Determinants of green procurement implementation and its impact on Organizational

performance in the plastic industry

BY

ZAKARIA OMARA ABUHADI

AND

ABDIRAHMAN MOHAMED OSMAN

A PROPOSAL PROJECT SUBMITTED IN PARTIAL FULFILLMENTS OF THE REQUIREMENTS FOR THE

DEGREE IN BACHELOR OF PROCUREMENT AND LOGISTICS

FACULTY OF MANAGEMENT SCIENCES

SIMAD UNIVERSITY

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 Chapter One

INTRODUCTION

This chapter relates to the introduction of the study. It consists of the background of the study,
problem statement, objectives of the study, research questions, significance of the study, scope of
the study, operational definitions of key terms.

1.1 BACKGROUND OF STUDY

The world population has a responsibility to develop and implement procurement policies that
promote a sustainable approach to making goods and services (Nasiche and Ngugi, 2014).
Increasingly, governments, enterprises and development agencies have adopted environmental
criteria within their supply chain system in order to promote corporate objectives on sustainable
development (Nijaki and Worrel, 2012). Various researchers have examined the positive linkage
between effect of green procurement and its contribution towards reduction of sources of waste
and promotion of recycling among other benefits (Guenther, 2010).

In the EU, the potential of green public procurement was first underlined in the European
Commission‟s announcement from 2003 concerning integrated product policies, encouraging
member states to adopt national action plans for such procurements before the end of 2006. The
new European legal framework for public procurement contains instructions on how public
procurers can include environmental considerations in their processes and procedures.
Additionally, the EU‟s strategy for sustainable development has a political objective to increase
the EU‟s green public procurement average by 2010 to member state best practice in 2006
Fangmiao Hou (2007).

Stock (1992) thought that green purchasing can improve a firm's economic position, by reducing
disposal and liability costs, conserving resources, and improving an organization's public image.
Min and Galle (2005) find that the two most highly rated obstacles to effective Implementing
green purchasing was cost and revenue. In the process of implementing green procurement, the
enterprise is bound to increase investment, training staff costs and the communication costs with
suppliers ,etc, which hence causes the loss of other investment opportunities (Liu Bin,2009) Zhu
Qinghua et al.(2004) found the suppliers stress had greater impact on the implementation of
green supply chain through research. Fangmiao Hou (2007) pointed out that the close

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cooperation of suppliers and buyers would promote the successful completion of green
purchasing activities.

In Japan, Green Procurement Network (GPN) and its leading roles in February 1996, by an
initiative of the Environmental Agency of Japan, was established to promote green purchasing
among businesses, governmental organizations and individual consumers in Japan (Claver-
Cortes, 2007). The mission of the GPN is to spread the concept of green purchasing, and to
provide guidelines and information necessary for practicing green purchasing. Since then the
GPN has taken a leading role to promote green purchasing in Japan (Li & Geiser, 2009).

In Somalia , green procurement is still a relatively new concept, playing only a small role in
public procurement decisions (Lozano & Valles, 2013). For larger development projects all state
entities are required to do environmental impact assessments by national law. Beyond this,
several provinces and municipalities are pursuing the development and/or implementation of a
green procurement policy (Preuss, 2013). According to Odhiambo, (2008) many organizations in
Somalia are working to improve the environmental performance of their operations and products
and green procurement has been a logical extension of this work. Similar to public buyers,
private sector organizations have in the last two decades adopted green procurement practices for
specific products (e.g., recycledcontent office paper, renewable energy, paints, cleaners, etc.),
with a few others have developed green procurement policies that cover a wider range of
products, services and environmental issues (Odhiambo, (2008). As the business benefits of
these efforts become better known, green procurement is continuing to grow in the private sector
(Lucas, 2007). Somalia government has not been left behind in looking at the issues concerning
green procurement practices.

