LEVERAGING ENVIRONMENTAL INFORMATION

INTEGRATION TO ENABLE ENVIRONMENTAL

MANAGEMENT CAPABILITY AND PERFORMANCE
CHRISTINA W. Y. WONG
The Hong Kong Polytechnic University

Although environmental sustainability has emerged as an important orga-

nizational capability to protect the environment and sustain businesses,
there is little knowledge on how it is developed. This is of particular
importance when environmental management no longer relies solely on
an individual firm’s efforts, but on its supply chain partners as well.
Building on dynamic capabilities theory, environmental information inte-
gration (EII) is defined as the organizational capacity of sharing informa-
tion on environmental management with supply chain partners to
facilitate coordination of environmental management practices. This study
examines how EII contributes to environmental management capabilities
in terms of corporate environmental innovativeness and adaptability. The
research model is empirically tested using data collected from 230 firms.
The findings show that supplier EII is insufficient in improving environ-
mental management capabilities. Internal EII contributes to corporate
environmental adaptability, while customer EII engenders both corporate
environmental innovativeness and adaptability. This study suggests that
strategic values of EII go beyond the sharing of environmental manage-
ment information between supply chain partners, simultaneously contrib-
uting to the environmental management capabilities of firms. This study
contributes substantially to environmental management research by pro-
viding empirical evidence on the specific dimensions of EII in supply
chains that contribute to environmental management capabilities and
business values.

Keywords: environmental sustainability; environmental management; sustainable

supply chain management; information integration; dynamic capabilities; financial
performance; environmental performance

INTRODUCTION protection, such as closed-loop supply chains and

Environmental protection is an important and
timely organizational issue that affects long-term
development of businesses (Madsen, 2009). While
firms are actively engaging in practices, ranging from
cleaner production (Rothenberg, Pil & Maxwell, 2001;
Yang, Hong & Modi, 2011) to eco-product design
(Toffel, 2004), there is growing attention to the signif-
icance of supply chain collaboration in environmental
Acknowledgments: The author is grateful to the Editor-in-Chief, the
Associate Editor, and the four anonymous reviewers for their helpful
comments on earlier versions of this manuscript. This research is
partially supported by the Research Grants Council of Hong Kong
Special Administrative Region, China (GRF PolyU 5500/10H).
reverse logistics (Parmigiani, Klassen & Russo, 2011).
As a result, many industry leaders, such as Nike,
Hewlett-Packard and S.C. Johnson, share information
with their supply chain partners in support of their
efforts to eliminate the use of toxic materials, reduce
energy consumption and avoid waste production
throughout their supply chain processes. However, the
Carbon Disclosure Project Supply Chain Report
(2011) and Green Chemistry & Commerce Council
(2009) suggest that coordination of environmental
management practices in a supply chain is fraught
with challenges. Such challenges are induced by the
complexity of supply chain communication and coor-
dination, suggesting the importance of developing an

