycles. SP8 .221 .771
Beneficial, safe and healthy for individuals and communities throughout its life cycle. SP1 .227 .763
Physically designed to optimize materials and energy. SP7 .182 .808
Maximizes the use of renewable or recycled source materials. SP4 .171 .767
Sourced, manufactured, transported and recycled using renewable energy. SP3 .268 .661
Meets market criteria for performance and cost. SP2 .237 .670
Manufactured using clean production technologies and best practices. SP5 .126 .755
Made from materials healthy in all probable end-of-life scenarios. SP6 .010 .811
KMO .896
Bartlett’s Test of Sphericity 1.2603
Eigenvalue 5.096 4.793
Percentage variance (70.63%) 36.401 34.237
336 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340

Table 2
Factor analysis for sustainable supply chain performance.

Items Item no. Component

OPE ECON SOC EN

Operations (OPE)
Ability to reduce manufacturing operating cost. Ope4 .887 .090 .234 .087
Number of days for a supply chain to respond to plan, source, make and deliver unexpected demand variations. Ope3 .878 .069 .149 .081
Ability to quickly respond to changes to competitors product offerings. Ope2 .873 .154 .119 .039
Inventory days of supply/inventory turnover rate (number of days cash is tied up in inventory). Ope5 .855 .127 .138 .138
Ability to fulfill perfect order(complete, without any delays and damage free). Ope1 .846 .197 .160 .196
Economic (ECO)
Significant improvement in terms of sales and market share. Econ3 .170 .903 .220 .155
Significant reduction in terms of waste and its disposal costs. Econ1 .146 .881 .123 .254
Significant improvement in terms of resources management efficiency. Econ2 .171 .875 .274 .164
Social (SOC)
Significant improvement in its image in the eyes of its customers. Soc2 .221 .122 .826 .261
Significant improvement in relations with community stakeholders, e.g., Nongovernmental organizations (NGO)
Soc3 .163 .263 .778 .147
and community activists.
Significant improvement in product image. Soc1 .263 .237 .772 .220
Environment (EN)
Significant improvement in its compliance to environmental standards. En1 .057 .149 .124 .859
Significant reduction in consumption for hazardous/harmful/toxic materials. En2 .204 .203 .166 .765
Significant reduction in energy consumption. En3 .107 .162 .282 .737
KMO .832
Bartlett’s Test of Sphericity 1.1243
Eigenvalue 4.045 2.677 2.280 2.192
Percentage variance (79.95%) 28.891 19.121 16.288 15.654

H1.2a. Sustainable Packaging positively affects environmental

Operation
Environmental outcomes
Purchasing
Economic H1.2b. Sustainable Packaging positively affects economic outcomes.

Environmental H1.2c. Sustainable Packaging positively affects social outcomes

Sustainable
Packaging
H1.2d. Sustainable Packaging positively affects operational
Social
outcomes.
Fig. 3. Modified theoretical framework.
4.4. Reliability

The inter-item consistency measure of Cronbach’s alpha was

used to assess the reliability of all major variables. All the
In view of the changes in the theoretical framework, the original
reliability values are above 0.80, thus all major variables are
hypotheses related to the relationships between sustainable supply
reliable measures (Nunnally, 1978). The Highest Cronbach’s alpha
chain management practices and outcomes were restated. The
was observed for environmental purchasing at 0.962 and the
restated hypotheses reflect the addition of operation, economic,
lowest for Environment (0.787). The high value of Cronbach’s
environment and social as the new list of variables for outcomes.
alpha for all the variables under study indicates that the question
Accordingly, new hypotheses were added to reflect the hypothe-
items are reliable and consistent. This can be attributed to the fact
sized relationships between sustainable supply chain manage-
that all the questionnaire items were either adopted or adapted
ment practices and operation, economic, environment and social
from published journals or articles that have been empirically
outcomes.
tested or conceptualized.
H1: Sustainable Supply Chain Management Practices positively
affect outcomes
4.5. Regression analysis
H1.1. Environmental Purchasing positively affects outcomes
Table 3 shows the findings from multiple regression. Multiple
H1.1a. Environmental Purchasing positively affects environmen- regression analyses are used to determine the influence of a set of
tal outcomes independent variables on a dependent variable, i.e., how much of
the variance in the dependent variable is explained by the set of
H1.1b. Environmental Purchasing positively affects economic
predictors or independent variables (Hair et al., 1998). Table 4
outcomes.
presents the results of the regression analysis for sustainable
H1.1c. Environmental Purchasing positively affects social outcomes supply chain management and performance. The first model is
between sustainable supply chain practices and environmental
H1.1d. Environmental Purchasing positively affects operational performance and it was significant (F¼24.847; p o0.001) with
outcomes. R2 ¼.328 and adjusted R2 ¼ .314. Environmental purchasing was
not found to have any relationship with environmental perfor-
H1.2. Sustainable Packaging positively affects outcomes mance (b ¼ .062, p4.05). However, sustainable packaging was
 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340 337

