Journal of Purchasing & Supply Management 19 (2013) 134143

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Journal of Purchasing & Supply Management

journal homepage: www.elsevier.com/locate/pursup

Participation of suppliers in greening supply chains: An empirical

analysis of German automotive suppliers
Marjolein C.J. Caniels a,n, Matthias H. Gehrsitz b, Janjaap Semeijn a
a
Faculty of Management Sciences, Open University of the Netherlands, P.O. box 2960, NL-6401 DL Heerlen, The Netherlands
b
Faculty of Economics and Business Administration, Universiteit Maastricht, P.O. Box 616 6200 MD Maastricht, The Netherlands

a r t i c l e i n f o a b s t r a c t

Article history: The public increasingly holds companies accountable for environmental misbehavior in their supply
Received 4 June 2012 chains. To offset that risk corporations start initiatives to green their supply chains. Yet suppliers often
Received in revised form fail to properly participate in these initiatives. This paper presents a conceptual framework to explain
25 October 2012
supplier participation in green initiatives, by investigating customer requirements, supplier readiness,
Accepted 23 February 2013
relational norms and customer investment as possible drivers. The framework and hypotheses were
Available online 15 March 2013
tested using survey data of 54 German automotive suppliers. Partial least squares methodology was
Keywords: deployed for hypothesis testing. The study found supplier readiness and customer requirements to be
Environmental management signicant drivers in supplier participation. Relational norms and customer investment did not per se
Supplierbuyer relations
yield signicant importance for explaining supplier participation, but when taking into account rm
Supply chain management
size, the data suggests that cooperative relation norms and customer investment work as an additional
Automotive suppliers
driver in green supply chain management for larger suppliers. This research is one of the few studies
that explore drivers for supply chain participation at the suppliers level.
& 2013 Elsevier Ltd. All rights reserved.

1. Introduction
In todays world much concern and attention is directed
towards climate change and other environmental issues, such as
loss of biological diversity. This concern is not only voiced by
activists or academics, but by the general public as well, which
has led to the calling for companies to act sustainable.
Regulatory bodies, non-governmental organizations (NGOs)
and end consumers put corporations under intense scrutiny and
hold them accountable for both environmental and social mis-
behavior. Prominent examples include Sony (unsafe levels of
cadmium in Playstation consoles), Home Depot (sourced logs
form protected forests) and Mattel (lead detected in toys)
(Parmigiani et al., 2011; Lee, 2008). In these cases the misconduct
has not occurred at the focal company but at the suppliers site. As
an increasing share of a rms total expenditure accounts for
purchased inputs (Lee and Klassen, 2008), this means that the
bulk of environmental risk shifts to suppliers outside the direct
control of the focal company. A high level of environmental
performance by a focal rm may be broken down by a poor level
of environmental management by its suppliers (Faruk et al., 2002;
n
Corresponding author. Tel.: 31 45 576 2724.
E-mail addresses: Marjolein.Caniels@ou.nl (M.C.J. Caniels),
Matthias.gehrsitz@dbschenker.com (M.H. Gehrsitz), jjs@ou.nl (J. Semeijn).
Handeld et al. 2005). Yet, the nal seller of the product is
confronted with the reputational risk and the resulting negative
economic consequences.
To off-set that risk all members in the supply chain, especially
suppliers, need to align competitive priorities to comply with
environmental and social standards. Corporations need to develop
strategies and approaches that foster willingness in suppliers to
take part in green supply chain initiatives. To date, this issue has
received little attention by scholars, with the exception of con-
tributions such as Thun and Muller (2010) and Azevedo et al.
(2011). In fact, green supply chain management and related
research disciplines, such as marketing and operations manage-
ment largely focus on the focal rms internal operations
(e.g. Kang et al., 2010), purchasing approaches (e.g. Pagell et al.,
2009) or green market practices (e.g. Cronin et al., 2011). Despite
the great importance of ecological aspects for industrial compa-
nies, there is still a lack of empirical work that addresses the
internal organizational processes of suppliers, especially in
the eld of green supply chain management (Prahinski &
Kocabasoglu, 2006). We argue that the focus of green supply
chain management research should include studies into supplier
motivations, and not solely lie on the internal organization of the
focal rm itself.
Building on the work of Lee (2008) we investigate drivers for
the participation of suppliers and develop a conceptual frame-
work around the question as to what factors facilitate complying