114 Volume 49, Number 2

 Environmental Information Integration
information sharing mechanism to support environ-
mental management beyond an individual firm. For
example, PepsiCo shares information and integrates
with its suppliers to successfully reduce their green-
house gas emissions in the supply chain as a whole
(ATKearney, 2011). Drawing in part on extant find-
ings from both the information systems and supply
chain management disciplines (Flynn, Huo & Zhao,
2010; Lee, 2000; Wong, Boon-itt & Wong, 2011c;
Wong, Lai & Cheng, 2011a), this study explores the
effects of environmental information integration
established internally across business units and exter-
nally with suppliers and customers on the environ-
mental management capabilities of firms.
Environmental information integration (EII) is
defined as the information sharing infrastructure that
supports environmental information exchange and
coordination across business functions and partner
firms (Almotairi & Lumsden, 2009; Bajwa et al., 2008;
Grover & Saeed, 2007; Lai, Wong, Cheng & Yeung,
2006). While it differs from the traditional supply
chain information integration that is confined to sup-
porting such activities as shipment coordination, order
fulfilment and so forth (Lai, Wong & Cheng, 2010; Lai
et al., 2006; Lau, Hui, Chan & Wong, 2002; Wong, Lai
& Cheng, 2009a; Wong, Lai & Ngai, 2009b), it also
differs from vertical integration that is concerned with
corporate ownership. EII reflects organizational elec-
tronic connectivity with supply chain partners that
enables firms to acquire and disseminate information
to coordinate environmental management practices,
ranging from eco-product design, asset recovery, com-
ponents disassembly and recycling, to reuse, with the
aim of mitigating the environmental impact of prod-
ucts throughout their life cycle (Elliot, 2011). For
example, by sharing information on product design
and material composite with downstream customers
(e.g., distributors and retailers), firms enable their cus-
tomers’ participation in such asset recovery tasks as
returned product inspection and separation. On the
other hand, information related to the condition and
amount of retrieved components and materials enable
upstream partners (e.g., component suppliers and
manufacturers) to identify opportunities for product
and process improvement, and plan for inventory.
However, there is limited empirical evidence on
how EII may contribute to the environmental man-
agement capabilities of firms. This omission in the lit-
erature is undesirable because there are few
managerial insights into how firms may develop their
environmental management capabilities through lever-
aging their supply chain efforts in environmental pro-
tection. The concept of environmental management
capabilities is concerned with conserving natural capi-
tal, whereby firms reduce their environmental impact
by such means as reducing waste in operations, using
April 2013
renewable inputs, and continuously improving their
operations to sustain yield with minimum adverse
impact to the environment (Goodland, 1995; Klassen
& Whybark, 1999). It refers to the ability of firms to
integrate environmental issues into business opera-
tions (Lee & Klassen, 2008) and is related to the orga-
nizational characteristics and management system that
facilitates and supports a firm’s environmental protec-
tion efforts and initiatives. Although there is little
empirical evidence of its performance impact and
knowledge on how it is developed, a few prior studies
have provided anecdotal evidence and discussion on
the potential performance impact of environmental
management capabilities in terms of corporate
environmental innovativeness and adaptability in
mitigating environmental damage, preempting future
environmental requirements and satisfying customer
needs (Handfield, Sroufe & Walton, 2005). The objec-
tive of this study is to answer two critical research
questions related to the development of environmen-
tal management capabilities and its performance
impact: (1) How does EII influence environmental
management capabilities in terms of corporate envi-
ronmental innovativeness and adaptability? and (2)
What are the implications of developing environmen-
tal management capabilities for financial and environ-
mental performance? To answer these research
questions, we draw on dynamic capabilities (DC) the-
ory to examine the environmental management capa-
bilities of firms in innovating new environmental
practices and adapting to new market environmental
demands and expectations, while EII facilitates envi-
ronmental management capabilities by providing the
relevant information.
LITERATURE REVIEW
Environmental Management Capabilities as
Dynamic Capabilities
Noting the limit of natural resources that requires
economic and environmental goals to be pursued
within these limits (Farrell & Hart, 1998), firms
require proactive problem solving and innovation to
improve traditional, inefficient business processes and
products (Ramus, 2001). Firms also need to be adap-
tive to changing environmental requirements (e.g.,
new environmental regulations) (Elliot, 2011; Milne,
Kearins & Walton, 2006). In line with organizational
dynamic capabilities (DC) theory, which advocates
the ability of firms to continually build and develop
organizational practices to sustain business growth
(Teece, Pisano & Shuen, 1997), environmental man-
agement capabilities is characterized by the capabili-
ties of firms to innovate and adapt to changing
market needs (Beske, 2012; Elliot, 2011). It extends
beyond corporate strategic goals (Farrell & Hart, 1998;
115
 Journal of Supply Chain Management
Parris & Kates, 2003), environmental protection initia-
tives (Jacobs, Singhal & Subramanian, 2010) and
environmental management practices (Matos & Hall,
2007).
Dynamic capabilities theory suggests that firms that
are responsive and rapid in product innovation, cou-
pled with the capabilities to effectively coordinate and
redeploy internal and external competencies, would
improve performance (Teece et al., 1997). It considers
the capacity of firms to integrate, build and renew
internal and external competencies to adapt to chang-
ing market needs (Sirmon, Hitt & Ireland, 2007). DC
theory, in line with the corporate social responsibility
literature, provides a theoretical grounding for the
conceptualization of environmental management
capabilities, which is a key component of the environ-
mental sustainability of firms in attending and
responding to changing market and societal needs
(Ackerman & Bauer, 1976). Environmental manage-
ment capabilities reflect firms’ ability to develop inno-
vative practices while being adaptive to market needs
(Klassen & Whybark, 1999; Quak & de Koster, 2007),
to address the growing concern of environmental
expectations while improving environmental and
financial performance (Kleindorfer, Singhal & van
Wassenhove, 2005).
Based on DC theory, corporate environmental innova-
tiveness is concerned with the development and adop-
tion of new environmental management practices to
improve the efficiency and effectiveness of firms’ envi-
ronmental protection efforts (Fong & Chang, 2012;
Geffen & Rothenberg, 2000; Theyel, 2000). It is
related to the ability of firms to make investments
and seize opportunities in developing new environ-
mentally friendly products or adopting new pollution
prevention practices and technologies. Corporate envi-
ronmental innovativeness requires supply chain efforts
to improve end-to-end processes between a focal firm
and its suppliers and customers (Lee, 2000) and to
improve resource visibility and information sharing to
facilitate innovation (Geffen & Rothenberg, 2000).
On the other hand, corporate environmental adaptability
is concerned with firms’ responsiveness and flexibility
in responding to new environmental requirements
and needs while sustaining economic growth (Milne
et al., 2006). It reflects the ability of firms to support
the restructuring and reengineering of business pro-
cesses to comply with new environmental principles
and market demands (e.g., use of alternative energy).
In the context of supply chain management, adapt-
ability is considered a critical capability of firms in
coping with the changing market needs (Lee, 2004).
Thus, corporate environmental adaptability is an
important environmental management capability to
flexibly address future changes in environmental regu-
lations and market expectations (Colby, 1991).
116 Volume 49, Number 2
According to DC theory, these characteristics of envi-
ronmental management capabilities are crucial for
firms to continually integrate new resources (e.g.,
environmental technologies, practices or information)
to the existing ones to innovate, while adapting to
changing or evolving market needs. The triple bottom
line literature suggests that environmental sustainabil-
ity is related to a balance of economic, environmental
and social goals (Carter & Rogers, 2008). To achieve
these goals in a supply chain, according to the
resource-based view of a firm, firms need enabling
processes to acquire the relevant information and
facilitate the development of environmental manage-
ment capabilities (Barney, 2012; Priem & Swink,
2012). In line with this view, DC theory presumes the
existence of two critical aspects: (1) the input of new
resources that can be applied to modify existing orga-
nizational practices and (2) the capabilities of chang-
ing existing organizational practices (Winter, 2000).
The development of such capabilities requires acquisi-
tions of new information to understand market needs
(Dillman, 2000) and collective efforts in managing
cross-functional business activities to address the mar-
ket needs (Fawcett, Wallin, Allred, Fawcett & Magnan,
2011). As such, information is considered an impor-
tant resource input that enables firms to build and
make necessary adjustments to their existing environ-
mental knowledge and practices (Ravichandran &
Lertwongsatien, 2005). EII serves as a strategically sig-
nificant mechanism to facilitate information sharing
amongst functions and supply chain partners (Frohlich
& Westbrook, 2001). The environmental management
capabilities of firms is considered as the second critical
aspect of DC, which reflects the ability of firms to
modify and change their existing practices to improve
their environmental and economic performance.
Environmental Information Integration
The conceptualization of EII revolves around the
fundamental concept of the intra- and inter-organiza-
tional systems infrastructure to facilitate timely, accu-
rate and standardized data exchange across
organization functions (Truman, 2000). In line with
the notion of supply chain integration, EII provides
the electronic linkages of internal and external func-
tions to share environmental information and coordi-
nate environmental management practices (e.g.,
return product collection, disassembly, recycling). It is
concerned with managing the environmental impacts
of business activities ranging from product develop-
ment, production, delivery and consumption, to post-
disposal disposition of products (Linton, Klassen &
Jayaraman, 2007; Pagell & Wu, 2009). As such, EII
enables the coordination of environmental protection
responsibilities and tasks among supply chain
partners.
 Environmental Information Integration
From the technical perspective, EII is concerned with
the electronic interconnectedness and linkages devel-
oped between partner firms to share logically compati-
ble data (Bernstein & Haas, 2008). EII supports
communication and sharing of such environmental
management information as solid waste generation
and carbon emission among the associated partners.
It reflects the extent to which partner firms and func-
tions are interconnected to allow timely and accurate
environmental information sharing across organiza-
tional functions (Goodhue, Wybo & Kirsch, 1992).
From the coordination perspective, EII is concerned
with inter- and intra-organizational environmental
management practices, for example, the collection of
returned products and separation of reusable parts,
being streamlined and coupled by information sys-
tems (Truman, 2000; Wong et al., 2009a,b). It enables
coordination of inter-dependency and allocation of
responsibility, ranging from end-of-life product collec-
tion and disassembly, to material recycling amongst
partners to achieve environmental goals (e.g., reduce
disposal to landfill) at a low cost (Rao & Holt, 2005).
In line with DC theory, these perspectives highlight
the importance of EII in enabling supply chain part-
ners to collaborate in environmental management
through information sharing to plan and improve
decision making, with the result of having better coor-
dination and organization in their environmental
management practices.
Dimensions of Environmental Information
Integration
A firm is an open social and economic system,
where it is influenced by external forces and condi-
tioned by internal processes (Astley & Van de Ven,
1983). Such a classical view of organization advocates
the need to distinguish between internal and external
EII and is in line with the conceptualization of supply
chain integration, namely internal, supplier and cus-
tomer integration (Flynn et al., 2010; Frohlich &
Westbrook, 2001; Wong et al., 2011c). Supply chain
integration is concerned with the extent to which (i.e.
the degree of integration) a focal firm collaborates
with supply chain partners and facilitates data flow
across its intra- and inter-organizational processes.
Adopting this line of thought, EII is divided into three
dimensions: namely internal EII, customer EII and
supplier EII.
Internal EII supports the coordination of internal
processes to achieve corporate environmental goals. It
is concerned with the extent to which a firm config-
ures its communication and information sharing
infrastructure across intra-organizational functions to
facilitate organizational efforts in environmental man-
agement (Lai, Wong & Cheng, 2008). On the other
hand, external EII includes supplier and customer EII
April 2013
to take into account the differences between upstream
and downstream supply chains. Customer and sup-
plier EII refer to the extent to which electronic link-
ages are developed across inter-organizational
processes, which are structured to facilitate the perfor-
mance of environmental management, for which each
partner is responsible.
Customer EII is concerned with the information
sharing infrastructure of firms sharing environmental
information with customers (e.g., new eco-product
introduction), while acquiring information of new
customer requirements and expectations (e.g., new
environmental standards and regulations). Such EII
helps identify business and environmental manage-
ment opportunities (Priem & Swink, 2012), while
informing and educating customers about alternative
products and practices. Customer EII can therefore be
useful in engaging customers in participating in
environmental protection (e.g., returning end-of-life
products).
On the other hand, supplier EII is concerned with
the information sharing infrastructure that enables
information sharing between a focal firm and its sup-
pliers to facilitate upstream supply chain operations
on such aspects as materials selection and treatment
of manufacturing by-products. Supplier EII enables
product and process improvement by sharing infor-
mation related to their material wastage, new alterna-
tive materials and manufacturing technologies, and so
forth. It enables supply chain partners to align their
environmental objectives while collaboratively engag-
ing in environmental practices to reduce their adverse
environmental impact.
Synthesis of the Extant Literature
Upon conducting an extensive literature review, we
summarized the seminal works on environmental
management capabilities in Table 1 and observed the
following limitations in the literature. First, the defini-
tion and conceptualization of environmental manage-
ment capabilities varies across studies. While some
studies take organizational environmental manage-
ment capabilities as the accountability and control of
natural resources consumption (Elliot, 2011; Linton
et al., 2007; Parmigiani et al., 2011), some consider
environmental management capabilities as business
practices (Montabon, Sroufe & Narasimhan, 2007;
Wu & Pagell, 2011). A few studies have provided
empirical evidence that is confined to specific prac-
tices, such as announcing corporate environmental
initiatives (Jacobs et al., 2010) and incorporating life-
cycle assessment into product design (Matos & Hall,
2007). This study responds to the call for empirically
investigating environmental management capabilities
as an organizational ability to achieve sustained com-
petitive advantage (Hart, 1995).
117
118
TABLE 1
Summary of Literature Related to Environmental Sustainability

