Green manufacturing and environmental productivity growth
| Published date | 09 July 2018 |
| DOI | https://doi.org/10.1108/IMDS-03-2018-0102 |
| Pages | 1303-1319 |
| Date | 09 July 2018 |
| Author | Yan Li,Min Zhang |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
Green manufacturing and
environmental productivity growth
Yan Li
Management School, University of Liverpool, Liverpool, UK, and
Min Zhang
Norwich Business School, University of East Anglia, Norwich, UK
Abstract
Purpose –Due to stringent regulations on carbon emissions, green manufacturing has become a critical
issue in manufacturers’strategic planning. Manufacturers are greening production through carbon
abatement activities. The purpose of this paper is to investigate the factors that influence the effects of
carbon abatement on environmental productivity growth.
Design/methodology/approach –Using data envelopment analysis with directional distance function, this
study examines productivity growth associated with carbon abatement under regulated and unregulated
production technologies. A pollution abatement index (PAI) is constructed for determining the effects of
carbon abatement on environmental productivity growth. Panel data of 18 European countries in paper and
pulp and coke sectors are collected for the analysis.
Findings –The empirical findings reveal that carbon abatement may positively or negatively affect
environmental productivity growth which is dependent on the nature of technology in a sector, the innovation
capabilities of a country and environmental regulations.
Originality/value –Conventional approaches in measuring productivity changes do not normally take
undesired outputs (e.g. carbon emissions) into consideration. This study contributes to literature by
constructing a PAI that considers productivity changes under a joint production technology (where both
desired and undesired outputs are considered). The findings enhance current understandings on the
effectiveness of carbon abatement activities and help managers establish corporate environmental strategies
to adopt green manufacturing.
Keywords Data envelopment analysis, Green manufacturing, Carbon abatement, Environmental productivity
Paper type Research paper
1. Introduction
The growing concerns about environmental pollutions and global warming have made
governments to develop regulations and policies to reduce greenhouse gas emissions from
industrial production (Rao, 2004; Vachon and Klassen, 2007; Orji and Wei, 2016; Kazancoglu
et al., 2018). For example, the European Union (EU) committed to the targets of 20 per cent
cut in greenhouse gas emissions ( from 1990 levels) and 20 per cent improvement in energy
efficiency (European Commission, 2014). The greening of energy intensive sectors, such as
iron and steel, paper and pulp, coke and refinery, plays pivotal roles in tackling global
climate change because large amounts of greenhouse gas are generated during the
production and supply chain processes (World Bank, 2007; Rao, 2004; Orji and Wei, 2016).
The CO
2
emission reduction has been regarded as the key environmental target under all
recent regulatory schemes, including Kyoto Protocol, Chicago Climate Exchange, European
Union Emissions Trading Scheme, and Climate Change Act.
Stricter regulations on the environment and increasing pressure from public are
forcing manufacturers to include environmental factors in their manufacturing strategies
and to adopt green manufacturing, which refers to the production systems that minimise
the negative impacts of operations on the environment and natural resources
(Laosirihongthong et a l., 2013; Kazancoglu et al., 2018; Bai et al., 201 8). Green
manufacturing and carbon abatement may use pollution prevention technologies which
rely on improving input quality to reduce emissions of pollutants and the amount of waste
(Vachon and Klassen, 2007; Chiou et al., 2011) and/or pollution control technologies which
Industrial Management & Data
Systems
Vol. 118 No. 6, 2018
pp. 1303-1319
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-03-2018-0102
Received 8 March 2018
Revised 15 May 2018
Accepted 30 May 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
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Green
manufacturing
focus on capturing, treating or disposing pollutants or harmful by-products in
manufacturing processes (Rao, 2004; Ouardighi et al., 2016).
To meet regulatory requirements on carbon emission limits, manufacturers are
redesigning their production and supply chain operations, and are implementing carbon
abatement activities to red uce hazardous emissions, e liminate wasteful resource s
consumption, mitigate environmental risks and protect natural resources (Toptal et al.,
2014; Vachon and Klassen, 2007; Ouardighi et al., 2016). However, empirical evidence exists
that the implementation of carbon abatement activities may have an adverse effect on an
industry’s productivity (Ignatius et al., 2016; Pasurka, 2008). One possible reason is that
traditional productive measures do not consider environmental factors such as undesired
outputs (e.g. greenhouse gas) (Zhou et al., 2008). Hence, a joint production technology
approach that simultaneously considers both good and bad outputs has been proposed to
measure environmental productivity (Quariguasi Frota Neto et al., 2009). However, few
studies have estimated productivity growth under regulated and unregulated production
technologies for determining the effects of carbon abatement activities on environmental
productivity growth. This study aims to investigate the factors that influence the effects of
carbon abatement on environmental productivity growth using panel data from paper and
pulp and coke industries across eighteen European countries.
Data envelopment analysis (DEA) is a non-parametric method for the estimation of
production frontiers (Kahi et al., 2017; Chang et al., 2014). As a mathematical programming
based approach, DEA has been used for measuring relative efficiency of decision-making
units (DMUs) that have multiple inputs and outputs (Charnes et al., 1978). This method
compares DMUs considering all inputs used and outputs produced, and identifies the most
efficient DMUs (Liu et al., 2017). DEA with directional distance function has been widely
applied to measure environmental productivity (Chung et al., 1997; Färe et al., 2007;
Zhou et al., 2008; Chang et al., 2014; Ouardighi et al., 2016; Liu et al., 2017). For example,
Färe et al. (2007) analyse the environmental production performance using the data of 92
coal-fired power plants in the USA. Ramli et al. (2013) investigate the eco-efficiency of the
Malaysian manufacturing sectors considering CO
2
emissions. Arabi et al. (2017) measure the
eco-efficiency of Iranian gas-fired power plants using the data from 2003 to 2010. We adopt
this DEA approach, as we find that the method is particularly relevant since regulators
themselves commonly use similar efficiency and productivity measures as management
tools and to evaluate policy outcomes. Also the applied DEA method allows us to construct
the pollution abatement index (PAI) in the second stage to offer a more explicit implication
for the environmental regulatory settings.
We focus on greenhouse gas pollution prevention and control and investigate CO
2
emission as the main and common bad output because it has been regarded as the key
environmental target under all recent regulatory schemes. We conduct the research in the
paper and pulp and coke industries for two reasons. First, both paper and pulp and coke are
energy intensive industries which generate considerably high levels of CO
2
emissions
during the production processes. Carbon abatement activities have significant impacts on
environmental productivity growth in the two industries. Second, the two industries have
different production processes from inputs to final outputs and rely on different carbon
abatement technologies. Comparing the impacts of carbon abatement on environmental
productivity growth in the two industries can shed light on the roles played by technologies
in green manufacturing. The findings from our empirical analysis provide insights into the
impacts of the nature of production technologies and processes of a sector, innovation
capabilities of a country and environmental regulations and policies on carbon abatement.
Details of the model and its application are presented in Section 2. Section 3 describes the
data and discusses the empirical findings. Section 4 concludes the paper with the key
findings and highlights the implications and future research directions.
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