The document is a research proposal that examines the effect of ecodesign practices on the financial performance of manufacturing firms in Mombasa County, Kenya. It begins with background information on ecodesign and financial performance measures. It then discusses the manufacturing industry in Kenya and issues of pollution from factories in Mombasa County. The research problem looks at the mixed results from previous studies on the link between environmental protection and firm performance. The objectives are to determine the adoption of ecodesign practices, challenges to adoption, and the relationship between adoption and financial performance. The value of the study is that it can help firms and inform public policy.
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Ecodesign Impact on Kenyan Firm Finances
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EFFECT OF ECODESIGN PRACTICES ON THE FINANCIAL
PERFORMANCE OF MANUFACTURING FIRMS IN KENYA
By
1. Martin Otundo Richard
(Senior Freelance Researcher, Part Time Lecturer and PhD Student in Project Planning
& Management at JKUAT-Mombasa Campus; Kenya).
Cell: +254721246744; email:martinotundo@gmail.com: academia.edu: Martin Otundo.
2. Menge Suley William
(Administration Officer- Planning &Quality Management; Technical University of Kenya
)
Cell: +254726999463; email:willmenge@gmail.com
3. Rehema
Masters students at UON-KENYA
A research proposal sample prepared as a guideline for students and
researchers/scholars undertaking their studies in the field of
management with a specific bias to manufacturing firms’ performance
and environmental conservation. The research proposal is open for
criticism before data is collected and analyzed. Download it free at
academia.edu and please do not plagiarize since it is to be published
later.
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2
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Some of the challenges facing firms all over the world include global warming, declining
natural resources, pollution control and a demand for goods which are environmentally
friendly. They are forced to reduce their impact to the environment due to increasing
awareness of environmental problems brought about by economic activities (Galdeano,
Ce´spedes & Martı´nez, 2008). In order to satisfy these green demands, firms have to
come up with innovative products and processes by implementing green technologies,
eco-design, and international environmental management systems (Zhu, Sarkis & Lai,
2008; Hsu & Hu, 2011). The main aim of eco-design is the reduction of product
environmental impact during a product‟s life cycle, which is composed of raw materials,
production, distribution, use and final destination (Fiksel, 2006).
Models have been developed mostly with an aim of providing a framework that relates
environmental responsibility with shareholder value creation. Resource dependence
theory is based on the foundation that firms depend on each other for resources which
insure their sustainable growth (Pfeffer & Salancik, 1978). Resource-based view argue
that for a firm to obtain competitive advantage and financial performance resources are
very relevant.Institutional theory acknowledges the role played by external forces in
technology adoption by the firms (Bansal & Roth, 2000; Bansal, 2005). Stakeholder
concept is about what the organization should be and how it should be run.
Although factories create wealth and jobs for urban resident and the country at large,
some of them deal in substances that could be dangerous unless properly handled.
Mombasa County is the centre of industrial activities in the entire coastal region. It
accounts for 90% of the establishment and employment opportunities (Mwaguni &
Munga, 1997). The ecosystem around the coastline receives large quantities of riverine
and coastal watershed discharge which include industrial wastes that has impact on the
water sediment quality, biodiversity, productivity and system functioning. Coastal and
marine resources such as mangrove swamps and coral lagoons are under intense pressure
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from rapid population growth and industrial pollution from the coast (Mwaguni &
Munga, 1997).
1.1.1 Ecodesign
Ecodesign is defined as a set of project practices whose aim is at the creation of eco-
efficient products and processes; the concept was developed by the World Business
Council for Sustainable Development (WBCSD) at the Rio is a proactive process which
is very detailed and entailing. It influences all the stages of a life cycle of products
including: raw material extraction, production, packaging, distribution, use, recovery and
recycling (Jeswiet & Hauschild, 2005). It is a new approach to products design and it
involves identifying environmental aspects connected with the product and including
them in the design process of product development (Nowosielski, Spilka & Kania, 2007).