Consequences
Conceptualization of Antecedents of of
Environmental Environmental Environmental
Management Theoretical Management Management
Study Capabilities Focus Capabilities Capabilities Methodology Findings
Handfield Reduce all forms of waste, Operations Environmental regulations Environmental Case studies Environmental management
et al. including solid waste and air focus Customer expectations performance practices must be integrated
(1997) pollution into all stages of the value
chain, spanning product design,
procurement, manufacturing,
packaging, logistics and
distribution.
Farrell and “Improving the quality of human Corporate Social, economic and Economic growth Conceptualization Development of sustainability
Hart life while living within the value focus institutional factors Amount of indicators, which include basic
(1998) carrying capacity of supporting nonrenewable needs, community, the quality
ecosystems” energy used of the environment and the use
of resources.
Klassen and Environmental management Operations Toxic release Survey Three distinct environmental

Volume 49, Number 2

Whybark orientation (i.e., system analysis focus inventory management configurations of
(1999) and planning, organizational firms: compliance, opportunism
Journal of Supply Chain Management

responsibility and management and proactive orientation

controls) and environmental Proactive orientation firms have
technology investment (i.e., greater reductions in toxic
pollution prevention and pollutants than the compliance
pollution control) to address orientation firms.
environmental issues
Parris and “Vital environmental systems are Corporate Health of Conceptualization The composite index of
Kates maintained at healthy levels, value focus environmental environmental sustainability.
(2003) and to the extent to which system
levels are improving rather than
deteriorating”

(continued)
 TABLE 1 (Continued)

Consequences
Conceptualization of Antecedents of of
Environmental Environmental Environmental
Management Theoretical Management Management
Study Capabilities Focus Capabilities Capabilities Methodology Findings
Quak and Distribution network structure Operations Time-access restrictions, as a Financial and Case studies When few cities are affected by
de Koster and logistic planning that affect focus policy to improve social environmental the policy, costs and emissions
(2007) the environmental impact of sustainability. This policy forces performance increase moderately. When
distribution activities the distribution activities to more cities are affected, costs
take place within a specified and emissions increase
time period of the day. significantly.
Network structure and logistic
planning
Linton et al. Using resources to meet present Operations Product design, manufacturing Literature review Should consider sustainability in
(2007) needs without compromising focus by-products, by-products different supply chain activities.
future generations’ ability to produced during product use,
meet their own needs product life extension, product
end-of-life and recovery
processes

April 2013
Matos and Life-cycle assessment to optimize Operations Product design and stewardship Air emissions, Case studies Integrating sustainable
Hall (2007) closed-loop supply chains focus Uncertainties — economic, water discharge development in the supply
environmental and social quality, energy chain by incorporating the life-
uncertainties consumption, cycle assessment approach to
land disturbance optimize a closed-loop supply
Environmental Information Integration

chain.
Montabon Environmental management Operations Product Content analysis Six key environmental
et al. practices — recycling, proactive focus innovation management practices:
(2007) waste reduction, Process recycling, proactive waste
remanufacturing, environmental innovation reduction, remanufacturing,
design, specific design targets, Environmental environmental design, specific
surveillance of the market performance design targets, and surveillance
Financial of the market for environmental
performance issues (which are positively
(ROI and sales associated with firm
growth) performance).

(continued)

119
120
TABLE 1 (Continued)

Consequences
Conceptualization of Antecedents of of
Environmental Environmental Environmental
Management Theoretical Management Management
Study Capabilities Focus Capabilities Capabilities Methodology Findings
Carter and Integration of social, Operations External resources, vertical Triple bottom Conceptual Sustainability is considered as an
Rogers environmental, and economic focus coordination and social and line: development integration of environmental,
(2008) responsibilities environmental knowledge environment, social, and economic
society, and performance.
economic
performance
Jacobs Corporate environmental Strategy Organizational initiatives Market value Event studies Philanthropic announcement of
et al. initiatives, environmental focus giving gifts for environmental
(2010) awards and certifications, ISO causes brings significant
14000 certifications positive market reaction.
Voluntary emissions reduction
has negative market reaction.
ISO 14000 certification is
positively associated with

Volume 49, Number 2

market reaction.
Martin, The choice of in-house vs. Operations Specificity of operational assets, Survey and case Specificity of operational assets,
Journal of Supply Chain Management

Guide and contracted remanufacturing focus intellectual property, frequency studies intellectual property, and
Craighead operations of remanufacturing, brand frequency of remanufacturing
(2010) reputation, technological are significant drivers of in-
uncertainty, condition house remanufacturing.
uncertainty, product Brand reputation, technological
complexity and volume uncertainty, condition
uncertainty uncertainty, product complexity
and volume uncertainty are not
drivers of in-house
remanufacturing.

(continued)
 TABLE 1 (Continued)

Consequences
Conceptualization of Antecedents of of
Environmental Environmental Environmental
Management Theoretical Management Management
Study Capabilities Focus Capabilities Capabilities Methodology Findings
Guide and The marketing of remanufactured Operations Consumer perception and Cannibalization of Field study and For consumer products, the risk
Li (2010) products focus experiences new product laboratory of cannibalization is minimal.
sales by studies For commercial products,
remanufacturing there is a potential risk of
red products cannibalization.
Elliot (2011) “Stakeholder behavior impacting Operations Stakeholders: society, Environment Conceptual Developed an integrative
on the natural environment that focus government, industry and development framework for IT-enabled
meets the needs of the present alliances, organizations, business transformation to
without compromising the individuals and groups in improve business efficiencies
ability of future stakeholders to organizations and effectiveness.
meet their own needs” Human behaviors

April 2013
Wu and Environmental sustainability Strategy Environmental strategies and Environmental Case studies Organizations with different
Pagell means that business activities focus postures and economic business modes and priorities
(2011) are conducted in a way that performance tend to have different
protect natural resources and environmental strategies and
Environmental Information Integration

the environment, while serving postures. Different

the common good of society. environmental postures exhibit
trade-offs in their economic and
environmental aspects.
Parmigiani Control and take accountability Operations Efficient vs. market responsive Economic, social, Theoretical Stakeholder exposure determines
et al. for environmental impact focus supply chain configuration and development how social/environmental,
(2011) environmental technical and relationship
performance capabilities impact social and
environmental outcomes.