1478-4092/$ - see front matter & 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.pursup.2013.02.005
 M.C.J. Caniels et al. / Journal of Purchasing & Supply Management 19 (2013) 134143
with green supply chain initiatives for suppliers. To test the
framework, a survey among German automobile suppliers has been
conducted. Narrowing the scope to one industrial sector makes the
results more precise and meaningful as different sectors with
diverging supply chain congurations (efcient vs. responsive)
might need to deploy different approaches (Parmigiani et al.,
2011). The survey addressing suppliers also sheds an original light
on green supply chain initiatives, as most research is conducted
from the Original Equipment Manufacturers (OEM) perspective.
The paper is organized as follows. In the next section the
research framework and proposed hypothesizes are described,
based on a synthesis of extant literature in the eld of sustainable
supply chain management. Then we present the research design
and methodology. Subsequently, we show the results, followed by
a discussion and managerial implications. We conclude with
limitations and a conclusion.
2. Literature review
2.1. Sustainable supply chain management
Traditionally, cost, quality, exibility and delivery are the four
areas in which a rms supply chain and operations compete
(Ward et al., 1996, 1998; Vachon and Klassen, 2006). With the
emergence of green or sustainable supply chain management
(GSCM, SSCM) in the 1990s companies face the challenge on how
to best incorporate sustainability in their supply chains.
Researchers have examined several stand-alone topics in SCM
related to sustainability e.g. green logistics strategies (Murphy
et al., 1996) or green purchasing (Min and Galle, 1997). Note that,
being green reects only one particular part of sustainability. The
UN World Commission on Environment and Development United
Nations (1987) and the United Nations 2005 World Summit refer
to sustainable development as development that meets the needs
of the present generation without compromising the ability of
future generations to meet their own needs. This implies creating
and maintaining a balance between economic, environmental and
social/equity aspects. In general this conceptualization is referred
to as the People, Planet, Prot aspects of sustainability or the
triple bottom line (Romijn and Caniels, 2011). In the supply chain
management literature this interpretation is adopted by Carter
and Rogers (2008). Hence, Carter and Rogers (2008, p. 368), dene
SSCM as: the strategic, transparent integration and achievement
of an organizations social, environmental, and economic goals in
the systematic coordination of key inter-organizational business
processes for improving the long-term economic performance of
the individual company and its supply chains. However, in this
study we follow the commonly adopted notion that green supply
chain management (GSCM) is an organizational philosophy
which helps organizations and their partners to achieve corporate
prot and market-share objectives by reducing environmental
risk and impacts while improving ecological efciency (Azevedo
et al., 2011, p. 850; Rao and Holt, 2005; Zhu et al., 2008; de
Figueiredo and Mayerle, 2008).
Note that in this study we will use the terms green and
sustainability interchangeably. With both terms we refer to
ecological sustainability, i.e. the planet aspect of the triple bottom
line notion.
2.2. GSCM and its impact on competitiveness
Extant literature is not clear on whether green practices are
economically protable or not. Naffziger and Montagno (2003)
state that company performance is affected negatively. Will
(2008) assumes that the adoption of green practices increases
135
costs and slows down business processes. On the other hand,
already early work by Porter (1991) and Porter and Van der Linde
(1995) challenged this view and proposed that sustainable
measures, such as for example pollution prevention, can enhance
economic protability.
Hart (1995) suggests that organizations can obtain long term
competitive advantage by considering the impact of their actions
on the environment and society. However, despite increasing
evidence of a social and environmental performance-prot con-
nection Margolis and Walh (2003), several authors have sug-
gested that a link between green practices and economic
performance may be more complicated than a simple direct
correlation (Zhu and Sarkis, 2004; Etzion, 2007). In the words of
Hoffman and Bazerman (2005): The key to resolving this debate is
the recognition that (social and environmental) behaviors are some-
times prot-compatible and sometimes not. When parties acknowl-
edge this simple fact, it becomes easier to convince corporations to
adopt environmental and social initiatives that are mutually bene-
cial. This thinking moves us beyond the simple question: does it
pay to be green? (Hoffman and Bazerman, 2005, p. 16).
Considering the loss of reputation that OEMs have suffered due
to recent environmental scandals at suppliers, the impact of green
practices on protability should not only be ascertained by its
effect on traditional SCM areas, such as cost, quality, exibility
and delivery. Areas such as reputation and commonly held
opinion about a brand are typically affected by a rms imple-
mentation of green practices (Yoon et al., 2006). Firms that adopt
a clear approach to green practices in combination with appro-
priate internal supplier management run a reduced or minimal
risk to loss of their reputation, which in turn leads to a compe-
titive advantage (Leppelt et al., 2011). Investors believe that
green companies are less likely to cause environmental mishap
or be sued for one, and hence are less risky objects for invest-
ments, with a lower cost of capital than non-green companies
(Feldman and Soyka, 1997). As a result green practices have not
only an economic effect on internal operations but also aid in
nding external nancial means. In this respect, superior SSCM
capability can be a basis for differentiation and in that way
represent an advantage over rivals (Ketchen and Hult, 2007).
Studies have indicated that small and medium sized supplier
rms have limited resources available to implement effective
environmental capabilities (Lee and Klassen, 2008). In addition
they often lack know how and expertise needed to act on new
information regarding environmental impact of certain raw
materials or chemicals used in the production process (Lee and
Klassen, 2008). Furthermore, whereas the OEM needs to fulll
governmental environmental requirements, often smaller sup-
plier rms are not forced by legislation to integrate environmen-
tal concerns into their management practices. Yet, there is a large
potential for OEMs to realize economic gains from adopting green
practices and involve their suppliers in these. Knowledge as to
how OEMs can design and structure processes to assure sustain-
able supplier operations is limited (Carter and Rogers, 2008).
Hence, it is worthwhile to investigate the drivers for the partici-
pation of suppliers in green supply chain initiatives.
2.3. A sustainable automotive supply chain
Automobiles are very complex products that require a high
degree of outsourcing to suppliers for their assembly (Simpson
and Power, 2005). Purchased materials, components and other
