sustainability

Article
Green Supply Chain Management Efforts of First-Tier
Suppliers on Economic and Business Performances in the
Electronics Industry
So Ra Park 1 , Sung Tae Kim 2 and Hong-Hee Lee 2, *

1 College of Tourism and Hospitality, Cheju Halla University, Jeju-si 63092, Korea; [email protected]
2 Greehey School of Business, St. Mary’s University, San Antonio, TX 78228, USA; [email protected]
* Correspondence: [email protected]

Abstract: Green supply chain management (GSCM) has a necessary goal of performing a firm’s
social and environmental responsibilities, and SMEs employ GSCM practices with constrained
resources. SMEs need to determine which areas they need to concentrate their limited resources
to result in positively noticeable economic outcomes. This study aims to identify what GSCM
practices would influence economic and business profitability for first-tier suppliers in the electronics
industry. Specifically, this examines whether internal environmental management (IEM), green
purchasing (GP), cooperation with customers (CC), and eco-design (ECO) have a role in enhancing
an organization’s economic performance (ECP) and business performance (BP). Survey data from
193 South Korean electronics firms were collected to test the proposed model. The survey responses
were analyzed using structural equation modeling (SEM). The results of the present study showed
that IEM, CC, and ECO of the responding SMEs had direct positive influences on ECP. Moreover,





 economic performance has a statistically significant influence on BP. However, GP did not show a
Citation: Park, S.R.; Kim, S.T.; Lee, significant relationship with ECP. This study investigated first-tier suppliers within the electronics
H.-H. Green Supply Chain industry and identified what GSCM practices would be important in improving the performances of
Management Efforts of First-Tier SME manufacturing companies.
Suppliers on Economic and Business
Performances in the Electronics Keywords: green SCM; internal environmental management; green purchasing; cooperation with
Industry. Sustainability 2022, 14, 1836.
customers; eco-design; economic performance; business performance; sustainability
https://doi.org/10.3390/su14031836

Academic Editors: Antonio

P. Volpentesta and Alberto
Michele Felicetti 1. Introduction
Received: 31 December 2021 “Extreme weather won’t be the only climate-related threat to supply chains in the
Accepted: 3 February 2022 years ahead” said the analysts of McKinsey & Company [1]. Regulatory and institutional
Published: 5 February 2022 pressures regarding environmentally conscious practices are forcing companies to deal
with environmental risks and threats. Financial losses triggered by environmental changes
Publisher’s Note: MDPI stays neutral
threaten the long-term sustainability of firms. Investors also distance themselves from
with regard to jurisdictional claims in
companies without proper environmental, social, and corporate governance (ESG) practices.
published maps and institutional affil-
Customers’ voices are ever crucial in this digital age, and they request companies to take
iations.
on challenges: re-innovate the entire value chains and provide environmentally friendly
products and services. Therefore, eco-friendly corporate practices are being adopted in
managing the supply chain, and governments are instituting various regulations to curb
Copyright: © 2022 by the authors. activities harmful to the environment [2,3].
Licensee MDPI, Basel, Switzerland. Nations at all economic levels recognize the emergent and dire need to deal with
This article is an open access article environmental issues for all global citizens. At the COP26 in Glasgow in November 2021,
distributed under the terms and over 190 world leaders met and renewed their bow to keep the tap on the degree of global
conditions of the Creative Commons warming to no more than 1.5 ◦ C compared to the preindustrial era. The current cumulative
Attribution (CC BY) license (https:// pledges to contain the temperature rise are insufficient to meet the necessary but ambitious
creativecommons.org/licenses/by/ environmental goal [4]. Such an environmental goal cannot be achieved without the
4.0/).

Sustainability 2022, 14, 1836. https://doi.org/10.3390/su14031836 https://www.mdpi.com/journal/sustainability

Sustainability 2022, 14, 1836 2 of 23

cooperation among all economic entities and the stakeholders under the guidance of local
and global organizations and governments [5].
Green supply chain management (GSCM) is a trend to be environmentally responsible
as well as a move to reduce climate risks and grab opportunities for corporate sustainability.
Regulatory and ethical pressures urge corporations to set organizational climate targets
tightly and use appropriate tools to measure progress towards the targets [6,7]. However,
when firms pledge to achieve net-zero emissions from their operations, they easily overlook
the activities of their suppliers, which could be potentially significant sources of pollution.
According to Neil Rees, head of the ESG program in Agilent Technologies, logistics service
providers and manufacturers in the upstream of the supply chain account for almost 90% of
the company’s carbon emissions [8]. Due diligence is progressively being required for
corporates in doing businesses within many economic communities including the EU. In
most industries, scope 3 carbon emission data must be disclosed by firms for regulators
and investors. However, firms tend to have limited visibility into their greenhouse gas
emission status across the entire supply chain [8]. As Bowcott et al. [1] point out, the roles
of small and medium-sized enterprises (SMEs) in producing green(er) materials will be
critical in greening the supply chain for the customer corporations. A sustainable stream of
green(er) materials is only possible when the SMEs are effective in successfully employing
green processes and creating profitability with their green practices. Curbing the negative
environmental impacts on the entire supply chain is essential for the firms to achieve
their environmental goals. Therefore, there is a dire need to understand suppliers that are
categorized as SMEs due to the lack and importance of understanding of the group and the
current research.
The current research focuses on SMEs, especially electronics manufacturers, which
are first-tier suppliers for larger electronic corporates as well as focal companies with
their own supply chains. As first-tier suppliers of large electronics firms, the SMEs under
investigation strive to satisfy their ESG-compliant corporate customers with the GSCM
practices. The majority of prior tier-based research on GSCM has examined companies in
different tiers at the same time, ignoring a need to understand the tier-specific performance
of GSCM practices. Suppliers categorized in different tiers could have a different priority
on GSCM practices [9]. By the same token, same-tier suppliers would share a similar
understanding regarding their GSCM practices [10]. Therefore, we will single out a group
of first-tier suppliers in the electronics industry to understand the GSCM factors related to
the supplier company side. This should be a significant contribution to academia filling
the gap of tier-focused study of suppliers in GSCM. Additionally, this can enhance the
understanding of suppliers management for ESG disclosures and GSCM practices. Most
importantly, as focal companies, SME suppliers can further understand what are important
GSCM practices leading their economic as well as business performance. Moreover, it
would be an addition to the electronics industry with few empirical studies on topics
related to sustainable supply chains [11].
Three pillars of sustainability, social development, environmental protection, and
economic development, are the core of how companies have to deal with environmental
issues. Competitive companies create economic advantages out of a given situation more
actively, rather than considering environmental management only as a cost center and a
burden. Some corporate examples are as follows: (1) treating the wastewater from the
beer production creates methane power for Lagunitas Brewing Co., (2) designing water
bottle packages to use less plastic reduces the cost of materials as well as of transportation
for Dasani and Nestle, and (3) switching to renewable energy from more expensive fossil
energy reduces cost for Alphabet Inc. and Facebook Inc. which belong to an industry
consuming the energy the heaviest [12]. The majority of GSCM studies focus on the roles of
each GSCM factor on multiple profitability measures. SMEs cannot distribute their limited
resources in multiple areas to achieve multiple outcomes. SMEs typically are known to have
limited resources in realizing the positive outcome for environmental GSCM adoption [13];
therefore, this research focuses only a few and material performance measures, economic
Sustainability 2022, 14, 1836 3 of 23

and business performance to point out what are GSCM performance measures to realize
tangible and practical outcomes for SMEs. Economic profitability shows the reduction in
costs, fees, and fines due to the adopted environmental practices by the focal company [14].
For customer corporations, securing green(er) materials is thought to be critical in reducing
shortages and price volatility. By conducting a study on SMEs, the current research would
like to identify key independent GSCM factors that will contribute to economic profitability
and business profitability. To enhance the understanding of SMEs’ green supply chain
practices and to understand the first-tier suppliers’ GSCM performance outcomes, we
propose a research question as follows:
Research Question. Will GSCM practices influence economic and business profitability for SMEs
in the electronics industry?
To answer the question, the current study tries to put a perspective on the existing
GSCM research by applying it to SMEs in South Korea. South Korea is still in the early stage
of GSCM adoption as with other developing countries. Therefore, SMEs’ GSCM practices
are recently adopted to meet both the due diligence efforts of the customer companies as
well to comply with impending environmental and social laws. Therefore, this research will
provide a direction for SMEs of developing countries in adopting environmental practices.
The current research is organized as follows. Section 2 reviews previous studies on
GSCM practices and performances. The hypotheses are derived in Section 3, and research
methods are described, including data collection in Section 4. After the analysis, results are
summarized in Section 5, and the findings and implications of the study are discussed.

