You should start by reading the original article: Paul Hong, James Jungbae Roh, Greg Rawski, (2012),"Benchmarking sustainability practices: evidence from manufacturing firms", Benchmarking: An...

You should start by reading the original article:
Paul Hong, James Jungbae Roh, Greg Rawski, (2012),"Benchmarking sustainability practices: evidence from manufacturing firms", Benchmarking: An International Journal, Vol. 19 Iss: 4 pp. 634 – 648
http://dx.doi.org/10.1108/14635771211258052
Critically evaluate the arguments made there: this should provide a core component of your essay. Make sure that you understand what the authors mean by ‘sustainability’ – this is a word that’s meaning varies in different contexts.
You are being asked to consider whether benchmarking ‘sustainability practice’ will be helpful when examining different contexts. Essentially, then, this essay is asking you to consider how important context is – and whether practices are likely to be comparable from one context to another. As part of this you might like to evaluate what practices, or elements of practices, are sufficiently interchangeable
to be comparable, and which are not. This then should take your essay to examining the principles of benchmarking. As part of this, you may wish to consider what benchmarking systems are successful in practice, and you could draw upon your own experiences here.
You should avoid quoting excessively from material published by consultants and practitioners that is widely available on the Internet unless you critically evaluate the claims that are made. You are likely to find much more relevant material in academic journals.
This assignment will ideally show students ability to critically evaluate an academic article, and their ability to relate theory to practice.
Benchmarking sustainability
practices: evidence from
manufacturing firms
Paul Hong
Department of Information Operations and Technology Management,
University of Toledo, Toledo, Ohio, USA
James Jungbae Roh
Rohrer College of Business, Rowan University, Glassboro, New Jersey, USA, and
Greg Rawski
Schroeder Family School of Business Administration, University of Evansville,
Evansville, Indiana, USA
Abstract
Purpose – With increasing emphasis on the environment, firms are required to include sustainability
practices at all levels – strategic, operational, and outcome measures. The purpose of this paper is to
present a research model that defines sustainability practices in the context of the competitive business
environment, strategic driver, operational and supply chain practices, and performance outcomes.
Design/methodology/approach – This paper identifies research gaps in the areas of integration of
sustainability practices across functional levels within firms and across networks. In total,
379 companies were analyzed in structural equation modeling.
Findings – This study has three important findings: First, firms striving for responsiveness to
market and customers also improve environmental performance; second, this study confirms lean
practices as an important mediator to achieve excellent environmental performance; third, the focal
company takes the lead in achieving environmental performance, and suppliers are in the supportive
circle of influence.
Originality/value – This study provides a research model based on rich theoretical support.
It further provides reliable measures of sustainability practices as benchmark tools.
Keywords Responsive product strategy, Environmental performance, Lean practices,
Supply chain restructuring, Empirical study, Manufacturing industries, Supply chain management,
Sustainable development
Paper type Research paper
Introduction
Increasingly, firms have wrestled with sustainability practices at all levels – strategic,
operational, and outcome measures – for their competitive advantage (Zhu and Sarkis,
2004). Benchmarking is also important in improving sustainability practices. A vast
majority of firms reportedly use benchmarking in their companies for competitive
analyses, implementation of improvement programs, performance assessment, and
organizational change practices (Rigby, 2001; Gurumurthy and Kodali, 2009). Effective
benchmarking requires a shared understanding of its nature, causal relational chains,
and outcome measures useful for both small and large organizations with a reliable,
large set of data (Meybodi, 2009; Wong and Wong, 2008). Thus, benchmarking
sustainability practices requires intra- and inter-organizational practices with a set
of environmental and business performance outcomes. However, such benchmarking
has not been adequately explored (Klassen and McLaughlin, 1996; Soni and Kodali,
2010; Yang et al., 2011).
In response to research needs in this area, this study presents a research model that
defines sustainability practices in the context of the business environment, strategic
goal setting, operational improvement, supply chain restructuring (SCR) practices,
and performance outcomes. It examines the following research questions:
RQ1. What are some of the key constructs related to sustainability practices?
RQ2. What are the causal relational chains of sustainability practices?