external input account for a high share of total expenditures (Lee
and Klassen, 2008). Currently the share is between 60 and 80% of
the total manufacturing cost, rendering the automotive sector one
of the most supplier-dependent industries (van Weele, 2010;
Scannell et al., 2000). It becomes increasingly evident that the
136 M.C.J. Caniels et al. / Journal of Purchasing & Supply Management 19 (2013) 134143
image and public perception of an automotive OEM with regard
to corporate social responsibility (CSR) is not only dependent on
its own CSR performance, but also on the CSR performance of its
supply chain members, and in particular its suppliers (Awaysheh
and Klassen, 2010), since the OEM is held responsible for the
sustainability of the entire chain.
For decades car manufacturers have realized the importance
and the competitive advantage of environmental protection,
especially in the German automotive industry which has always
been long term oriented. Attention for environmental aspects
begins by introducing new technologies in the manufacturing
process, also in close cooperation with suppliers. OEMs develop
their own standards that usually go beyond the requirements of
ISO, particularly when it comes to environmental issues. These
green standards are dened just by the car manufacturer, but
sometimes they are developed together with key suppliers.
Exactly how suppliers are involved into green supply chain
management activities is yet to be explored by research. Existing
research on sustainable supply chains in the automobile industry
focused on operational issues such as individual manufacturing
processes (Koplin et al., 2007). Geffen and Rothenberg (2000)
found the involvement of suppliers in the development of
environmental friendly automotive paint to be crucial. More
recently Klassen and Vachon (2003) investigated the role of
suppliers in plant level environmental enhancements in the
Canadian printing industry and reported the importance of
collaboration for supplier investments in environmental technol-
ogies. Still, comprehensive supply chain management research is
yet to be achieved on how rms can involve suppliers in green
management practices and engage them into cooperation in
green activities, which is a key leverage point with regard to
varying CSR pressure (Carter and Rogers, 2008).
2.4. Customer requirements and inuence
Extant research has indicated that a party with dominant
market power (the OEM) can exercise control over the actions
of channel members (e.g., Haugland and Reve, 1994; Ness and
Haugland, 2005; Wang et al., 2008). Likewise, the buyer, as a
major nancial stakeholder, has the power to demand improve-
ments in his suppliers environmental management practice and
mandate the introduction of environmentally sound technologies
(Simpson et al., 2007). Typically, large buyers pass on ecological
pressure along the supply chain to their suppliers, thus increasing
the exposure of upstream supply chain members to environmen-
tal regulations (Noci and Vergandi, 1999). One approach to
accomplish better environmental supplier performance is via
diffusion of standardized environmental management systems
such as ISO14001 (Corbett and Krisch, 2001). Focal companies
might establish this as an order qualier, which has to be met
before a supplier is considered for an order at all (Zhu and Sarkis,
2001; Min and Galle, 2001). At the end of the day it is the channel
leader (in this case the OEM) that has the power to inuence
the environmental policies and strategies of its suppliers and
dictate supplier participation in green supply chain activities.
We hypothesize that issuing GSCM requirements by upstream
supply chain members is a powerful criterion for suppliers to
initiate programs of environmental performance improvement:
H1. Buyer GSCM requirements have a positive inuence on the
willingness of suppliers to participate in GSCM initiatives.
2.5. Supplier readiness
Attempts to set up green supply chain initiatives with suppli-
ers are bound to fail if suppliers are not able to make the required
changes. Environmental awareness of managers can increase the
participation in green supply chain initiatives (Azevedo et al., 2011).
Environmental champions can persuade and enable an organization
to turn green issues into successful corporate programs and
innovations (Anderson and Bateman, 2000). Furthermore, research
by Lippman (1999) has shown that top-level leadership and
commitment is the foundation of environmental action and initia-
tives. When managers identify and evaluate environmental issues,
they will have to respond by allocating internal resources such as
manpower and nancial assets, and actively participate in greening
the chain.
In addition, several organizational capabilities can facilitate
adoption of environmental practices. It has been shown that inter-
organizational learning, communication and cross-functional teams
enhance awareness of the possible benets of green activities (Hart,
1995; Lippman 1999). A culture sensitive to environmental issues
and a high degree of information sharing further enhance the
environmental capabilities (Hitchens et al., 2003). Hence, we pro-
pose that the compliance capabilities of suppliers taking part in
GSCM initiatives is subject to internal characteristics, including
manager environmental awareness, inter-organizational communi-
cation and the availability of human, technical and nancial
resources, i.e. GSCM readiness.
H2. GSCM readiness of suppliers is positively correlated to
participation in green supply chain initiatives.
2.6. Supplier relationship
The type of interactions with suppliers has been studied
extensively in the literature on buyer supplier relationships
(Dwyer et al., 1987; Rinehart et al., 2004), vertical or supply chain
coordination (Chen et al., 2001) and supply chain integration
(Frohlich and Westbrook, 2001). Broadly speaking, two different
strategies of interaction can be identied (Vachon and Klassen,
2006; Poppo and Zenger, 2002): (1) arms length, transactional
based interactions and (2) cooperative, relational interactions.
The arms length approach is characterized by maintaining
short-term relationships with suppliers (Ellram, 1991). It is
concerned with minimizing dependence on suppliers and max-
imizing bargaining power of the buyer. Price competition among
the suppliers is encouraged (Dyer et al., 1998). Usually strict
supplier criteria are set up and compliance is tightly evaluated.
Supplied goods are closely inspected to see whether they are in
accordance with specications. From the buyers perspective,
supplier evaluation and monitoring skills are important to ensure
continuous improvement in suppliers processes to maintain
quality while reducing costs (Parmigiani et al., 2011).
From the perspective of greening the supply chain and parti-
cipation in green initiatives in the chain an arms length interac-
tion style will enforce GSCM compliance from suppliers (Lee and
Klassen, 2008). OEMs can coerce their suppliers into adopting
GSCM activities even though these might not be perceived as
directly benecial by suppliers. The drawback of coercion is that
the demanded level of green practices is perceived as the ceiling
rather than the desired oor for sustainable conduct (Michael,