2. Literature Review
More countries are requiring the disclosure of corporate environmental, social, and
governance (ESG) resports and companies are being evaluated on their socially responsible
practices by multiple stakeholders [15–17]. Therefore, companies including small and
medium-sized enterprises have to find strategic ways to deal with sustainable manage-
ment of their entire operations. One stream of research is attempting to provide practical
solutions for imminent industry-related issues related to sustainable supply chain manage-
ment including supply chain network design [18], sustainable supplier selection [19–21],
environmental transportation/routing [22,23], and reverse logistics [23]. Another stream of
research is seeking the understanding of the current environment and the participants of a
supply chain to provide strategic direction for sustainable operation.
This section first describes the development of sustainable supplier management
and tier-related supplier management issues (Section 2.1) and shows the existing research
on suppliers in green supply chain management (Section 2.2). Section 2.3 describes per-
formance measures relevant for the current research. Finally, individual GSCM practices
(Sections 2.4–2.7) are explained and reviewed to build a general background of the proposed
research model in Section 3.

2.1. Sustainable Supplier Management and Tier-Dependenct Characteristics

Sustainable supplier management is the concept based on sustainable supply chain
management and the core idea that “social practices for suppliers do not develop in iso-
lation, but instead must be connected with, and take into account, the nature of both
the upstream and downstream portions of the supply chain” [24]. While there are many
definitions of sustainable supply chain management depending on the persepective of the
study [25], the definition of Carter and Rogers [26] is well-rounded and widely accepted,
stating “the strategic transparent integration and achievement of an organization’s social,
environmental, and economic goals in the systemic coordination of key inter-organizational
business processes for improving the long-term economic performance of the individual
company and its supply chains.” While it is imperative to pursue the sustainable supplier
management, it is not easy to identify suppliers farther downstream from the focal com-
Sustainability 2022, 14, 1836 4 of 23

pany. It is even more difficult to track their practices on their labors, the society, and the
environment [27].
There are multiple approaches managers can take to manage sustainable supply chain.
Ageron et al. [28] show that there can be active, reactive, pro-active, collaborative, or individ-
ual approaches for managerial approaches. Yang and Zhang [29] listed supplier selection,
supplier monitoring, supplier development, and supplier collaboration as the supplier
management practices influencing buyer–supplier performance. Choosing a sustainable
supplier is an important step that can greatly reduce future supplier management efforts.
Supplier selection is dependent not only on the economic factors but also environment as
well as social criteria [11,19]. Criteria for focal companies to consider when selecting or
evaluating suppliers include industry dynamics, dependency, distance, and transparency
of supplier behaviors [19,28]. However, when established suppliers exist or when the
focal firms have a weak buying power, the supplier management practice should focus on
other practices than supplier selection. Sustainable supplier collaboration could influence
buyer–supplier performance the greatest by cutting product development time and costs
and reducing information asymmetry [29,30].
Managing suppliers differ by the tier group they belong to. Suppliers categorized in
different tiers could have a different priority when deciding on their environmental, social,
and economical strategies [9]. Some supplier management strategies can be adapted to
the depth of the tier suppliers belong to. For example, auditing suppliers for their socially
responsible practices is important for companies with longer supply chains with more
tiers [24]. Similarly, managing supply chains using trust and open communication becomes
harder as the number of tiers in the supply chain increases [27]. Same-tier suppliers would
share a similar understanding of their environment and the position they would take to
manage sustainable supply chain [10]. Additionally, the level of collaboration required to
maintain the optimal relationship is dependent on the number of tiers and the types of
suppliers [28].

2.2. Green Supply Chain Management

Multiple studies on GSCM have been examining different aspects of what companies
do in terms of their green practices along their supply chain, which are the dimensionality
of GSCM. Sarkis et al. [31] defined GSCM as “integrating environmental concerns into the
inter-organizational practices of SCM including reverse logistics.“ All areas of the supply
chains can be handled with environmentally friendlier practices such as products design,
material procurement, green manufacturing, green delivery, and disposal of goods after
consumption [32]. Fathollahi-Fard et al. [18] adopted red deer and whale optimization algo-
rithms as new hybrid meta-heuristic methods to present sustainable supply chain network
design solutions in the tire manufacturing industry. The vast majority of previous research
points out different aspects of GSCM processes and dimensionality and sees each of the
GSCM processes as a single construct. For example, Petljak et al. [33] saw GSCM processes
to be composed of cooperation with suppliers, green purchasing, and green logistics. Some
of the earlier research considers GSCM as a second-order factor with a multiple first-order
factors. Zhu et al. [34] came up with a GSCM with five factors including internal envi-
ronmental management, green purchasing, cooperation with customers, eco-design, and
investment recovery by utilizing materials and equipment efficiently [35]. Lee et al. [36] and
Zaid et al. [37] perceived GSCM to include two dimensions composed of internal GSCM
management and external GSCM management. Internal GSCM management is relevant in
meeting internal environmental targets under management supports utilizing the internal
system and processes. External GSCM management goes beyond the boundary of the
corporate umbrella into the upstream and downstream of the supply chain. Lee et al. [36]
named internal environmental management and eco-design as two internal practices, and
green purchasing and cooperation with customers as external practices. Zaid et al. [37]
categorize GSCM into internal GSCM and external GSCM. The internal GSCM practices
Sustainability 2022, 14, 1836 5 of 23

are composed of eco-design and internal environmental management, and external GSCM
practices as green purchasing, reverse logistics, and environmental cooperation.
This study adopts the GSCM processes of Lee et al. [36] and utilizes the first-order
factors. Although some earlier research finds the GSCM performance to cover additional
factors such as IR [34,35,38], we employ the commonly used and conceptually distinct fac-
tors, internal environmental management (IEM), eco-design (ECO), green purchasing (GP),
and cooperation with customers (CC). For example, recent research often ignores IR prob-
ably based on the conceptual similarity to cost efficiency factors such as economic per-
formance. The current research excluded IR and used economic performance as a cost
efficiency measure.

2.3. Economic and Business Performances

During the 1990s, the productivity paradox [39] questioned whether a large invest-
ment in information technology could produce increased profitability or not. Referring
to “Global Productivity: Trends, Drivers, and Policies” produced by the World Bank [40],
technological progress is recognized as the driver of labor productivity. Similar tests are
being carried out to see whether environmental investments such as GSCM, ESG, corpo-
rate social responsibility (CSR), and creating shared value (CSV) will bring recognizable
environmental, operational, and business performances. Evidence of GSCM investment’s
profitability is demonstrated with multiple performance measures as follows.
Performance measures are considered important in operational, tactical, and strategic
levels, and a firm should select a set of measures based on their characteristics and the
purpose of using them. Hervani et al. [41] suggested three criteria in selecting GSCM
performance measure: the GSCM adoption stages, the proactiveness in adopting the GSCM
approaches, and interorganizational considerations. For example, having a proactive GSCM
approach can adopt more green practices than what the laws or regulations require.
In the studies of GSCM, performance measures are typically used as dependent vari-
ables providing utilitarian justification for the implementation of green practices. Organiza-
tional performance is thought to be the final dependent variable that results from good envi-
ronmental performance and economic performance [34,42]. According to Richard et al. [43],
organizational performance comprises three outcomes of firms: financial performance such
as return on investment (ROI), return on assets (ROA), and profits; market performance
such as market share and market position; and shareholder return such as total shareholder
return and economic value-added.
Green and Inman [42] define organizational performance as the “financial and market-
ing performance of the organization as compared to the industry average.” Organizational
performance is considered as the final dependent of GSCM, which will be highly related
to economic as well as environmental performance. Green et al. [38] found that adopting
GSCM practices in manufacturing firms can improve economic as well as environmental
performances. Economic and environmental performance are found to influence organi-
zational performance through operational performance. For this study, we use the term
business performance (BP) instead of organizational performance since the latter can also
be used as a comprehensive term including environmental, social, economic, marketing,
operational, and logistics performance [44]. BP uses financial and marketing performance
as indices, and it demonstrates a firm’s financial performance and the firm’s market valu-
ation [45]. Financial performance is often measured using accounting tools such as ROI
and return on sales (ROS) demonstrating BP along with market performance. Market share
and market growth are frequently used market performance indexes and are important
measures of GSCM BP. For the organization’s sustainable efforts across the entire GSCM to
benefit the focal company and all its stakeholders, greener products need to be sold. There-
fore, marketing performance, a predictor of product adoption, will be one key performance
factor of GSCM effectiveness
Among different performance variables, ECP is chosen as the mediator between
individual GSCM factors and BP. Environmental performance and ECP both discuss cost
Sustainability 2022, 14, 1836 6 of 23

