Abstract
This study explores the barriers to environmentally-conscious innovation of manufacturing firms. Gleaned via a survey from 333 manufacturing firms in Pakistan, and analyzed through a partial least-squares technique, the data show that organizational resources, resistance to change, business traditions and technical issues appear to be the internal barriers to environmentally-conscious innovation. Conversely, extant policies, shortage of consumer demand, shortage of external affiliation, uncertain benefits and shortage of information seem to be the external barriers to environmentally-conscious innovation, which must also be addressed. These findings have significant implications for manufacturing management and, despite its limitations, the study offers pragmatic policymaking guidelines and future research suggestions.
Keywords
Introduction
The concept of sustainable development is becoming a priority in international agendas, in recent years. The manufacturing sector is playing a vital role in sustainable development as it takes the major part of a country’s resources. Sustainable Consumption and Production (SCP) are arising as an important challenge in emerging markets [1]. Emerging markets are the ones who are expanding their spaces or the use of resources [2, 3].
These markets show a high annual growth rate when compared with other companies operating in the same country. When such markets try to bring change and adopt modern sustainable policies, they face challenges. Over the years substantial efforts have been made to deal with sustainability issues, and subsequently it has been recognized that the base to deal with the production of eco-friendly product lies in relative awareness and competencies [4]. The rapid development of the manufacturing sector has impacted in issues like soil, air and water pollution; diminishing natural resources and health issues. These issues are threatening the sustainable development of the planet.
The need to do manufacturing with least harmful effects to the environment gave rise to a new paradigm called Environmentally Conscious Manufacturing (ECM) or Green manufacturing (GM). These concepts focus on utilizing and consuming natural resources most efficiently so that its harmful impacts on the natural environment and humans can be minimized. Although GM is beneficial for resources and human beings, it can’t be applied everywhere. The implementation of GM is hindered by barriers and to remove these barriers, it’s important for government and industry to work in collaboration with each other.
In the developed countries, limited resources and growing demand of energy has reduced the speed of development. The emerging markets in developed countries are now focusing on the markets in developing countries to make use of their natural and human resources, and less strict environmental legislative conditions.
Literature review
In the last decade, much research has been conducted related to environmental conscious manufacturing. The focus of attention is the factors hindering the manufacturing process which is safe for the environment and health. The growing interest in knowing the barriers to such manufacturing and factors related to it has given rise to the literature in this field and many research studies like [4–11] came to the front.
Internal barriers
Lack of organizational resources
Experts are conducting studies in the field of environmentally conscious manufacturing to help organizations and government to protect the environment. A study [12] describes the importance of having qualified staff for ecological manufacturing and that the shortage of well qualified employees can affect innovation. Another study by [13] also emphasizes the fact that the organizations who lack skilled and qualified staff in environmental management will not do much in innovation in this context. Other findings reveal that skilled employees do not serve in the same organization for long enough. Organizations pay too much attention to short-term purposes and tasks, and this plays the role of a constraint on their long-term innovation ingenuity [6, 14]. Therefore, the following hypothesis is developed.
H1: Lack of organizational resources has a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Resistance to change
People have the tendency to stick to their perceptions and attitudes and it is not easy to bring change in them. They restrict themselves to self-developed boundaries built once and close the option of looking outside those margins. But time and technology both are changing every day and so are the necessities of life on this planet. With these confined attitudes and perceptions, it is difficult to bring change in the products people are accustomed to. Organizations have resistance to change in their staff because of internal factors like management not being supportive, lack of communication and underprivileged human resource services [15]. Small organizations don’t take it as their responsibility to manufacture products keeping in view the environment. They don’t find any competitive advantage in it, neither have they thought that it can bring any good to their business in the market [16]. Organizational culture is also equally important in determining the attitudes and perceptions of its employees. Organization’s resistance to adopt innovation indicates clearly that its culture has failed in supporting it [17]. Managers should be told that the close relationship of product and process innovation demands a culture of knowledge sharing within the firm. Intensive flow of information and expertise should not just be welcomed but also be motivated throughout the process of innovation [18]. Therefore, the following hypothesis is developed.