2006). Suppliers are likely to comply, but only to fulll minimum
requirements. For the OEM more value can be derived from
suppliers that willingly participate and acknowledge the value
of GSCM activities for their own benet. Hence, simple coercion
may not be the most desirable strategy to achieve this goal.
Alternatively, OEMs may convince their suppliers of the benets
to be gained by implementing GSCM practices.
Furthermore, Rao (2002) argued that when the buyer does
not get involved in the suppliers activities and keeps them at
arms length, the level of frustration and failure rate for new
 M.C.J. Caniels et al. / Journal of Purchasing & Supply Management 19 (2013) 134143
technologies is much higher. Similarly, a lack of supplier involve-
ment could represent a clear obstacle to the implementation of
new processes and technologies involved in implementing initia-
tives for green supply chain management. We hypothesize:
H3a. An arms length approach to relationship management is
negatively correlated to participation in green supply chain
initiatives.
A cooperative approach focuses on developing long term
relationships with suppliers, and is characterized by buyer-
supplier interaction geared towards collaboration and jointly
improving performance (Lee and Klassen, 2008). Among others
the interactions include joint planning sessions and sharing of
data and know-how (Vachon and Klassen, 2006). With this
cooperative interaction style buyers build trust with suppliers.
In return, suppliers make relationship specic investments, which
in turn enhance the productivity of the entire supply chain.
In contrast to an arms length approach, a cooperative
approach puts less emphasis on the short term deliverables, but
tries to foster processes which lead to long term operation
enhancements. It includes designing contractual and informa-
tional mechanisms to align incentives, share information, increase
commitment and generate common goals between buyers and
suppliers (Williamson, 2008; Corbett and Klassen, 2006). Liker
and Wu (2000) found that the collaborative relationship manage-
ment of Japanese automakers lead to superior performance in
traditional supply chain areas (cost, quality exibility and deliv-
ery). Hence, it is likely that a collaborative style is also favorable
for inducing the implementation of green practices. Furthermore,
Vachon and Klassen (2008) found that synergetic improvements
in environmental quality can be achieved only if OEMs embark on
environmental collaboration with suppliers, in which joint envir-
onmental planning takes place and environmental knowledge and
know-how are shared.
A cooperative interaction style aimed at long term relationship
building can only be adopted when the supplier base is small
(Trent and Monczka, 1999). Vachon and Klassen (2006) found that
a smaller, more focused supply base favored greater collaborative
environmental practices. A similar argument holds for suppliers.
Suppliers that serve multiple buyers will not make buyer specic
investments in cooperation or implementation of specic GSCM
activities unless they have a long term relationship with this
buyer and therefore implicit guarantees on future business. The
reduced exposure to competitive stress that goes together with a
cooperative interaction style of the buyer can justify preferential
treatment by the supplier (Mahapatra et al., 2012). Hence:
H3b. A cooperative approach to relationship management is
positively correlated to participation in green supply chain
initiatives.
A cooperative interaction style emphasizes building long term
relationships and promotes an honest distribution of risks and
rewards (Lavie, 2006). It supports the design and implementation
of inter-organizational routines that are aimed at supplier devel-
opment. Supplier development is broadly dened as any activity
that a buyer undertakes to improve a suppliers performance
and/or capabilities (Handeld et al., 2002; Krausse et al., 2000). It
encompasses nancial and technical assistance as well as training
of staff and incentives or awards (Narasimhan et al., 2008).
Several studies nd a positive correlation between cooperative
relationship management and supplier development investments
(e.g. Narasimhan et al., 2008; Mahapatra et al., 2012). Supplier
development investments encompass routines that enhance
the capabilities of suppliers to engage in GSCM activities. It is
likely that when a buyer has established relational norms of
137
cooperation, a supplier will be inclined to invest in development
initiatives such as GSCM activities. This reasoning is in line with
the Resource Dependence Theory. Not only on the suppliers side
are investments stimulated. Liker and Choi (2004) show that
Toyota and Honda build strong cooperative relationships with a
few suppliers before investing in the development of supplier
capabilities. In other words, buyers invest in supplier develop-
ment as well after a cooperative interaction style has successfully
built up a collaborative attitude from both sides. We hypothesize:
H4. A cooperative approach to relationship management is posi-
tively correlated to supplier development investments.
2.7. Supplier development investment
Superior supplier performance is a necessary asset for supply
chain excellence in the extended enterprise. It is well recognized
that targeted supplier development initiatives can lead to super-
ior supplier performance (Handeld et al., 2002). When green
criteria are met with reluctance or incapability by suppliers, large
organizations can provide incentives and support to suppliers in
order to make compliance economically viable (Raynard and
Forstater, 2002). Accordingly, many large companies have started
to encourage suppliers to be green by funding them (Rao, 2002;
Zsidisin and Ellram, 2003). Simpson and Power (2005) argue that
the supplier development investments made by automobile
OEMs to foster lean practices also enhances green performance.
Therefore:
H5. Supplier development investment is positively correlated to
participation in green supply chain initiatives.
Fig. 1 presents the conceptual model of our study.
3. Methodology
The questionnaire contained 24 items and draws on previous
research. Supplier readiness (SR), customer requirements (CR)
and supplier participation (SP) are based on Lee (2008). Vachon
et al. (2009) was used for relational norms arms length (RNA) and
relational norms cooperation (RNC), while part of the survey by
Narasimhan et al. (2008) was adopted for customer investment
(CI). All constructs were assessed via a ve-point Likert scales
(1strongly disagree; 5strongly agree). For better understand-
ing of suppliers motivation three additional questions were
added as suggested by Baden et al. (2009) (see Table 1). Prior to
administering the survey, the questionnaire was reviewed by two
supply chain experts for clarity and conceptual conclusiveness.
After incorporating comments on the questionnaire from two
experts in the eld of sustainability and supply chain manage-
ment, the questionnaire was mailed to automotive suppliers
Relational
Norms Customer
Cooperation H3b Requirements
H4 H1
Customer Supplier
H5
Investment Participation
H2
Supplier
Relational H3a Readiness
Norms
Arms Length
Fig. 1. Conceptual model.
138 M.C.J. Caniels et al. / Journal of Purchasing & Supply Management 19 (2013) 134143