and risk reduction, and we adopt ECP due to its comprehensive usage in small and
medium-sized manufacturing companies.
SMEs are significantly less engaged with environmental practices compared with
large-sized companies, and the sustainable practice of SMEs is a less researched area [13].
Entrepreneurs of SMEs tend to be cash-strained and lack the necessary skills and knowledge
to integrate sustainable practices into their manufacturing systems. The limitations faced by
SMEs bars them to make enough investment to realize economic outcomes [13,46]. SMEs
lack environmental strategies due to their limited financial resources and the incapability
of implementation practices [45]. Other difficulties SMEs face include the lack of long-
term organizational vision, the lack of environmental awareness and training, the inability
to obtain innovation, and the absence of skills in managing external stakeholders [47].
However, considering the number and the portion of the total workforce in SMEs and the
diverse products and resources they create in the ecosystem, it is critical to investigate the
issues of SMEs’ sustainable practices [13].
SMEs have three reasons as to why they can/must adopt environmental practices:
(1) SMEs collaboratively work with other stakeholders such as customers and suppliers to
achieve their environmental goals, (2) SMEs are facing pressure to practice GSCM activities
from the industries, the suppliers, and the government, and (3) SMEs, as is the case in
the current research, are often an important constituent of other firms’ supply chains [48].
Sustainable efforts in SMEs create opportunities and values, definite competitive advan-
tages. Simpson et al. [49] discussed that having good environmental practices can build
competitive advantages for SMEs. Based on the resource-based view, the capability to
involve diverse stakeholders is not easily imitable by others. Therefore, the ability to
involve all stakeholders along the supply chains for environmental practices demonstrates
the SME’s strategic capabilities. According to Xu et al. [50], industry standards can promote
collaboration and control among participants along the supply chains. In turn, efficient
supply chains can positively influence the environmental performances of all the firms
involved. With the increasing attention to sustainability, large corporations are under a lot
of pressure to ensure their supply chain participants’ environmental practices. Not only
the financial profitability, but financial investors also investigate the ESG soundness of
the firms for the investment decisions [16]. ESG evaluation criteria include value-adding
activities of the firms concerning their stakeholders, one of the groups being suppliers who
are often SMEs.
In the context of SMEs, ecopreneurship is a word describing “profit-oriented and
environmentally concerned at the same time” [51], and ecopreneurs are concerned with
environmental means to create economic values. Even with limited resources, knowledge,
and skills, SMEs can achieve positive outcomes. Some enabling characteristics of the
positive outcomes include the traits of CEOs/owners and flexibilities. SMEs are under a
significant influence of the owners’ environmental values, and owners of SMEs consider
themselves to be more environmently friendly compared to their peers [52]. Therefore,
SMEs have the flexibility to get involved in innovative and sustainable activities, leading to
positive financial outcomes [52].

2.4. Internal Environmental Management

Environmental management (EM) describes a set of management activities dealing
with environmental issues faced by a company [53]. EM spans from reducing negative
environmental impacts from companies’ processes and products to increasing economic as
well as social welfare, and it can be categorized into internal environmental management
(IEM) and external environmental management (EEM). EM is considered to be IEM when
environmental activities are related to the products, processes, and activities internal
to the focal company; while, EEM covers activities involving entities such as upstream,
downstream, and other external entities of the focal company’s supply chain.
Organizational internal capabilities related to IEM are comprised of organizational
innovation and organizational performance, influencing the organization’s decision to
Sustainability 2022, 14, 1836 7 of 23

adopt innovative practices for better environmental and business performances [41]. Those
internal capabilities are organizational resources, capacities, organizational structure, and
procedures, and they dictate how an organization deals with changes and challenges. Along
with the organizational structure allowing environmental innovation, knowledge regarding
products, materials, markets, and available technologies are necessary to drive product
innovation. Internal knowledge base with necessary technical skills and competencies,
and organizational culture enabling self-assessment and implementation of a new system
are critical drivers of GSCM internal capabilities [41]. Interfunctional collaboration, total
environmental quality management, and other necessary environmental management
practices and programs are also important for IEM [34,35,54].
IEM is related to setting the organizational goals in line with sustainability, and the
goals are supported with the mid-level and senior-level managements’ wills [54]. Top
management can emphasize GSCM implementation with a strong priority, bring necessary
measures, assess and reward to reinforce green management, and put all the resources
to strengthen green practices [41]. Ethical leadership is to bring employees’ internal and
external citizenship behaviors which would bring employee’s ethical behavior towards all
stakeholders including other employees, suppliers, partner companies, and customers [55].
Ethical leadership and employees’ citizenship behavior would create an ethical atmosphere
and positive work attitude creating a ground for better business performance [55,56].

2.5. Green Purchasing

Suppliers form “the first echelon” among all members in the supply chain affecting
corporate profitability and a lot of research is carried out in the area of sustainable sup-
plier [20]. The role of procurement within an organization should be considered strategic
for multiple reasons, including economic and compliance issues. A large portion of a
manufacturing firm’s expenses is typically spent on purchasing. Purchasing costs account
for 40% to 70% of the sales [42], implying that a small reduction can be significant savings
for the company. More environmental requirements and laws are codified by the nations,
transnational organizations, and industrial associations. Additionally, the reliance on out-
sourcing makes it crucial for the focal company to align with suppliers strategically. Finally,
social and environmental pressures urge the focal company to “due diligence” in the legal
and voluntary compliance of their CSR activities. Therefore, purchasing can be considered
one crucial area of CSR activities [57]. Ethical purchasing approaches are well expressed in
a concept called purchasing social responsibility, which covers aspects of the environment,
human rights, philanthropy, safety, and diversity [58].
Green purchasing (GP) describes corporate efforts in minimizing negative externalities
impacting the environment in the selection and procedure of acquiring products and the
services required for the operation of the business. GP is used interchangeably with the
terms such as “green procurement” and “sustainable procurement”. In corporate green
management, GP directs its focus of controlling pollution to preventing pollution [59]
in ways including: a reduction in pollution in inbound logistics; reduced environmental
impacts of the procured material; reduction in energy consumption and emission while
processing the procured materials; and eco-efficiency of the products using the procured
material(s). These GP activities can be performed as follows [60]: demanding greener
products to suppliers, selecting suppliers using greener practices (e.g., ISO standardization,
waste and emission reduction), and collaborating with suppliers for greener performances
(supplier training, selection of greener and waste reduction processes). Not all activities
influence the GP outcomes positively. Laari et al. [61] found that not all supplier-related
activities translate into positive environmental or financial outcomes.

