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Green supply chain agility in EMS ISO 14001 manufacturing firms: empirical
justification of social and environmental performance as an organisational
outcome

Article in International Journal of Procurement Management · January 2017

DOI: 10.1504/IJPM.2017.10000826

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Int. J. Procurement Management, Vol. 10, No. 1, 2017 51

Green supply chain agility in EMS ISO 14001

manufacturing firms: empirical justification of social
and environmental performance as an organisational
outcome

Yudi Fernando* and

Geevaneswary Saththasivam
Graduate School of Business,
Universiti Sains Malaysia,
11800 Penang, Malaysia
Email: yudi@usm.my
Email: geevanes@yahoo.com
*Corresponding author

Abstract: In today’s sustainable economic world, the rational thought should

be the costs of life cycle, resources or supply chain process. Supply chains need
to possess agility to achieve environmental performance (EP) and social
performance (SP). However, at present, there is very little knowledge and
awareness of how these two concepts interact within a supply chain. This paper
therefore, aims to develop a conceptual framework to depict how green supply
chain agility (GSCA) strengthens the EP and SP within the supply chain. In this
study, a self-administered questionnaire was designed based on important
criteria identified in the literature, and then administered to 230 organisations
representing various industries which are part of EMS ISO 14001 certified
manufacturing firms in Malaysia. The results showed that GSCA improves the
performance of a firm environmentally and socially, and the control variables
have no significant influence on the dependent variables.

Keywords: procurement; green supply chain agility; GSCA; sustainable supply

chain; environmental performance; social performance; manufacturing;
Malaysia.

Reference to this paper should be made as follows: Fernando, Y. and

Saththasivam, G. (2017) ‘Green supply chain agility in EMS ISO 14001
manufacturing firms: empirical justification of social and environmental
performance as an organisational outcome’, Int. J. Procurement Management,
Vol. 10, No. 1, pp.51–69.

Biographical notes: Yudi Fernando is a Senior Lecturer in Operations

Management at the Graduate School of Business, Universiti Sains Malaysia
(USM). He worked for several years in the electronics industry. His current
research interests are green operation management, service management,
logistics, and sustainable issues in supply chain management. He is a council
member of The Society of Logisticians, Malaysia/Pertubuhan Pakar Logistik
Malaysia (LogM). Internationally, he has been appointed in the editorial boards
of some refereed journals, technical committees in conferences and is an
invited speaker in various universities. He has enjoyed his daily work as an
operation management scholar, while actively teaching and publishing in the
related field.

Copyright © 2017 Inderscience Enterprises Ltd.

52 Y. Fernando and G. Saththasivam

Geevaneswary Saththasivam is a doctorate scholar in supply chain management

at the Graduate School of Business, Universiti Sains Malaysia (USM). She
obtained her MBA from Universiti Utara Malaysia (UUM) and Bachelor
degree (BSc Hons) majoring in Computing and Information Systems from
University of Lincoln, UK. She has 11 years of working experience in
multinational companies (MNC) in the field of purchasing, information
technology, operation, business development and contract and compliance. Her
research interests include sustainable supply chain management, green strategy
management and corporate social responsibility.

1 Introduction

The current changes in environmental requirements influencing manufacturing activities

have attracted both scholars and practitioners’ attention to the development of
environmental management strategies for the supply chain. Supply chain management
(SCM) was introduced by management consultants in the early 1980s. In recent years,
SCM has created a wide and intense interest across disciplines. Well-managed supply
chain is crucial in the highly competitive global business environment. Business leaders,
researchers and policy makers recognise that supply chains provide operational and
strategic advantages for organisations, regions, and countries (Silvestre, 2015). SCM was
initially perceived as the logistics of manufacturing and distribution, which extended
from outside the firm to customers and suppliers. However, SCM is currently being
conceptualised and applied as the integration of all business processes across the supply
chain. In order to collaborate with partners through supply chain integration, managers
should achieve internal integration before the external integration exists. Firms need to
include external integration at strategic levels in order to reap the greatest advantages
from supply chain integration (Alfalla-Luque et al., 2015). The procurement systems
integrated in the supply chain should address the green aspects and be responsible for the
community’s well-being.
Some firms may prefer to integrate the production process with suppliers and
business partners by the projects. This is to ease material handling and production
foresight. Supply chain integration is challenging due to low transaction frequency and
uniqueness of the projects. In supply chain literature, a lack of discussions about
integrative activities has encouraged researchers to elaborate in the findings; for example,
engineering projects involve the coordination of activities performed by many people
with different specialties and functional roles at different hierarchical levels (Eriksson,
2015). Business integration should gain supply chain agility. Supply chain literature has
been widely discussed the agility concept as a part of the area of contemporary business.
It is stated that the agility is easily adopted in the field of manufacturing. Hence,
manufacturing firms should develop the supply chain agility to conduct a proper planning
for the enhancement of production efficiency. However, limited discussions and
empirical studies on inter-organisational agility have provided very little guidance for
business practitioners. Indeed, the agility frequently involves just the application of
system engineering thinking to describe and optimise factors influencing the transfer of
material and information between firms (Kisperska-Moron and Swierczek, 2009). It was
also indicated that supply chain managers have little guidance on what results to expect
from the implementation of agility-focused strategies. Therefore, it was suggested that he
 Green supply chain agility in EMS ISO 14001 manufacturing firms 53