1.2 Statement of the Problem

Faced with global resource depletion and increasing environmental degradation, businesses can
no longer ignore environmental concerns. Globalization, public pressure, laws, and
environmental standards are all pushing businesses to improve their environmental policies.
Firms must connect their economic performance and the environment to maintain sustainable
growth and development. Environmental performance is primarily concerned with improving the
environment by reducing harmful substances and other emissions. On the other side, economic
performance focuses on waste cost reduction in the industrial industry. According to Shultz and

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Holbrook (1999), it is critical to balance economic and environmental performance, particularly
for businesses facing competitive, regulatory, and community challenges.Green procurement
directly contributes to supply chain performance and efficiency. Environmentally friendly
products can be recycled easier, endure longer, and generate less waste. This allows businesses
to save money on garbage disposal while also reducing pollution and relieving landfill pressures
(IISD, 2013). Green products use less energy, water, fuel, and other natural resources to make
and operate, resulting in cost savings. Because it is part of a re-use system and does not contain
dangerous ingredients, an eco-friendly product will often require less energy and represent lower
waste costs (UNDP, 2008). This current study will fill this knowledge gap by Determinants of
green procurement implementation and its impact on Organizational performance in the plastic
industry.

1.3 PURPOSE OF THE STUDY

The objectives of this study is to investigate Determinants of green procurement implementation

and its impact on Organizational performance in the plastic industry.

1.4 RESEARCH OBJECTIVES

1.4.1 General objective

To describe Determinants of green procurement implementation and its impact on

Organizational performance in the plastic industry.

1.4.2 Specific objectives

The study was guided by the following specific objectives:

 To establish the effect of green purchasing on Organizational performance in the plastic

industry.
 To determine the effect of green manufacturing Organizational performance in the plastic
industry.
 To examine the effect of reverse logistics Organizational performance in the plastic
industry.

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1.5 Research questions

 What are the effect of green purchasing on Organizational performance in the plastic
industry?
 What determine the effect of green manufacturing Organizational performance in the
plastic industry?
 How does examine the effect of reverse logistics Organizational performance in the
plastic industry?
1.6 Scope of the study

This study will be conducted between 2022 and 2023 and also n conducts Mogadishu. This study
will focus on the Determinants of green procurement implementation and its impact on
Organizational performance in the plastic industry.

1.7 Significance of study

This research is significant because its primary goal is to add to the existing body of knowledge by
filling a gap in the empirical literature on this research issue. The study will be useful to both public
and private organizations, and it will be used as a guide to help procurement professionals, various
institutions, policymakers, and others in making sound procurement decisions, as well as a source of
reference for future researchers collecting empirical data on Determinants of green procurement
implementation and its impact on Organizational performance in the Plastic industry.
1.8 OPERATIONAL DEFINITIONS OF THE VARIABLES
Green purchasing is defined as an environmentally-conscious purchasing practice that reduces
sources of waste and promotes recycling and reclamation of purchased materials without adversely
affecting performance requirements of such materials.

Green Manufacturing(GM), it is the system that integrates product and product design issues with
issues of manufacturing, planning and control in such a manner to identify, quantify, access and
manage the flow of environmental waste with the goal of reducing and ultimately minimizing
environmental impact while also trying to maximize resource efficiency (Melnyk, Smith, Frost and
Sullivan 2009).
Reverse logistic: is defined as process of planning, implementing and controlling the efficient of a
finished and used to recover its value or send for proper disposal by manufacturer (Kuan et al. 2016).