2.6. Eco-Design
The manufacturing industry is mainly responsible for making ecological, socially
conscious, and still economically profitable products [62,63]. Performance, usage, produc-
tion, and disposal after-life will be all affected by product design, potentially influencing
Sustainability 2022, 14, 1836 8 of 23

70% of manufacturing costs [64]. Therefore, eco-design (ECO) is a term relevant to sustain-
ability [65] and implies ecological improvement or development of a product. The term
eco-design has the same or similar connotation as “design for environment” and “design
for sustainability,” the latter being considered as an evolved stage of ECO. According
to Rocha et al. [66], ECO implies technical innovation, redesign of products, and reorga-
nization of the functionality of products at the basic stage and aims to reduce products’
environmental impacts. However, at a more advanced level, technical as well as social
innovations are sought after in the product design process. The social, environmental,
and economic impact of products are assessed at the global level, and the needs of a prod-
uct are revisited. Therefore, ECO is the designing of a product with the consideration
of minimizing the environmental impacts during the entire lifecycle of the products [54].
The value of an ECO product is evaluated through the lifecycle analysis of the product.
There are two very similar concepts that look at the ECO for the lifespan of a product:
eco-design methodology using life-cycle assessment and sustainable consumption. ECO
looks at how product design will influence the environment as early as the design stage.
The life-cycle methodology comes up with the total environmental impact of a product
during the product’s life cycle [67].
Along with sustainable consumption, designing for sustainable behavior is an impor-
tant part of ECO concerned with the reasons and the manners of product users’ interaction
with the products [68]. Therefore, the influence of ECO assumes the market acceptance
of the products which requires products to meet consumers’ needs and requirements [69].
While the effectiveness of ECO will be initially shown as the focal company’s cost effec-
tiveness; however, the final evaluation of ECO should be demonstrated with a strong
competitive position with the market.

2.7. Cooperation with Customers

Organizations’ interactions with other entities are typically explained with a supply
chain and network-oriented view. Stakeholders along the line of a corporate supply chain
or connected with the company’s network links can influence the innovative product
design, manufacturing, usage, and much more. The key stakeholders of the involvement
process would be the customer group. The end-users are the ones who finally access
the value of the ECO products via money vote. Customers can be involved with green
management practices by collaborating with the companies and monitoring what the
company does [61]. Environmental collaboration with customers is involved with product
design, green delivery, and communication of environmental roles. Customers’ monitoring
activities include monitoring green practices and requesting green certification, selecting
environmentally sound suppliers, and requesting environmental.
Environmental collaboration with customers positively influences the firm’s finan-
cial performance [61]. A study on shipper logistic service providers shows that external
GSCM with customers influences financial performance, especially when environmental
proactivity is greater [70]. Bask et al. [70] recognize that external customers’ environ-
mental motivation and internal environmental motivation are the two main reasons for
adopting GSCM practices, and environmental proactivity will give rise to better financial
performance. Definitions of the constructs adopted in this study are listed in Table 1.

Table 1. Construct definitions.

Construct Operational Definition References

A set of management activities involved with evolving environmental
Internal Environmental
sustainability as a fundamental organizational goal through support Aslam et al. [54]
Management (IEM)
and commitment of mid-level and senior managers.
Corporate efforts in minimizing negative externalities impacting
Green Purchasing (GP) environment in the selection and process of acquiring products and Min and Galle [59]
services required for the operation of the business.
Sustainability 2022, 14, 1836 9 of 23

Table 1. Cont.

Construct Operational Definition References

Cooperation with Cooperation with customer requires working with customers to design Green et al. [38];
Customers (CC) cleaner production processes that produce environmentally. Zhu et al. [34]
Designing of a product so as to minimize the environmental impact of
Eco-design (ECO) Aslam et al. [54]
the product during the entire life of the products.
Economic performance related to the manufacturing plant’s ability to
reduce costs associated with purchased materials, energy consumption, Green et al. [38];
Economic Performance (EP)
waste treatment, waste discharge, and fines for Zhu et al. [34]
environmental accidents.
Firm’s financial and marketing performance reflecting the firm’s Um [45];
Business Performance (BP)
green practices. Green and Inman [42]

3. Hypotheses Development
This section proposes the research model and develops hypotheses based on existing studies.
IEM is a crucial activity related to the feasibility of GSCM implementation, the man-
agements’ GSCM supports as well as the internal green practice system [48]. The current
research defines economic performance as “performance related to the manufacturing
plant’s ability to reduce costs associated with purchased materials, energy consumption,
waste treatment, waste discharge, and fines for environmental accidents” [38]. ECP is
conceptually similar to environmental performance since environmental performance mea-
sures whether environmental efforts minimize waste and reduce costs. Laari et al. [61]
found a positive relationship between IEM and environmental performance, which rela-
tionship, therefore, should apply similarly with ECP. According to De Giovanni [53], IEM
is found to be a strong and relevant driver of all three triple bottom lines (environmental,
economic, and social) performances, and Fallahpour et al. [19] also suggested supply chain
managers also try to develop a sustainable system supporting both social, economic as well
as economic criteria for performance improvement. In a study on 207 manufacturing firms
in Pakistan, environmental performance positively mediated the relationship between
IEM and ECP [71]. IEM is an important enabler of GSCM [72]. IEM decreases the cost of
materials purchased, costs related to energy consumption, waste treatment fees, and fines
for environmental accidents. Therefore, we hypothesize as follows.

Hypothesis 1 (H1). Internal environment management (IEM) will positively influence economic
performance (ECP).

Reducing waste and energy by green purchasing could result in big savings for
the supply chain. Costs incurred in purchasing are 40% to 70% of a firm’s sales [73].
Suppliers’ socially responsible activities complying with environmental standards can
trigger innovation and reduce the total cost within the entire supply chain [60].
Green purchasing is now preferred as a risk-aversion option. The environmentally
conscious procurement is related to economic performance if buyer firms perceive it as a
protection against possible economic losses resulting from non-compliance. Manufacturers
observe that the suppliers conform to environmental compliance [48].
Economic performance offers practical justification for the implementation of green
purchasing. Green et al. [38] propose that GSCM practices target waste reduction, and the
adoption of green purchasing in manufacturing firms could improve economic performance.
Chen [74] suggests that green procurement helps prevent pollution and eventually supports
economic performance. Zaid et al. [37] pinpoint that green purchasing boosts net income
and lowers the cost of products. Accordingly, the following hypothesis is suggested:

Hypothesis 2 (H2). Green Purchasing (GP) will positively influence economic performance (ECP).
Sustainability 2022, 14, 1836 10 of 23

Involving customers is conducive to suppliers’ innovation by enhancing suppliers’

new product development process and consequently expediting the release of the new
products [75,76]. As such, process integration with customers affects goods and services
delivered to the buyer firms and improves the suppliers’ organizational effectiveness in
terms of waste reduction, cost reduction, and enhanced firm performance.
Cooperation with customers (CC) in the context of GSCM is defined as the collabo-
rative efforts between manufacturing firms and their customers in developing environ-
mentally friendly design, cleaner production, green packaging, and a database system that
might help reduce the negative environmental impacts within firms’ supply chain activi-
ties [77–79]. Suppliers can also better understand customer expectations and requirements.
Additionally, Theyel [80] specified that CC refers to working together with customers
to determine and achieve environmental goals, which lowers harmful environmental ef-
fects, complies with customers’ environmental standards, and informs the delivery of
customers’ requirements.
Empirical studies by Zhu et al. [81,82] show that green customer cooperation for
successful GSCM systems implementation improves the environmental, operational, and
economic performance of manufacturing firms. Along with a customer-oriented approach
to supply chain management, green customer cooperation provides manufacturers with
the opportunity to satisfy the green expectations from customers better than their competi-
tors [83]. Thus, the following hypothesis is proposed.

Hypothesis (H3). Cooperation with customers (CC) will positively influence economic perfor-
mance (ECP).

ECO aims to reduce a product’s environmental impacts and influence the economic
performance of manufacturing firms [72,84]. Additionally, ECO and CC bring ECP as
demonstrated in industrial examples and academic research [85]. The design of products
can directly reduce the cost of the materials [67], energy consumption [86], waste treat-
ment [87], and environmental accidents [88], which are the key measures of the economic
performance of GSCM. Moreover, the ECO product can only be valued when customers
easily identify the advantages of the products, which leads to a sales increase in the
products [67]. Integrating the ECO framework for both products and processes brings
environmental and economic performances [89]. Therefore, the eco-friendly design will
directly and positively influence economic performance. We hypothesize as follows.