Karlsson and Luttropp (2006) defined it as a sustainable solutions of products and
services changes that reduce negative sustainability and maximize positive sustainability
and impacts economic, environmental, social and ethical throughout and beyond the life-
cycle a products while Fiskel and Wapman (1994) define it as a process which considers
design performances with respect to environmental, health and safety over the product
and process entire life cycle. Eco-design is one of the practices of GSCM and is known
by other names which includes; design for environment, green design, environmentally
conscious design, life cycle design, clean design and sustainable design. It usually takes
place early in the product‟s design so as to ensure that environmental consequences of the
product‟s entire life cycle are well known before manufacturing decisions are made put
into action (Gheorghe & Ishii, 2008).
1.1.2 Financial Performance
Firms performance can act as a guideline for future decisions on investment and
development Tehrani & Rahnama, 2006). Financial evaluation is among the important
and oldest used method for evaluating the firm perform. Analyzing financial performance
provides information regarding procedures, correlations, qualities firms strengths and
weaknesses and their financial positions. It also tells of the past and present conditions
and value for future strategies (Tehran, Mehragan1 & Golkani, 2012)
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Measuring financial performance is considered a simpler task, but it has its own
challenges given the two measures which are involved. Accounting measures capture the
historical aspects of firm performance (McGuire, Schneeweis & Hill, 1986) while Market
measures looks into the future and focuses on the performance of the market. They give
incite to the investors on the firm‟s ability to generate future economic earnings
(McGuire et al. 1988). Generally accounting measures are a reflection of past or short-
term financial performance and market measures are reflections of future or long-term
financial performance (Hoskisson, Johnson & Moesel, 1994; Keats & Hitts, 1988)
Financial performance is subjective measure of how well a firm can use its assets to
generate revenues for itself. It measures financial health of a firm over a given period of
time and can be used to compare similar firms (Ashok, 2009). There are different ways
which can be used to measure financial performance as indicated by Needles (2011)
including; return on investment (ROI), market share growth, sales Growth, return on
sales (ROS), return on equity (ROE) and earnings before interest and tax (EBIT).
1.1.3 Ecodesign and Financial Performance
Environmental variables impact on financial performance may not be an immediate one
hence making it important to analyze the causal relationships between different variable
while taking into consideration the part played by mediating variables. The contribution
of firms resources and competitive advantage is very important. Proactive environmental
management contributes to competitive advantage through costs reduction and
differentiation (Galdeano-Go´ mez, Ce´ spedes-Lorente & Martı´nez-del-Rı´o, 2008;
Gonza´ lez-Benito and Gonza´ lez- Benito, 2005; Shrivastava, 1995).
An increase in revenue can be brought about by a good environmental performance like
better access to certain markets, differentiating products and offering pollution control
technology. It can also lead to cost reductions for example risk management and relations
with external stakeholders, cost of material, energy, and services and cost of
capital(Ambec & Lanoie, 2008). Although the primary focus of ecodesign is the
reduction of environmental impact, other benefits include an increase in competitiveness
through cost reduction, entrance into new markets and the development of new products
(Knight & Jenkins, 2008).
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Johnston (2005) concludes that while capital expenditures for voluntary environmental
improvements prove to have a negative impact on current earnings of the firm, they
appear to have a positive relation to the long run financial performance. Achieving
environmental sustainability is a long-term and ongoing process which stretches over a
long period; therefore any increase in firm value from adoption of eco-effective
management goes beyond the current period. Cleaner technologies does not need to
generate high rate of return in the short run or have short payback period to be
considered successful this is because most pollution prevention technologies are cheaper
than end-of-pipe technologies (US Congress, 2004).
1.1.4 Manufacturing Industry in Kenya
Manufacturing sector in Kenya has been seen to constitute 70 per cent of the industrial
sector contribution to GDP. Kenya Vision 2030 identifies it as one of the sectors which
are the key drivers for achieving a sustained annual GDP growth of 10 per cent. Kenya‟s
share of manufacturing exports to the global market is estimated to be about 0.02 per cent
which is favorable compared with its immediate neighbors Uganda and Tanzania (Kenya
Institute for Public Policy Research and Analysis, 2013). Manufacturing sector grew by
4.8 per cent in 2013 compared to a revised growth of 3.2 per cent in 2012. And it‟s
expected to maintain its current growth path (Kenya National Bureau of Statistics, 2014).