Table 3  Sustainable Packaging only has a positive effect on environ-

Reliability. mental, economic, social and operational outcomes.
No. of items Cronbach’s alpha

Environmental purchasing 6 .962 5. Discussion

Sustainable packaging 8 .903
Environment 3 .787 The initial theoretical framework defined that sustainable
Social 3 .844
supply chain management practices will lead to only one out-
Economic 3 .939
Operations 5 .940 come of sustainable supply chain performance; however, the
results from the factor analysis show four different factors for
the outcomes. The review of literature on green supply chain
initiatives by Zhu and Sarkis (2004) stated that the possible
outcomes of green supply chain management can be categorized
Table 4
as economic and environmental outcome.
Regression of sustainable supply chain management on performance. However, Kassinis and Soteriou (2003) derived intangible
outcome as another type of outcome of green supply chain
Sustainable Environment Social Economic Economic initiatives. These categories of outcome were compared with the
supply chain performance performance performance performance
sustainable supply chain management outcome proposed by
practices b b b b
Carter and Rogers (2008) who categorized outcomes of sustain-
Environmental .062 .297nnn .255nn .848nnn able supply chain as environmental, economic and social out-
purchasing come. Referring to the question items derived from the SCOR
Sustainable .542nnn .478nnn .409nnn .031
model and by citing the supply chain performance metrics by
packaging
R2 .328 .442 .325 .742
Gunasekaran et al. (2004) who termed the key metrics as
Adjusted R2 .314 .431 .312 .737 operational outcomes, in this study, the four factors of outcome
F 24.847 40.443nnn 24.543nnn 141.106nnn will be defined as economic, environmental, social and opera-
tional outcomes, which are directly aligned with sustainable
Significance Level:
supply chain performance. The definitions of the four outcomes
nn
p o0.01.
are as follows:
nnn
p o0.001.

 Environmental outcomes: defined as positive consequences of

green supply chain initiatives on the natural environment
significantly related with environment performance (b ¼.542, inside and outside the firm (Zhu and Sarkis, 2004).
p o.001).  Economic outcomes: defined as financial returns that can actu-
The next model is between sustainable supply chain practices ally result from the adoption of green supply chain initiatives
with social performance. This model can explain 44.2% (R2 ¼0.442) (Zhu and Sarkis, 2004).
of variance on social performance and was significant (F¼40.443,  Social outcomes: defined as conceptual or difficult to quantify
po.001). The 55.8% due to error or explained by other factors are outcomes that can actually result from the adoption of green
not included in this study. Environmental Purchasing (b ¼.297; supply chain initiatives (Kassinis and Soteriou, 2003).
p40.001) and Sustainable Packaging (b ¼.478; p40.001) were  Operational outcomes: defined as operational level measures,
found to be statistically related with social performance. The third which include the ability in day-to-day technical representa-
model is the results of the regression analysis undertaken to test tion, adherence to developed schedule, ability to avoid com-
the sustainable supply chain management on economic perfor- plaints and achievement of defect free deliveries (Gunasekaran
mance. The model is significant (F¼24.543; p valueo0.001). The et al., 2004).
coefficient of determination (R2) was found to be 0.325 indicating
that 32.5% of Economic performance is explained by the sustain- The results of the study showed that environmental purchas-
able supply chain management. From the regression analysis it can ing does not have a positive effect on environmental outcome,
be observed that Environmental Purchasing (b ¼.255; p40.01) and which contradicts the findings of Bjorklund (2010) that the
Sustainable Packaging (b ¼.409; p40.001) did have a significant increased focus on the purchasing function has literally increased
influence on Economic performance. the discussion on the contribution of purchasing in reducing the
The last model is the results of the regression analysis impact on the natural environment. One of the possible reasons
undertaken to test the effect of two dimensions of sustainable for the above result could be that the responding firms believe
supply chain management on operations performance. The model that the benefits of these initiatives may reflect on external
is significant (F¼141.106; p value o0.001). Environmental parties rather than on the firm itself. For example, although
purchasing and sustainable packaging were entered into the regres- environmental purchasing focuses on improving the environmen-
sion, the coefficient of determination (R2) was found to be 0.742 tal performance of its suppliers, by purchasing environmentally
indicating that 74.2% of operations performance was explained by friendly materials the direct benefit goes to the suppliers rather
sustainable supply chain management. The remaining 25.8% is than the firm indirectly. Another contributing factor to the above
unexplained in this model. From the regression analysis, it can be finding could be the lack of availability of systematic monitoring
observed that environmental purchasing (b ¼.848; po0.001) did and sharing of key performance indicators derived from the
have a significant influence on operation performance. Nevertheless, environmental purchasing activities from the environmental
sustainable packaging (b ¼.031; p40.05) was not found to have a aspect of the organization. Thus, the lack of visibility on the key
significant relationship with operation performance. indicators could lead to the above findings of environmental
The results can be summarized as follows: purchasing not contributing to the environmental performance
of an organization.
 Environmental purchasing only has a positive effect on economic, However, environmental purchasing showed a positive effect
social and operational outcomes. on economic, social and operational outcomes. For economic
338 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340

