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Ecological modernisation of Chinese export manufacturing

via green logistics management and its regional implications

Kee-hung Lai a,, Christina W.Y. Wong b,1, T.C.E. Cheng a,2

a Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kongb Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong

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

Article histo ry:

Received 1 April 2011

Received in revised form 4 August 2011

Accepted 5 October 2011

Available online 3 November 2011

We investigate how various ecological modernisation forces in terms of environmental regula-

tions, customer pressure, and economic pressure are associated with the implementation of

green logistics management (GLM) by Chinese export manufacturers to manage the logistics

life cycle of their products. Based on survey data from 128 Chinese export manufacturers, we

find that customer pressure is a significant factor affecting the extent of their GLM implementa-

tion, which in turn is positively associated with their environmental, financial, and operational

performance. Contrary to our expectation and previous findings on environmental management

in developed countries, bothenvironmental regulationsand economic pressureare notsignificant

drivers for Chinese export manufacturers to pursue GLM.

2011 Elsevier Inc. All rights reserved.

Keywords:

Ecological modernisation

Environmental management

Chinese export manufacturing

Developing economy

Empirical

1. Introduction

Under growing pressure for ecological modernisation, which stresses implementing innovative management practices to mit-

igate the negative environmental impacts from the pursuit of profitable growth, enterprises in China are increasingly seeking en-

vironmentally sustainable solutions that improve business performance while preserving the local, as well as the global

environment[1,2]. In particular, Chinese export manufacturers face the need to mitigate the environmental damage of their ac-

tivities by implementing management systems with formal procedures to monitor, report, and control their merchandise's logis-

tics life cycle[3,4].

Green logistics management (GLM) aims to deploy processes that produce and distribute goods in a sustainable way, with a

view to reducing waste and conserving resources in performing logistics activities[5]. GLM can be viewed as a management ap-

proach by which firms formally manage, evaluate, report, and control the environmental impacts of their actions throughout thelife cycles of their products [6]. This management approach requires firms to: (i) adopt procedures to formally operate, document,

and report their logistics activities, (ii) conduct evaluation of their performance, (iii) inform and communicate with various stake-

holders regarding their logistics activities, and (iv) comply with environmental standards.

Technological Forecasting & Social Change 79 (2012) 766770

Corresponding author. Tel.: +852 2766 7920.

E-mail addresses:lgtmlai@polyu.edu.hk(K. Lai),tcchris@polyu.edu.hk(C.W.Y. Wong),l gtcheng@polyu.edu.hk(T.C.E. Cheng).1 Tel.: +852 2766 6415.2 Tel.: +852 2766 5215.

0040-1625/$

see front matter 2011 Elsevier Inc. All rights reserved.doi:10.1016/j.techfore.2011.10.004

Contents lists available at SciVerse ScienceDirect

Technological Forecasting & Social Change

http://-/?-http://-/?-http://dx.doi.org/10.1016/j.techfore.2011.10.004http://dx.doi.org/10.1016/j.techfore.2011.10.004http://dx.doi.org/10.1016/j.techfore.2011.10.004mailto:lgtmlai@polyu.edu.hkmailto:tcchris@polyu.edu.hkmailto:lgtcheng@polyu.edu.hkhttp://dx.doi.org/10.1016/j.techfore.2011.10.004http://www.sciencedirect.com/science/journal/00401625http://crossmark.crossref.org/dialog/?doi=10.1016/j.techfore.2011.10.004&domain=pdfhttp://www.sciencedirect.com/science/journal/00401625http://dx.doi.org/10.1016/j.techfore.2011.10.004mailto:lgtcheng@polyu.edu.hkmailto:tcchris@polyu.edu.hkmailto:lgtmlai@polyu.edu.hkhttp://dx.doi.org/10.1016/j.techfore.2011.10.004http://-/?-http://-/?-http://-/?-http://-/?-

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In this study we seek to understand the impact of Chinese export manufacturers' actions on the environment and on the rep-

utation of their developed-country customers[7]by exploring the ecological modernisation forces (EMFs) encountered by the

former. Specifically, the purposeof this study is threefold, namely: (i) examining the key EMFs from the institutional perspective

of environmental responsibility that drives Chinese export manufacturers to implement GLM, (ii) investigating the performance

impact of GLM implementation in Chinese export manufacturing, and (iii) exploring the mediating role that GLM plays in help-

ing adopting manufacturers to cope with the EMFs in their pursuit of preserving the environment without compromising busi-

ness performance.