supply chain managers should have a clear understanding of the performance outcomes
associated with agility (Gligor et al., 2015). The unnecessary process and eliminated
waste are associated with the efficiency of organisations.
During the last decades, environmentally conscious business practices have received
an increasing attention from both scholars and practitioners. The number of organisations
contemplating the integration of environmental practices into their strategic plans and
operations is continuously rising (Sarkis et al., 2011). SCM has traditionally been viewed
as a process where raw materials are converted into final products, and then delivered to
end-users. This process involves extraction and exploitation of the natural resources. It is
significant to note that we are living in a decade when the environmental sustainability is
perceived as an important issue of business practice. The waste and emissions caused
by the supply chain have become one of the main sources of serious environmental
problems including global warming and acid rain. Green supply chain policies are
desirable because of reactive regulation proactive strategies and competitive advantages.
Therefore, it is necessary to integrate the organisational environmental management
practices into the entire supply chain to achieve a sustainable supply chain and maintain
competitive advantage (Zhu et al., 2008; Linton et al., 2007). Moreover, the green
SCM practices should cover all the supply chain activities, from green purchasing to
integrating lifecycle management, through manufacturers, customers, and closing the
loop with reverse logistics (Zhu et al., 2008).
The growing significance of SCM is currently being driven largely by the escalating
deterioration of the environment, expanded legislation, intensified global competition,
and value-seeking initiatives. Most organisations pay attention to the application of their
business strategies and practices as a major concern of environmental sustainability. They
have realised the greater benefits of the green technology adoption in business operation,
which also affected company eco-system including suppliers, distributors, retailers and
other supporting companies such as the third-party logistics (3PL). As a result, the
sustainable SCM emerges as a new systematic environmental approach in the SCM and
has been increasingly accepted and practiced by forward-thinking organisations (Dou
et al., 2014). Recently, scholars have also discussed the environmental outcome and
profitability results of SCM. Yet, a lack of how green supply chain agility (GSCA)
affecting the social and environmental performance has not been clearly discussed in the
supply chain literature. It is, therefore, important that firms should be responsible for the
environment and the surrounding community. Hence, this challenge must be overcome
by today’s modern managers. Moreover, the management of corporate social
responsibility (CSR) should pay more attention to the measurement of social performance
of GSCA. Eadie and Rafferty (2014) also suggested that firms should write contracts to
create specific clauses which address social issues in the project area.
This study is making an attempt to investigate the GSCA in EMS ISO 14001
manufacturing firms. The firms which have ISO 14001 environmental management
system undertake the green practices. The ISO 14001 firms are concerned with the
implementation of cleaner production, eco-efficiency, and the evaluation of the life cycle
of products among others (Campos et al., 2015). Yet, Campos (2012) argued that the
deployment of an EMS hardly assures the effectiveness of environmental management.
Firms that hardly have the environmental management system certification, their
environmental practices may be ill-monitored. Furthermore, this study also aims to
continuously assess the effects of EP and SP in EMS ISO 14001 manufacturing firms as
the outcome of GSCA. This paper is organised into four parts. The first part presents
54 Y. Fernando and G. Saththasivam

relevant literature review that examines issues in SCM. In particular, an overview of

manufacturing supply chain is also presented in this section. The second part describes
and critically discusses the method including measurements, sample profile and data
collection instruments. The third part presents the results and analysis in an attempt to get
responses to research hypotheses. Finally, the discussions, suggestions for further
research and conclusions are provided at the end of the paper.

2 Literature review

Manufacturing firms need to ensure the final product and process that have passed
several performance tests and quality evaluation characteristics (Padhi et al., 2014). The
sustainability concept should be applied in the entire production processes for cost saving
and quality control. The conceptual model proposed in this paper provides a holistic
perspective towards the investigation of the integration of GSCA paradigms in SCM. The
conceptual model was developed using empirical evidences available in the literature.