Table 1
Additional questions on suppliers motivation.
Abbreviated questions Yes Not sure
(%) (%)
Imposed environmental standards hinder green 30 44
practices
Different environmental requirements pose a 35 24
problem
Green practices will become an order winner 37 35
located in Germany in May/June 2011. By limiting the survey to a
single industry we can control for potential confounding effects of
factors such as environmental regulations or industry-wide con-
ventions. The German automotive industry has a long history of
eco-initiatives and tight eco-laws and regulations, for example
AltautoV and the German act on closed-loop resource manage-
ment (Thun and Muller, 2010). German automotive has faced, and
continues to face several crucial environmental challenges such as
the introduction of the particle lter or the transition to more
energy-efcient actuation (e.g. hybrid engines). This dynamic
makes insights in that industry particularly interesting.
The automotive sector in general experiences great expectations
of the society with regard to sustainability, as automobiles are
regarded as having a negative effect on the environment (Thun
and Muller, 2010). Therefore, it becomes even more crucial for
automotive OEMs to display environmentally friendly behavior.
Furthermore, in global supply chains OEMs are held responsible
for the sustainable performance of their suppliers (Suering and
Muller, 2008; Yang et al, 2009). Challenges for managing suppli-
ers in this respect are especially high in the automotive industry
due to the large number of components involved in manufactur-
ing a car (more than 5000 components). Consequently, the
automotive industry is characterized by complex networks of
suppliers (Thun and Hoenig, 2011).
Implied by the narrow scope of the study is the reduced
number of possible participants. Contact details from 225 suppli-
ers were obtained, and response rate was maximized by adopting
the following procedure (Frohlich, 2002): (1) appeal (direct
request via telephone), (2) steady pressure (repeated calling/
mailing until yes/no decision was obtained), (3) subject interest
(channeling the survey to the most appropriate manager), and
(4) results (participants will receive results). In this way a total of
(Chin et al., 2003; Wetzels et al., 2009). PLS path modeling
maximizes the explained variance of all dependent variables,
thus supporting prediction oriented research. It is particularly
No
(%) suited for predictive analysis in situations of low theoretical
information (Birkinshaw et al., 1995; Joreskog, 1982). That means
26 PLS is used for theory building rather than theory conrmation.
To assess PLS models, Chin (1998) proposed a two-stage
41
process consisting of: (1) assessment of the outer model (relation-
28 ship: latent-observed variables) and (2) assessment of the inner
model (relationship: latent-latent variables). In the rst stage,
the reliability and validity of the measurement model is evaluated
and established. In the second stage the hypothesized relation-
ships are tested via path modeling.
Measurement quality was assessed rst by addressing the relia-
bility of the indicators and constructs (see Table 2 for an overview).
Cronbachs alpha values are well above the minimum threshold of
0.6 (Nunnally, 1978), suggesting that each construct is internally
consistent. Factor loadings also exceed the suggested minimum of
0.4 (Carmines and Zeller 1979), thereby providing support for a high
degree of individual item reliability (Hulland, 1999). Composite
reliability is above the recommended threshold of 0.7 (Nunnally,
1978), indicating that the variance of a given construct explains at
least 70% of the variance of the corresponding measure.
Convergent validity shows whether a set of indicators repre-
sents one and the same underlying construct. Sufcient conver-
gent validity is indicated by an average variance extracted (AVE)
of 0.5 or higher (Fornell and Larcker, 1981). This criterion is
met for all constructs except for CI. Since, the CI indicators are
arguably not 100% one-dimensional, a level of 0.4 is still
acceptable (Menor et al., 2007).
Finally, we examined the Pearson correlation matrix
(see Table 3) to evaluate discriminant validity. A latent variable
can be called a discriminant valid, if it shares more variance with
its own block of indicators than with another latent variable
representing a different block of indicators. To check for that,
the Fornell-Larcker criterion is employed, which states that
the square root of a latent variables AVE must be higher than
Table 2
Factor loadings and reliabilities.
Scale Item Factor loading Cronbachs AVE Composite
(varimax rotation) a reliability

