Effects of Green Production Practices on Financial Performance of Manufacturing Firms in Kenya

Abstract

Common issues facing firms all over the globe in modern business include: climate change and global warming, decline in the number of basic production natural resources pollution control and a demand for goods which are environmentally friendly. Therefore, firms have to come up with innovative products and processes by implementing green technologies, eco-design, and international environmental management systems in their production in what is called 'green production' for them to meet these green demands. The concept has been adopted therefore in developed countries but remains a challenge in developing countries; a need for more studies in the area. The objective of this study was to examine the effects of green production on financial performance of manufacturing firms in Mombasa County, Kenya. The study was guided by two theories; resource dependence theory, and institutional theory. This study adopted a descriptive research design. The target population of this study was all the manufacturing firms in Mombasa County. The study employed purposive sampling technique by using a sample comprising of all 70 firms registered with the Kenya Association of Manufacturers as at December 2017. Primary data in this study was collected using a semi-structured questionnaire that was administered using drop and pick later method. The completed questionnaires were first edited for consistency and completeness before processing responses. After data cleaning, data was coded, entered into the computer for analysis. Data was analyzed using SPSS. The data was analyzed and presented using descriptive statistics such as means and percentages, frequency counts, and standard deviations. Out of the 70 questionnaires given to the field, 60 of them were filled and return making the return rate to be 85.7%. Also, majority (70%) of the firms have been in operation between five to ten years, followed by those that have been in operation for over ten years (20%) and finally those who have operated for less than five years came last at 10%. Equally, all the firms (100%) were registered with the various environmental management bodies before carrying out their activities. Further, majority of the firms: (80%) had a well outlined environmental protection policy; (70%) had environmental management department; and (91.7%) indicated that firms were ISO 14001 Certified. In relation to green operation strategies, the trend indicates that majority of the respondents (97%) have heard of green operation strategies in their firms. In relation to design for use of raw materials, use of recyclable materials is the most implemented green production practice as indicated by a mean of 4.34. In relation to design for manufacture, the most prevalent adopted design for manufacture or production is alternative production techniques (4.32), followed by Low generation of waste (4.12), Low/clean energy consumption (4.01), fewer production processes (3.78) etc. As per the issue of design for product use, no energy/auxiliary material use practice of design for product use was the most adopted by firms (3.929), followed by Clean energy source practice (3.898), Clean consumables during use (3.762), Low energy consumption (3.712) etc. In relation to firms' performance, the firms that had adopted green manufacturing concepts had their financial performance components improved. The most improved financial component was earnings before interest and tax with a mean score of 4.471. This was followed by: return on sales (4.327), return on investment (4.215), sales growth (4.112), profitability (4.061), and finally return on equity (3.904).