Hypothesis (H4). Eco-Design (ECO) will positively influence economic performance (ECP).

A firm’s primary goal is profitability, and it is pursued by the performances of stake-

holders in the supply chain of the focal firm [90]. Therefore, GSCM’s ultimate performance
goal is achieving the primary goal, increasing the firm’s profitability. The current research
utilizes the term business performance (BP) to denote the firm’s profitability, and BP is
defined as “financial and marketing performance of the organization as compared to the
industry average” by Green and Inman [42]. Financial performance is measured with
financial measures, and is to be achieved with better environmental and operational per-
formances. Environmental performance is concerned with minimizing costs involved
with weak environmental positioning, increasing capability and better operational per-
formance, and satisfying customers with efficient production processes characterized by
robust products, flexible operation, on-time delivery, and others [52].
ECP is positively and significantly associated with business performance in multiple
research [38,91]. For example, hotel employees’ positive perception of implementing
GSCM brings ECP and ECP, and, in turn, influences BP positively [92]. Green et al. [38]
investigated whether ECP influences BP through operations by surveying plant managers
in US manufacturing organizations. Similar to the results from Zhu et al.’s [34] research
on the Chinese manufacturing industry, practicing GSCM and green information systems
Sustainability 2022, 14, 1836 11 of 23

brings ECP, and ECP indirectly leads to BP through operational performance. Therefore,
we assume that ECP would positively influence BP and we propose H5.

Hypothesis (H5). Economic performance (ECP) will positively influence business performance (BP).

4. Research Methodology
This section presents descriptive statistics based on the collected data from the survey.
The responding firms’ basic background information will be presented in Section 4.1,
followed by the measurement development in Section 4.2, the illustration of the data
collection process in Section 4.3, the non-responses bias in Section 4.4, and the measurement
assessment in Section 4.5.

4.1. Description of Data Sources

Table A1 (in Appendix A) represents the characteristics of the responding firms as
well as respondents’ job titles and work experience. All the firms fit the classification of
small and medium-sized enterprises (SEMs) as targeted. Here is the distribution: 118 firms
(61.1%) are with greater than 50 and less than or equal to 200 employees, 49 firms (25.4%)
with greater than 200 and less than or equal to 400 employees, and 26 firms (13.5%) with
over 400 and less than or equal to 500 employees.
The respondents’ job titles ranged from the top/senior executives to employees, and
middle manager (71.5%) is the most frequently reported job title in charge of GSCM. This
may be viewed that the SMEs decided to have the GSCM practices under the supervision
of at least the middle-level management team, a decision presenting their will to succeed
in sustaining the GSCM practices. Additionally, three-fourths of the respondents (74.1%)
have worked over five years, and over 37% among them have worked in the position over
ten years.
The population of interest in this study is the supply chain managers of South Korean
small and medium-sized electronic manufacturers that are mostly first or second-tier
suppliers to major electric firms in South Korea. This study selected SME suppliers for the
investigation because they are often regarded as the invisible link in the supply chains due
to their lack of eco-friendly systems and competency that can adversely affect the economic
performance and brand reputation of the customer companies [92–94].
There are two reasons for selecting the electronics industry. First, technologies in
electronics change rapidly, and the product life cycles are short. These tendencies elevated
environmental concerns and motivated a number of critical environmental regulations for
this industry to be instituted globally. Second, the present study collected data only from a
single sector to control any potential confounding factors, such as variation in economic
conditions or environmental regulations. The electronics industry is an excellent candidate
to monitor GSCM and has a group of participants suitable to observe their supply chains.

4.2. Measurement Development

To develop a measurement model for GSCM practices, we adopted 18 measurement
items pertaining to current GSCM practices from Zhu and Sarkis [35] and 8 items in
total for the measurement of economic and business performances from Zhu et al. [34].
The measurement items were reviewed by Korean SCM experts to ensure that the items
developed and tested in Chinese industries can also be operationalized in South Korea.
This procedure confirmed the content and face validity of our measurement items that
are organized into a survey questionnaire to be administered to manufacturing firms in
South Korea. The questions were asked using a five-point Likert scale (1: strongly disagree,
2: disagree, 3: neutral, 4: agree, 5: strongly agree).

4.3. Data Collection

Our survey team acquired the list of 756 companies in the electronics industry from
the Korea Investor Service (KIS). According to the Korean Ministry of SMEs and Startups,
 Sustainability 2022, 14, 1836 12 of 23

electronics manufacturers with a revenue of less than 85 million USD a year are classified
as SMEs, and all of the companies met this guideline. Our staff contacted individual
companies on the list by phone and briefly explained the purpose of our research. The
questionnaire was administered to the SCM managers from who we received their verbal
consent. The survey team contacted the managers again to verify their receipt of the
questionnaire and then explained how to rate each questionnaire item in detail. When
unanswered items were found in a returned questionnaire, follow-up telephone calls
Sustainability 2022, 14, 1836 13 of 25
were made to complete the survey. Finally, we have collected 193 usable responses. The
methodology adopted to guide the process of this study is illustrated in Figure 1.

Figure
Figure1.1.Methodological
Methodologicalframework.
framework.

4.4.Non-response
4.4. Non-Response Bias
Bias Analysis
Analysis
Toexamine
To examineaapossible
possiblenon-response
non-responsebias biasand
andthe
thegeneralizability
generalizabilityofoffindings
findingstotothe
the
population, a t-test was performed to check if there is any significant difference
population, a t-test was performed to check if there is any significant difference in key in key
attributes such as the number of employees between early and late responses [95]. The
attributes such as the number of employees between early and late responses [95]. The t-
t-test results do not indicate statistically significant differences between the compared sets,
test results do not indicate statistically significant differences between the compared sets,
and, thus, the results suggest that the responded group represents an unbiased sample.
and, thus, the results suggest that the responded group represents an unbiased sample.
4.5. Measure Assessment
4.5. Measure Assessment
This study examined the psychometric properties of our reflective scales using a
This studyfactor
confirmatory examined the psychometric
analysis (CFA). First, properties
we includedof our
all reflective
reflective scales
latentusing a con-in
variables
firmatory factor analysis (CFA). First, we included all reflective latent variables
a single multifactorial CFA model. The output indicated the existence of multivariate in a single
multifactorial CFA model. The output indicated the existence of multivariate
non-normality. Hence, we utilized the maximum likelihood parameter estimates with non-normal-
ity. Hence,errors
standard we utilized
and athe maximum
chi-square testlikelihood parameter
statistic that estimates
are robust with standard
to non-normality, errors
using the
and a chi-square test statistic that are robust to non-normality, using the robust
robust maximum likelihood estimation (MLR) in Mplus Version 7. Specifically, we adopted maximum
likelihood
a two-stepestimation (MLR)approach
model building in MplusinVersion
which the7. Specifically,
measurementwe adopted
models werea examined
two-step
model building approach in which the measurement models were examined before test-
ing the structural model. All models were identified by setting the means of all latent fac-
tors to 0 and latent factor variances to 1. Then, we estimated all item intercepts, item factor
loadings, and item residual variances.
All factor loadings and the factor covariance were statistically significant. As re-
Sustainability 2022, 14, 1836 13 of 23

before testing the structural model. All models were identified by setting the means of all
latent factors to 0 and latent factor variances to 1. Then, we estimated all item intercepts,
item factor loadings, and item residual variances.
All factor loadings and the factor covariance were statistically significant. As reported
in Table 1, standardized factor loadings for all items ranged from 0.623 to 0.974. R2 values
for the amount of item variance accounted for ranged from 0.194 to 0.308. This result
suggests that the factor loadings were significant. Furthermore, the overall fit indices of
our model (χ2 /d.f. = 1.87, CFI = 0.931, SRMR = 0.083, RMSEA = 0.067) are acceptable [96].

