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Greening the automotive supply chain: a relationship perspective

Purpose This study seeks to explore the moderating impact of

relationship conditions existing between a customer and its suppliers on
the uptake and effectiveness of the customers environmental
performance requirements (otherwise known as green-supply).
HypothesisH1. The suppliers level of environmental commitment is related to the
environmental performance requirements of its major customer.
H2a. The presence of relationship-specific investments will improve
supplier response to the customers environmental performance
H2b. Contracts signed between the customer and the supplier will
improve supplier response to the customers environmental performance
H2c. Use by the customer of supplier assessment will improve supplier
response to the customers environmental performance requirements .
Variables for customers environmental Performance requirements
Our major customer requires us to achieve ISO14000 certification
Our major customer has a clear policy statement on their commitment to
the environment
Our major customer would withhold our supply contract if we did not meet
their environmental performance requirements

Individual moderator variables

Investment: We dedicate and reserve equipment and capacity specifically

to maintain this
Contracts: We have signed an extensive agreement (or contract) with this
customer specifying price, quality and lead-time
Assessment: This customer assesses our operations (e.g. questionnaire)
from time to time
The 55 respondents in the survey sample 82 percent of organizations
were either manufacturing or component suppliers. 80 percent of

organizations had less than 320 employees in their Australian operations

and the average number of employees was 232. According to 2004
figures, three automotive brands (Toyota, Ford and Holden) held over a 50
percent share of the Australian automotive market (AIG, 2005). The export
figure of 36 percent shown in Table I is expected to reflect the dominance
of these three brands in the volume of exported product shown as a gross
amount for the Australian industry. The average figure of 12 percent of
exported products for those remaining in the industry is expected to be a
fair representation of the average automotive supplier rather than any of
the larger employers such as the assembly firms. On the basis of a
comparison between the expected demographics of the survey population
and the demographics of those that responded, it was concluded that the
responding population was representative of the larger and target
population. Non-response was attributed to lack-of-interest bias only
(Armstrong and Overton, 1977).

Descriptive Data Analysis

Data Analysis
Returned surveys were analysed using linear regression analysis with
EXCEL. Data were checked first for normality assumptions using normal
probability plots and tests for kurtosis and skewness. Items were reduced
into relevant scales using factor analysis (principal component with a
varimax rotation) and factor loadings of less than 0.65 were excluded
(Tables II, III and IV). Tests for multi-collinearity were completed using
variance-inflation and tolerance factors. Overall, significance of the
regression model was assessed using the test statistics of standardized (b)
co-efficients, standard error of the co-efficient, F and adjusted R 2. A final
moderated multiple regression (MMR) analysis was used to test H2a-2c
after that described in Baron and Kenny (1986) and later in Aguinis
Conducting test

The primary relationship which is proposed between the main construct
suppliers environmental commitment and customers environmental
focus is articulated through H1. The results of the regression analysis for
H1 are shown in Table V. In Table V, standardized co-efficients and
adjusted R 2 values are provided to describe the results of the analysis.
The results of the regression analysis show no statistically significant
relationship between the suppliers level of environmental commitment
and the customers environmental performance requirements. At the
item-specific level, one variable contributed most of the predicted
variance in the relationship between the suppliers environmental
commitment and customers environmental performance requirements
supplier certification to ISO14001 with the remaining two items
predicting much less.
The second stage of the analysis involved including a series of condition
variables as moderators of the primary relationship described by H1.
Using MMR analysis, the results of this analysis which describes and tests
H2a-2c is shown in Table VI. In Table VI, standardized co-efficients are
shown for the regression analysis for each of the moderator variables
Investment (H2a), Contracts (H2b) and Assessment (H2c) along with

adjusted R 2 values, change in adjusted R 2 values between the unmoderated and moderated models and the F statistic.

In the MMR analysis, the primary regression relationship between the

environmental commitment construct and the customers environmental
performance requirement construct becomes statistically significant for
the Investment model (change in adjusted R 2 is significant at p, 0.001)
but not for the Contracts or Assessment models.

ABS (2005), Australias automotive industry, Year Book Australia
Australian Bureau of Statistics, Belconnen, January.
AIG (2005), The Victorian Automotive Components Industry, Australian
Industry Group,
Aguinis, H. (2004), Regression Analysis for Categorical Moderators,
Guilford Press, New York, NY.

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