2.1 Underpinning theory

In this paper, the GSCA in the manufacturing supply chain is proposed based on the
natural resource-based view (NRBV). Therefore, this study focuses on NRBV and
determines a link of the theory leading to research objectives.

2.1.1 Natural resource-based view

NRBV emerged from an earlier theoretical contribution of resource-based view (RBV)
(Hart, 1995). The RBV argues that it is the bundle of resources of the firm rather than a
product deployment of those resources that determines the competitive position of a firm
(Wernerfelt, 1995). Similarly, if the strategic factor market is perfectly competitive, even
if firms implement strategies that create an imperfectly competitive product market, those
strategies are not a source of economic rents (Barney, 1986). In contrast, expectations on
strategic factors of a firm are different from another. This heterogeneous nature of the
expectations of a firm makes it possible to obtain above-normal returns from acquiring
strategic resources to implement a product market strategy.
The NRBV has received supports in research linking environmental sustainability
practices related to supply chain activities to improve economic, operational and market
performance (Vachon and Klassen, 2006, 2008). The fundamental assumptions of RBV
theory relate to the resource heterogeneity and immobility of a firm. Barney (1986, 1991)
argued that firms could not expect to obtain a sustained competitive advantage when
strategic resources such as human, organisational, and financial resources are evenly
distributed across competing firms, and that they are highly transferable. Organisations
implementing GSCM develop causally ambiguous and socially complex resources that
are expected to translate into improved environmental and operational performance that
may further lead to improvements in terms of the financial performance of the
organisation.
Hart and Dowell (2011) evaluate the application of NRBV of the firm as proposed by
Hart (1995) in the period between these publications and reports that most of the
applications of NRBV theory only focus on pollution prevention. Meanwhile, it paid
 Green supply chain agility in EMS ISO 14001 manufacturing firms 55

less attention to empirical research on product stewardship or sustainable development

strategies. Lin (2012) identifies pollution prevention as one of the firm level
environmental strategies that range along a continuum of pro-activeness. Lubin and Esty
(2010) indicated that sustainability efforts in firms are driven by innovations in energy
efficiency, renewable power, resource productivity, and pollution control. Ameer and
Othman (2012) compare the financial performance of firms with superior sustainable
practices against ones that do not engage in such practices.

2.2 Environmental performance

Environmental aspects can be defined as the direct involvement of an organisation with
its suppliers and customers in planning jointly for environmental management and
environmental solutions. The focus is on collaboration between a focal plant and its
suppliers as well as its customers. Within a rich collaborative context, suppliers and
customers plan together to reduce the environmental impacts on production processes and
products. Environmental collaboration includes the exchange of technical information
and requires a mutual willingness to learn about each other’s operations in order to plan
and set goals for environmental improvement. Nevertheless, it also implies the
cooperation to reduce the environmental impact associated with material flows in the
supply chain (Bowen et al., 2001; Carter et al., 2011). Environmental collaboration
comprises a better understanding of each other’s responsibilities and capabilities with
regard to environmental management. A review of literature on environmental issues
indicates a significant relationship between green practices and corporate profitability
within any organisation. Firms with higher scores on environmental criteria realise
stronger financial returns than the overall market, whereas companies with poor scores
have weaker returns (Correa et al., 2008; Estampe et al., 2013; Lee et al., 2012; Zhu
et al., 2010).

2.3 Social performance

In addition to the environmental concerns, supply chain increasingly faces SP pressure
(Dreyer et al., 2006) as well as commercial and reputational risks (Carter and Rogers,
2008). Not only can social issues threaten the brand image of the firm, but they also
impact the economic viability of the entire supply chain. Supply chain relationships can
be viewed as a combination of monitoring and collaboration. Collaboration relies on
more direct interaction between managers, technical experts and workers within the firm,
or among suppliers, customers and other stakeholders, to jointly improve SP.
Collaborative efforts can be made as supply chain relationships for more creative options
and changes to improve either EP or SP. Moreover, a deeper relationship also promotes
trust and experimentation. The concept of CSR is currently firmly rooted in global
business agenda. However, in order to move from theory to concrete action, many
obstacles need to be overcome. Indeed, a key challenge facing business is the need for
more reliable indicators of progress in the field of CSR, along with the dissemination of
CSR strategies. Transparency and dialogues can make a business more prestigious, and
promote the standard of the organisations at the same time. SP entails the management of
social resources (Sarkis et al., 2010) that enriches human resource in firms, within the
supply chain and in the wider community (Dyllick and Hockerts, 2002).
56 Y. Fernando and G. Saththasivam