outcome, the finding is supported by the proposition from Carter particularly from the economic and social perspective. This aligns
et al. (2000) that environmental purchasing has a positive effect with the notation that expected business benefits have a sig-
on a firm’s performance in relation to net income and cost of nificant effect on sustainable supply chain management practices.
goods sold. On social outcome, the finding corresponds with the Thus, the firms need to work together to share the benefits and
finding by Preuss (2000), which states that a company adopting ‘success stories’ of sustainable supply chain management prac-
social and/or environmental standards can leverage on their tices with other firms so as to spread and create interest in SSCM
purchasing function to transfer those standards to suppliers, thus concepts across a large number of firms. Importantly, SSCM needs
generating a chain effect leading to quick and deep changes in the to be conveyed as a route for firm’s commercial success rather
overall social and environmental elements. The positive relation- than as a moral obligation.
ship between environmental purchasing and operational outcome
can be linked with the findings of Zhu et al. (2005) that green
supply chain practices were perceived to have a large influence 5.2. Directions for future research
on promoting product quality. This can be related to the strategic
stage of the supply chain performance metric proposed by Future research could utilize the concepts and results to
Gunasekaran et al. (2004), which focuses on the level of customer develop a detailed conceptualization of sustainable supply chain
perceived value of a product. management practices and their impact on sustainable supply
The results of the study showed that sustainable packaging has chain performance, especially in the context of Malaysia. Future
a significant positive effect on the three types of outcome – studies can replicate this study by looking at other forms of SSCM
environmental, economic and social. The findings of James et al. practices, such as Sustainable Warehousing and Sustainable
(2005a) that sustainable packaging must ensure the reduced Transportation, and in different contexts, such as different sectors
environmental impact of product spoilage and waste supports or States. Future studies may use longitudinal analysis in studying
the result of the positive relationship between sustainable packa- sustainable supply chain management practices as a means of
ging and the environmental, economic and social outcomes. This providing a clear picture concerning the effect of SSCM. A good
is because a reduction in the resources and waste directly implies example will be to perform a comparison on the outcomes of
the key environmental element, which can be related to overall SSCM before and after the adoption of SSCM practices.
cost reduction from an economic point of view. While sustainable
packaging through environmentally friendly packaging and waste
5.3. Conclusion
reduction can be said to fulfill external societal drivers due to
increasing public awareness, consumer demand for environmen-
Today, sustainability is receiving an increasing level of atten-
tally friendly performance, and the influence of NGOs concerned
tion at both the local and global levels, which eventually leads to
with corporate green wash.
questions on how to integrate sustainability with business opera-
However, the result shows that sustainable packaging does not
tions and strategy. Sustainable supply chain management (SSCM)
have a positive effect on operational outcome, which contradicts
could be a good means to extend the responsibility of business
the study by Twede (1995) who stated that through a reduction in
organizations from being reactive in reducing pollution and waste
the cost of packing and by mechanizing operations; organizations
and other sustainable related efforts, to proactively assuming full
are able to improve the speed of packing and eliminate assembly
responsibility for their products from acquisition of raw materials
line downtime. The contradictory finding between sustainable
to the final disposal of the products from a sustainability per-
packaging and operational outcome could be due to the inability
spective. This paper examines sustainable supply chain manage-
to associate the benefits of sustainable packaging with actual
ment practices within manufacturing firms in Malaysia.
outcome from an operational key metrics perspective. This can be
The main contribution of the paper is its proof concerning the
partly due to the lack of a monitoring system or indicators that
effects of the SSCM practices on the sustainable supply chain
can directly link sustainable packaging with improvements on
performance of the firm. Environmental purchasing and sustain-
operational outcomes, such as improvement in overall supply
able packaging were found to have a direct impact on the firm’s
chain delivery cycle time.
performance outcome, especially on economic and social out-
In summary, both environmental purchasing and sustainable
comes. This signals that SSCM practices can bring value to both
packaging showed a positive effect on economic and social out-
the organizations and the external environment. SSCM practices
comes. This indicates that, in general, Malaysian firms place
will lead to a reduction in resources, material and waste, thereby
high consideration on the business benefits of sustainable supply
enabling better resource utilization, and play a significant role in
chain management practices as key determining criteria to adopt
achieving the ‘‘triple bottom line’’ of social, environmental, and
sustainable supply chain management practices. Thus, although a
economic performance, and, thus, contributing to sustainable
positive result on social outcome might not reflect the reason for
development of the country.
firms to adopt sustainable supply chain management practices, it
In summary, the overall findings indicate that sustainable supply
could be towards the expectation that sustainable supply chain
chain management practices represent an interesting area of
management practices leads to an improvement in the financial
research and practice, which requires further research to understand
and market position of the firms.
why firms adopt sustainable supply chain management practices
in the first place. This study attempts to set a solid theoretical
and empirical basis for this area of research. Thus, future studies
5.1. Implications of the study
are encouraged to make use of this study for further investigation of
this interesting and important topic, namely, sustainable supply
From the transaction cost (TC) perspective, there is empirical
chains.
evidence of strong vertical integration between sustainable sup-
ply chain management (SSCM) practices and the four types of
outcome (environment, economic, social and operational) con-
cerning sustainable supply chain performance. In respect of Appendix
managerial implications, the results indicate that SSCM practice
has a positive effect on sustainable supply chain performance, See Table A1 for more details.
 S. Zailani et al. / Int. J. Production Economics 140 (2012) 330–340 339