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Environmental performance is evaluated according to factors such as consumption of resources,
compliance level with regulations, processes, products and services of the company towards
environment (Sharma and Vredenburg, 1998).
Economic/Financial Performance: is related to the cost reduction or minimization of
environmental activities related to material procurement, market share growth, consumption of
energy, treatment of waste, discharge of waste, environmental accidents and profit increase (Chien
and Shih, 2007; Zhu et al., 2008; Duarte et al., 2011; Green et al., 2012; Diabat et al., 2013; Lin,
2013; Cosimato and Troisi, 2015; Diab et al., 2015; Zhang and Yang, 2016; Vijayvargy et al., 2016;
Zhu et al., 2017; Sharma et al., 2017; Paulraj et al., 2017; Thanki and Thakkar, 2018)

CONCEPTUAL FRAMEWOR

Green Procurement implementation Organizational performance

IV DV

Green purchasing Environmental performance

Green manufacturing
Financial performance

Reverse logistic

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 Chapter two

LITERATURE REVIEW

2.1 INTRODUCTION

This chapter presents different literatures related to the Determinants of green procurement
implementation and its impact on Organizational performance in the plastic industry. , it will
specifically concentrate of the green purchasing, green manufacturing and Reverse logistics on
organizational performance. These literatures have been retrieved from various books, articles
and studies relating to the same research top under investigation. The independent variable like
Green purchasing, Green manufacturing and Reverse logistics positively influences on
Organizational performance measured environmental performance and economic /financial
performance .

2.2 Definition and concept of the Green Procurement implementation.

Green procurement is the process of selecting goods and services with the least amount of
environmental impact. Organizations are expected to assess a product's environmental impact
throughout its lifecycle. Green procurement (GP) is a technique for minimizing waste and
pollution when making purchasing decisions by considering environmental consequences such as
price, performance, and other factors (Holbrook, 2004). Consumers may use their purchasing
power to help the environment by selecting environmentally friendly products (Commission for
Environmental Cooperation, 2009).

Amemba et al. (2013) Green procurement is defined as environmental procurement that includes
activities such as material reduction, reuse, and recycling. Organizations can undertake supplier
environmental audits and assessments to monitor supplier compliance with environmental norms
and criteria, according to Toke et al., (2012), in order to achieve green procurement. It involves a
collaborative strategy in which businesses and their suppliers work together to develop cleaner
technology and processes.

Green procurement is a solution for environmentally conscious and cost-conscious companies.

It's a way of buying a variety of items and services with the least amount of environmental

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damage. It demands a firm or organization to examine a product's environmental impact at all
stages of its lifespan. This includes the costs of obtaining raw materials, as well as the costs of
manufacturing, transporting, storing, processing, utilizing, and discarding the product. Green
products are those that decrease waste, enhance energy efficiency, limit harmful by-products, use
recycled materials, or are reusable.(Salam 2008)

2.2.1 Green purchasing

Green purchasing (GP). GP refers to eco-conscious practices that minimize sources of waste and
boost recycling and renewal of purchased items and products without adversely affecting the
performance requirements of such items (Younis et al., 2016). Green purchasing takes into
account environmental considerations in purchasing policies, programs and procedures
(Balasubramanian and Shukla, 2017).

Thus, green purchasing ensures that purchased commodities meet environmental standards such
as reusability, recyclability, and the presence of innocuous components (Hsu et al., 2013). The
focus of green purchasing is on engaging with suppliers (González-Benito et al., 2016). This
entails evaluating suppliers' EP using environmental standards to assure environmental quality in
their operational systems (Awad et al., 2016) such as environmental cooperation with suppliers
and environmental audits for suppliers' internal management (Shi et al., 2012). Firms will be able
to submit design specifications to suppliers that include environmental standards for green
acquired items if they include the green concept into purchasing (Hu and Hsu, 2010).

2.2.2Green Manufacturing

Green manufacturing is defined as manufacturing processes that use inputs with low
environmental effect, are highly efficient, and produce little or no waste or pollution. Lowering
raw material costs, increasing production efficiency, lowering environmental and occupational
safety costs, and improving corporate image are all benefits of green manufacturing.