SP is defined as the firm’s ability to be socially responsible for the community

stakeholder relationship through the CSR programmes, improve the social quality of
employees and equality without discrimination. The capability on how firms
transparently communicate and inform the public with regard to business process, and the
achievement of the firm also contributes to the SP of the firms. The study of social
sustainability is limited in the supply chain literature (Hutchins and Sutherland, 2008;
Ashby et al., 2012; Winter and Knemeyer, 2013). CSR in the supply chain provides better
insights for the purview of social sustainability practices in the supply chain (Hutchins
and Sutherland, 2008; Ashby et al., 2012) even though some supply chain scholars
disagree with its applicability (Sarkis et al., 2010). Therefore, the measurement of SP can
consider community relations as the construct. One of the measurements is to take into
considerations the community relations via complaints (Eadie and Rafferty, 2014).

2.4 Green supply chain agility

Agility has been characterised as a means of handling change, increasing customers’

responsibility and mastering market turbulence (Van Hoek et al., 2001; Ismail and Sharifi
2006). Furthermore, it has been defined as the dominant competitive vehicle for
organisations in such an uncertain and ever-changing business environment, and has been
viewed as the business paradigm of the 21st century (Tseng and Lin, 2011). The term
‘agile supply chain’ best describes the overall agility level of respective supply chain
members considered as a unit, whereas the term ‘firm supply chain agility’ refers to the
focal ability of the firm to be agile by reconfiguring and considering green resources
within its supply chain. This research investigates green agility from the focal
organisations’ perspectives. Agility is a broad and multidimensional concept used in
many disciplines (Gligor and Holcomb, 2012).

2.5 Control variable

To ensure the robustness results and achieved objectives, this study controls a number of
extraneous or contextual variables that may affect the results of the study. The control
variables in this study are firm size and type of ownership. The selection of these
variables is based on the findings of previous studies that these variables have a
significant effect on green initiatives. Bowen (2002) also argued that larger firms are
more committed to voluntary green initiatives because they have more resources, and
they are more visible to the society. Firm participation in green-interested associations
(e.g. professional associations) is expected to raise the level of awareness of green
practices in a firm (Carter and Easton, 2011). A difference in firm size and ownership
leads to different business strategies, resources and capabilities that may affect the EP
and SP.

2.6 Hypotheses development

GSCA represents a willingness of an enterprise to meet changes in terms of increasing

demand volatility. Agility (or the ability to move quickly and easily) is a desirable trait in
almost any situation, particularly it relates to the supply chain. The role of a supply chain
 Green supply chain agility in EMS ISO 14001 manufacturing firms 57

agility is not only to ensure that the industry has the proper raw material supplies to
produce the final product, but in a broader sense, to ensure that the enterprise is nimble
enough to meet customer demands in a profitable way. The GSCA is of great importance
in achieving related EP and SP. The survey results reported in this study seek to establish
the relationship between the dimension of GSCA and the EP and SP as the organisation
outcome. Studies dealing with agility in supply chains have examined how agility has
an impact on economic performance but have neglected the impact of social and
environmental sustainability. This study fulfils the gaps and aims to investigate how
agility affects firm practices of SCM sustainability.

2.6.1 The relationship between GSCA and environmental performance

Agility is not a goal in itself, but the necessity to uphold the competitiveness in the
uncertainty of the market (Jackson and Johansson, 2003). Logically, an agile organisation
should stay competitive and improve its performance (Sherehiy et al., 2007). Therefore,
the question: “What could be done by gathering data, to sense opportunities and threats,
to learn from new knowledge, and respond to unpredictable events in the internal and
external environment?” was raised. Theoretical evidence was provided by Tallon and
Pinsonneault (2011) that the more agile an organisation is, the higher the performance of
the firm will be. The supply chains face additional barriers to sustainability in economic
developments, which contributes to a higher degree of complexity and uncertainty. This
is due to the existence of highly turbulent business environments and institutional voids
(Silvestre, 2015). Firms that have the green agile supply chain should have better
outcome of EP. The ISO14001 firms have designed some green specifications to
suppliers including environmental criteria for purchased materials. With the green
specification, greater improvement has been achieved in EP.
H1 The higher the GSCA, the higher the environmental performance in EMS
ISO 14001 certified manufacturing firms.