121
 Journal of Supply Chain Management
Second, although prior studies acknowledge the
importance of supply chain efforts in environmental
protection (e.g., Handfield et al., 2005; Matos & Hall,
2007; Quak & de Koster, 2007), they focus on the
environmental practices at various supply chain stages
(e.g., product design and procurement stage) and their
performance impact, neglecting how the supply chain
collective efforts are developed. While information
integration facilitates coordination of cross-firm activi-
ties and enables joint efforts in environmental protec-
tion, this study is novel in advancing knowledge on
how firms may develop their environmental manage-
ment capabilities by forming EII across internal func-
tions and with supply chain partners (Kleindorfer
et al., 2005; Wong, Lai, Cheng & Lun, 2011b). Such
an approach is in line with the process-based perspec-
tive of corporate social responsibility that suggests that
environmental issues are related to organizational
capacity in meeting market and societal needs (Acker-
man & Bauer, 1976). To cope with such needs, firms
require enabling processes, such as EII, that provide
environmental information and a coordination mech-
anism (Wong et al., 2011a).
Third, prior studies have examined the use of such
IS applications as Environmental ERP software, GaBi
and SimaPro to measure, manage and report environ-
mental data (Denzer, Shimak & Russell, 1995; Gun-
ther, 1997). While these systems are largely confined
to applications of individual organizations, little is
known about how the inter-organizational environ-
mental management efforts on such activities as green
procurement (Carter & Carter, 1998), take-back activi-
ties (Atasu, Van Wassenhove & Sarvary, 2009; Lai &
Wong, 2012; Lai, Wong & Cheng, 2012; Lun, Lai,
Wong, Ng & Cheng, 2011) and remanufacturing
(Webster & Mitra, 2007) are coordinated. This omis-
sion in the literature is undesirable for the theoretical
and managerial development of environmental man-
agement, as managers lack the knowledge on how to
develop environmental management capabilities by
leveraging their supply chain environmental manage-
ment efforts. In particular, Vachon and Klassen
(2007) found that the investments made in pollution
control and prevention technologies tend to increase
as a focal firm integrates more with its suppliers and
customers. It is therefore important to reveal the
dimensions of EII that contribute to environmental
management capabilities and the performance impacts
of environmental management capabilities.
HYPOTHESES
Effects of EII on Environmental Management
Capabilities
Internal EII facilitates communication and informa-
tion sharing and promotes cross-functional coopera-
122 Volume 49, Number 2
tion (Mukhopadhyay, Kekre & Kalathur, 1995). It
facilitates new eco-product development by integrating
cross-functional efforts in sourcing, product design,
production, disassembly and so forth, to ensure the
product has little adverse environmental impact
throughout its life cycle. Internal EII lowers the silos
across functions and enables access of information
and knowledge that is critical to developing new
products and environmental management practices
that are difficult to complete under the effort of a
function in isolation. According to DC theory, such
EII fuels innovative activities by providing additional
information and knowledge to generate new ideas
and facilitating firms in their development and adop-
tion of new environmental management practices and
technologies. While facilitating internal process coor-
dination, internal EII improves flexibility of business
functions in responding to changing market demands,
expectations and regulatory requirements as it facilities
cross-functional adjustments and changes in practice.
H1: Internal EII is positively associated with envi-
ronmental management capabilities in terms
of (a) corporate environmental innovativeness
and (b) corporate environmental adaptability.
By facilitating information sharing with suppliers,
supplier EII encourages supplier participation in the
stages of product design, production and asset recov-
ery, with the objective of minimizing product life-cycle
costs to the environment (Hart, 1995; Wong, Lai, Lun
& Cheng, 2012). Supplier EII provides firms with infor-
mation and knowledge related to alternative choices of
materials, designs for material waste reduction and
reuse of scrap and retrieved components to reduce
material consumption and disposal to landfill (Carter
& Carter, 1998; Pagell, Wu & Wasserman, 2010). In
addition, supplier EII supports the sharing of environ-
mental performance, such as the amount of emission,
waste water drainage and solid waste disposal in opera-
tions, enabling firms to identify areas of improvement
in a supply chain. For example, in addition to innovat-
ing technologies that increase fuel efficiency when
vehicles are in use, Honda Motor Co. tracks emission
and environmental impacts of its suppliers’ production
of components and vehicle assembly to monitor and
control their environmental impacts throughout its
supply chain (Anonymous, 2012; Bardelline, 2011).
Another example is the motorcycle manufacturing
industry in Japan that establishes a voluntary recycling
system by utilizing their existing information systems
networks to facilitate such processes as product collec-
tion, disassembly, component inspection, recycling
and so forth among partners in a motorcycle supply
chain (Staff, 2004). Based on DC theory, supplier EII
provides sources of information to facilitate innovation
of new eco-products and environmental management
 Environmental Information Integration
practices. While promoting a collaborative and mutual
understanding on partners’ responsibilities and func-
tions in environmental management, supplier EII helps
develop flexibility in environmental management to
adapt and respond to changes in environmental
requirements and demands.
H2: Supplier EII is positively associated with
environmental management capabilities in
terms of (a) corporate environmental innova-
tiveness and (b) corporate environmental
adaptability.
As customer EII supports information sharing and
communication with customers, it provides market
intelligence and new information that enable firms to
identify such opportunities as new eco-product devel-
opment and environmental technology adoption.
Customer EII provides information that improves the
understanding of market needs, which in turn reduces
uncertainties in eco-product design, asset recovery
planning and reverse logistics scheduling. Such infor-
mation integration enhances organizational adaptabil-
ity to market needs by providing updated market
information (Ettle & Reza, 1992), thus improving
firms’ responsiveness to new market demands and
unanticipated changes in environmental requirements
(Flynn et al., 2010). It also helps preempt the loss of
investment in new product and process development
due to failure in meeting market needs. Equally, cus-
tomer EII assists customers in identifying environmen-
tally friendly alternatives, while providing them with
information to engage and participate in environmen-
tal protection activities. For example, DuPont, a major
supplier of chemicals and materials, integrates with its
customers and is involved in the early stages of product
development, allowing it to deliver solutions that help
its customers satisfy market needs (Guide & Li, 2010).
Such involvement also enables DuPont to learn about
new market needs, which are beneficial to its new
product development and innovation. This mutual
exchange of information about market requirements
and environmental best practices helps develop a col-
laborative nature of value creation with customers,
helping firms to identify market opportunities while
meeting the market needs to sustain businesses.
H3: Customer EII is positively associated with
environmental management capabilities in
terms of (a) corporate environmental innova-
tiveness and (b) corporate environmental
adaptability.
Environmental Management Capabilities and
Performance
Environmental management capabilities often corre-
spond to the concept of the triple bottom line, which
April 2013
is concerned with the balance of the well-being of
people and the planet, as well as viable organizational
economic benefits (Kleindorfer et al., 2005). In the
context of supply chain management, environmental
management capabilities require the efforts and ability
of firms to manage the uncertainties in a supply
chain, ranging from sourcing decision to demand
forecast, which have different financial and environ-
mental impacts (Carter & Rogers, 2008). Corporate
environmental innovativeness pertains to organiza-
tional and supply chain-wide efforts to initiate,
develop, introduce, diffuse and implement novel envi-
ronmental management practices (Roy, Sivakumar &
Wilkinson, 2004). Such advanced development of
environmental management capabilities often goes
beyond environmental requirements and standards.
Corporate environmental innovativeness enables firms
to preempt and anticipate changes in environmental
requirements and market expectations, avoiding a lack
of compliance with environmental regulation that
may lead to consequential legal fines and customer
boycott. The case of Procter & Gamble’s invention of
Tide concentrated detergent is an exemplar of a suc-
cessful innovation in environmental product develop-
ment. Such effort of Procter & Gamble enabled it to
cope with Walmart’s new packaging reduction request
in 2008 (GreenerDesign Staff, 2008), which otherwise
may have stopped Tide from shelving its products in
one of the biggest retail outlets in North America.
Corporate environmental innovativeness protects
investments in product and process development,
while reducing environmental impacts by eliminating
the use of hazardous materials, the consumption of
new resources and raw materials, and the disposal to
landfills by taking into account of the environmental
impacts of products throughout their life cycle.
H4: Corporate environmental innovativeness is
positively associated with (a) financial perfor-
mance and (b) environmental performance.
The degree of flexibility and responsiveness in
responding to new market demands constitute firms’
environmental adaptability. It maintains the agility in
firms’ environmental practices to adjust to new envi-
ronmental requirements and to take advantage of
increasing knowledge about environmental protection.
Having such capabilities enable firms to reduce waste
of efforts and lead time in responding to new envi-
ronmental requirements and commercializing new
products, contributing to the triple bottom line by
improving return on investment, as well as reducing
waste and disposal (Carter & Dresner, 2001). As such,
corporate environmental adaptability is valuable for
firms in adapting to market changes and gaining
investment payback in a short period of time. Such
123
 Journal of Supply Chain Management
capabilities enable firms to modify their existing
products and processes, and launch new products
with short lead times, bringing such benefits as being
the first-comers with increased market shares and
returns on investment.
H5: Corporate environmental adaptability is posi-
tively associated with (a) financial perfor-
mance and (b) environmental performance.
METHODOLOGY
Sample and Data Collection
We selected a random sample of 1,000 firms partici-
pating in voluntary environmental management
schemes of environmental excellence and green label
schemes in Hong Kong to serve as our empirical set-
ting for the following reasons. First, firms’ participa-
tion in these environmental management schemes
reflects their commitment to environmental protec-
tion. These firms conduct and report their environ-
mental management practices and results voluntarily.
As one of our research questions is to examine EII as
antecedents of environmental management capabili-
ties in terms of corporate environmental innovative-
ness and adaptability, and their performance impact,
this sample is appropriate for providing the relevant
information due to the initiatives taken in environ-
mental protection. Second, these groups consist of
firms in different industries, which offer different
products and services, enabling us to improve the gen-
eralizability of the findings of firms operating in dif-
ferent supply chains with different EII arrangements.
Third, our sample aims at achieving environmental
protection goals through resource conservation, waste
and carbon footprint reduction, improvement in air
quality, and product development with environmental
attributes. Such coverage of environmental initiatives
provides information about organizational efforts in
these aspects by collaborating with their supply chain
partners.
Following the procedures recommended by Gerbing
and Anderson (1988), we first conducted interviews
with 10 senior managers in the areas of environmen-
tal, supply chain and information systems manage-
ment in industries including manufacturing,
construction and retailing to understand industry
practices. These interviews revealed that environmen-
tal management is prevalent and vital to businesses,
and the participation of supply chain partners is
important to its success. Many firms are working
closely with their supply chain partners to reduce their
environmental impact, while encouraging innovation
and change to embed environmental management
into business activities. Second, we developed a pool
of measurement items from the literature and
124 Volume 49, Number 2
amended the items systematically to reflect organiza-
tional efforts in environmental protection. Third, we
pre-tested the survey items with five managers and five
academics in the field to assess the clarity, relevancy
and comprehensiveness of the measurement scales.
We refined the measurement based on their feedback
and conducted a pilot test with 40 managers. We then
conducted an exploratory factor analysis to purify the
scales, and on the basis of the pilot test results, we
refined and finalized the questionnaire.
A survey package containing the questionnaire, a
self-addressed prepaid reply envelop and a cover letter
explaining the purpose of this research (assuring the
answers of respondents are reported in aggregate and
their company details are kept confidential) was
mailed to each of them (Dillman, 2000). We made
follow-up telephone calls 5 days after the first mailing
to seek acknowledgment of the receipt of the survey
package and to stress the importance of their response
in this research. Two weeks after the follow-up calls,
we sent another survey package to the nonrespon-
dents. We then sent another survey package to the
nonrespondents 3 weeks after the second mailing.
Our data collection was concluded 3 weeks after the
final mailing with a total of 238 returned question-
naires. We eliminated eight returns due to significant
missing data. The resulting response rate is 23 percent,
which is comparable to other survey-based environ-
mental management studies (Ramus & Steger, 2000).
Measurement Development
We operationalized the constructs using the reflec-
tive measures based on the guidelines recommended
by Jarvis, MacKenzie and Podsakoff (2003). We
adopted measurements that have been employed pre-
viously to improve the reliability and validity of the
measures. A five-point Likert scale was used for all the
measures, where a higher value indicates a higher
level of integration and environmental management
capabilities, or better performance.
Environmental Information Integration. We
adopted the measure of internal information integra-
tion from previous studies (Gold, Malhotra & Segars,
2001; Rai, Patnayakuni & Seth, 2006). The scale cap-
tures the extent to which firms encourage and provide
infrastructure to facilitate employees’ access to envi-
ronmental management information. Similarly, we
adopted the measurement for customer and supplier
information integration from the literature (Frohlich
& Westbrook, 2001; Rai et al., 2006). These two con-
structs reflect the relationships between a focal firm
and its customers and suppliers in the collaboration
and sharing of environmental information. They
measure the extent to which a focal firm has devel-
oped mechanisms and infrastructures to exchange
environmental information. The respondents were
 Environmental Information Integration