RQ3. In the causal relationships, how are lean practices (LP), SCR, environmental
performance (EP), and firm performance (FP) related?
The paper is organized as follows. First, based on literature review, this article presents
a research model that shows how sustainability issues are approached in
manufacturing firms. Hypotheses articulate the nature of relationships between key
variables. This paper examines the interrelationships that involve responsive product
strategy (RPS), LP, supply chain innovation, EP, and performance outcomes.
This research extends the work of Dobrzykowski et al. (2011), who found that green
innovation goals are positively related to supply chain redesign, which models the
influence of value co-creation and absorptive capacity. Second, results from
379 companies worldwide add insight to practitioners to benchmark their own
organization and see how they use sustainability practices to achieve financial growth.
Third, the research results and their implications are discussed.
A model of causal chains of sustainability practices
A key driver for implementing new organization-wide practices (e.g. sustainability
practices) for any firm is its strategic initiatives (e.g. business strategic practices) that
respond to the pressures of the external environment (e.g. market requirements,
societal expectations, and government regulations). Such strategic initiatives influence
firms to adopt internal response practices that reflect the similar features of
sustainability practices (Hong et al., 2009; Yang et al., 2011). Since sustainability
requirements cover all the component parts that suppliers provide, external network
configurations that involve suppliers and customers are critical for sustainability
implementation (Liao et al., 2010; Roh et al., 2011). Internal response practices and
external network configurations will result in desirable sustainability outcomes
(Zhu and Sarkis, 2004; Soni and Kodali, 2010; Hong et al., 2010a, b). Figure 1 shows
a general model of causal chains for sustainability practices.
Literature review
Figure 2 shows the research model of sustainability practices of manufacturing firms.
This integrative research model specifies the above general model including strategic
driver (i.e. RPS), internal response practices (i.e. LP), external network configurations
(i.e. SCR), and sustainability outcomes (i.e. EP and FP). In this section, the domain of
each construct is defined with adequate literature support. The essential nature of each
construct is explained in the next section.
Responsive product strategy
Identifying a strategy can take various forms. A stream of researchers has examined
competitive priorities (Christopher and Towill, 2001; Slack and Lewis, 2002).
Competitive priorities of firms are to pursue RPS that focuses on offering products with
competitive elements in terms of innovativeness, flexibility, and frequent offerings
(Fisher, 1997; Lee, 2002). Considering the dynamic nature of business environments
(e.g. a downturn or upturn of the global economy), competitive firms are flexible
enough to make constant strategic adjustments and policy changes. Thus, RPS is
defined as a set of order winners that aim to increase market responsiveness by
reflecting customers’ needs for innovative product features, wider product
assortments, and timely product delivery.
Lean practices
LP aim to empower the workforce with enhanced sets of skills and expertise while
continuously streamlining the entire business process from sourcing to delivery. This is
accomplished by minimizing wastes and increasing quality and productivity
exemplified in the Toyota Production System (Womack and Jones, 2003; Holweg,
2007). Major LP include cellular manufacturing, continuous improvement programs,
cross-functional work force, lot size reductions, preventive maintenance, kanban, and
quick changeover techniques (Yang et al., 2011). In this study, LP are defined as a series
of organizational actions designed to achieve more with less through continuous
improvement, employee empowerment, and consistent sets of decisions.
Supply chain restructuring
SCR becomes important with an increasing availability of outsourcing (Lei and Hitt,
1995), large numbers of suppliers with manufacturing and service capabilities
(Kopczak, 1997; Camm et al., 1997), and globalization (Friedman, 2005). In a broad
context, SCR goes beyond improvements in business routines and involves strategic
policy shifts to implement group purchasing, reverse e-auction, time-based logistics,
different supply chain relationships, and employee redeployment. Effective
coordination of the flow of goods and information throughout a thoughtfully
developed supply chain can enhance a firm’s ability to respond to customer needs for
green innovative products (Dobrzykowski et al., 2011). In this research, SCR refers to
the extent of implementing action programs that will bring about significant changes
in the supply chains including changes in the suppliers’ portfolios, supplier


Figure 1.
A general model of causal
chains for sustainability
practices


Figure 2.