2.6.2 The relationship between GSCA and social performance

Parmigiani et al. (2011) noted that the capabilities developed in the past may be
inappropriate for meeting social and environmental needs. They therefore, suggest the
need for new capabilities in supply chain practices. As the positive impact of
agility has gained increased recognition, researchers have offered different theoretical
conceptualisations. The sustainable supply chain can achieve a low-carbon economy by
considering social dimension for future research (Jabbour et al., 2015). In essence, the
GSCA of a firm can be defined as the ability of the firm to quickly adjust green tactics
and operations within its supply chain to respond or adapt to changes, opportunities or
threats in its EP and SP. Firms which have green agility in the supply chain have better
performance in social aspects. With regard to the best personnel promotion, the firms
should ensure that the minority has been accommodated and promoted based on personal
ability.
H2 The higher the GSCA, the higher the social performance in EMS ISO 14001
certified manufacturing firms.
58 Y. Fernando and G. Saththasivam

3 Methods

This section aims to report a large scale survey by a questionnaire administered to assess
the levels of relation of GSCA in manufacturing firms and its outcome. Thus, this paper
presents the research framework and describes methods used to empirically examine the
relationship between independent and dependent variables. Discussions in this paper
focus on the research design, unit of analysis, population, target population, sampling,
and the development of the survey instrument. The proposed research model of this study
(Figure 1) illustrates the two concepts focusing on EP and SP as the outcomes of firm
performance.

Figure 1 Proposed research model (see online version for colours)

3.1 Research design

Research design was selected by the researcher depending on the positivist paradigm
before the phenomenon was determined. Therefore, in this study, quantitative research
approach using the questionnaire survey technique was conducted to collect data from a
representative sample of respondents based on interactions (Zikmund et al., 2012).
Moreover, it was stated that survey is perceived as a suitable method for data collection
when the sample size is large (Hair et al., 2003). This method is also used by many
researchers due to its low costs and effective administration (Sekaran, 2006; Zikmund
et al., 2012). Additionally, Sekaran and Bougie (2010) proposed using the questionnaire
survey for data collection because it is considered as a useful and popular method to have
responses to research questions. Furthermore, it was agreed that a self-administered
questionnaire survey is appropriate for measuring self-reported beliefs and behaviours
(Rundle-Thiele, 2005).
 Green supply chain agility in EMS ISO 14001 manufacturing firms 59

3.2 Study approach

In this study, the relationships between the independent variables (IV) and dependent
variables (DV) were examined. Online survey was carried out throughout the
manufacturing firms in Malaysia, where the supply chain practices tend to be more
prominent. Thus, the primary interest of this study is to investigate the influence of
GSCA (IV) on the EP and SP (DV). In this study, the relationships between the
independent variables (IV) and dependent variables (DV) were examined. Online survey
was carried out throughout the manufacturing firms in Malaysia, where the supply chain
practices tend to be more prominent. Thus, the primary interest of this study is to
investigate the influence of GSCA (IV) on the EP and SP (DV).

3.3 The unit of analysis

The main unit of analysis in this study is the organisation, which primarily refers to the
small and medium enterprises (SMEs) and multinational companies (MNCs). As such,
the survey focuses on the respondents’ perceptions towards the supply chain related to
practices and the performance of the organisation as a whole. The respondents are the
higher level management individuals such as general managers, managing directors or
CEO of the firm or the head of the supply chain department. According to Sekaran
(2006), the unit of analysis reflects the level of aggregation of the data collected
throughout the data analysis. The level of aggregation which data collected from top
management perspective would provide better picture of GSCA practices and its impacts
on the outcomes of the firms.

3.4 Population and target population

The research population of this study consists of manufacturing firms in Malaysia, which
have implemented green supply chain in their organisations. Li et al. (2006), however,
stated that sustainable supply chain practices tend to be more prominent among
large-sized firms. The types of sectors involved in this survey were electrics and
electronics, petroleum, liquefied natural gas (LNG), chemicals, palm oil, crude
petroleum, machinery, metals and optical industries in Malaysia. These firms are
expected to have a high involvement towards supply chain initiatives. EMS ISO 14001
certified firms were selected as a sample because they are expected to have embarked on
the adoption of green purchasing/logistics initiatives, which leads to green practices. This
is supported by the studies of Darnall et al. (2006), Sroufe (2003), and Zhu et al. (2008).
The ISO 14001 Environmental Management System standard, designed to introduce
environmental improvements in every aspect of a firm’s operations, offers an organised
approach to manage environmental issues; and it has become a widespread administrative
tool towards corporate environmental management.
In particular, there is a total of 520 firms with ISO 14001 certification in Malaysia.
However, the survey questionnaires were distributed to the top management in the
organisations available in the Federation of Malaysian Manufacturers (FMM) Directory,
2014. According to the record of the Malaysian Industry Development Authority
(MIDA), the growth of manufacturing industry from a total of just four companies with
577 employees and a total output value of RM25 million in 1970, the manufacturing
industry is currently expanding to more than 2,000 firms with a total investment of
60 Y. Fernando and G. Saththasivam