2. Theoretical background and hypotheses

GLM advocates that enterprises adopt an array of environmental management practices such as reducing carbon dioxide emis-

sions in distribution, remanufacturing, reuse, recycling, extending the product life cycle, and capturing value from used products

[810]. The adoption of such practices is highly desirable for Chinese export manufacturers in their quest to reduce the environ-

mental harm of their activities and to institutionalise changes to develop an ecologically modernised industry[11,12]. By collect-

ing and analysing returned products, Chinese export manufacturers can identify problems related to product use patterns, as well

as opportunities for product improvement and development. Such indirect market feedback provides useful input to Chinese ex-

port manufacturers to improve product design, sourcing decisions, forward and reverse logistics planning, and new product de-

velopment [7]. Such an approach can help the Chinese export manufacturing industry sustain its world leadership position in

manufacturing, and alleviate the local and regional environmental problems caused by the corresponding product flows. By

implementing GLM, Chinese export manufacturers stand a better chance of reducing the environmental burden of developing,

distributing, and disposing of their products in overseas markets, while improving their operational and financial performance.

Therefore, we predict that:

Hypothesis 1 (H1). The extent of GLM implementation by Chinese export manufacturers is positively related to their environ-

mental, financial, and operational performance.

Chinese enterprises have been fraught with challenges in accessing natural resources in recent years due to polluted air and

water, energy shortage, and deforestation as a result of rapid industrialisation[13,14]. Dwindling natural resources are detrimen-

tal to China's continued growth and economic development. With resource scarcity and rising raw material prices, e.g., crude oil,

copper, nickel, steel, and resin, where material costs make up approximately 50% of the total cost of the goods sold, Chinese ex-

port manufacturers are under economic pressure to reduce material costs by taking such environmental initiatives as using repro-

cessed or scrap materials for new merchandise production. At the same time, they have to comply with environmental

requirements and market expectations in exporting and sales to foreign customers. These customer-based environmental re-

quirements vary from ISO 14000 certification [15]to retrieval of reusable parts or products from their countries. In many in-stances, these requirements are imposed by customers to fulfil their own environment-related obligations, as well as to

demonstrate their environmental responsibility [14]. In addition, Chinese export manufacturers are increasingly expected to com-

ply with the environmental regulations of the countries that import their manufactured products, e.g., WEEE and REACH [16].

Covering product development, as well as management of the logistics life cycle, such regulations mandate Chinese export man-

ufacturers to collect end-of-life products and capture their residual value to satisfy the environmental expectation of the interna-

tional market. The implementation of GLM by Chinese export manufacturers reflects that the industry is ecologically modernising

[17]. In view of the above observations, we expect that:

Hypothesis 2 (H2). The extent of the ecological modernisation forces as characterised by customer, economic, and regulatory

pressuresencountered by Chinese export manufacturers is positively related to the extent of their GLM implementation.

According to Mol[18], the ecological modernisation of China requires changes by Chinese export manufacturers to address

emerging environmental problems. Their roles in resolving these problems and their actions to improve and balance their eco-

nomic and environmental performance are crucial to environmental protection. GLM is highly valuable to the ecological modern-

isation of China's industry, the export manufacturers of which often strive for self-interest fulfilment and consider environmental

issues secondary. For instance, the worsening environmental problems in China have reached a point that erodes its GDP growth

[14]. This situation urgently begs for a balance between economic and environmental performance in running such a high-

polluting sector as manufacturing[19]. To strike such a balance requires the efficient use of resources such as energy, fuel, raw

materials, and water, as well as the effective manufacturing and distribution of products that create customer value. Due to the

growing desire for environmental protection in international markets, many Chinese export manufacturers have pursued GLM

in the hope of improving their environmental, financial, and operational performance, which are the underlying goals of ecolog-

ical modernisation[17]. Accordingly, we conjecture that:

Hypothesis 3 (H3). GLM mediates the relationships between the ecological modernisation forces as characterised by customer,

economic, and regulatory pressures encountered by Chinese export manufacturers and their environmental, financial, and op-

erational performance.

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3. Research methodology

3.1. Data collection and sample

Following prior studies [e.g.,20], we collected empirical data to examine the EMFs encountered by Chinese export manufac-

turers3 and the ways in which GLM is helpful for them to meet the escalating environmental requirements for their merchandise.

To test the hypotheses, we collected primary data using the key-informant survey design from a random sample of 800 Chinese

export manufacturers drawn from the database Dun & Bradstreet. The development of our research instrument in the form of a

survey questionnaire for primary data collection underwent a series of validation procedures .4

3.2. Measures

In developing the survey questionnaire, we operationalise the construct variables of interest based on the environmental and

general management literature. The scales for measuring the variables, the validity and reliability issues, the survey administra-

tion procedures, discussion of the issues of non-response bias and common method variance are reported in Lai and Wong [3].

