A Relationship between Supply Chain Practices, Environmental Sustainability and Financial Performance: Evidence from Manufacturing Companies in Jordan

Luay Jum’A,Muhammad Ikram,Dominik Zimon

doi:10.3390/su13042152

Abstract

Pursuing sustainable development creates competitiveness for manufacturing firms in the market, however the financial pressure of adopting sustainable environmental practices is still a major concern. Few studies were found on the inter-relationships between supply chain management practices, environmental sustainability, and firm financial performance. Moreover, manufacturing companies are compelled by different pressure groups across the globe to maintain environmental standards while conducting their business and supply chain activities. Therefore, the current study aims to investigate the impact of supply chain practices on environmental sustainability and financial performance. In addition, the role of environmental sustainability as a mediator between supply chain management and financial performance was analyzed to improve sustainable development. A well-designed questionnaire was administered to manufacturing companies in Jordan for data collection. A total of 376 responses were analyzed and the proposed hypotheses were tested by using Structural Equation Modelling (SEM) approach. The results reveal that environmental sustainability was tested significantly and influenced by supply chain practices such as relationship with customers, postponement, level of information sharing, and information quality. Whereas environmental sustainability had a significant direct effect on financial performance. Finally, environmental sustainability mediated the relationship of all supply chain management practices with financial performance except strategic supplier partnership dimension. The study provides policy guidelines to decision makers while simultaneously assists the managers to improve sustainability practices in manufacturing companies.

Highlights

In the context of sustainable development, the Supply Chain Management (SCM), practices need to be introduced to encourage business and overall SC efficiency and to concentrate on environmental, economic, and social issues [1,2,3,4,5]
The findings indicated that environmental sustainability had the highest path coefficients (β = 0.454), which indicated that when environmental sustainability is increased by 1 standard deviation unit, financial performance will be increased by 0.454 standard deviation units
The study aims at examining the impact of five main SCM activities on financial performance along with the mediation of environmental sustainability

Summary

Introduction

In the context of sustainable development, the Supply Chain Management (SCM), practices need to be introduced to encourage business and overall SC efficiency and to concentrate on environmental, economic, and social issues [1,2,3,4,5]. SCM practices should be utilized to simultaneously fulfil two objectives, including enhancement of firm’s performance as an entity and the performance of all supply chain members in the competitive marketplace [7]. Firms need to be responsible about social and environmental issues in the SCM and help other sustainable businesses to comply with. Sustainability has three pillars, including environmental, economic, and social aspects [10]. The measurement of sustainable performance depends on the importance of sustainability aspects to the firms

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Conclusion