RM108 billion and a workforce of more than 600,000 people. In this context, a sample of
research was selected from the Federation of Malaysian Manufacturers (FMM) Industry
Directory 2014 of Malaysian Manufacturers (45th ed.).

3.5 Sampling
The most general method used to gather data from selected target population samples is
the process called sampling. The main purpose of sampling method is to select an
adequate number of a sample from the population, in order to understand the properties
of the sample and make it possible to generalise the findings to the whole population.
This study has adopted probability sampling focusing on the stratified random sampling.
With stratified sampling, the researcher can representatively sample even the smallest and
most inaccessible subgroups in the population. This method allows the researcher to
sample the rare extremes of the given population.

3.6 Results
For data analysis, IBM SPSS predictive analytics software version 20.0 was used to
compute the codes, the mean, the frequencies, and the standard deviations. Subsequently,
partial least square (PLS) path modelling was applied as a variance-based SEM to study
the relationship among all the variables (Urbach and Ahlemann, 2010). Out of the
400 survey questionnaires distributed (willingness to participate by e-mails), 230 were
returned, which is equivalent to 57.5% response rate. Whereas, the non-response rate was
42.5% (all the 230 surveys were complete and usable). Respondents were classified based
on the number of years. These respondents have been working in the current business,
gender, age, marital status, ethnicity, education and positions held. All the firms
participating in the survey have implemented ISO 14001 (Environmental Management
Systems). With regard to the history of the company in practicing ISO 14001, all the
firms have implemented GSCA to their support business operations. To measure
goodness of the model, several assessments were conducted. Construct validity was
tested with respective loading and cross loading, as presented in Table 1. All of the factor
loadings exceed 0.5. Figure 2 shows cross loadings of theoretical model and concluded
that all loading meets the criteria of construct validity.
Table 1 Summary of cross loading

Items X Y1 Y2
Agility (X) AG1 0.517 0.039 0.019
AG3 0.767 0.156 0.055
AG4 0.949 0.356 0.331
AG8 0.775 0.145 0.060
AG9 0.937 0.344 0.310
AG10 0.824 0.317 0.252
Note: Bold and underlined values are loading for items which are above the
recommended value of 0.5.
 Green supply chain agility in EMS ISO 14001 manufacturing firms 61

Table 1 Summary of cross loading (continued)

Items X Y1 Y2
Environmental performance (Y1) EP3 0.075 0.837 0.351
EP4 0.360 0.966 0.520
EP5 0.351 0.967 0.449
Social performance (Y2) SP1 0.315 0.443 0.865
SP2 0.160 0.432 0.860
SP3 0.220 0.445 0.933
SP4 0.286 0.465 0.955
Note: Bold and underlined values are loading for items which are above the
recommended value of 0.5.

Figure 2 Cross loadings of theoretical model (see online version for colours)

According to Hair et al. (2011), the second criterion of discriminant validity is that the
loadings of the indicators on its assigned latent variable ought to be higher than its
loadings. The composite reliability (Table 2) indicates the outer loadings of the
indicators, construct range from 0.961 to 0.947. The Cronbach alpha value is higher than
0.70. Both tests of reliability have met the cut-off value of 0.70 (Hair et al., 1998). This
study has adopted the criteria given by Hair et al. (2011) and Fornell and Larcker (1981).
The communality values have exceeded 0.50 and are close to one, which indicates that
the model explains most of the variation for three variables. The communality values are
also able to assess the constructs fitting into the theoretical model.
62 Y. Fernando and G. Saththasivam