54 responses was collected, resulting in a response rate of 24%, Customer CR1 0.71 0.8739 0.7995 0.9228
which is comparable to other studies in the eld of supply chain requirements CR2 0.62
research (Frohlich, 2002; Erdogan and Baker, 2002). CR3 0.85

Supplier SR1 0.64 0.9127 0.6984 0.9325

readiness SR2 0.41
4. Analysis and results SR3 0.76
SR4 0.81
SR5 0.61
4.1. Reliability and validity SR6 0.67

Relational norms RNA1 0.76 0.8737 0.7948 0.9207

The data was analyzed using partial least-squares (PLS) rather
(arms length) RNA2 0.71
than covariance based structural equation modeling (CBSEM). RNA3 0.77
SEM was chosen because it allows the analyses of systems of
Relational norms RNC1 0.63 0.6982 0.6372 0.8350
independent and dependent variables at the same time, whereas (cooperation) RNC2 0.47
multiple regression analysis does not. Furthermore, PLS is robust RNC3 0.42
with respect to multicollinearity (Cassel et al., 2000), violations of Customer CI1 0.61 0.6574 0.4753 0.7728
the normality distribution assumption (Haenlein and Kaplan, investment CI2 0.48
2004; Cassel et al., 1999), and small sample sizes (Green and CI3 0.72
Ryans, 1990; Haenlein and Kaplan, 2004). Barclay et al. (1995) CI4 0.69
state a robust PLS path modeling sample size is equal to at least Supplier SP1 0.75 0.7831 0.5340 0.8506
ten times the largest number of structural paths directed at a participation SP2 0.65
particular construct in the inner path model. In addition PLS is SP3 0.61
SP4 0.53
particularly well suited for complex modeling, including models SP5 0.62
with hierarchical constructs, mediating and moderating effects
 M.C.J. Caniels et al. / Journal of Purchasing & Supply Management 19 (2013) 134143 139

Table 3 Table 4
Pearson correlation matrix (AVE on diagonal). Structural model and hypothesis testing summary.

Mean S.D. CI CR RNA RNC SP SR Path Standardized coefcient t-Value Result Conclusion

CI 2.84 0.66 0.689 CR-SP 0.35 2.37 Signicant Supported

CR 3.27 1.11 0.106 0.894 SR-SP 0.50 3.75 Signicant Supported
RNA 3.21 0.82  0.397nn  0.119 0.892 RNA-SP 0.20 0.91 Insignicant Not supported
RNC 3.10 0.72 0.656nn 0.165  0.782nn 0.798 RNC-SP 0.32 1.25 Insignicant Not supported
SP 3.54 0.65 0.226 0.649nn  0.204 0.300n 0.731 CI-SP 0.06 0.38 Insignicant Not supported
SR 3.52 0.78 0.138 0.623nn  0.168 0.122 0.686nn 836 RNC-CI 0.72 10.59 Signicant Supported
R2 in supplier participation 0.69
n
Correlation is signicant at the 0.05 level (2-tailed). R2 in customer investment 0.51
nn
Correlation is signicant at the 0.01 level (2-tailed).

not statistically signicant. Overall the model accounted for 69%

(R2 0.69) of the variance in supplier participation and 51%
(R2 0.51) of customer investment. Chin (1998) describes these
values as substantial and moderate, respectively.