Research model
development, and the coordination of flow of goods (Croom, 2001; Grant, 2005; Kopczak,
1997; Roh et al., 2011).
Environmental performance
Firms take notice that EP is a key aspect of their competitive profiles
(Rothenberg et al., 2005). The 1997 Kyoto Agreement urges industrialized nations to
reduce carbon dioxide by an average of 5.2 percent below1990 levels by 2012. In response,
firmslikeWal-Mart and IBMhave communicated their green initiatives across all areas of
their business suppliers. Still, EP management in a supply chain context is a relatively
newarea of theory development (ShawandGrant, 2010; Zhu and Sarkis, 2004).This study
extends the measures used by Hong et al. (2009) and defines EP as the extent to which
a firm enhances EP, social reputation, employee satisfaction, and employee knowledge.
Firm performance
Researchers have utilized FP as one of the key measures of firms’ effectiveness and
efficiency (Yamin et al., 1999). Firm growth measures such as sales, market share,
return on sales (ROS), and return on investment (ROI) are useful in assessing
effectiveness in meeting customer demands (Koufteros et al., 2007). Thus, for the
purpose of this study, FP is defined as the extent of an organization’s achievement in
terms of sales and market share.
Hypotheses development
Responsive product strategy and lean practices
RPS aims to meet customers’ changing requirements by developing innovative
products and services and delivering them from suppliers to distributors (Hill, 2000).
A RPS is a good fit for innovative products. This requires practices that embody short
production and delivery cycles, cost reductions, and customer responsiveness
(Reichhart and Holweg, 2007). To thrive in emerging market conditions, a company has
to be capable of rapidly responding to market trends and operating as an efficient
member of an extended and increasingly global supply network (Saad and Gindy, 2007).
LP help firms align their processes to changing customer demand and trim costs in
wastes and inventory level (Hong et al., 2010a). As firms try to curtail time to market,
they will focus on LP to reduce waste and slash lead times. Thus, we hypothesize that:
H1a. The extent of RPS is positively associated with LP.
Responsive product strategy and supply chain restructuring
RPS also intends to shorten the new product development cycle while achieving
innovative processes and a wide variety of product offerings, which naturally involves
a high level of coordination and collaboration with suppliers (Hill, 2000). In a supply
chain context, new product design frequently entails searching for the right suppliers
for changing components and platforms. Firms that seek to offer more innovative,
environmentally sound products more frequently, regardless of service/product focus,
likely need to redesign and improve their supply chain (Dobrzykowski et al., 2011).
Effective implementation of a RPS thus requires trust-based ties with suppliers and
explores the possibility to develop symbiotic relationships with suppliers. In this
process, a firm may have to reconfigure its supplier base and rediscover new networks
(Camm et al., 1997; Lei and Hitt, 1995). A focal company alone may not be able to
increase the extent of responsiveness to the needs of ultimate customers. Instead, the
entire supply chain partners need to get involved in improving the complex set of
responsive requirements. RPS naturally involves restricting the supply chain for
effective collaboration of all the supply chain partners. Therefore, we hypothesize that:
H1b. The extent of RPS is positively associated with SCR.
Responsive product strategy and environmental performance
The goal of RPS is to satisfy the increasing environmental requirements. The recent
incidents such as the BP spills in the Gulf of Mexico and Toyota’s global recall
amplified consumers’ concern about the environment. Firms look for ways to enhance
creativity and idea generation to integrate environmental aspects into product design,
to bring eco-design closer to the attention of the designer in general, and to achieve
“green flagship products” by reducing toxic substances and enhancing recyclability
(Weaver et al., 2007). Thus, firms attain EP as they approach their strategic directives
(Rao, 2002). Increasingly, firms plan their RPS to achieve the EP requirements
(e.g. designing, producing and delivering environmentally safe products). EP is not the
result of mere operational or product managers. Rather, it is the result of the
organization-wide effort for a long period of time. Naturally, such RPS shows a very
strong strategic orientation toward EP (Hong et al., 2009). Thus, we hypothesize that:
H1c. The extent of RPS is positively associated with EP.