asked to indicate the frequency of occurrence of each
measurement item on a five-point Likert scale with
1 = almost never to 5 = almost always.
Environmental Management Capabilities. For the
environmental management capabilities measures, we
developed the measure of corporate environmental
innovativeness based on Wang and Ahmed (2004).
The scale assesses the innovativeness of firms in devel-
oping environmentally responsible products and ser-
vices and adopting new environmental management
practices to sustain the growth of businesses with low
levels of environmental impact. On the other hand,
we developed the measure of corporate environmen-
tal adaptability based on Gold et al. (2001). The mea-
sure was rephrased systematically to reflect the extent
to which firms have flexibility to respond to new and
changing market demands and environmental
requirements. The respondents were asked to indicate
the frequency of occurrence of corporate environmen-
tal innovativeness and adaptability on a five-point
Likert scale with 1 = almost never to 5 = almost
always.
Performance. For the performance variables, we
adapted the measure of financial and environmental
performance from the study by Montabon
et al.(2007). The measure assesses financial perfor-
mance with regard to returns on investment, market
share growth, profit growth and profit growth rate gen-
erated from environmentally friendly products relative
to their industry’s average on a five-point Likert scale
with 1 = significantly below average to 5 = signifi-
cantly above average. The environmental performance
measure evaluates the extent to which firms reduce
their environmental impact through a reduction in
hazardous materials, resource consumption, green-
house gas emission, waste disposal and waste water
drainage.
Control Variables. We included firm size (i.e.
number of employees) and primary product/service
type (i.e., multiple industry categories) as control vari-
ables. Larger firms tend to be more resourceful in sup-
porting the development of information integration
(Zhu, 2004), while product type affects the coordina-
tion amongst supply chain partners (Fisher, 1997)
due to differences in market demands and environ-
mental requirements. The model analyses with the
control variables are discussed in Appendix 1.
ANALYSES AND RESULTS
Sample Profiles
To ensure the qualification of the respondents, we
collected information about their knowledge and
involvement in environmental management in their
organizations, and the number of years they have
worked in their organizations. The informants indi-
cated average to high (3.8 of a five-point scale) level
of involvement and knowledge about environmental
management, and 56.5 percent of informants have
worked in their organizations for more than 5 years.
Their positions include CEO, COO, Director and
Manager of Environmental Department. Table 2 sum-
marizes the respondents’ profiles in terms of industry,
firm size and annual sales.
Bias Issues
We checked potential problems of common method
variance in three steps. First, we followed the marker

TABLE 2
Profiles of Sample

Sample Characteristics Percentage Sample Characteristics Percentage

Industries Annual Sales (USD)
Banking/insurance/financial service 5.2 Below $10M 16.5
Construction 9.1 $10M–$20M 6.1
Engineering and technical service 3.0 $20M–$50M 41.8
Hotel/hostel 4.3 $50M–$100M 11.7
Retail and trading 4.3 $100 and above 23.9
Transport and logistics 6.5
Government department 2.2 Number of employees
Electricity and gas utilities 4.3 1–10 3
Hospital/health services 4.8 11–50 9.6
Manufacturing 10.4 51–100 13
Property management 25.7 101–500 29.2
School/Education services 2.2 500 and above 45.2
Others 17.8

April 2013 125

 Journal of Supply Chain Management

TABLE 3
Descriptive Statistics and Correlations

Mean SD 1 2 3 4 5 6 7
1. Internal EII 3.75 0.82 .
2. Customer EII 3.37 0.92 0.785**
3. Supplier EII 3.21 0.93 0.708** 0.831**
4. Corporate environmental innovativeness 3.19 0.88 0.686** 0.742** 0.658**
5. Corporate environmental adaptability 3.52 0.86 0.698** 0.645** 0.556** 0.744**
6. Financial performance 3.44 0.62 0.375** 0.408** 0.405** 0.457** 0.479**
7. Environmental performance 3.52 0.65 0.628** 0.624** 0.583** 0.646** 0.653** 0.478**
8. Year of employment (marker variable) 3.03 1.52 0.197* 0.131 0.161 0.107 0.180** 0.013 0.167*

