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Investment in Environmental Process Improvement

Author

Listed:
  • Wenli Xiao
  • Cheryl Gaimon
  • Ravi Subramanian
  • Markus Biehl

Abstract

We analyze a firm's investment in environmental process improvement (EPI) to reduce the environmental impact (EI) of its manufacturing processes in relation to various internal firm characteristics and in response to different external regulatory drivers. We provide a deep understanding of how these internal and external forces cause the firm to pursue EPI earlier or later in the planning horizon and at an increasing or a decreasing rate over time. In particular, we show how a regulator can drive different patterns of EPI over time through subsidies for EPI or penalties for EI. We also explore the impacts of two key operational capabilities of the firm—the production‐cost efficiency of EPI and the effectiveness of EPI in reducing EI—on the rate of EPI over time. We demonstrate that improvements in these operational capabilities contrastingly alter the timing of investments in EPI. Lastly, we demonstrate that a firm capable of leveraging EPI to enhance product functionality or command a reputational premium in the marketplace pursues a remarkably different pattern of EPI over time compared to a cost‐focused firm that only responds to regulatory forces.

Suggested Citation

  • Wenli Xiao & Cheryl Gaimon & Ravi Subramanian & Markus Biehl, 2019. "Investment in Environmental Process Improvement," Production and Operations Management, Production and Operations Management Society, vol. 28(2), pages 407-420, February.
    • Handle: RePEc:bla:popmgt:v:28:y:2019:i:2:p:407-420
    DOI: 10.1111/poms.12927
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    Citations

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    Cited by:

    1. De Giovanni, Pietro, 2021. "Smart Supply Chains with vendor managed inventory, coordination, and environmental performance," European Journal of Operational Research, Elsevier, vol. 292(2), pages 515-531.
    2. Golmohammadi, Amirmohsen & Kraft, Tim & Monemian, Seyedamin, 2024. "Setting the deadline and the penalty policy for a new environmental standard," European Journal of Operational Research, Elsevier, vol. 315(1), pages 88-101.
    3. Zhang, Xiuyi & Hou, Wenhua, 2022. "The impacts of e-tailer's private label on the sales mode selection: From the perspectives of economic and environmental sustainability," European Journal of Operational Research, Elsevier, vol. 296(2), pages 601-614.
    4. Emre Berk & Onurcan Ayas & M. Ali Ülkü, 2023. "Optimizing Process-Improvement Efforts for Supply Chain Operations under Disruptions: New Structural Results," Sustainability, MDPI, vol. 15(17), pages 1-23, August.
    5. Shao, Shuai & Tan, Zhijia & Wang, Tingsong & Liu, Zhiyuan, 2023. "Configuration design of the emission control areas for coastal ships: A Stackelberg game model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 172(C).
    6. Gong, Canran & Song, Huaming & Chen, Daqiang & Day, Steven James & Ignatius, Joshua, 2024. "Logistics sourcing of e-commerce firms considering promised delivery time and environmental sustainability," European Journal of Operational Research, Elsevier, vol. 317(1), pages 60-75.
    7. Ma, Xin & Fan, Di & Zhou, Yi & Yang, Cheng-Hu, 2021. "The impact of inspection on the sustainable production strategy: Environmental violation and abatement in emerging markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 150(C).
    8. Meng, Mingyou & Deng, Shiming & Zhou, Pin & Xu, He, 2023. "The effects of subsidy programs in byproduct synergy operations," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).

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