H2: Resistance to change has a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Business tradition barriers
[19] Reveal in their study that the upcoming generation of organizations will develop long-lasting sustainable competitive advantages by integrating skill and expertise of their employees with schemes of compensation and innovative information technologies. This kind of organization can bring changes in their innovative decisions as they have better opportunities and expertise to bring focus and attention to environmentally conscious manufacturing (ECM) practices [20]. When companies initiated a conscious effort to monitor use of energy, it ultimately had an impact over environmental behaviour [6]. Companies need to have good functional relationships, in-house collaborations and the practices which support environment friendly product innovation [10]. Therefore, the following hypothesis is developed.
H3: Business tradition barriers have a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Technical & Procedural barriers
A major barrier to innovation is seen in the form of lack of technical knowledge and expertise [21]. Mentioned in their study that the organizations with competencies in research and development demonstrate increased innovative skills when compared with their competitors. Being first-movers such organizations can generate more revenue and escalate their market share. A study by [22] supported a negative relationship of technical knowledge and relevant expertise with the environmentally-conscious innovation. Therefore, the following hypothesis is developed to analyze the condition further.
H4: Technical and procedural barriers have a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
External barriers
Policy barriers
Comprehending consumer preferences in purchasing environmentally-conscious products can help policy makers in business enterprises and government organization build beneficial rules for environmentally-conscious manufacturing [23]. The government does not provide subsidies, grants or loans to encourage organizations to produce environment friendly products. When government is not supporting steps taken for innovation then it can de-motivate organizations to bring change [24], and the similar results were supported by [25], who further mentioned that the lack of knowledge and expertise on ecological production or absence of environmental leadership can be caused by the lack of support by government. A study by [26] discussed the barriers Malaysian companies are facing in taking environment friendly actions. Government should make some policies with the purpose of increasing environmental regulations and escalating the number of sectors affected by such regulations [10]. Therefore, the following hypothesis is developed to further analyze the condition:
H5: Policy barriers have a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Shortage of consumer demand barriers
For the production of environment friendly products, it is important for the customers to be environmentally conscious and ready to pay more for it. When customers don’t give response to the new products, then it will affect the organizational tendency to bring innovation in production [13]. Manufacturers utilize time, cost and resources to bring the change but if the market doesn’t give appropriate response towards the new product then it is of no use for the organization to continue meeting the constraints it has. To adopt ecological products it is important to have consumers ready to accept it. As an example, we can look at the German renewable markets, where policy makers struggled for almost ten years to promote renewable energy by making it a part of legislation but no considerable integration happened till a campaign was started to make it socially acceptable [27]. Therefore, the following hypothesis is developed to further analyze the condition:
H6: Shortage of consumer demand is a barrier that has a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Shortage of external affiliation barriers
External partners play a vital role in supporting an organization for its environmentally-conscious innovation ingenuity. Suppliers introduce information, material and skill whereas customers cause market demand [10]. Findings of a study conducted in Sweden show that small firms find it difficult to look for suppliers or partners for working on ecological innovation [14]. The reason why suppliers don’t cooperate in such activities can be due to unidentified demand of consumers, increased cost in redesigning and production for environmentally-conscious manufacturing [28, 29]. Another study reveals that it is difficult to find external partners who are interested to invest in environment friendly innovation technology because they are not ready for the redesigning of the product. They don’t want to convert current products into environment safe products [30]. The uncertainty about financial benefits is a cause of investors showing reluctance in clean development mechanism [31]. Therefore, the following hypothesis is developed to further analyze the condition:
H7: Shortage of external affiliation is a barrier that has a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Uncertain benefits barriers
Without the promise of profit and benefits, organizations don’t get motivated to introduce innovation. If there are no environmental commercial benefits foreseen in taking environment friendly innovation actions, then organizations don’t put effort in it [16]. Another study by [32], supported the same findings. It reveals that when organizations don’t find benefits in such implementations, they further reduce it [31]. Conducted a study on similar grounds and found that competition and financial benefits have influence on clean development mechanism opportunities. Therefore, the following hypothesis is developed to further analyze the condition:
H8: Lack of uncertain benefits has a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Shortage of information barriers
It has become difficult to manage change and innovation, as the complexity in the process has increased during the years. Despite the availability of information, projecting future outcomes is a risk due to a rising degree of uncertainty. Information is now more quickly transformed into actionable knowledge and the slow speed of change in the business environment is unable to keep pace with it. The study by [32], concludes that if technological evidences and external market are not strong then they negatively affect environment friendly innovation. The technological information and availability of an environment friendly product gives information about the demand of a product in the market and the absence of this kind of information brings uncertainty for the firms. Success of product and innovation is possible when available market opportunities are turned in to action plans considering the environmental requirements. It is the act of sharing knowledge about requirements that makes innovation successful [18] (see Fig. 1). Therefore, the following hypothesis is developed to further analyze the condition:
Research framework.