*p < 0.05, **p < 0.01 (two-tailed).

method suggested by Lindell and Whitney (2001) to
check for common method variance with the marker
variable, which is theoretically unrelated to at least
one construct. We used years of employment of
respondents by the sampled firms as the marker vari-
able. As shown in Table 3, we found that the years of
employment was not significantly related to four vari-
ables in the research model, indicating that common
method variance was not a concern in our study. Sec-
ond, we conducted Harmon’s one-factor test (Podsak-
off, MacKenzie, Lee & Podsakoff, 2003), where we
examined the chi-square difference between a single
latent factor and the hypothesized model with seven
constructs and found a significant difference between
the chi-square values (Δv2 = 1745.54, Δdf = 21,
p < 0.05). These results indicate that common method
variance was not an issue in our study. Third, we col-
lected the financial data of 27 respondent firms,
which made their financial data publicly available, to
test the relationships between corporate environmen-
tal innovativeness and adaptability and net profit
using regression analysis. The results suggest that both
corporate environmental innovativeness and adapt-
ability are positively related to financial performance
(p < 0.05). These results provide further evidence that
common method variance should not be an issue in
this study.
We also took two steps to check whether nonre-
sponse bias posed any problems in this study. First,
we randomly selected 30 nonresponding firms,
phoned them and asked a random selection of items
in the questionnaire covering all the variables. We
found no significant differences (p > 0.05) in the
answers between the responding and nonresponding
firms. Second, we followed Armstrong and Overton
(1977) and verified that the response of the early and
late respondents to the questionnaire items did not
differ significantly at the p < 0.05 level, suggesting that
nonresponse bias was not an issue in the collected
data.
Measurement Validation
We performed confirmatory factor analysis (CFA)
using AMOS 18.0 to assess the psychometric properties
of the factor structures. Following Gerbing and Ander-
son (1988), we used the maximum likelihood estima-
tion with covariance to test measurement scales. We
assessed their reliability and validity with an over-
all confirmatory measurement model, where each
measurement item loads onto its respective latent con-
structs. All factor loadings were statistically significant
(p < 0.01). The composite reliability of each construct
exceeded the recommended 0.70 threshold, ranging
from 0.87 to 0.94. As shown in Table 4, the average
variance extracted (AVE) from each construct was
greater than the threshold of 0.5 (Fornell & Larcker,
1981), indicating strong convergent validity. Table 4
summarizes the item loading, and the Cronbach’s
alpha, composite reliability and AVE of each construct.
We assessed discriminant validity by conducting chi-
square difference tests between nested CFA models for
all pairs of constructs. We compared the chi-square
between the unconstrained model (i.e., the model
with two constructs that vary freely) and the con-
strained model (i.e., the model with the correlations
between two constructs constrained to 1) (Bagozzi,
Yi & Phillips, 1991). Table 5 summarizes the chi-
square different test results and the chi-square of
the constrained and unconstrained models. The sig-
nificant chi-square differences between all pairs of
constructs suggest discriminant validity of our mea-
surement.
Hypothesis Testing
We established a structural equation model with
maximum likelihood estimation to test the hypotheses;

126 Volume 49, Number 2


Measurement Scale and Standardized Loadings
Constructs
Internal EII (Gold et al., 2001; Rai
et al., 2006)
(Cronbach’s alpha = 0.93; Composite
reliability = 0.94; AVE = 0.73)
Customer EII (Frohlich & Westbrook,
2001; Rai et al., 2006)
(Cronbach’s alpha = 0.91; Composite
reliability = 0.87; AVE = 0.64)
Supplier EII (Frohlich & Westbrook,
2001; Rai et al., 2006)
(Cronbach’s alpha = 0.93; Composite
reliability = 0.93; AVE = 0.77)
Corporate environmental
innovativeness (Wang & Ahmed,
2004)
(Cronbach’s alpha = 0.90; Composite
reliability = 0.90; AVE = 0.70)
Corporate environmental adaptability
(Gold et al., 2001)
Environmental Information Integration
TABLE 4
Standardized
Loadings
Measurement Items (p < 0.01)
IEII1. Employees are informed of environmental management 0.80
issues quickly.
IEII2. Employees can obtain the needed 0.86
information on environmental management easily.
IEII3. Environmental management information is 0.88
accessible by all work parties inside our company.
IEII4. Tools (e.g., IT system) are used to 0.88
communicate environmental management
information across internal business functions.
IEII5. Employees are encouraged to search for 0.86
new information related to environmental
management.
IEII6. Employees are required to keep a record of 0.83
environmental management information.
CEII1. Tools (e.g., IT system) are used to obtain environmental 0.75
management information from customers.
CEII2. Environmental management information is 0.63
shared with customers.
CEII3. Environmental management information 0.87
related to product/service promotion is
communicated to customers via electronic means
(e.g., IT systems).
CEII4. Environmental management information 0.92
from customers is used for improving our
products/services.
SEII1. Tools (e.g., IT system) are used to communicate 0.86
environmental management information with our suppliers.
SEII2. Environmental management information is 0.92
shared with our suppliers.
SEII3. Environmental management information 0.84
from suppliers is used for improving our
products/services.
SEII4. Environmental management information 0.89
from suppliers is required to be updated
regularly.
EPI1. We have developed new environmental management 0.90
products/services in the past two years.
EPI2. We adopt new environmental management 0.76
practices when conventional methods fail.
EPI3. We take risky growth opportunities for 0.84
environmentally friendly product/service
development.
EPI4. We seek novel solutions to environmental 0.83
problems.
EPA1. Our company is responsive to new market demands for 0.84
environmentally friendly products/service.
0.99
(continued)
April 2013 127
 Journal of Supply Chain Management

TABLE 4 (Continued)

Standardized
Loadings
Constructs Measurement Items (p < 0.01)
(Cronbach’s alpha = 0.92; Composite EPA2. Our company adapts quickly to
reliability = 0.91; AVE = 0.78) unanticipated changes in environmental
requirements.
EPA3. Our company reacts quickly to new 0.80
environmental information about the industry.
Financial performance (Montabon BP1. Increase in return on investment. 0.82
et al., 2007) BP2. Increase in market share. 0.80
(Cronbach’s alpha = 0.89; Composite BP3. Increase in total profit from products/ 0.89
reliability = 0.92; AVE = 0.65) services.
BP4. Increase in profit from environmentally 0.71
friendly products/services.
BP5. Greater investment return on new product 0.69
development.
Environmental performance (Montabon EP1. Reduction in hazardous/harmful materials used in product 0.78
et al., 2007) manufacturing/service delivery.
(Cronbach’s alpha = 0.92; Composite EP2. Reduction in the use of electricity. 0.69
reliability = 0.92; AVE = 0.59) EP3. Reduction in total fuel consumption used 0.81
during transportation of products/services.
EP4. Reduction in total papers used. 0.66
EP5. Reduction in total packaging materials used. 0.74
EP6. Reduction in air emissions. 0.82
EP7. Reduction in solid waste disposal. 0.81
EP8. Reduction in waste water drainage. 0.83