Table A1
Items for the variables.

Environmental purchasing: currently our company y. Low extent Low Moderate High High extent

EP1 Purchases recycled packaging.

EP2 Purchases packaging that is of lighter weight.
EP3 Uses a life-cycle analysis to evaluate the environmental friendliness of products and packaging.
EP4 Participates in the design of products for disassembly.
EP5 Asks suppliers to commit to waste reduction goals.
EP6 Participates in the design of products for recycling or reuse.

Sustainable packaging: currently our packaging y. Low extent Low Moderate High High extent

SP1 Beneficial, safe and healthy for individuals and communities throughout its life cycle.
SP2 Meets market criteria for performance and cost.
SP3 Sourced, manufactured, transported and recycled using renewable energy.
SP4 Maximizes the use of renewable or recycled source materials.
SP5 Manufactured using clean production technologies and best practices.
SP6 Made from materials healthy in all probable end-of-life scenarios.
SP7 Physically designed to optimize materials and energy.
SP8 Effectively recovered and utilized in biological and industrial cradle-to-cradle cycles.

For the last three years, my firm has achieved y. Strongly Disagree Moderate Agree Strongly
disagree agree

O1 Significant improvement in its compliance to environmental standards.

O2 Significant reduction in consumption for hazardous/harmful/toxic materials.
O3 Significant reduction in energy consumption.
O4 Significant improvement in product image.
O5 Significant improvement in its image in the eyes of its customers.
O6 Significant improvement in relations with community stakeholders, e.g., Nongovernmental organizations
(NGO) and community activists.
O7 Significant reduction in terms of wastes and its disposal costs.
O8 Significant improvement in terms of resources management efficiency.
O9 Significant improvement in terms of sales and market share.
O10 Ability to fulfill perfect order(complete, without any delays and damage free).
O11 Ability to quickly respond to changes to competitors product offerings.
O12 Number of days for a supply chain to respond to plan, source, make and deliver unexpected demand
variations.
O13 Ability to reduce manufacturing operating cost.
O14 Inventory days of supply/inventory turnover rate (number of days cash is tied up in inventory).

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