5. Discussion and managerial implications

Carter and Easton (2011) consider sustainability the license to

Fig. 2. Structural model results.
the correlations with all other latent variables. The Fornell-
Larcker criterion is met for all latent variables, hence measure-
ment quality is conrmed.
4.2. Structural model
The structural model represents the relationships between
constructs that were hypothesized in the research model. Paths
coefcients (statistical and practical signicance) and coefcients
of determination (R2) together indicate how well the model
performed. Path coefcients have been established via PLS algo-
rithm and t-values via bootstrapping (5000 samples). Fig. 2
graphically depicts the standardized path coefcients for each
hypothesized relationship (t-values in brackets). Dashed lines
indicate a path coefcient that does not signicantly differ from
zero (p o0.1). Table 4 provides the path coefcients along the
t-values and the coefcient of determination.
It was hypothesized that customer requirements will have a
direct impact on supplier willingness to participate in GSCM
initiatives (H1). The path coefcient from CR to SP (H1 0.35;
t-value2.37) is statistically signicant at p o0.1, thereby sup-
porting this hypothesis. Hypothesis 2 is supported as well and
indicates that supplier readiness is positively associated with
supplier participation. The path coefcient from SR to SP
(H2 0.50; t-value3.75) is statistically signicant at p o0.01.
Hypothesis 3 concerns the relationship between relationship
styles, i.e. arms length (H3a) or cooperation (H3b), and participa-
tion in green supply chain initiatives. (H3a) and (H3b) are not
supported by our data (H3a 0.20; t-value0.91; H3b 0.32;
t-value1.25). Hypothesis 4 posed that a cooperative approach
to SCM is directly related to supplier development investment.
The path coefcient from RNC to CI (H4 0.72; t-value0.38) is
statistically signicant at po0.01, thereby supporting H4. It was
hypothesized that supplier development investments are posi-
tively correlated to participation in green supply chain initiatives
(H5). We found no support in our sample for this hypothesis as
the path coefcient from CI to SP (H5 0.06; t-value10.59) was
do business in the 21st century. To obtain this license, sustainable
practices must be implemented throughout the supply chain, not
in the least place by suppliers. Extant literature has put the main
emphasis on OEM green manufacturing, while the relationship
with suppliers is generally overlooked. The aim of this study was
to gain a better understanding of the drivers for the participation
of suppliers in green supply chain initiatives. Four independent
variables were hypothesized to inuence supplier participation,
namely customer requirements, supplier readiness, relational
norms and customer investment. The theoretical and managerial
implications of our ndings are as follows.
The ndings from our sample supported a positive relationship
between customer requirements with respect to green manufactur-
ing and supplier participation in green initiatives (H1). This nding
is in line with prior research which suggests that a wave of
encouragement for greening the supply chain is likely to be
triggered by a few powerful rms that propagate market or
regulatory pressure upstream to their suppliers (e.g. Hall, 2000).
Furthermore, other studies have shown that suppliers respond to
regulation conveyed through the supply chain (Green et al., 2000).
Hence, issuing and aligning GSCM requirements by upstream supply
chain members is an important driver for suppliers to participate in
environmental performance improvement initiatives.
From a managerial perspective it could be concluded that
pushing certication standards down to suppliers apparently does
help to increase supplier participation in greening the supply
chain. However, mandating the adherence of suppliers to ISO
standards might not be sufcient and might even be counter-
productive. King et al. (2005) found that the use of ISO14001
certication led to poorer environmental performance than would
be the case without ISO 14001. Similarly, Zhu et al. (2007) found
that management practices such as ISO 14001 are more effective
when general quality management systems are already imple-
mented. In our survey, 30% of respondents indicated that imposed
standards actually set lower levels than suppliers would set for
themselves, which is an indication for a possible ceiling effect in
GSCM practices (Michael, 2006). The German automobile industry
is characterized by strict environmental legislation and regula-
tion. Professional purchasers could substantially support their
choice of appropriate suppliers that are likely to cooperate in
environmental activities by assessing whether suppliers fulll
regulation purely as a requirement, or whether they are actively
engaged in sustainable quality management. A supplier in
the latter category might be much more willing and able to
140 M.C.J. Caniels et al. / Journal of Purchasing & Supply Management 19 (2013) 134143
proactively cooperate with OEMs towards sustainable solutions.
This relates to the study of Hart (1995) which identied suppliers
that are most likely to be ready for sustainability initiatives. These
suppliers have certain organizational capabilities, among which a
focus on efcient cross-functional communication and continu-
ous improvement. Suppliers that are engaged in quality assurance
and intrinsically motivated to continuously improve their busi-
ness processes are forerunners for proactive environmental man-
agement (Hart, 1995). In sum, professional purchasers could
improve chances of successfully involving suppliers in GSCM by
selecting suppliers not only on having ISO 14001 but also on their
general stance toward continuous improvement, as well as on
their exibility and adaptive capabilities to ensure long term
compliance.
A second nding of our study is the positive and signicant
relationship between supplier readiness and supplier willingness to
participate in GSCM initiatives (H2). In other words, internal
capabilities of suppliers, e.g. relevant knowledge and know-how,
are positively related to participation in GSCM initiatives. In fact, of
all our independent variables, supplier readiness shows the highest
path coefcient and correlation to supplier participation. This is in
line with the ndings from South Korean data (Lee, 2008). Further-
more, descriptive statistics indicate that supplier readiness has a
high mean (3.52 on a 5 point scale), which suggests that suppliers
deem GSCM to be important and are willing to invest in the
corresponding capabilities. Table 1 indicated that 37% of respon-
dents said they expect that profound environmentally friendly
business processes will lead to additional customers in the long
term. This nding signals that green products and business pro-
cesses might shift from being an order qualifying criteria to an order
winning one. This outcome is in accordance with the results
reported in the research of Harwood and Humby (2008) and
Azevedo et al. (2011). Note that a staggering 35% of respondents
indicated to have difculties to comply with various green require-
ments from different customers. It can be concluded that there is
substantial room for suppliers to benet from participating in GSCM
initiatives of large buyers.
A managerial implication that is related to this nding concerns
the following. When purchasers evaluate the willingness of sup-
pliers to participate in sustainability initiatives of OEMs they
should be aware of the different points of departure of suppliers
with regard to GSCM readiness. A large group of suppliers might
lack technical know-how to comply with sustainability require-
ments, let alone that they are able to actively engage in GSCM
initiatives. Typically, small suppliers may lack the nancial means
to invest in green initiatives. However, when they have adopted a
focus on continuous improvement this group of small suppliers
might be very willing to participate in green initiatives in coopera-
tion with an OEM. Yet, a dominant power position of the OEM
could enforce unreasonable contracts on small suppliers that then
are unable to stay in business. Therefore, OEM purchasers need not
only evaluate existing suppliers capabilities and resources when it
comes to environmental practices (Bansal, 2005), but also select for
a display of a holistic view on quality assurance and lay emphasis
on the willingness of suppliers to participate in GSCM. Suppliers
that compete on price might not be the ones who are forerunners
in a proactive and cooperative mind-set with regard to GSCM. An
OEM purchaser may want to include GSCM readiness and will-
ingness in the set of supplier selection criteria.
Our ndings supported the hypothesis that a cooperative
relationship has a positive inuence on customer investments in
green initiatives (H4). A cooperative approach builds trust and
suggests commitment to the relationship on part of the buyer as
well as the supplier. In such relationships suppliers are more
inclined to invest in development initiatives such as GSCM
activities. This resonates with studies on relational norms that