H9: Shortage of information barriers has a negative effect on the adoption of environmentally-conscious manufacturing in Pakistan.
Data collection was completed in two individual phases. In the first step, informal interviews were conducted with the employees working at different designations in five manufacturing companies to know if the variables identified through literature will reflect the conditions of manufacturing of companies working in Pakistan. With the help of conclusions made in interviews, a survey questionnaire was used to collect data.
Data collection
The sample of the study consisted of Pakistani manufacturing companies belonging to different sectors. The list of these companies was obtained from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). The data shows that there are 333 members in General Body of FPCCI 2017. The survey questionnaire was sent to all members.
The respondents were selected working at different levels in organisation. From CEOs, managers, directors to persons-in-charge working in different departments of organisation were included in sample. These people were selected because of having the first hand information and knowledge about environment friendly actions the organisation is taking or the barriers in moving a step ahead towards them. Questionnaires were sent to the corresponding respondents through mail in each organisation. Total 426 questionnaires were distributed, 187 responses were usable when received. This resulted in a response rate of 43.8% (187/426).
Measure of constructs
The questionnaire is divided into three sections: demographic profile, internal barriers (organizational resources barriers, resistance to change barriers, business tradition barriers, Technical and procedural barriers), and external barriers (Policy barriers, shortage of consumer demand barriers, shortage of external affiliation barriers, uncertain benefits barriers, shortage of information barriers). To measure the items, the 5 point Likert scale was used, ranging responses from “Strongly Disagree” to “Strong Agree”. To ensure the content validity of the scale, the items were adopted from the previous studies as follows:
Data analysis
To test the research model, Smart PLS Version 3.0 was used and the structural equation modeling technique was used. According to [33], this method is appropriate for studies which are exploratory in nature. This technique is also good to use when the sample is small in size. For data analysis two-step method was applied as recommended by [33]. This approach is used to check the validity and reliability of the measures before finding out the structural relationship of the model. Firstly, measurement model was analyzed, whereas secondly, the structural relationship of constructs was tested.
Results and discussion
Measurement model results
There are 10 parts of the questionnaire. First past is about demographic information, second part constitutes internal barriers (Lack of organizational resources, Resistance to change, Business tradition barriers, Technical & Procedural barriers), whereas third part addresses external barriers (Policy barriers, Shortage of consumer demand barriers, Shortage of external affiliation barriers, Uncertain benefits barrier, Shortage of information barriers). The items were measured using a 5 point Likert scale. For the content validity, the survey questions were taken from the previous studies as follows: Lack of organizational resources [16, 32], Resistance to change [34], Business tradition barriers [20, 35], Technical & Procedural barriers [21, 37], Policy barriers [25, 34], Shortage of consumer demand barriers [13, 32], Shortage of external affiliation barriers [14, 30], Uncertain benefits barrier [25, 32], Shortage of information barriers [32, 34].