Green Manufacturing is when a company employs environmentally friendly inputs in its

manufacturing process in order to reduce its environmental impact. Green manufacturing gives
the company a competitive edge by lowering raw material prices, increasing production
efficiency, and improving the company's image (Ninlaw, Seskan, Tossapol, and Pilada, 2010).
Green technology and Eco-innovation are two examples of green industrial processes. It is the

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driving force behind the transition to a green and low-carbon economy. Furthermore, many
organizations see the use of green manufacturing technologies as a cornerstone of their economic
growth programs (Defra, 2008).

2.2.3 Reverse Logistics

Reverse logistics is more than reusing containers and recycling packaging materials. Reverse
logistics also involves recycling of waste products, monitoring of logistics returns and proper
disposal of waste products redesigning packaging to use less material, or reducing the energy and
pollution from transportation are important activities, but they might be secondary to the real
importance of overall reverse logistics. Reverse logistics also includes processing returned
merchandise due to damage, seasonal inventory, restock, salvage, recalls and hazardous material
programs, obsolete equipment disposition and asset recovery. Recognizing the strategic value of
reverse logistics operations is one of the more interesting and significant topics in supply chain
management. (Stock and colleagues, 2006).

These reverse logistics operations serve a wide range of activities, including "green logistics,"
which is defined as "efforts to lessen the supply chain's environmental effect," as well as product
returns, repairs, and refurbishment (Srivastava, 2013).

Nonrenewable natural resource consumption, air pollutants, traffic congestion and road usage,
noise pollution, and hazardous and non-hazardous waste disposal are all major environmental
challenges in logistics (Russo & Cardinali, 2012).

Odhiambo (2008) highlighted reverse logistics in his study, suggesting that it significantly
improves organizational performance by turning supply chain management into a success story.
Reverse logistics can help a company remanufacture or repair products, materials, and parts.

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2.3 Organizational performance

Organizational performance is a measure for evaluating the company’s success level to achieve
its objectives (Daft, 1995). Companies hire GSCM activities that incorporate organizational and
environmental performances (Walton, et al., 1998; Zhu and Cote, 2004; Zhu et al., 2008; Green
et al., 2012). GSCM includes a significant organizational performance indicator, so as to
diminish environmental risks.

Organizational performance, which refers to a company's ability to effectively implement

strategies in order to accomplish institutional goals , determines its potential success. The ability
of a company's management to put a strategy into action has a substantial impact on the
company's performance. According to (Rahman, Karim, and Arif 2021), the core of leadership is
a conditional relationship between a manager and his or her followers. Given how difficult it is
to achieve organizational goals, it is vital that leaders' techniques be adaptive enough to allow for
change. Employees, who are a vital part of the organization and comprise the team that works to
achieve the organization's objectives, have an impact on its success . Environmental and
economic performance have been separated into two categories by several researchers.(Rahman,
Karim, and Arif 2021)

2.3.1 Environmental Performance

In the current era of environmental awareness, it is necessary for organizations to seek ways to
reduce their environmental impacts through integrating the firm’s EP with strategies, activities,
quality, staff relationships and corporate image to face environmental regulations and issues
(Kung et al., 2012). EP is defined as “the outcome of a firm’s strategic activities that manage (or
not) its impact on the natural environment” (Walls et al., 2012).

Environmental performance is measured by elements such as resource consumption, regulatory

compliance, firm operations, products, and services, and environmental impact (Sharma and
Vredenburg, 1998).

Huang, Wu and Rahman (2012) demonstrated that environmental performance is positively

associated with economic performance in RL with evidence from the Taiwanese high-tech
sector. Their study showed environmental performance can be related to increase of profitability
in the short-term, whereas can turn into competitive advantage in the long-term.

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2.3.2 Economic/Financial Performance

Economic performance is influenced by GSCM in terms of cost savings, improved product

quality, increased product price, increased sales and profit margin, new market opportunities,
employee motivation and satisfaction, improvements in corporate image, and access to financial
opportunities (Shrivastava, 1995; Zhu and Sarkis, 2004; Lin et al., 2014; Malviya and Kant,
2015; Wu et al., 2015; Chavez et al., 2016; Laari et al., 2016).

