Theoretical framework
Legitimacy theory
Legitimacy theory is derived from the concept of organizational legitimacy. It posits that organization cautiously strive to operate and function within the accepted standards of their societies. This theory lies on the notion that their exits a contract between the company and the society which are never permanent but keep changing. Owing to the above link to the stakeholder’s communities involved, legitimacy may be used as a resource for additional external resources or a tool to improve the company reputation (Hummel, & Schlick, 2016). Besides, the theory offers insight on organizations initiatives that are geared towards the well being of the environment rather than the profits. Thus it is important to study this theory since it provides insight on innovative sound policies geared towards the environment. The theory is used in this study to bring out the role of green procurements efforts in protecting the environment and the resultant impacts on a company’s competitiveness.
Supplier assessment
Green procurement involves the screening and ascertaining that suppliers adhere to the set standards in relations to environmental issues. Most firms put a lot of factors into consideration, such as the goods provided, whether they are renewable or non-renewable. Thus the provider of products that can be reused and have minimal effects on the environment are given higher priority. In the procurement process, the screening of suppliers is essential to facilitate decision making. Apart from the apparent cost and quality, this paper takes a view on the importance of obtaining recyclable goods from suppliers an important variable for pollution control. By screening the suppliers and choosing the most appropriate one, the use of harmful substance will highly be minimized (Skjøsvik, & Breunig,2016).
The concept of sustainable procurement
According to Aragão, & Jabbour, (2017) Sustainable procurement builds on traditional procurement policies which tend to extend through the adoption of sustainable strategies. The concept of sustainable supply entails the overall procedure of acquiring goods from a supplier that provides optimum life cost, generating value for money, and the economy with minimal degradation towards the environment. Sustainable procurement entails putting into consideration the effect of purchased goods on people, the economy, and the environment.
Mangla et al. (2019) Assert that firms adopting sustainable procurement gain immense benefits in terms of reduced production cost, increased sale, improved stakeholders relationship, and the resultant enhanced reputations. Firms that take into consideration the importance of the environment in their production process beginning form the procurement of goods tend to have a higher competitive advantage. This is brought about by increased confidence and trust from the public and minimal legal repercussions from relevant authorities due to failures to comply with environmental legislation.
In both private and public firms, the pressure is mounting for firms to put in place sustainable procurement policies. According to Mangla et al., (2019), companies that adopt sustainable practices tend to be efficient in terms of operations, and the procurement of recyclable goods helps to conserve resources. Besides, the need to improve organizations efficiency firms take environmental issues as a competitive tool. Procurement of recyclable goods is the central pillar of sustainable policies ensuring that organization meets their needs, services, and utilities based not on own cost analysis but to maximize on the net benefit to the firm and the world (Rogers, 2016).
Impacts of green procurement and competition
Venkatesh & Luthra (2016) argues that the quest for competitive advantage is essential for the long term survival of a firm. Procurement policies that highlight the need to obtain recyclable goods from suppliers provide a critical position and impact the firm positively. Sustainable procurement adds value by improving a firm’s prominence, in that firms tend to be the lowest competitor and at the same time responding to customers’ needs. Consumers demand green products translates to high sales rates to firms that integrate recyclable products in their manufacturing process. In this way, a firms market share is increased, which a competitive advantage brought forth by the procurement of recyclable goods.
Adoption of green procurement has negative impacts on a firm. In spite of existing literature highlighting the importance of the green purchase, it also raises the cost of production since a firm has to pay more to suppliers to obtain goods that are recyclable and environmentally friendly which might not be present at the time. Besides, an increase in the cost of production increases a firm’s product in the market, decreasing its competitive advantage. Customers tend to deviate to cheap and cost-effective products. The impacts of green procurement have been mainly aggravated by global trade, which has resulted in the opening of domestic markets to foreign firms. In the vent of stringent environmental policies and legislative measure to go green, local firms that fail to comply face high cost in terms of production and legal implications. Argues that firms from countries with lenient legislation tend to have the upper hand compared to local firms (Testa, Annunziata Iraldo, & Frey, 2016).
How low energy consuming goods affects firm competitiveness
With the rising production rates, the energy requirements also increase. It is clear that pollution causes enormous financial implications and degrades the environment. The need to reduce the use of harmful substance calls for stringent measures which will promote proper energy use. Leonidou et al. (2015) assert that the natural environment is an essential arena for economic competition. Environmental issues concerning energy offer both competitive advantage and constraints. Firms can gain competitive advantage by managing environmental variables. The use of environmental technologies that entails production technologies, methods, and procedures that conserve energy through the use of both hardware and operating modes tend to increases a firm’s competitive advantage. Environmental technologies are incorporated in the design of low power consuming environmentally friendly goods, thus affecting the competitive landscape.
The application of environmental technologies in the design of low energy consuming goods is a potential strategic resource since it affects the supply chain. In this way, they provide firms with unique and imitable advantages of the value chain, making a firm to stand out from the competitor. In the manufacture of low energy consuming goods, the focus is placed on improving environmental efficiency and minimizes waste and pollution. Lower environmental liabilities made firms a better credit risk and cautioned from legal mitigation, both of which are important as a competitive advantage (Nath, & Ramanathan, 2016).
References
Mangla, S. K., Luthra, S., Jakhar, S. K., Kumar, A., & Rana, N. P. (2019). Sustainable Procurement in Supply Chain Operations.
Aragão, C. G., & Jabbour, C. J. C. (2017). Green training for sustainable procurement? Insights from the Brazilian public sector. Industrial and Commercial Training, 49(1), 48-54.
Venkatesh, V. G., & Luthra, S. (2016). Role of sustainable procurement in sustainable manufacturing operations: an Indian insight. In Strategic Management of Sustainable Manufacturing Operations (pp. 132-148). IGI Global.
Leonidou, L. C., Fotiadis, T. A., Christodoulides, P., Spyropoulou, S., & Katsikeas, C. S. (2015). Environmentally friendly export business strategy: Its determinants and effects on competitive advantage and performance. International Business Review, 24(5), 798-811.
Rogers, M., (2016, March 24). 6 Benefits of Becoming a Sustainable Business. Retrieved from https://www.environmentalleader.com/2016/03/6-benefits-of-becoming-a-sustainable-business/
Hummel, K., & Schlick, C., (2016). The relationship between sustainability performance and sustainability disclosure–Reconciling voluntary disclosure theory and legitimacy theory. Journal of Accounting and Public Policy, 35(5), 455-476.
Skjøsvik, T., & Breunig, K. J., (2016, September). A Client-Centric Framework for Assesment of Profesional Service Firms’ Knowledge Assets. In European Conference on Knowledge Management (p. 806). Academic Conferences International Limited.
Testa, F., Annunziata, E., Iraldo, F., & Frey, M. (2016). Drawbacks and opportunities of green public procurement: a useful tool for sustainable production. Journal of Cleaner Production, 112, 1893-1900.
Nath, P., & Ramanathan, R., (2016). Environmental management practices, environmental technology portfolio, and environmental commitment: A content analytic approach for UK manufacturing firms. International Journal of Production Economics, 171, 427-437.