Reflective constructs were measured in terms of reliability and validity. All items were above 0.8 (Table 1) on composite reliability results. As suggested by [38], items are accepted when they load at least at 0.6. Loadings of all scales is greater than 0.8 and it suggests individual item reliability as acceptable. Using average variance extracted (AVE) the convergent validity was estimated. The average variance extracted of all constructs was above 0.6, which according to [39] denotes an acceptable degree of convergent validity.
Measurement model evaluation
Measurement model evaluation
Two approaches were used to evaluate the discriminant validity of the items. Firstly, the indicators were evaluated on cross loadings. All indicators loaded lower on an opposing construct. Secondly, according to the criterion given by [39], square root of AVE of each item surpassed the inter-correlations of the item with the other items in the given model Table 2). Analysis done from both ways confirmed that all items have discriminant validity.
Discriminant validity coefficients
Diagonals (in bold) represent square root of the AVE.
The results reveal that the model explains 53.0% of variance in environmentally safe product innovation. Besides assessing the magnitude of R2, predictive variance has also been included in the previous researches which was established by [40, 41], as additional model fit assessment. This technique determines if the model is adequate to predict the indicators of every latent construct. Stone-Geisser Q2 was applied to check the predictive relevance. In PLS, blindfolding procedure was used to compute this examination, subsequent to instructions by [42].
The nonparametric bootstrapping was applied to analyze the structural model. The effects of the research model were evaluated (Table 3). The results reveal that H1, H2, H4, H5, H6, H7, H9 are supported, whereas H3 and H8 are disapproved.
Path relationship between constructs
Path relationship between constructs
*p < 0.05, **p < 0.01, ***p < 0.001 (one tailed).
Growing environmental destruction is giving rise to the discussion of ecological innovation and environmental issues. Business sectors are also getting the pressure arising from these concerns. Despite the fact that it is necessary to pay attention to environmental issues, only a few of the manufacturing companies in Pakistan are considering this factor. Due to lack of awareness about environmentally-conscious innovation, manufacturers in Pakistan are not taking a step ahead. This study’s intent was to investigate the internal and external barriers to manufacturing innovation in Pakistan, thereby improving the future of environmentally-conscious innovation.
The results of the study show that the organizational resources play the role of a barrier in environmentally-conscious innovation adoption. Lack of skilled personnel, willingness of employees in the learning process, heavy work load schedule, lack of training of employees create a hindrance in environment safe product manufacturing. The concept of environmentally-conscious manufacturing isn’t very old in Pakistan, so it is hard to find skilled employees relevant to different kinds of manufacturing industries working here [43]. Describes the importance of human resource in ecological products manufacturing. As the concept of environmentally conscious manufacturing in Pakistan isn’t very popular, so manufacturing industry is required to bring change in the products from the design till the packaging stages. This task needs skilled employees and it can be handled through attracting employees and then training them for the successful implementation of ecological product manufacturing. Ecological requirements alone cannot be a reason for innovation success. Although they give us a reason to identify opportunities in the market, we still need to turn those opportunities into successful projects [18].
The findings of the study also indicate that the resistance to change is proving a barrier in adopting environmentally-conscious innovation manufacturing in companies in Pakistan. The organizations are following the pattern where employees are working on the same products for years and no efforts are being made to bring a change in the product with the changing time. Employees are not given the opportunity to think out of the box for new product design or processes. Managers are required to bring change in the organization. They should be open to bring change and able to think creatively [34]. Organizations are equally responsible to bring innovation and creativity. They should give opportunities to employees to present creative ideas and by improving these ideas continuously products can be improved [44].
Another barrier to environmentally-conscious manufacturing is the business tradition. In business tradition, the management impacts a lot on the decisions and policies. The decisions of cost reduction, systematic planning and long term policies, applying previous learning in manufacturing, following emerging solutions in the field for environmentally-conscious manufacturing are all the decisions made by the management and they determine the business tradition of the company. The learning and the past experiences of the manufacturer can influence the pattern organization will follow [45, 46]. Conducted a study in which they claimed that to reduce greenhouse gas emissions it is better to adopt proactive ways instead of adopting end of the pipe control process, which are expensive. Therefore, lack of manufacturer’s exposure to outstanding policies made a negative effect on innovation.
