Managing a portfolio of green projects: Drivers of efficiency and the role of complementary projects

Abstract

Increasingly, multinational enterprise buyers concern their suppliers’ green performance with respect to energy consumption and waste emission because stakeholders consider multinationals are obligated to ensure that their suppliers make continuous progress in managing environmental issues. However, operations managers confront the challenge of how and in what ways to improve suppliers’ green performance. Recently, buyer and supplier firms have begun to formulate a green project portfolio in a coordinated manner to enhance supplier’s green performance (e.g., buyer initiated-supplier voluntarily implemented green projects). This research examines the drivers of green project portfolio efficiency and the role of complementary projects in suppliers. We develop hypotheses describing the main effect of the portfolio focus, the interaction effect of firm’s financial strength, and the complementary role of social and technical projects on portfolio efficiency. The project-level data of suppliers come from a world-leading automobile company and the firm (supplier)-level data is obtained from the Dun & Bradstreet company. We test our hypotheses using data envelopment analysis and Simar & Wilson (2007)’s two-stage, semi-parametric models. The empirical results suggest that a more focused green portfolio enhances the firm’s ability to benefit from implementing green projects, which is contingent upon the firm’s financial strength. Also, we find that a synergy of social and technical green projects can create congruence thereby increasing portfolio efficiency. Our research contributes to the green supply chain management and project management literature by revealing the drivers of green project portfolio efficiency and the role of complementary projects. The research findings should be helpful for managers to improve the efficiency of green projects implementation.