pertain to supplier development in different areas. For example,
Narasimhan et al. (2008) found that a relational norm of coopera-
tion is a prerequisite for developing trust that is needed to justify
investments in supplier development.
For purchasers this means that building up cooperative rela-
tionships with a selected set of suppliers is expected to be
benecial. These suppliers are likely to take an active part in
GSCM. Cooperation with less knowledgeable but proactive sup-
pliers will still provide original ideas and solutions to problems
that occur in practice as proactive suppliers engage their creativ-
ity. Furthermore, a limited number of suppliers has already
developed knowledge and know-how on green production. Espe-
cially when suppliers provide parts to different OEMs in different
countries, with different legislations they might have a vast
knowledge about their green production capabilities and possi-
bilities available. In practice we see that buyers already prot
from suppliers know-how by moving beyond mere ISO standards
and jointly develop green practices in the supply chain.
The nding that neither the relationship style nor customer
investment have a signicant positive inuence on supplier
participation (H3a/H3b and H5 are not supported) is puzzling.
These observations are not consistent with those of prior
research, which argued that a buyers direct involvement in
internal operations such as providing technical assistance has a
direct inuence on the achievement of signicant environmental
and operational performance improvement by the supplier (e.g.
Simpson and Power, 2005). In accordance with the work of Dyer
and Hatch (2004) a cooperative relationship management was
expected to yield a higher level or supplier participation. Hence,
these ndings merit deeper evaluation. Looking at the raw data it
seems that relational norms (cooperative as well as arms length)
and customer investment were not evenly distributed in the
sample. We performed an additional analysis and the model
was retted using only companies with 500 employees (sample
size n 28). In the retted model H3b and H5 were supported
(H3b0.34; t-value 2.23; H5 0.27; t-value2.18). With a
sample size of 28, PLS is still able to produce statistically
signicant results, however underlying accuracy is lost making
results exploratory at best (Goodhue et al., 2006). Nevertheless,
limiting the scope of the study to large suppliers or to for example
1st tier suppliers suggest conrmation of our hypotheses H3b and
H5. The fact that we nd signicance in this specic group of
suppliers opens new avenues for future research on which we will
come back in the next section.
From a managerial perspective these results suggest that to
induce supplier participation in GSCM of large suppliers it is
desirable to engage in a cooperative relationship style. Coopera-
tion between OEM and key suppliers at already the earliest stage
(product denition phase) is the way to ensure participation.
Usually, a cooperative relationship style leads to long term
collaboration and builds trust between the parties. Therefore,
OEM purchasers should be aware of the effect of their relationship
style on the long term desired outcomes for the OEM as a whole,
such as sustainable products and manufacturing methods.
Similarly, for this set of large suppliers, investments of the OEM
are stimulating supplier participation as well. Hence OEM managers
may want to concentrate their investments in supplier development
on a limited set of large suppliers that still need to make the leap
towards sustainable production and the development of know-how
on this part. Work on industrial ecology (e.g. Frosch, 1994) could be
a starting point to develop these practices. Combining this result
with the ndings for our hypotheses about willingness and readi-
ness, it can be said that for the group of small suppliers it is wise to
concentrate developmental investments on those suppliers that
demonstrate active quality assurance and commitment to contin-
uous improvement and learning.
 M.C.J. Caniels et al. / Journal of Purchasing & Supply Management 19 (2013) 134143
Up till this point we discussed managerial implication for
German OEM purchasers. In addition, managerial implications for
German automotive suppliers can be formulated. As the German
automobile industry is characterized by strict environmental
legislation and erce overall regulation it is a tough market in
which to compete. German automotive suppliers have to provide
excellent quality products on time and at the lowest possible cost.
Active participation in green initiatives of OEMs are yet another
factor on which they can win or lose orders. Manufacturing green
products with green production processes is fast evolving into an
order winning criterion, making competition on being green as
erce as on the traditional supply chain areas (cost, quality,
exibility and delivery). However, adopting environmentally
friendly production processes as well as improving the knowledge
about the environmental effects of certain chemicals and materi-
als may provide chances to improve a German suppliers global
competitive position not only in the automotive industry, but also
in other branches of the manufacturing industry. The mere fact
that a supplier is able to fulll German automotive environmental
regulation and supplies to German automobile factories will
generate additional business from other industrial sectors.
Consumers increasingly demand eco-friendly products. This is
a trend in society, and consequently environmental legislation is
likely to become even stricter over time. At this moment suppliers
may still be able to jump on the ship and adapt their production
processes and increase their knowledge base. Few years from now
it might become much harder for suppliers to step into the
market, because the existing suppliers are so far ahead in their
environmental knowledge and know-how that it will require
large investments on part of the supplier to match this knowledge
and become competitive with regard to price level. Hence, now is
the time for existing suppliers to take a lead position in green
production. German automotive suppliers currently compete on
the basis of their know-how, high quality and reliable delivery
times. The greening of the supply chain provides a challenge and a
chance to also compete on sustainable production methods and
extensive knowledge about green manufacturing and green
products.
6. Limitations and future research
Due to unavoidable compromises regarding range and size of
the sample as well as in the design and layout of the survey, this
study has limitations which need to be considered. First of all it
has to be acknowledged that relying on a single informant to
evaluate management practices in an organization adds subjec-
tivity and bias to the response (Vachon et al., 2009). This is
particularly true for supply chain research as it encompasses
several functions, including material ow, logistics, operations,
purchasing and marketing, suggesting that one respondent might
not have the oversight of all pertaining issues. This issue has to be
kept in mind when deriving conclusions from our study.
A second limitation lies in our small sample size, which limits
the extent to which the results can be generalized. Therefore, our
study should be viewed as exploratory and suggestive rather than
conclusive. Future studies concerning the drivers of supplier
participation are warranted. The model presented in our study
explains a substantial part of the willingness of suppliers to
participate in GSCM activities. Yet, it might be worthwhile to
replicate this study in order to establish generalizability. Further-
more, subsequent studies might want to consider additional
factors of importance explaining supplier participation. For
instance, further research is needed that evaluates the strains
and tradeoffs faced by suppliers when they are confronted with
dissimilar or even contradicting GSCM requirements of different
141
customers. The degree in which a supplier is confronted with this
problem might have an impact on the willingness to participate in
supplier development programs of an OEM. Furthermore, future
studies might consider adding a dummy variable to differentiate
between rst tier and other suppliers, or alternatively SME
suppliers and larger suppliers. Our exploratory ndings suggest
that this might increase our insight into the effect of a cooperative
relationship style and customer investment on supplier willing-
ness to participate in GSCM activities.
Despite of these limitations, we believe that this study has
extended our understanding of drivers of supplier participation in
GSCM practices and has identied several valuable insights that
managers from OEMs as well as supplier rms can adopt to attain
a more sustainable supply chain.
Acknowledgments
The authors would like to thank Simon Bartczek, for testing the
questionnaire and providing additional literature; and Walter H.
Groth, Maurice Biermans, Kerstin Huber and Kilian Huber for their
helpful insights and comments.
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