Technical and procedural barriers have a significant impact on environmentally-conscious innovation adoption. R&D play a very significant role in innovation. Lack of knowledge and shortage of expertise can likely create a barrier in the adoption of innovation. Therefore companies need to invest more in environmentally conscious R&D.
Lack of external affiliations effect environmentally-conscious innovation negatively in manufacturing companies in Pakistan. Big companies are always interested in extending their good practices to win the hearts of their customers and to increase their trust. According to [16] this effort develops a win-win situation for company and customers in context of cost, control, quality and profit. Therefore, if the company has poor external partnership then it effects the environment safe product process innovation. It is difficult to look for partners who are willing to take part in ecological product innovation [14]. There are several reasons due to which finding an external affiliation can be hard. Financing innovation, its feasibility, high cost of monitoring and production, and stretched payback period are the significant causes for making it difficult to find external partnership [32, 37]. It is recommended that investors should take such investment as a distinctive opportunity rather a useless expense.
Shortage of relevant information is another barrier to environmentally-conscious innovation for manufacturing companies in Pakistan. Most of the manufacturers don’t have awareness about environmental hazards and their impact on the planet. There is also lack of awareness on how to minimize the impact of these threatening situations. They are uncertain about environment related requirement, rules and regulations [32].
Government policies also are a barrier that have negative effects on environmentally-conscious innovation in manufacturing companies in Pakistan. The task of Government is not just to set the rules to protect the environment, but it should also be to ensure that the organizations work according to those rules [25]. If Citizens lodge complaints or Government itself takes action against manufacturers responsible for harming the environment, then by rectification in their system, manufacturers can be tracked towards environmentally-conscious innovation.
Another barrier to environmentally-conscious innovation is the shortage of consumer demand. The consumer demand is limited because such products are usually expensive. Therefore, Organizations believe that by practicing environmentally-conscious innovation their growth will be limited. This risk refrains them from practicing it [13].
The lack of uncertain benefits is another barrier to environmentally-conscious innovation. Manufacturers perceive its benefits as uncertain. The idea that there is less demand of environment friendly products, they are high in cost, and that the customers are not ready to pay for them, make the benefits uncertain for companies [31]. Provided evidences in his study that there is influence of commercial benefits and competition on clean development mechanisms. The study further suggested that companies in consideration of having eco-friendly approach, perceive financial motivation and competition as a challenge to move towards environment friendly opportunities.
Managerial and policy implications
The results describe the internal and external barriers which are faced by manufacturers working in Pakistan. The results are useful for manufacturing companies in Pakistan, as by removing these barriers they can practice the environmentally-conscious innovation. The results are useful for the Policy makers as well, as these provide an insight to the problems manufacturers are facing in moving towards environmentally-conscious innovation. Studies on internal barriers can be helpful for corporate governance to make their organization work in accordance with the requirement of surroundings. Findings on external barriers provide a way to environmentally-conscious innovative policy channels.
To take steps towards environmentally-conscious innovation, policy makers and manufacturing companies should pay attention towards organizational resources barriers, Technical and procedural barriers and towards barriers caused by resistance to change and business tradition. To move with the world, government should also tackle the policy barriers and the barriers causing shortage of consumer demand, shortage of external affiliation, uncertain benefits, and shortage of information.
Limitations and recommendations to future studies
There are certain limitation in generalizing the findings of this study. This study verifies the hypotheses through results gathered in a survey which only gives a cross-section of this study. Therefore, the findings are unable to address the dynamics of environmentally-conscious innovation in the process of its barriers. A longitudinal study may be able to conclude more precise results. The sample of this study was the manufacturing companies only, including non-manufacturing companies in the sample may bring more variations in the barriers to environmentally-conscious innovation. The companies included in the sample were belonging to Pakistan, conditions may vary in other countries. Conducting the study in different regions of a country may yield different results.