Lean practices and environmental performance
The link between LP and EP has been widely supported in the literature (Womack and
Jones, 2003; Yang et al., 2011). LP are organizational actions that minimize or eliminate
wastes in all forms. Thus, LP are helpful for firms to remove pollutant and harmful
emissions by means of reduction in product shipment volumes and thus waste
reductions (King and Lenox, 2001; Rothenberg et al., 2001). Apple’s 21.5-inch iMac is
designed with 50 percent less material and generates 35 percent fewer carbon
emissions than the first generation, 15-inch iMac (Apple, 2010). LP contribute
to enhanced EP (King and Lenox, 2001; Shah and Ward, 2003). The rationale behind
this link is that effectiveness means environmental soundness. Making continuous
improvements is also necessary to augment EP. Thus, we hypothesize that:
H2a. The extent of LP implementation is positively associated with EP.
Lean practices and supply chain restructuring
LP start with the focal company in a supply chain. They impact activities in the supply
chain through continuous improvements, elimination of wastes, and commitment for
quality and innovation, which require active participation of globally dispersed
suppliers and distributors. Honda USA has endeavored to implement a comprehensive
program for its suppliers to increase the knowledge base of each supplier and broaden
cross-functional teamwork for achieving overall supply chain productivity (MacDuffie
and Helper, 2002). LP thus are extended to include suppliers with long-term partnerships
and expand supplier bases for robust network flexibility (Liao et al., 2010; Hong et al.,
2010a). Such broad implementation of LP across the supply chain lead firms to reorient
and restructure supply chains and establish competitive advantage (Liker and Wu, 2006;
Womack and Jones, 2003). Thus, we hypothesize that:
H2b. The extent of LP implementation is positively associated with SCR.
Lean practices and FP
The association between LP and FP has gained support in the literature (Shah and
Ward, 2003; Yang et al., 2011). Minimizing or eliminating wastes in the value chain is
helpful for firms to reduce unnecessary spending. Such savings enable the firm to
spend resources in more strategic and needed aspects of the business. LP allow firms to
achieve cost savings and thus increase profitability. LP are useful to enhance FP. Thus,
we hypothesize that:
H2c. The extent of LP implementation is positively associated with FP.
Supply chain restructuring and environmental performance
SCR encourages supply chain participants to work toward overall supply chain
effectiveness. Firms try to increase the levels of coordination and implement supplier
development programs and select suppliers that are capable to meet up-to-date
environmental regulation standards. Such SCR is directed to ensure environmentally
safe component parts are processed, distributed, and delivered to customers. Such SCR
initiatives are conducive to reducing environment-hazard materials and emissions and
to increasing employees’ satisfaction and knowledge to do more with less (Camm et al.,
1997; Grant, 2005). Thus, we hypothesize:
H3a. The extent of SCR is positively associated with EP.
Supply chain restructuring and FP
SCR helps firms meet corporate objectives better than before. Firms restructure their
supply chains to compete based on network capabilities beyond individual organizational
competencies. SCR also facilitates firms’ ability to eliminate wasteful elements and
promote overall process effectiveness in the supply chain. Suppliers with enhanced
competence stemming from SCR better serve customers, achieve cost competitiveness
and tailor supply chain outcomes to the market requirements (Kopczak, 1997). Thus,
we hypothesize:
H3b. The extent of SCR is positively associated with FP.
Environmental performance and FP
Karpoff et al. (2005) report that violating environmental laws resulting in fines, damage
awards, and remediation costs damages a firm’s reputation and causes market
value loss. Additionally, a study that examined 430 announcements of corporate
environmental initiatives and 381 announcements of environmental awards and
certifications finds that the shareholders positively react to positive EP
(Jacobs et al., 2010). Environmentally responsible firms do manage cost and quality
targets in plant levels and improve their corporate public image (Rothenberg et al.,
2005). Several other studies have shown positive relationships between environmental
efficiency and other performance metrics such as quality, cost, and sales (Klassen and
McLaughlin, 1996; Rothenberg et al., 2001). Thus, we hypothesize that:
H4. The extent of EP is positively associated with the firm’s performance.