5. Results
In the previous section, the methodological framework was suggested, and the data
were collected accordingly. This section examines the reliability and validity of the research,
and statistical analysis of the data followed by the discussion of the results with respect to
the hypotheses testing.

5.1. Measurement Model

The means and standard deviations of all measurement items assessed in this study
are given in Table 2. Before proceeding to analyzing the reliability/validity of the study
and hypotheses testing results, the descriptive statistics need to be discussed to better
understand the results of the study. In terms of internal environmental management, both
the top management teams and middle managers of the Korean SMEs have a solid commit-
ment to GSCM (IEM4: average = 4.44; IEM5: average = 4.55). In this regard, the firms are
taking GSCM practices very seriously to maintain environmental compliance and auditing
programs (IEM2: average = 4.47). This factor is particularly critical for the relationship
with their buying firms that tend to select suppliers with good environmental compliance
records. In this line of thought, supplier firms make efforts to meet the requirements of their
customers. Our survey responses also show that the average of all items for cooperation
with customers is high. Additionally, the items related to reducing energy usage and
materials show high averages (e.g., ECO1: average = 4.54; ECO4: average 4.62).

Table 2. Summary of measurement results, standardized factor loadings, reliability, and convergent
validity.

Factor Reliability and

Constructs and Measurement Items Mean S.D. t-Value
Loading Validity
Internal Environmental Management α = 0.857; CR = 0.888;
In our firm, environmental management
IEM1 4.13 0.739 0.739 18.752 AVE = 0.541
systems exist
Our firm keeps environmental compliance and
IEM2 4.47 0.606 0.767 21.451
auditing programs
Our firm maintains cross-functional cooperation for
IEM3 4.27 0.766 0.730 18.425
environmental improvements
IEM4 Senior managers show commitment of GSCM 4.44 0.701 0.819 27.236
IEM5 Mid-level managers support GSCM 4.55 0.598 0.858 29.145
Green Purchasing α = 0.882; CR = 0.879;
Environmental audit for suppliers’
GP1 4.47 0.770 0.764 21.013 AVE = 0.647
internal management
GP2 Suppliers’ ISO 14,001 certification 4.50 0.793 0.734 18.719
GP3 Eco-labeling of our products 4.49 0.740 0.827 28.725
Cooperation with suppliers for
GP4 4.50 0.753 0.885 37.444
environmental objectives
Cooperation with Customers α = 0.894; CR = 0.909;
CC1 Cooperation with customers for eco-design 4.45 0.831 0.716 18.720 AVE = 0.717
CC2 Cooperation with customers for cleaner production 4.49 0.764 0.893 45.892
Sustainability 2022, 14, 1836 14 of 23

Table 2. Cont.

Factor Reliability and

Constructs and Measurement Items Mean S.D. t-Value
Loading Validity
CC3 Cooperation with customers for green packaging 4.51 0.782 0.869 39.752
Cooperation with customers for developing
CC4 4.46 0.775 0.896 47.210
environmental database of products
Eco-design α = 0.774; CR = 0.857;
Design of products for reduced consumption of
ECO1 4.54 0.847 0.755 18.815 AVE = 0.546
material/energy is important
ECO2 Design for Disassembly (DFD) is important 4.11 0.999 0.700 15.575
ECO3 Design of products for reuse/recycle is important 4.21 0.971 0.623 11.852
Design of products to avoid use of hazardous
ECO4 products and/or their manufacturing process 4.62 0.760 0.665 13.986
is important
In the design of products, life cycle assessment (LCA)
ECO5 4.30 0.909 0.848 25.254
is important
Economic Performance α = 0.854; CR = 0.950;
ECP1 Decrease in cost for materials purchasing 3.79 0.946 0.838 36.938 AVE = 0.828
ECP2 Decrease in cost for energy consumption 4.11 0.858 0.974 154.256
ECP3 Decrease in fee for waste treatment 4.10 0.913 0.969 144.688
ECP4 Decrease in fine for environmental accidents 4.35 0.872 0.850 39.855
Business Performance α = 0.921; CR = 0.945;
BP1 Better asset utilization 4.00 0.888 0.788 26.316 AVE = 0.699
BP2 Stronger competitive position 4.21 0.840 0.789 26.551
BP3 Improved profitability 4.00 0.872 0.941 75.753
BP4 Overall improved organizational performance 4.02 0.859 0.929 68.747

The unidimensionality of our constructs was assessed using confirmatory factor anal-
ysis (CFA). All fit indices satisfy cutoff limits. CFI is above 0.9, and SRMR and RMSEA
are below 0.08 [95]. Cronbach’s alpha and composite reliability of the constructs exceeded
the threshold value of 0.70 [97,98]. These confirm that the theoretical constructs present
adequate reliability.
Convergent validity was examined by conducting CFA. As exhibited in Table 2, all
items in their respective constructs have statistically significant factor loadings greater
than 0.60, and the t-values are greater than 2.0. The average variance extracted (AVE)
values exceed the widely recognized rule of thumb, 0.50 demonstrating the convergent
validity [97].
Discriminant validity is evaluated by comparing the correlation between a construct
and the squared root of AVE. Discriminant validity identifies whether the AVE for each
multi-item construct is greater than the shared variance between constructs [97]. The
square roots of AVEs of all constructs should be greater than the correlations between
any individual pair, as reported in Table 3 [97]. Additionally, this study performed the
cross-loading method for all factors. As illustrated in Table 4, the results of the cross-loading
method reaffirm the discriminant validity of our constructs.

Table 3. Discriminant validity: Fornell Larcker criterion.

Construct IEM GP CC ECO ECP BP

IEM 0.736
GP 0.335 0.804
CC 0.287 0.635 0.847
ECO 0.200 0.247 0.293 0.739
ECP 0.230 0.243 0.316 0.330 0.910
BP 0.360 0.480 0.363 0.338 0.710 0.836
Note: The bold section is the diagonal cells that list the square root of average variance extracted (AVE) for the
reflective constructs.
Sustainability 2022, 14, 1836 15 of 23

Table 4. Discriminant validity: cross-loading method.