Companies implementing environmental management operations via more advanced

management and control systems for environmental risks, as well as the development of capacity
and competence for continuous improvement, regard economic performance as a critical aspect
(Epstein and Wisner, 2001; Hervani et al., 2005; Zhu et al., 2008).

Economic performance is a vital factor for companies undertaking environmental management

operations via more advanced management and control systems for environmental risks, as well
as the development of capacity and competence for continual improvement (Epstein and Wisner,
2001; Hervani et al., 2005; Zhu et al., 2008).

Cost savings, improved product quality, increased product price, increased sales and profit
margin, new market opportunities, employee motivation and satisfaction, improvements in
corporate image, and access to financial opportunities are all influenced by GSCM (Shrivastava,
1995; Zhu and Sarkis, 2004; Lin et al., 2014; Malviya and Kant, 2015; Wu et al., 2015; Chavez
et al., 2016; Laari et al., 2016).

2.4 EMPIRICAL REVIEW

2.4.1 Implementation of Green Procurement

Green procurement steams from pollution prevention principles and activities. Also known as
green or environmental purchasing, green procurement compares price, technology, quality and
the environmental impact of the product, service or contract. Green procurement policies are
applicable to all organizations, regardless of size. Green procurement programs may be as simple
as purchasing renewable energy or recycled office paper or more involved such as setting
environmental requirements for suppliers and contractors. Green products or services utilize
fewer resources, are designed to last longer and minimize their impact on the environment from

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cradle to grave. In addition, green products and services have less of an impact on human health
and may have higher safety standards. Whilst some green products or services may have a
greater upfront expense, they save money over the life of the product or service (Miles, 2010).

Lozano (2013) suggested that before a green procurement program can be implemented, current
purchasing practices and policies must be reviewed and assessed. A life cycle assessment of the
environmental impacts of products or services is required and a set of environmental criteria
against which purchase and contract decisions are made has to be developed. The outcome is a
regularly reviewed green purchasing policy that is integrated into other organizational plans,
programs, and policies. A green purchasing policy includes date stamped priorities and targets,
the assignment of responsibilities and accountability and a communication and promotion plan.
Green procurement policies and programs can reduce expenditure and waste; increase resource
efficiency; and influence production, markets, prices, available services and organizational
behavior. They can also assist countries in meeting multilateral requirements such as the Kyoto
Protocol and Rotterdam Convention. International Standards Organization and other bodies have
established guidelines for green procurement programs. Obstacles to implementing a green
procurement program include: lack of readily available environmental friendly products;
expensive or zero environmental alternatives; inaccurate studies; lack of organizational support;
and inaccurate or unsupported environmental claims by manufacturers and suppliers. Legislation,
organizational policies, directives, environmental management systems or multi-lateral
agreements often require organizations to implement a green procurement program (Jae Mather,
2010). As reported by Morrison (Morrison, 1991) in one of his studies, 70% of the organizations
have specific allocations made to tackle this issue. But still many organizations consider this
from a corporate reputation and that the competitors are doing it which forces them to do it as
well. It is nothing more than a marketing gimmick or advertisement agenda for the firm.
Governments of different nations are encouraging both private and public firms to become green
in which ever ways possible and have been creating policies and providing with incentives for
initiatives taken by these firms. Environmental issues have been the core of sustainable
procurement. The ozone depletion, reduction of carbon emission, bio-degradable materials, eco-
friendly products, alternate energy sources to effectively use the natural sources have all been
important factors. Socio-economic development of the local, like the social welfare of people,
health care, employment opportunities also form the core of sustainable procurement.

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CONCEPTUAL FRAMEWOR

Green Procurement implementation Organizational performance

IV DV

Green purchasing Environmental performance

Green manufacturing
Financial performance

Reverse logistic

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