Research methodology
The International Manufacturing Strategy Survey (IMSS) V, a worldwide research
project involving more than 20 countries, was used for empirical analysis. The survey
was conducted in 2009 in the Asian Pacific, European, North American, and South
American regions. The respondents to this survey are plant managers or
manufacturing executives of manufacturing units. Initial contact was made before
sending the questionnaire to find out their willingness to take part in this study.
Although the response rate varied across countries, it exceeded 25 percent on average,
warranting an affirmative assessment. After eliminating incomplete cases,
379 responses remained for further analysis. Table I reports the profile of respondents.
Research instrument assessment
To assess the research instrument, this study follows the two-step approach
recommended by Anderson and Gerbing (1988). First, exploratory factor analysis
using principal component analysis with varimax rotation was used. A few items that
showed low loadings were dropped, resulting in 15 items. An example of excluded
items is “increasing the level of workforce flexibility following your business unit’s
competitive strategy.” We expected that it would load on the construct of LP since


Table I.
Profile of respondents
giving flexibility to employees through job sharing and variable working facilitates
firms’ ability to implement the LP. But the loading was ,0.6, and it seemed necessary
to opt the item out for better convergent and discriminant validity. Similarly, the item
“rethinking and restructuring distribution strategy in order to change the level of
intermediation” was expected to cover an important dimension of SCR. However, the
loading did not significantly explain the construct and we decided to drop the item to
enhance reliability of the construct. After exploratory analysis, confirmatory factor
analysis proceeded to assess convergent and discriminant validity.
In terms of convergent validity, Cronbach’s alpha for each construct seemed
reasonable with the lowest being 0.75, which exceeds the cutoff value of 0.60 (Cronbach,
1951; Nunnally, 1978). The measurement model fits displayed in Table II show good
fits as x2 divided by the degree of freedom is ,2, absolute and comparative fit indices
are above 0.94, and the 95 percent of confidence level of root mean square error of
approximation (RMSEA) ranges between 0.018 and 0.047 (Byrne, 2001; Hu and Bentler,
1998). Standardized item loadings from confirmatory factor analysis were statistically
significant at the 0.001 level and the loadings were also deemed adequate because the
lowest loading was 0.625 (Bagozzi et al., 1998). Discriminant validity assesses
idiosyncrasy of each construct from another. Table III shows the evidence of
discriminant validity because:
. composite reliability exceeded 0.77; and
. the average variance extracted values are greater than the squared correlation
between the construct and the other constructs (Fornell and Larcker, 1981).
Structural model results
Verifying the robustness of the measurement model led us to test the proposed
structural equation model. Figure 2 shows the directions and significances of the
hypothesized relationships (g) between the exogenous variable, RPS (j), and the
endogenous variables (h), LP, SCR, and EP. It also portrays the structural relationships
(b) between LP, SCR, EP, and FP. Fit indices for the structural model shows good
model fit to the data for x2/df ¼ 1.58, which is ,2; absolute and comparative indices
are .0.94, and RMSEA is 0.039, which is significantly less than the suggested limit of
0.08 for good model fit (Browne and Cudeck, 1993).
The test results reveal that all hypotheses from H1 to H4 are strongly supported
except for three hypotheses (H1c, H3a, and H3b), the relationship between RPS and EP
and that between SCR and environmental and FP. In regards to H1, the influence of
RPS on LP and SCR turned out to be very strong with their t-values 4.51 and
3.72, respectively. As hypothesized, achieving responsiveness to customers requires
firms to imbue lean principles in the organization and supply chains and also to
reconsider their supply chain strategy. However, RPS did not have a direct impact on
EP (H1c). The reason behind the insignificant relationship suggests that in many firms
RPS might not have taken environmental effects into the strategy formulation process
yet. Manufacturers might not have translated the urgency of EP down to the individual
plant level to the extent necessary to tackle corporate social responsibility. It is
noteworthy that RPS does not affect EP directly but indirectly via LP. The magnitude
of the indirect effect is 0.16, which is a significant impact. The impact of RPS realizes
when lean principles and practices permeate through the organization and supply
chains (Figure 3).


Table II.