Construct IEM GP CC ECO ECP BP

IEM1 0.665 0.064 −0.002 0.078 0.192 0.078
Sustainability 2022, 14, 1836 16 of 25
IEM2 0.751 0.077 0.059 0.032 0.069 0.032
IEM3 0.778 0.161 0.150 0.124 0.050 0.161
IEM4 0.819 0.196 −0.028 0.050 0.132 0.197
IEM5
IEM5 0.824
0.824 0.094
0.094 0.119
0.119 0.108
0.108 0.048 0.048 0.108 0.108
GP1
GP1 0.380
0.380 0.717
0.717 0.104
0.104 0.169
0.169 0.039 0.039 0.104 0.104
GP2
GP2 0.398
0.398 0.711
0.711 0.036
0.036 0.036
0.036 0.122 0.122 0.036 0.036
GP3
GP3 0.152
0.152 0.820
0.820 0.130
0.130 0.182
0.182 0.122 0.122 0.152 0.152
GP4 0.284 0.814 0.114 0.194 0.100 0.115
GP4 0.284 0.814 0.114 0.194 0.100 0.115
CC1
CC1 0.206
0.206 0.138
0.138 0.708
0.708 0.215
0.215 0.184 0.184 0.207 0.207
CC2 0.206 0.106 0.220
CC2 0.206 0.106 0.851
0.851 0.220 0.121 0.121 0.107 0.107
CC3 0.122 0.077 0.806 0.370 0.038 0.077
CC3
CC4
0.122
0.108
0.077
0.107
0.806
0.867
0.370
0.245
0.038 0.126 0.077 0.107
CC4 0.108 0.107 0.867 0.245 0.126 0.107
ECO1 0.106 0.003 0.049 0.804 0.048 0.106
ECO1 0.106 0.003 0.049 0.804 0.048 0.106
ECO2 0.110 0.107 0.047 0.815 0.029 0.110
ECO2
ECO3 0.110
0.183 0.107
0.118 0.047
0.124 0.815
0.751 0.029−0.0640.110 0.124
ECO3
ECO4 0.183
0.119 0.118
−0.026 0.124
0.119 0.751
0.699 −0.064 0.170 0.124 0.120
ECO4
ECO5 0.119
0.193 −0.026
0.106 0.119
0.086 0.699
0.786 0.170 0.170 0.120 0.087
ECO5
ECP1 0.193
−0.030 0.106
0.212 0.086
0.139 0.786
−0.115 0.170 0.790 0.087 0.139
ECP1
ECP2 −0.030
0.058 0.212
0.137 0.139
0.074 −0.115
0.106 0.790 0.836 0.139 0.074
ECP3
ECP2 0.060
0.058 0.117
0.137 0.038
0.074 0.058
0.106 0.836 0.813 0.074 0.061
ECP4
ECP3 0.065
0.060 0.019
0.117 0.029
0.038 0.322
0.058 0.813 0.666 0.061 0.029
ECP4
BP1 0.065
0.160 0.019
0.165 0.029
0.069 0.322
0.029 0.666 0.158 0.029 0.787
BP2
BP1 0.261
0.160 0.019
0.165 0.186
0.069 0.174
0.029 0.158 0.019 0.787 0.711
BP3
BP2 0.140
0.261 0.125
0.019 0.166
0.186 −0.030
0.174 0.019 0.138 0.711 0.858
BP4 0.163 0.170 0.131 0.093 0.168 0.830
BP3 0.140 0.125 0.166 −0.030 0.138 0.858
BP4 0.163 0.170 0.131 0.093 0.168 0.830
5.2. Structural Model
5.2. Structural Model the relationships between constructs by testing the proposed model
We examined
usingWe SEM. The results
examined are summarized
the relationships betweenin Figure 2 and
constructs byTable
testing5. the
Theproposed
results ofmodel
our empirical
using SEM. Thepresent
examination results are
thatsummarized
three of thein four
FigureGSCM
2 and Table 5. Thehave
practices results of our empir-
statistically significant
ical examination
relationships withpresent
ECP.that three ofin
As shown the four 4,
Table GSCM
IEM,practices
CC, andhaveECOstatistically signifi-
have positive, significant
cant relationships with ECP. As shown in Table 4, IEM, CC, and ECO have positive,
effects on ECP. These results provide support for H1, H3, and H4 (H1: β = 0.143, t = 1.834; sig-
nificant
H3: β =effects
0.197,ont ECP. TheseH4:
= 1.913; results
β =provide
0.145, support for H1,
t = 1.899). H3, and H4
However, the(H1: β =of
effect 0.143,
GP on ECP
t = 1.834; H3: β = 0.197, t = 1.913; H4: β = 0.145, t = 1.899). However, the effect of GP on ECP
shows no statistically significant result (H2: β = 0.120, t = 1.107), hence H2 is not supported.
shows no statistically significant result (H2: β = 0.120, t = 1.107), hence H2 is not supported.
In regards to explanatory power, this model explains 19.4% of the variance in ECP. The
In regards to explanatory power, this model explains 19.4% of the variance in ECP. The
investigation
investigation on onthethe relationship
relationship between
between ECPECPand BP and BP shows
shows a stronga positive
strong positive association
association
(H5: β = 0.555, t = 10.322). Thus, H5 is also supported, and the model explains
(H5: β = 0.555, t = 10.322). Thus, H5 is also supported, and the model explains 30.8% of the 30.8% of the
variance in
variance in BP.BP.

IEM

GP
ECP H5: 0.555*** BP
R2=0.194 t = 10.322 R2=0.308
CC

ECO

Figure 2.
Figure 2.Results
Resultsofof
hypothesized research
hypothesized model;
research *** p <***
model; 0.001; * p < 0.05.
p < 0.001; * p < 0.05.
Table 5. Comparison of hypotheses test results.
Sustainability 2022, 14, 1836 16 of 23

Table 5. Comparison of hypotheses test results.

Standardized Coefficient
Hypotheses Results
(t-Value)
Internal Environmental Management
H1 0.143 (1.834) * Supported
→ Economic Performance
Green Purchasing
H2 0.120 (1.107) Not Supported
→ Economic Performance
Cooperation with Customer
H3 0.197 (1.913) * Supported
→ Economic Performance
Eco-design
H4 0.145 (1.899) * Supported
→ Economic Performance
Economic Performance
H5 0.555 (10.322) *** Supported
→ Business Performance
Fit indices: χ2 = 537.603 (d.f. = 287), χ2 /d.f. = 1.87, CFI = 0.931, SRMR = 0.080, RMSEA = 0.067. *** p < 0.001; * p < 0.05.

6. Discussion
Internal environmental management was positively related to the ECP (H1). This is in
line with De Giovanni [53], where internal environmental management demonstrated a
strong relationship with all three attributes of the triple bottom line. Internal environmental
efforts are now generally regarded to have a positive impact on economic performance.
Corporate social responsibility is performed under the umbrella of ESG these days. Larry
Fink, the CEO of BlackRock, the leading global asset and risk management company, said
they would not invest in companies that do not adopt ESG strategies or companies with
high climate risk [99]. He also said the firm would double its offerings of ESG ETFs in a
few years. The financial industry’s backing of the ESG movement is based on the idea that
environmentally conscious companies would perform better in the long run.
The environmental performance, a non-financial indicator, improves along with oppor-
tunities for resource utilization and cost reduction. Nike has cut 3.5 million pounds of waste
since 2012 by reducing raw materials going into each shoe. Nestle SA reduced material
and shipping costs but increased recyclability by designing plastic bottles ultra-thin and
using recyclable materials [12]. Additionally, investors analyze and evaluate companies
using ESG criteria. Mike Winterfield, founder of Active Impact Investments mentioned that
companies desiring to get investment should have business models making them profitable
regardless of government intervention [100].
Better financial performance is expected when top management supports internal
environmental management and gets the employees involved. Utilizing transformation
leadership theory, Waldman et al. [101] stressed that intellectually stimulated leaders
strived to balance performance goals and environmental responsibilities. Velte [102] also
found the significant moderating effect of CEO power on the relationship between ESG
achievement and financial performance. Internal GSCM practices are composed of eco-
design and internal environmental management as dimensions, and they are found to have
a significant influence on economic performance [37].
The current study found that green purchasing was not related to economic perfor-
mance (H2). This is in line with De Giovanni [53] showing a weak relationship between
external environmental management and economic performance. Collaboration with sup-
pliers for GSCM and suppliers’ efforts for the environment were not directly related to
economic performance. We assume that for the current research participants, the level
of collaboration with suppliers did not reach the threshold in achieving economic perfor-
mance. Additionally, survey participants are first-tier suppliers that provide parts to large
electronics corporations, and their suppliers are second-tier suppliers. Second-tier suppli-
ers will face less direct pressure for green practices and have fewer available resources to
spare for green practices. Since the parts procurement market is extremely competitive,
the focal companies barely meet the price, quality, and environmental requirements to
pursue further GSCM practices such as collaborating with their supplier firms. Within the
relationship between parts suppliers and the final product manufacturer, the latter typically
Sustainability 2022, 14, 1836 17 of 23