the study constructs were estimated simultaneously.
Figure 1 summarizes the results of the structural
model. Consistent with prior environmental manage-
ment and supply chain integration studies (e.g., Flynn
et al., 2010; Jarvis et al., 2003; Klassen & Whybark,
1999), the fits of the structural models are good with
CFI, TLI and IFI equal to or above the recommended
threshold of 0.90 and RMSEA <0.08 (v2 = 1110.19,
df = 574, v2/df = 2.01, p < 0.01; GFI = 0.92; IFI = 0.92;
TLI = 0.90; CFI = 0.92; RMSEA = 0.06). The Bollen-
Stine bootstrap test was performed with 2000 boot-
strap replicates. The Bollen-Stine bootstrap p-value of
the overall model fit is 0.12 (>0.05), indicating that
there is insufficient evidence to reject the hypothesized
model and given its fit with the data (Bollen & Stine,
1992).
The R2 of corporate environmental innovativeness
and adaptability is 70 percent and 57 percent, respec-
tively, indicating significant data variation explained
by EII. Similarly, environmental management capabil-
ities explain 24 percent of financial performance and
55 percent of environmental performance. The results
indicate that supplier EII does not affect environmen-
tal innovativeness (b = 0.13, p > 0.05) and adaptabil-
ity (b = 0.27, p > 0.05), failing to lend support for
H2a and H2b. On the contrary, customer EII has a
significant and positive relationship with both envi-
ronmental innovativeness (b = 0.83, p < 0.001) and
adaptability (b = 0.64, p < 0.01), lending support for
H3a and H3b. Internal EII has a significant and posi-
tive relationship with environmental adaptability
(b = 0.38, p < 0.001), but not environmental innova-
tiveness (b = 0.14, p > 0.05), providing support for
H1b but not H1a. These results suggest that firms with
a higher level of customer EII achieve a higher level of
environmental management capabilities, in innovating
environmental management practices and products
and adapting to new market needs.
The two key functions of environmental manage-
ment capabilities, corporate environmental innova-
tiveness and adaptability, have a significant and
positive impact on both business and environmental
performance. As shown in Figure 1, corporate envi-
ronmental innovativeness is positively and signifi-
cantly associated with financial performance
(b = 0.26, p < 0.05) and environmental performance
(b = 0.44, p < 0.001), lending support for H4a and
H4b. Corporate environmental adaptability is also

128 Volume 49, Number 2

 Environmental Information Integration

TABLE 5
Discriminant Validity Analysis

Unconstrained Constrained
Construct Pairs v2 df v2 df Δv2
Internal EII
Supplier EII 119.75 34 142.80 35 23.05*
Customer EII 110.61 34 133.23 35 22.62*
Corporate environmental innovativeness 108.41 34 118.54 35 10.13*
Corporate environmental adaptability 83.48 26 97.57 27 14.09*
Financial performance 135.64 43 226.71 44 91.07*
Environmental performance 190.36 76 229.32 77 38.96*
Supplier EII
Customer EII 64.38 19 76.47 20 12.09*
Corporate environmental innovativeness 57.86 19 80.29 20 22.43*
Corporate environmental adaptability 44.18 13 80.09 14 35.91*
Financial performance 101.70 26 204.34 27 102.64*
Environmental performance 164.64 53 213.27 54 48.63*
Customer EII
Corporate environmental innovativeness 28.58 19 51.09 20 22.51*
Corporate environmental adaptability 21.67 13 31.11 14 9.44*
Financial performance 84.49 26 145.72 27 61.23*
Environmental performance 130.88 53 153.64 54 22.76*
Corporate environmental innovativeness
Corporate environmental adaptability 37.69 13 48.31 14 10.62*
Financial performance 101.71 26 188.93 27 87.22*
Environmental performance 138.47 53 174.38 54 35.91*

Corporate environmental adaptability

Financial performance 72.57 19 142.03 20 69.46*
Environmental performance 122.76 43 151.57 44 28.81*
Financial performance
Environmental performance 228.48 64 271.09 65 42.61*
*p < 0.001.

positively and significantly related to financial perfor-
mance (b = 0.25, p < 0.05) and environmental perfor-
mance (b = 0.32, p < 0.01). As suggested by these
results, firms with a greater ability in developing new
environmentally friendly products, environmental
practices and novel solutions to environmental prob-
lems achieve better business and environmental
performance.
DISCUSSION
Major Findings and Theoretical Implications
First, customer EII engenders environmental man-
agement capabilities of firms in terms of corporate
environmental innovativeness and adaptability. The
findings reveal that customer EII contributes to the
environmental management capabilities of firms, in
particular through effective information sharing and
communication with customers. Such EII improves
the ability of firms to innovate new environmen-
tal management products and practices to tackle
environmental problems, while being adaptable and
responsive to new environmental demands and
requirements. This finding is consistent with the
theoretical conjectures of DC theory, where customer
EII provides new information and knowledge that
integrate with the existing environmental management
practices, enabling firms to manage the changing
environmental requirements. This provides insight
into the information integration and environmental
management literature, by suggesting the usefulness
of integrating with customers and probing into cus-
tomer information to improve the environmental
management capabilities of firms (Elliot, 2011). In
addition, from the perspective of supply chain man-
agement, the importance of customer EII suggests that