Table 2 Summary result of the measurement model and convergent validity

Composite Cronbachs
Constructs Items Loadings AVEb Communality
reliabilitya alpha
Agility AG1 0.517 0.916 0.652 0.903 0.652
AG3 0.767
AG4 0.949
AG8 0.775
AG9 0.937
AG10 0.824
Environmental EP3 0.837 0.947 0.856 0.927 0.856
EP4 0.966
EP5 0.967
Social SP1 0.865 0.947 0.818 0.927 0.818
SP2 0.860
SP3 0.933
SP4 0.955
a
Notes: Composite reliability (CR) = (square of the summation of the factor loadings) /
{(square of the summation of the factor laodings) + (square of the summation of
the error variance)}
b
Average variance extracted (AVE) = (summation of the square of factor
loadings) / {(summation of the square of the factor loadings) +
(summation of the error variance)}
Fornell and Larcker (1981) proposed that latent variable should have AVE, which is
higher than the squared correlations between the latent variable and all other variables
(Fornell and Larcker, 1981; Chin, 1998, 2010). Hence, the square root of the AVE of
each construct should be greater than its correlation among other constructs. The values
that are printed in bold in Table 3 indicate the square root of AVE of each latent variable
that are greater than the squared correlations among all variables. Besides that, the
discriminant validity was assessed to ensure that the diagonal elements are higher than
the off-diagonal value in corresponding columns and rows to support the discriminant
validity of reflective scales.
Table 3 Discriminant validity

Agility Environmental Social

Agility 0.808
Environmental 0.342 0.925
Social 0.286 0.494 0.904
Note: Diagonal (in bold) represent the square root of AVE while the other entries
represent the squared correlations
Figure 3 shows the bootstrapping results to test the measures of accuracy to sample
estimates in random sampling methods. This study used the value of bootstrapping results
as the basis to accept or reject the research hypotheses.
 Green supply chain agility in EMS ISO 14001 manufacturing firms 63

Figure 3 Bootstrapping results (see online version for colours)

3.6.1 Hypothesis testing and result analysis

This section discusses the results of hypotheses testing. The hypotheses were tested with
the corresponding statistical analysis. Based on PLS path analysis using SmartPLS2.0,
the empirical results of this work encompasses the assessment of the hypothesised main
effects and control variable effects. Table 4 shows the path analysis of direct model. It
was used to test the hypotheses generated, and the results are summarised in Table 4. The
results in the table comprise the following data such as coefficient (β) and path
significance (t-values). This study is used 1-tailed (t-value > 1.65) significant level as
the benchmark to decide the acceptance level. If any t-value is lower than 1.65, the
hypothesis should be rejected. This was applied to test the effect of control variables in
the model. This is in line with the direction of purposed hypothesis and objective of the
study.
Before the hypotheses were tested, the effect of control variable on dependent
variables had been tested. The number of employees was used as the proxy of firm size.
The bootstrapping results indicated that firm size has no impact on the EP (path
coefficient = 0.029, t-value = 0.444). The path of firm size as control variable was also
computed on SP. There is no evidence to infer that firm size has an impact on SP (path
coefficient = 0.053, t-value = 0.831). The paths that link control variables to DVs have
lower t-value ( < 1.65). The second control variable in the model was ownership. The
type of ownership such as local, foreign and joint collaborations may have different
business strategies and policies in the firm. It may affect the achievement of the firm. The
path of ownership which link to EP (path coefficient = 0.027, t-value = 0.434) and SP
64 Y. Fernando and G. Saththasivam

(path coefficient = 0.037, t-value = 0.522) was tested. There is no enough evidence to
conclude that the ownership of firms has an impact on dependent variables.
Table 4 Hypotheses testing

Research Standard t-values

Path Coefficient Decision
hypothesis error (one-tailed)
Control variables
No. emp → environmental 0.029 0.066 0.444 NS
No. emp → social 0.053 0.063 0.831 NS
Ownership → environmental 0.027 0.062 0.434 NS
Ownership → social 0.037 0.071 0.522 NS
Main variables
Hypothesis 1 Agility → environmental 0.347 0.090 3.857 Accept
Hypothesis 2 Agility → social 0.294 0.100 2.932 Accept
Note: NS: not significant.
Hypothesis H1 predicts that the higher the GSCA, the higher the EP in EMS ISO 14001
certified manufacturing firms. The results found that GSCA has a positive effect on EP.
The results of H1 are illustrated in the path from GSCA to EP. The path coefficient
from GSCA to EP has exceeded the acceptance values (path coefficient = 0.347,
t-value = 3.857). Therefore, H1 is supported. The results of H2 are illustrated in the path
from GSCA to SP. The path was used to test whether the proposed hypothesis that argued
on the higher the GSCA, the higher the SP in EMS ISO 14001 certified manufacturing
firms is true. The path coefficient between GSCA and SP is significant (path coefficient =
0.294, t-value = 2.932); therefore, H2 is supported.

