Green procurement and firm performance

The study sought to establish the effect of green procurement as a dimension of green SCM on the performance of the manufacturing firms in Kenya. Numerous studies have posited that green procurement practices lead to improvement of the performance of

firms in both financial and non-financial fronts. This study postulation was grounded on such studies in examining the effect of green procurement on the performance of manufacturing firms in Kenya.

The study findings indicate that firms that have internalized green procurement practices within their operations experience improvement in their performance outcomes. The multiple regression analysis results indicate that green procurement has a positive statistically significant effect on the performance of manufacturing firms; p < 0.05 (P=0.000) with an explanatory power of 33.86 percent. Therefore, the null hypothesis ―green procurement does not significantly influence firm performance‖ was rejected. This finding agrees with Gibbs (2000) findings under ecological modernization theory which espouses the positive contribution of green procurement to economic performance of manufacturing firms. It supports Lacroix and Stamatiou, (2007) contention that Japanese and European leading companies that decided to go along with green procurement activities were experiencing improved performance through increased overall cost efficiency, enhanced reputation through product differentiation, market share, and reduced environmental risks and liabilities. The study finding on the significant effect of green procurement on firm performance conforms to Lacroix, (2008) findings that companies register improved performance once they effectively adopt ecological practices within procurement. Zhu et al., (2008) Melnyk et al., (2003) all concluded that there is a link between green procurement and firm performance.

The study results showed that, environmental requirements as a specification for purchases, preference products that consumed fewer natural resources, working with suppliers to address environmental problems and environmental audits of supply base as indicators of green procurement were explicit across the firms studied having an overall scores of mean 4.24, STD 0.679; mean 4.01, STD 0.541; mean 4.24 STD 0.612 and mean 4.16, STD 0.672 respectively out of a possible maximum 5 points. An average STD value of 0.7646 implies small variations across the firms studied. These findings conform to the theoretical arguments by Lacroix and Stamatiou, (2007) that Japanese companies‘ record

improved performance as a result of embracing procurement eco-practices such environmental requirements as a specification for purchases, preference products that consumed fewer natural resources, working with suppliers to address environmental problems and environmental audits. This may be due to recognition by firms that by reducing the supplier generated wastes and surpluses at source, firms essentially decrease handling expenses, risks and costs associated with waste management. In addition, a vendor‘s savings from improved efficiencies may be passed along to buyers in the form of reduced prices which may greatly affect the firm‘s bottom line in terms of reduced operation costs.

The study finding re-enforces an emerging argument within the supply chain management theory that the performance of a given firm can no longer be viewed in isolation but rather within a global network of members within a certain supply chain (Zhu et al., 2008). This findings, therefore, is an indication that results from preceding studies, undertaken in the context of developed countries, in different time periods, within the manufacturing firms and utilizing both financial and non-financial measures are in agreement with the ones from developing countries context. It can therefore be stated that the effect of eco practices within procurement function on firm performance does not recognize geographical or business environment of the manufacturing firms. 4.10.2 Green manufacturing and firm performance

The study pursued to establish the effect of green manufacturing on the performance of manufacturing firms in Kenya. The study outcomes indicate that injection of ecological practices to manufacturing functions positively affect the firm performance. Results of regression analysis indicate that there is a significant relationship between green manufacturing practices and firm performance; p < 0.05 (P=0.000) with an explanatory power of 40.27 percent. Therefore, the null hypothesis ―green manufacturing does not significantly influence firm performance‖ was rejected. Further, the study findings indicate that using machines or tools which consume less energy, water, and fuel; impact and life cycle assessment tools for manufacturing; risk assessment for energy and resource use; environmental friendly raw material; efficient processes to reduce solid

waste, air emissions and conserve energy; and environmental management system (EMS) were explicit across the firms studied having an overall scores of mean 4.44, STD 0.605; mean 4.33, STD 0.734; mean 4.33 STD 0.686; mean 4.56,STD 0.531; mean 4.63 STD 0.586; and mean 4.16, STD 0.602 respectively out of a possible maximum 5 points. An average STD value of 0.624 implies small variations across the firms studied. The results of the analysis revealed that the influence of green manufacturing on performance is significant and is propelled by activities such as using machines or tools which consume less energy, water, and fuel; impact and life cycle assessment tools for manufacturing; risk assessment for energy and resource use; environmental friendly raw material; efficient processes to reduce solid waste, air emissions and conserve energy; and environmental management system. The results may explain the movement by the firms towards greening manufacturing practices. It can also be used to support the notion that generating waste costs money through payment for it three times over – when buying it, when processing it, and when disposing it. As such, firms which are able to drastically reduce the number of times they pay for wastes in a manufacturing process experience improved performance through cost reduction and product and processes differentiation. These findings are in agreement with the contention by: Phungrassami, (2008) that green manufacturing is a continuous strategy used by firms in improving their performance both financially and in non-financial fronts; Lacroix, (2008) that ecological practices within manufacturing activity result in improved environment, workers‘ health, waste reduction and reduction of disposal costs, optimization of the use of raw material , water, energy and maximization of safety thus impacting positively on the overall performance of the firm; Banerjee, (2003) that green manufacturing program improves environmental performance and increases profitability of a firm by minimizing waste throughout transformation process thus impacting significantly on the performance of firms.

In addition, Lacroix and Stamatiou, (2008) conclusion that firms in both sectors (public and private) are realizing performance improvement as a result of green manufacturing practices is supported by the study findings. According to them, eco initiatives within

manufacturing set up improve efficiency in managing energy, water, material, and workers‘ health thereby positively impacting on the overall performance of firms. This findings, therefore, is an sign that results from previous studies, undertaken in the context of developed countries, in different time periods, within the manufacturing firms and utilizing both financial and non-financial measures are in agreement with the ones from developing countries context ; the influence of green manufacturing on firm performance could exist irrespective of the context of the study.