April 2013 129

 Journal of Supply Chain Management
Environmental
informaƟon integraƟon
Management CapabiliƟes
.14
Internal EII
.38***
.73***
.13
.83*** Supplier EII
.27
Corporate environmental
.89*** .83***
.64**
Customer EII
*** p < 0.001; ** p < 0.01, * p < 0.05
Significant path
Insignificant path
environmental management capabilities stem from
market intelligence that is collected through sharing
information and communication with customers
(Tate, Ellram & Kirchoff, 2010). This is in line with
the literature that emphasizes the importance of
acquiring from customers the latest market informa-
tion and requirements (Frohlich & Westbrook, 2001).
The study results show that customer EII plays the
strongest role among the three types of EII. The
importance of customer EII can be attributed to rising
market expectations and demands on environmental
protection.
Second, internal EII significantly contributes to cor-
porate environmental adaptability, but not corporate
environmental innovativeness. The study findings
reveal that internal EII is critical for firms to respond
quickly to new environmental requirements, but is
not significantly related to the ability of firms to inno-
vate new environmental products and practices. That
is, according to DC theory, internal EII provides an
information sharing infrastructure, which improves
cooperation across functions and the capabilities of
firms to adapt to changes in organizational processes.
There was no evidence that such EII contributed to
the ability of firms to innovate new environmental
products and practices. This finding advances the
knowledge of DC theory concerning information inte-
gration. Although internal EII can improve the effec-
tiveness of business functions in responding to new
challenges, new market intelligence, such as customer
expectations and market trends, collected from cus-
tomer EII, is important in supporting corporate envi-
ronmental innovativeness. In other words, internal EII
is insufficient to support innovation for environmen-
tal management. This is consistent with prior DC
130
FIGURE 1
Empirical Results
Environmental
Performance
Corporate Financial
.26*
environmental performance
.44***
2
R = .24
innovaƟveness R2 = .70
.58*** Environmental
.25*
.32** performance
2
R = .55
adaptability 2
R = .57
Control variables:
• Firm size Corporate environmental innovaƟveness (.12**)
• Firm size Corporate environmental adaptability (.08)
• Firm size Financial performance (.02)
• Firm size Environmental performance (.05)
studies that indicate the importance of having infor-
mation acquisition routines to enable knowledge crea-
tion and innovation processes (Helfat, 1997).
Third, supplier EII does not contribute to corporate
environmental innovativeness and adaptability.
Although DC theory advocates that EII can be benefi-
cial to rendering organizational performance advan-
tage by providing information sharing capacity, the
theory is less clear about what specific type of EII may
lead to environmental management capabilities in the
context of supply chain management. The study find-
ings suggest that supplier EII is not significantly asso-
ciated with environmental innovativeness and
adaptability. Although supplier EII enables efficient
coordination with suppliers, it fails to support innova-
tion and agile adaptations on environmental pro-
cesses. Further interviews with some of the
respondents suggest that although their suppliers are
important in providing information related to sustain-
able sources of materials and components, their sup-
pliers rarely play a strategic role in new product and
process development for environmental protection.
This lack of strategic positioning of supplier EII hin-
ders its contribution to corporate environmental inno-
vativeness and adaptability. Firms rely on themselves
to design their new environmental management prac-
tices, to ensure the new environmental management
practices are compatible with their existing practices
and processes, and to avoid disruption to their opera-
tions. This results in a lack of recognition of the bene-
fits of establishing information sharing infrastructure
with suppliers. On the contrary, customer EII has sig-
nificant influence on environmental management
capabilities, as firms are often market oriented,
addressing market needs by acquiring information
Volume 49, Number 2
 Environmental Information Integration
from customers. This study advances the knowledge
of environmental management by revealing the
dimensions of EII that are useful in facilitating supply
chain collective efforts in environmental management
for firms to achieve corporate environmental innova-
tiveness and adaptability.
Fourth, corporate environmental innovativeness and
adaptability are positively associated with business
and environmental performance. Consistent with DC
theory, the study findings suggest that innovativeness
and adaptability of firms in environmental manage-
ment are critical organizational capabilities that are
valuable to business and environmental performance.
While environmental management capabilities
improves firms’ ability to develop environmental
products and practices that may preempt new and
future environmental regulations and requirements
(Handfield, Walton, Seegers & Melnyk, 1997; Hand-
field et al., 2005), it is also important for firms to
sustain businesses by capturing additional market
share, increasing returns on investment, and so forth.
This study provides empirical evidence concerning
environmental sustainability, which shows that envi-
ronmental management capabilities, in terms of cor-
porate environmental innovativeness and adaptability,
are important to business and environmental perfor-
mance improvement.
Managerial Implications
This paper offers several implications for managers.
First, our findings show that customer EII is critical
for environmental management capabilities. Firms are
recommended to strengthen their customer EII to
achieve a seamless information flow to develop their
environmental management capabilities. Even when
facing limited resources, it is important that managers
allocate resources to develop customer EII that pro-
vides an information sharing mechanism to facilitate
firms in acquiring the latest market information for
product or process improvement.
Second, managers should bear in mind that internal
EII is important for firms in improving corporate envi-
ronmental adaptability to the changing environmental
demands and requirements. Firms facing uncertainties
in coping with environmental management require-
ments in their marketplace should proactively develop
internal and customer EII to increase flexibility, so as
to respond quickly to new environmental standards
and customer expectations.
Third, managers should note the importance of
environmental management capabilities in achieving
both business and environmental performance. The
capabilities of firms in innovating environmentally
responsible practices and products and adapting to
changing environmental requirements not only play a
role in the reduction in resource consumption, waste
April 2013
and disposal, but also enable firms to improve their
returns on investment, profit and market share.
Limitations and Directions for Future Research
This study has some limitations, and they are dis-
cussed below with avenues for future research. First,
this study attempts to advance understanding of the
roles of EII in contributing to environmental manage-
ment capabilities in the context of supply chain man-
agement. Although internal, supplier and customer EII
are key factors that affect environmental operations in
a supply chain, future studies may consider other
supply chain factors, such as information technology
adoption, and supply chain relational aspects and
structures, which may affect the ability of firms to
achieve environmental management capabilities. Also,
the finding of the insignificant impact of supplier EII
implies that there might be mediating variables, such
as strategic partnerships with suppliers for environ-
mental management, that enable firms to reap the
benefits of supplier EII. Future studies may consider
investigating the mediating factors that may facilitate
or impede the relationship between supplier EII and
environmental management capabilities. For example,
supplier EII may contribute indirectly to corporate
environmental innovativeness through internal EII.
Second, two dimensions of environmental manage-
ment capabilities are considered in this study based
on DC theory and the corporate social responsibility
literature. Other organizational capabilities, such as
stakeholder integration and continuous operations
improvement, may be included in the study to
explore environmental management capabilities from
another theoretical perspective. Third, the insignificant
impact of internal EII on corporate environmental
innovativeness may imply the existence of precursors.
An extension of this study may include such internal
EII precursors as supplier EII, customer EII and con-
sultation with stakeholders (e.g., communities and
NGOs). Fourth, although we have carefully assessed
the possibility of common method bias by using mul-
tiple methods, future studies may collect more objec-
tive data to further minimize the potential for this
bias. Lastly, the cross-sectional design of this study
did not provide empirical data to examine causal rela-
tionships. Also, DC theory implies that capabilities
change. The measurement of environmental manage-
ment capabilities in terms of corporate environmental
innovativeness and adaptability provides an indirect
measure that could not assess the change in the
underlying capabilities over time. A future longitudi-
nal study would be desirable to complement this
research study by revealing the evolution of the asso-
ciations between the dimensions of EII, corporate
environmental innovativeness and adaptability, and
business and environmental performance.
131
 Journal of Supply Chain Management
CONCLUSION
Recognizing the importance of being environmen-
tally sustainable, this study has offered insight to firms
to achieve environmental management capabilities in
terms of corporate environmental innovativeness and
adaptability. While prior studies are confined to spe-
cific environmental management practices, for exam-
ple, eco-product development and sustainable supply
management (Paulraj, 2011; Russo & Harrison,
2005), and their impact on organizational perfor-
mance, this study considers corporate environmental
innovativeness and adaptability as organizational
capabilities of environmental management to achieve
financial and environmental performance. Based on
DC theory, the findings extend prior research by sug-
gesting that corporate environmental innovativeness
and adaptability are valuable to firms in achieving
their environmental objectives, as well as improving
financial performance.
Furthermore, this study revealed that EII facilitates
information sharing across internal and external busi-
ness processes, enabling collaboration across functions
and supply chain partners. Acknowledging the differ-
ences of different dimensions of integration in supply
chain management (Wong et al., 2011c), this study
reveals the value of internal, customer and supplier
EII in contributing to environmental management
capabilities. Although supplier EII is found to be
insufficient in enabling corporate environmental
innovativeness and adaptability, the finding suggests
the importance of customer EII in providing valuable
information related to environmental expectations and
requirements. The study also suggests that internal EII
is useful for firms to orchestrate business processes and
respond to new environmental requirements. Firms
should therefore make deliberate efforts to establish
internal EII and collaborate with customers to share
environmental information, to facilitate environmental
sustainability in their operations.
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Christina W. Y. Wong (Ph.D.) is an associate pro-
fessor in the Business Division of the Institute of Tex-
tiles and Clothing at the Hong Kong Polytechnic
University in Hong Kong, China. Her research focuses
on the management and performance of supply chain
integration, information integration and environmen-
tal practices. Dr. Wong’s research has appeared in a
variety of peer-reviewed journals including, most
recently, Journal of Operations Management, Journal of
Management Information Systems, Omega, Information &
Management, and International Journal of Production
Economics.
135
 Journal of Supply Chain Management

APPENDIX 1
CONTROL VARIABLES TESTING
Firm size (i.e., number of employees) and primary product/service types of firms (i.e. industry categories) are
included as control variables. Steps were taken to test the impact of these control variables on the endogenous vari-
ables, namely corporate environmental innovativeness, corporate environmental adaptability, financial performance
and environmental performance. First, we form dichotomous variables for primary product/service types, yielding
12 variables, where 1 represents the specific primary product/service (e.g., retail and trading) and 0 represents the
other primary product/service. Second, due to the large number of control variables, we are unable to model them
all at once to be tested with structural equation modeling. We therefore tested the impact of the control variables
on the endogenous variables by regression analysis. The results summarized in Table A1 suggest that, except for firm
size, the primary product/service types have no impact on the endogenous variables. We therefore include only firm
size in the structural model for hypotheses testing.

TABLE A1

Control Variable Regression Analysis Results

Corporate Environmental Corporate Environmental Financial Environmental

Control Variables Innovativeness Adaptability Performance Performance
Firm size 0.298*** 0.291*** 0.296*** 0.272***
Banking/insurance/ 0.032 0.040 0.041 0.023
financial service
Construction 0.071 0.014 0.084 0.107
Engineering and 0.051 0.004 0.094 0.071
technical service
Hotel/hostel 0.051 0.095 0.064 0.092
Retail and trading 0.063 0.095 0.117 0.137
Transport and logistics 0.127 0.075 0.077 0.159
Government 0.063 0.027 0.050 0.031
department
Electricity and gas 0.114 0.057 0.024 0.032
utilities
Hospital/health 0.035 0.150 0.120 0.027
services
Manufacturing 0.047 0.003 0.072 0.026
Property management 0.024 0.050 0.163 0.208
School/education 0.111 0.059 0.024 0.087
services

***p < 0.001.

136 Volume 49, Number 2