4 Discussions

The objective of this study is to find the empirical justification on the effects of GSCA
practices on EP and SP as an organisational outcome. The data was collected from
ISO14001 firms. It was found that the firms which conducted successful GSCA had a
significant impact on EP and SP. The theoretical contribution of the paper provides the
empirical justification and extends the green supply chain literature. This paper sheds a
new understanding of the GSCA effects on the EP and SP. Firms, nowadays, not only
have to focus on profit, but also need to consider firm relationship with community
stakeholder and CSR programs. Despite a quite number of previous studies supporting
the effects of supply chain agility on business performance (Jackson and Johansson,
2003; Sherehiy et al., 2007; Tallon and Pinsonneault, 2011), no solid justification is
provided on how the effect of GSCA impacts EP and SP.
The SP has normally been ignored in green supply chain literature; and firms prefer to
assess EP, periodically in compliance with rules and regulations. Yet, there is no specific
yardstick to assess the SP, which makes it difficult for firms to abide by any guidelines.
There is no efficient evidence to conclude control variables such as firm size and
ownership affecting EP and SP. The firms which have certified ISO14001 have similar
code of conduct on green practices to improve EP and SP. From the survey analysis, it
 Green supply chain agility in EMS ISO 14001 manufacturing firms 65

was indicated that the firms studied are involved with suppliers to increase efficiency as
well as working effectively with customers to design sustainable products and services.
The majority of the firms are concerned with the measurement of supplier performance,
the development of alternative methods of supply and supplier solution as well as the
enhancement of long-term relationship with suppliers. Most of these firms are involved in
the development of improved packaging, and an increase in the recyclable content of the
products. The purchasing role in supply chain does not necessarily need to be involved in
solving daily routine problems, but serves as a trouble-shooter to solve problems related
to the supplier’s strategy and to maintain the relationship with the supplier, and
commitment issues (Melander and Lakemond, 2014).
All firms have certification to environmental management standards such as
ISO14001 citing conformity with the framework of GSCA (in relation to the EP and SP,
a wide range of opportunities were cited by the firms). Among the key EP measures,
greenhouse gas emission reduction, improvement in energy efficiency and conservation
of resource logistic efficiency were evident in most of the firms. Other benefits achieved
by these firms increase the efficiency, reduce cost, improve risk management, improve
service, increase sales and market share, as well as inflate the revenue growth and
reputation. It is important that the supply chain of the firm should be ethical and socially
responsible. The higher the GSCA, the higher the EP in EMS ISO 14001 certified
manufacturing firms.
This finding provides a practical and useful tool for managers to conduct and assess
GSCA in order to enhance the performance of their firms. For instance, the organisational
practices can be used to evaluate the extent to which supply chain agility has been
implemented, and their impact on the competitive capability of the firm. The GSCA has
also played an important role in improving brand positioning in the market through
stakeholders well-being.

4.1 Limitations and future research

There are a number of limitations that influence the general ability of this study. First,
EMS ISO 14001 manufacturing firms were selected as a sample of study. Therefore,
future studies should replicate this model in non-EMS-ISO-14001 firms across multiple
industries. It would increase the understanding of supply chain agility. Second, in this
study, data was collected through a self-reported questionnaire. Therefore, there is a
possibility of respondents answering the questions in the way that is perceived to be more
desirable or acceptable than what is actually experienced or believed. Thus, the results of
this study should be considered indicative rather than definitive based on these
limitations.

4.2 Conclusions
The objectives of the study, as well as discussions concerning the theoretical
contributions and managerial implications, together with the limitations of the study, and
suggestions for future research were clarified in this paper. The research was conducted
to examine the relationship between GSCA practices and EP as well as SP in
manufacturing firms. It significantly contributes to a new approach as it puts GSCA in
relation to EP and SP. A general framework was developed, and an attempt in the
validation of the framework using survey questionnaires was made. Thus, this study is
66 Y. Fernando and G. Saththasivam

expected to provide a guidance with regard to GSCA practices in order to increase the
competitiveness of the firm, which will result in economic returns. Finally, suggestions
for further research were made with regard to exploring more green supply chain
practices and techniques. From obtained results, it is suggested that future studies should
conduct a qualitative approach to gain deeper insights into the relationship between the
green supply chain and performance of the firm with secondary data. The usage of energy
also needs to be addressed to maintain a lower carbon emission as the outcome of green
supply chain practices. It means that firms should pay attention to low carbon supply
chain as the focus on GSCM studies so that the material handling in procurement and
supply chain could minimise the emission of pollutants and to steer our earth away from
negative effects of global warming.

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