Exploratory factor
analysis and
reliability results
With respect to H2a, H2b and H3c, the structural model results disclose strong
influences of LP on SCR, EP, and FP. The relationship between LP and EP has been
advocated by earlier studies. To the authors’ best knowledge, however, its effect on
SCR has been empirically shown for the first time in this study. LP need to be adopted
in the supply chain context and this permeation results in SCR. The magnitude of the
impact turned out to be the strongest in this study (t-value is 7.11). The path coefficient
suggests the importance of synchronization of LP both in an organization and in its


Table III.
Descriptive statistics
and inter-correlations


Figure 3.
Structural equation model
results: standardized
coefficient (t-value)
periphery networks. The link between LP and a firm’s profitability was strongly
supported in this study, confirming the results of earlier studies such as the work of
Shah and Ward (2003).
When it comes to H3a and H3b, SCR surprisingly appeared to have no statistically
significant impact on EP and FP. We anticipated positive associations between SCR
and EP and between SCR and FP. The proposed rationale was that suppliers play
an important role in increasing EP. The infamous product recall of SONY in 2001
and Toyota’s global recall were partly related to poor suppliers’ performance (Lee and
Klassen, 2008; Ohnsman et al., 2010). However, this study presents that SCR does not
improve EP or FP. One possible interpretation is that restructuring the supply chain
may not necessarily mean making efforts to perk up EP and FP. Despite the reported
significant influence of suppliers on EP and FP, most responsibility for dealing with
environmental issues falls on the focal company. At the point of this study in 2010,
it seems that managing and guiding suppliers and supply chains is the secondary
responsibility for firms to improve EP; their primary responsibility is spreading LP
successfully at the organization level. This study shows that the path to increasing EP is
via organizational implementation of LP.
Finally, the link between EP and FP emerged strong in this study. It is significant at
the 0.001 level. There has been much debate about this relationship. Some studies
showed that the relationship is negative (Wagner and Schaltegger, 2004), some others
positive (Zhu and Sarkis, 2004), and still others inconsistent (Jacobs et al., 2010).
This study adds support for a positive association to this line of study.
Concluding remarks
The majority of respondents are mostly plant managers or senior managers from
European countries. Their knowledge about strategic and operational practices is at
the plant level. Thus, interpreting the results requires caution. In spite of the limitations
inherent in the survey instruments, this study makes several contributions to the body
of the literature.
First, this paper defines sustainability practices by 2009 IMSS V by extending the
previous papers by “supply chain coordination” (Roh et al., 2011), LP (Yang et al., 2011),
and “strategic green orientation” (Hong et al., 2009), which are all based on 2005 IMSS
IV. These previous studies did not examine broad sustainability practices. On the other
hand, this article examines sustainability practices in terms of EP, social reputation,
and employee satisfaction and knowledge. The results of this study suggest that firms
implement sustainability practices not only at the strategic level, but also at the
employee level, to achieve greater social reputation.
Second, these reliable measures of sustainability practices are useful for
benchmarking purposes. Firms may learn how to be responsive to the market and
customers and thus improve EP. This study shows how RPS addresses the
environmental aspects at the manufacturing plant level. Manufacturers that aim to be
responsive to customers may examine how their products reflect the environmental
dimension in order to gain competitive advantage.
Third, this study also shows how firms use LP and SCR to achieve excellent EP. LP
are an important baseline that enables firms to connect their RPS to arrive at EP. The
results confirm a stream of literature that lean leads to green (King and Lenox, 2001;
Rothenberg et al., 2001). This study contributes to this study by showing that LP
mediate the RPS to progress toward EP. Firms that aim to enhance EP should take LP
into consideration and endeavor to spread the principles throughout the interand
intra-organization level. The results also suggest that firms participate in SCR and
the effect of SCR does not significantly affect EP yet. The focal company and suppliers
might not strive to improve EP to the same extent. Thus, there should be caution that
restructuring the supply chain may automatically turn into improved EP in the
short term.
Finally, this study suggests future research issues in the area of improving
sustainability practices. Benchmarking is a valuable tool that provides an opportunity
to learn from other organizations (Soni and Kodali, 2010). Benchmarking
sustainability practices in diverse contexts in terms of industries and country
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