4. Tests of hypotheses

We tested all the hypotheses using the maximum likelihood estimation with the sample covariance matrix as input. The re-

sults indicate that our theorised relationships provide a reasonable fit to the data (2/df=1.63, pb0.001; comparative fit

index=0.90; incremental fit index=0.90; root mean square error of approximation=0.07). Fig. 1 summarises the results ofthe structural model parameter estimates. We find that customer pressure is positively related to Chinese export manufacturers'

extent of GLM implementation. However, the results do not support our speculation that environmental regulations and econom-

ic pressure are positively associated with GLM. These findings provide partial support for H2. Consistent with our expectation,

implementing GLM is positively associated with environmental, financial, and operational performance, lending support for H1.

H3 predicts that GLM mediates the relationships between the EMFs and the various performance measures. We took three

steps to analyse the mediating effect[21]. First, we tested if each EMF influences GLM and find a significant relationship between

customer pressure and GLM (=0.33,pb0.01). Second, we tested if each EMF influences the various performance measures. The

results show that economic pressure has significant relationships with operational performance (=0.31,pb0.05) and financial

performance (=0.676,pb0.01). Lastly, we tested if GLM affects the various performance measures with the control of the EMFs.

We find that the previously significant paths of economic pressure and operational and financial performance are no longer sig-

nificant. These results demonstrate that GLM plays a mediating role in the relationships between the EMFs and the various per-

formance measures, lending support for H3.

5. Discussions

Our findings show that GLM is a viable option for Chinese export manufacturers to realise their goal of ecological modernisa-

tion. We find strong evidence that GLM implementation mediates the relationships between the EMFs and the desired perfor-

mance outcomes espoused in ecological modernisation, revealing the important role that GLM plays in coping with the EMFs

to improve and balance economic and environmental performance.

Although the three EMFs under study, namely environmental regulations, customer pressure, and economic pressure, are all

seemingly important to driving Chinese export manufacturers to implement GLM, we only find that customer pressure has such

an influence. The findings suggest that regulatory and economic pressures are not the primary considerations of Chinese export

manufacturers in implementing GLM for environmental protection. We find that Chinese export manufacturers' GLM implemen-

tation is stimulated more by legitimacy and relationship continuation with customers than by regulatory and economic forces.

Although Chinese export manufacturers experience the economic pressure of increasing disposal and raw material costs, and

they recognise the benefit of cost saving from retrieving reusable parts, economic pressure is not significant enough as a primaryreason for them to implement GLM. Rather, the focus on satisfying customer requirements better explains their quest for perfor-

mance improvement. The findings indicate further that Chinese export manufacturers implementing GLM at a relatively high

level are experiencing higher levels of the EMFs and that their performance outcomes are associated with the extent of GLM im-

plementation in a positive manner. On the other hand, manufacturers operating at low levels of the EMFs tend to be associated

with lower levels of GLM implementation and performance outcomes. This result provides support for our theorisation that Chi-

nese export manufacturers pursue GLM to reap environmental, operational, and financial benefits, which are the underlying goals

of ecological modernisation.

3 Chinese export manufacturing rms involved in producing, distributing, and collecting products for international markets make up the population of this

study. We study Chinese export manufacturers because of the global importance ofmade in Chinaproducts. As globalisation lowers barriers to trade, Chinese

export manufacturers are expanding their role as major exporters in the world market, while facing strict international regulations that have a direct bearing on

their logistics operations, e.g., WEEE. In addition to growing international concerns about the environmental issues of product ows across national borders, there

are increasing pressures for resource conservation and modernity in China. Chinese export manufacturers are therefore of particular relevance and importance as

targets in this study.4 Details of the survey instrument validation procedures are available from the corresponding author upon request.

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5.1. Implications for research

Consistent with Economy and Lieberthal[14], Chinese export manufacturers seek legitimacy and business growth by satisfy-

ing customer needs through GLM implementation, while remaining passive in complying with the two extremes of EMFs, namely

mandatory compliance and voluntary conformance, for legal sanction avoidance and cost reduction, respectively.

This paper adds knowledge to the environmental aspect of logistics management and the drivers of ecological modernisation

of the Chinese export manufacturing industry via implementing GLM and their performance implications. We obtain evidence on

how Chinese export manufacturers respond to various institutional pressures from different EMFs for environmental protection

beyond product manufacturing through managing the logistics life cycle of their merchandise. Our study provides useful input for

future research on environmental management with a broader scope, which should consider the institutional forces embedded in

the drivers of ecological modernisation in examining corporate environmental actions for environmental protection.

Our study answers the call for research beyond the adoption of environmental management systems such as ISO 14000 in the

context of an emerging globalised economy [22], which requires enterprises in different countries to show environmental respon-

sibility by considering the environmental implications of their products' physical flows throughout their life cycles. Our study has

laid the foundation for future research to explore environmental management issues from a broader perspective that takes into

account the logistics life cycle of merchandise as a way of achieving ecological modernisation in developing countries.

