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When to increase firms’ sustainable operations for efficiency? A data envelopment analysis in the retailing industry

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  • Gong, Yeming
  • Liu, Jiawen
  • Zhu, Joe

Abstract

Retailers increasingly incorporate sustainable operations to improve their efficiency, which raises questions: Is it always beneficial to increase firms’ sustainable operations for operational efficiency? Under which conditions should a retailer increase its socially-responsible and environmentally-friendly operations to improve efficiency? Our research addresses inconsistent viewpoints in relation to sustainable activities and performance at an operational level, and fills in research gaps in measuring the efficiency of, and identifying the operational mechanisms active in, sustainable retail operations. By collecting data from 124 retailers, we integrate the DEA (data envelopment analysis) model with empirical methods. We first apply DEA models to evaluate the efficiency of retailers. Using efficiency values provided by DEA, we conduct hierarchical regression analysis to examine the influence of socially-responsible and environmentally-friendly operations, and understand the role of sustainable operations in the supply chain. Finally, we use nonlinear analysis to identify the conditions required to increase the efficiency of sustainable operations. Supply chain integration can improve efficiency with higher levels of socio-economic integration and environmental-economic integration. Firms in an internal operational environment with a higher level of financial flow integration and a lower level of physical flow integration are more likely to achieve high retail efficiency. We find two conditions for implementation with managerial insights. When these conditions, characterized by financial flow and physical flow integration, are satisfied, a retailer can increase sustainable operations to increase efficiency. We have a surprising but reasonable finding: the interaction of sustainable operations and physical flow integration is negatively correlated to efficiency.

Suggested Citation

  • Gong, Yeming & Liu, Jiawen & Zhu, Joe, 2019. "When to increase firms’ sustainable operations for efficiency? A data envelopment analysis in the retailing industry," European Journal of Operational Research, Elsevier, vol. 277(3), pages 1010-1026.
    • Handle: RePEc:eee:ejores:v:277:y:2019:i:3:p:1010-1026
    DOI: 10.1016/j.ejor.2019.03.019
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    8. Gupta, Anshu & Pachar, Nomita & Jain, Akansha & Govindan, Kannan & Jha, P.C., 2023. "Resource reallocation strategies for sustainable efficiency improvement of retail chains," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).
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