have the authority to make a purchasing decision, bring in suppliers for cooperation in
assembling parts [9]. Therefore, it seems that survey companies might not have the chance
to realize economic profits through green purchasing. Evaluation of the first-tier suppliers
themselves is highly dependent on how they manage their own suppliers.
Cooperation with customer firms was positively related to economic performance
(H3). Interorganizational sharing of knowledge and process integration results in enhanced
collaboration and control between participants in the supply chain, bringing the positive
environmental performance of firms [50]. H3 was partially supported with a p-value of less
than 0.05. Customers’ opinions on GSCM, such as cleaner production and green packaging,
may play an essential role in creating eco-friendly finished goods. Reflecting customers’
opinions potentially increases revenues by creating products appealing to customers’ needs
and consequently support economic performance. Because their customers are large
electronics companies, the suppliers would be inclined to take into account customer tastes
to maintain the partnership.
Eco-design was positively related to economic performance (H4). Internal GSCM
practices are comprised of eco-design and internal environmental management as dimen-
sions, and they are found to have a significant influence on economic performance [37].
Eco-design is a concrete and practical environmental effort that focuses on the finished
goods, and this study found that eco-design was a factor strongly impacting economic per-
formance. Companies can generate profits only when customers purchase their products
or service. Eco-friendly or green design attracts green consumers’ attention, and industries
are forced to be sustainably innovative [103].
The government should invest in companies abiding by ESG criteria and practices.
However, these efforts should be based on the profitability of the company. From a
company’s point of view, generating profits via cost reduction is still a priority. Therefore,
one of the most important elements of successful GSCM could be eco-friendly design, which
is an environmental effort focusing on finished goods attracting customers. The cost can be
lowered when reusability, remanufacturability, and design for disassembly are considered
from the development stage. For example, recyclability of a product could be helped
with modular design as Yang et al. [104] suggested. Achieving eco-design along with the
consideration of efficiency will have a positive impact on economic performance [105].
Economic performance was strongly related to business performance (H5). Li et al. [106]
stressed that effective SCM practices help secure the competitive advantage of the supply
chain and improve business performance of participating companies. The result of H5
showed the significant impact of cost reduction on the overall business performance of
electronics firms. It is expected that the economic performance achieved by environmental
efforts will help retain the competitive position and asset utilization, subsequently resulting
the sustainability of the companies and their supply chains. The Chinese SMEs’ efforts to
achieve cost reduction and quality improvement also support the result of our study. As the
Chinese government has initiated promotional plans for SMEs, Chinese SMEs experienced
various challenges. They concentrated on relationship management and cost reduction,
and quality improvement facilitated competitiveness according to Singh et al. [107]. As
the relationship between environmental practices and economic performance moves from
an intervening one to a complementary one over time [12], there seems to be a growing
perception that proactive and systematic responses to the environment reduce corporate
risks such as waste treatment fees and accident fines, and eventually make the supply chain
more sustainable.
Previous research shows a conflicting result as well. For example, Green et al. [38]
found that adopting GSCM practices in manufacturing firms can improve economic as well
as environmental performances. Economic and environmental performances influence BP
through operational performance, but they found economic performance did not directly
influence BP. According to Junaid et al. [108], green managerial innovation brought positive
firm performance in the Pakistan manufacturing industries while green process innovation
negatively impacted firm performance. The assumed reason for the difference is that the
Sustainability 2022, 14, 1836 18 of 23

costs involved with manufacturing processes and operations procedures outweigh the
extra profits gained from the process innovation. Conflicts related to green innovation on
business performance might be relevant to the type of innovation the focal company is
involved. Therefore, to see the full implication of GSCM, a research model should include
process performance along with economic and business performance. Additionally, green
innovation can reach positive firm performance by practicing green managerial innovation
rather than green process innovation.
The current research on first-tier suppliers demonstrated that internal environmental
management practices, close cooperation with the customer companies, and eco-design
would bring economic performance as well as business performance. Singling out these
first-tier characteristics should guide customer firms on how to manage their first-tier
characteristics separate from their second-tier and tiers further from them. Moreover,
the environmental pressure passed down from the customer companies leads the first-
tier suppliers to benefit from their GSCM activities economically. However, there are
no significant relationship benefits between the first-tier and second-tier suppliers. This
demonstrates that the success of GSCM might rely upon managing suppliers farther up the
supply chain.

7. Conclusions
This study examines the effects of GSCM practices on economic performance and
business performance of SMEs in the electronics industry. This study singled out a group of
SMEs who are subcontractors of large companies under compliance pressure with a strong
motivation to innovate. Findings of the study are as follows: (1) internal environmental
management, cooperation with customers, and eco-design influence the economic perfor-
mance of SMEs, first-tier suppliers of large electronic corporations positively, (2) green
purchasing did not have any significant relationship with economic performance of the focal
companies, and (3) economic performance has a positive influence on business performance
of the firms.
The implications can be drawn in several major ways. First, investigating only first-tier
suppliers as the focal companies of their own supply chains is academically significant,
filling the gap of tier-specific GSCM supplier research. The first-tier group demonstrated
that close customer connections, innovative design ideas, and internal management prac-
tices result in positive economic benefits and business performance. Building tier-specific
characteristics should also help large corporates to practice their due diligence in their
supply chains which are progressively instituted as enforceable laws.
Second, this study revealed that corporate environmental efforts are linked to per-
formance providing evidence for corporate sustainability. Now corporate environmen-
tal efforts go beyond nominal activities as part of public relations strategies to improve
the company’s image and pursue sustainable goals positively, influencing economic and
business performance.
Thirdly, this research should further strengthen the relationship between SMEs’ GSCM
practices and economic as well as environmental benefits. The current research on the
GSCM practices and positive business performance can boost SMEs’ adoption of green
practices producing positive environmental impacts. Additionally, expectations on posi-
tive economic as well as business performance can induce voluntary adoption of GSCM
activities helping with customer corporation’s due diligence compliance.
And finally, this study compared the impact of environmental efforts with suppliers
to those with customers. In the Korean electronics market, cooperation with customers is
operated in the form of collaboration between small partner companies and their suppliers
and is found to have a significant effect on financial performance. In addition, the electronics
industry requires continual adoption of innovative processes compared to other sectors, and
it is expected that the industry would adopt the environmental requirements of customers
easier. The partnership between the suppliers and manufacturing firms within South
Korean electronics industries is affected by factors such as profit sharing, mutual trust,
Sustainability 2022, 14, 1836 19 of 23

information sharing, and participating in decision-making which factors can be considered

to improve the relationship with suppliers [109].
This study has a couple of limitations. One, this study analyzed the Korean electronics
industry only. Further studies could investigate GSCM impacts on performances in other
sectors or in the electronics industry of other countries to generalize our findings. Second,
this study focused on two types of performances. Other performance measures such as
efficiency, environmental, or ESG performance could be investigated to accommodate vary-
ing needs. Especially ESG performance is emerging as a critical dimension for predicting
corporate sustainability.
For future studies, other ESG performance measures could be tested with SMEs’
GSCM practices. Moreover, firm size (small vs. medium) or external environmental factors
could be factored in studying GSCM performance studies. For example, the firm size
(small vs. medium) or firm’s governance type can be used as crucial moderation factors
for further analysis. Studying different tier groups of suppliers will also be academically
meaningful and strongly suggested for future studies. The current research on GSCM are
moving from finding determinants of various ESG-related performances towards finding
the most sustainable suppliers using various analytical techniques based on various criteria.
What the future research can pursue to complement the current trend would be examining
whether there are tier-specific features affecting the selection of sustainable suppliers.

Author Contributions: Conceptualization, S.R.P., S.T.K. and H.-H.L.; methodology, S.T.K.; validation,
S.R.P., S.T.K. and H.-H.L.; formal analysis, S.T.K.; investigation, H.-H.L.; data curation, S.T.K.; writing—
original draft preparation, S.R.P., S.T.K. and H.-H.L.; writing—review and editing, S.R.P. and H.-H.L.;
visualization, H.-H.L.; supervision, H.-H.L. All authors have read and agreed to the published version
of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Restrictions apply to the availability of these data.
Conflicts of Interest: The authors declare no conflict of interest.

Appendix A
For the characteristics of the responding firms, see Table A1.

Table A1. Characteristics of the responding firms.

Characteristics Frequency %
A. Respondents’ Job Titles
Top Executive 8 4.2
Senior Executive 28 14.5
Middle Manager 138 71.5
Employee in Charge 19 9.8
Total 193 100.0
B. Respondents’ Work Experience (years)
Less than 5 50 25.9
5–10 76 39.4
11–15 52 26.9
More than 15 15 7.8
Total 193 100.0
C. Firm Size (# of employees)
50–200 118 61.1
201–400 49 25.4
401–500 26 13.5
Total 193 100.0
Sustainability 2022, 14, 1836 20 of 23

Table A1. Cont.

Characteristics Frequency %
D. Industry Classification of the Customer Firms
(multiple answers)
Electronics 193
Telecommunication 7
Automobile 2

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