5.2. Implications for practice

Our findings thatenvironmentalregulations and economic pressure are insufficient to drive GLM implementation have important

implications for policy makers and managers. First, regulatory bodies in China should further extend their emphasis beyond specific

business activities such as pollutants generated in production processes to other factors conducive to ecological modernisation of the

manufacturing industry [18]. The regulatory emphasis of China on controlling pollution from individual manufacturing activities sug-

gests the need for improving the environmental performance of the entire logistics life cycle of the merchandise produced by their

manufacturing enterprises and for foreign companies to procure from manufacturers with GLM implementation for reducing re-source consumption and wastage in China. Second, our study results provide empirical evidence that Chinese export manufacturers

implement GLM in support of their quest for ecological modernisation and environmental performance profitably. Policy makers in

China should consider promoting green logistics activities and highlight the value of environmental management for business growth

in addition to exerting regulatory pressure. Such a strategy is also conducive to enhancing the competitiveness and accelerating the

ecological modernisation of the Chinese export manufacturing industry, which is increasingly expected by the international commu-

nity to undertake measures to tackle the global degrading environmental conditions. There is also a need to raise the awareness of

policy makers and Chinese export manufacturers of implementing GLM as a means to achieve ecological modernisation and the cor-

responding performance outcomes.While existing environment management practices have largely been founded on the adoption of

environmental management systems such as the ISO 14000 standards, managers may consider introducing new metrics to evaluate

organisational efforts to manage the environment-related aspects of their logistics functions[23].

Moreover, the mediating role of GLM suggests that export manufacturers in China can attain performance gains through GLM im-

plementation that helps overcome the different EMFs. The performance contributor role of GLM for environmental, operational, and

financial improvements is evident from ourstudy results, furnishingsupport for managers to consider GLMas an opportunity to excel,rather than a cost burden in their efforts to cope with the EMFs. There is a belief in the requirement of slack resources for

* Significant at p< 0.05

** Significant at p< 0.01

*** Significant at p< 0.001

t-values are in brackets

Environmental

regulation

Customer

pressure

Economic

pressure

GLM

Environmental

performance

Financial

performance

Operational

performance

-0.05

0.33

0.18

0.26

0.26

0.35

Fig. 1.A summary of the structural model parameter estimates.

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environmental management [24]. It is justifiable for the Chinese export manufacturing industry to embrace GLM with the ecological

modernisation goals of environmental protection and performance gains achieved through greening their logistics activities. For pol-

icy makers of China, they should understand the role that customer pressure plays in modernising Chinese manufacturing regarding

the environmental aspect. Internationalising the manufacturing sector can increase the exposure of Chinese export manufacturers to

the environmental expectations of the global market and hence the intensity of their GLM implementation as a means towards

accomplishing ecological modernisation[25]. Due to international customer pressure, the Chinese export manufacturing industry

can benefit from adopting environmentally sound energy-efficient machinery, advanced manufacturing equipment, eco-product de-

sign, and recycling materials. As the manufacturing logistics chain spans Asian regions from material sources to consumer markets in

Western countries, the Chinese government should play a role in promoting thechain-wide concept and facilitate the integrationof

different actors togreen the logistics chain, preventing the spread of pollution from local factories to global places of consumption.

Beyond environmental regulations, potential policy initiatives of China can be directed towards enforcing international environmen-

tal standards,offering trainingand technical assistance in terms of pollutioncontroland resource conservation,and providing funding

support for the Chinese export manufacturing industry to gain competitiveness with ecological modernisation in the world market.

Acknowledgement

The authors are grateful to the Editor and two anonymous reviewers for their constructive and useful comments on an earlier

version of the paper. This research was fully supported by a grant from the Research Grants Council of the Hong Kong Special Ad-

ministrative Region, China (GRF PolyU 5434/08H).

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Kee-hung Laiis Associate Professor with research interest in logistics management at the Department of Logistics and Maritime Studies, The Hong Kong PolytechnicUniversity. He has co-authored three books and his research papersappearin various journals such as California Management Review, Communications of the ACM,Jour-nal of Business Logistics, and others.

Christina W.Y. Wongis Assistant Professor at the Business Division of Institute of Textiles and Clothing, The Hong Kong Polytechnic University. Her work has been pub-lished inInformation & Management,Omega,International Journal of Production Economics,International Journal of Shipping and Transport Logistics, and others.

T.C. Edwin Chengis Chair Professor of Management at the Department of Logistics and Maritime Studies of The Hong Kong Polytechnic University. His researchinterests are in operations management and operations research. He has published over 460 papers in such journals asCalifornia Management Review,IEEE Trans-actions on Automatic Control, Journal of Operations Management,Management Science,MIS Quarterly,Operations Research, Production and Operations Management

andSIAM Journal on Optimization. He has co-authored nine books published by Chapman and Hall, McGraw-Hill, and Springer.

770 K. Lai et al. / Technological Forecasting & Social Change 79 (2012) 766770