Why is manufacturing not more sustainable? The effects of different sustainability practices on sustainability outcomes and competitive advantage

Abstract

Over the last decades, there has been growing worldwide concern for the notable contribution of manufacturing activities to environmental damages. In this context, there is an open debate regarding the incentives of companies to move from mere compliance strategies towards voluntary adoption of environmental responsibility strategies, simultaneously considering economic, environmental and social objectives. This paper aims to analyse the effect of different sets of sustainability practices on sustainability outcomes and the competitive advantage of manufacturing firms. The study distinguishes between internal, external monitoring and external collaborative sustainability practices and considers their effect on regulatory, environmental and manufacturing sustainability outcomes in order to identify their contribution to the competitive advantage of firms. Drawing on natural resource-based view theory, social exchange theory and transaction cost theory, and recent evidence in the field, the study tests several hypotheses using data from the fourth round of the High-Performance Management (HPM) project. Through structural equation modelling with partial least square methodology (PLS-SEM), this study shows the existence of differential effects of sustainability practices on sustainability outcomes and competitive advantage using a sample of 263 manufacturing plants located in 15 countries from three industry sectors. The findings of this study indicate that there are many reasons to be more sustainable. The adoption and effective implementation of both internal sustainability practices and external collaborative approaches boost sustainability outcomes. Manufacturing sustainability outcomes contribute the most to competitive advantage of manufacturing companies compared with regulatory or environmental ones. For practitioners, this study highlights the challenge of well-implemented internal sustainability practices that give support for effective collaborations, both determinants to achieve operational performance and competitive advantage. For the academia, this study shows that the interplay of different theories helps to understand the differential effects of sustainability in manufacturing.