The bedrock of economic and social development in Kenya is the environment. Six
sectors among them manufacturing have been identified in Vision 2030 as having the
greatest potential to stir the country to the next level of economic development. These
sectors depend on natural resource, which provides them with life supporting and basic
economic functioning. Natural resource base is continuously deteriorating despite its
economic importance. Forests, water, marine, coastal and land resources are increasingly
stressed due to uncontrolled use, degradation, pollution and environmental pressure. This
is a consequence of failure of a set of policy, regulatory and enforcement. Continuous
exploitation of natural resources in Kenya is inevitable, especially due to the launch of
Vision 2030, which envisions an economic growth rate of 10 percent annually (GoK,
2007).
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Earlier assessment of the pollution loads from industries has indicated a high level of
biological oxygen demand (BOD). Suspended matters and nitrogen compounds, solid
wastes from industries is usually not sorted and is deposited at the kibarani dumpsite in
Mombasa. It is realized that some of the industrial waste is toxic and hazardous to animal
and human health (Mwaguni & Munga, 1997). Firms in Mombasa County have been
connected to negative environmental impacts. These firms face different challenges of
sustainable energy consumption, management of solid and liquid wastes, and compliance
with environmental regulations. Urgent measures need to be put in place to change the
way society and industries manages natural resources (Lisney, Riley & Banks, 2003).
Hence adoption of eco design practices will be an option for these firms. The design
process tries to reduce and balance the environmental impacts of a product at each stage
of its life cycle, from raw materials up to end of life disposal.
1.2 Research Problem
The primary focus of ecodesign is the reduction of environmental impact, other benefits
include cost reduction, entrance into new markets and the launch of new products hence
increase in competitiveness (Knight & Jenkins, 2008). The societal businesses
responsibility has been a concern both of scholars and practitioners for a long time
(Salzmann, Ionescu-Somers & Steger, 2005). Increase concerns on the environment, the
rising pressure from the public and regulatory requirements has forced a lot of
organizations to increase their efforts in evaluation of environmental performance
(Lundberg, Balfors & Folkeson, 2009).
From the earlier assessment of industrial pollution in Mombasa County manufacturing
firms are found to be the major contributors (Mwaguni & Munga, 1997). These firms
face different major challenges of sustainable consumption, management of solids and
liquid wastes and compliance with strict environmental regulations. A big percentage of
pollution effluent generated on Mombasa Island and it‟s environ mostly ends up in the
estuarine creeks and rivers hence polluting them. Other industries release large quantities
of liquid waste directly into the sea, causing a significant Biochemical Oxygen Demand
(BOD) load (UNEP/AU/SIDA/Output 3.2 a, 2011). Eco design adoption leads to a great
reduction of environmental footprint, reduction of wastes and re-use of materials, and
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also results in the use of scarce natural resources efficiently and effectively, while
keeping the environment free from pressure (Dallas, 2008).
The examination of the possible direct link between environmental protection and firm
performance in the literature has produced mixed results. Despite the role played by
green issues to green innovation and business success, the relationships among these
aspects still remains controversial. This is because, while some studies have found a
positive relationship (Lo´pez-Gamero, Molina-Azorı´n & Claver-Corte´s, 2009;
Borchardt, Wendt, Pereira & Sellitto, 2011) others do not identify a positive link of
environmental proactivity and financial performance (Wagner, 2005; Watson,
Klingenberg, Polito & Geurts 2004). The lack of the consensus on these links causes a
research gap in the literature. Therefore, this study aims to examine if there is a
relationship between ecodesign and firm financial performance.
In Kenya research has been done in green manufacturing and green supply chain
management. Momanyi (2013) did a study on the adoption of green manufacturing
practices by food processing firms in Mombasa County in Kenya and found the benefits
of adopting green manufacturing practices. The overall indication from the study was that
there are significant benefits of adopting green manufacturing practices. Mohammed
(2012) did a study on green supply chain management and performance of manufacturing
firms in Mombasa, Kenya and found out that GSCM has a positive impact on most
manufacturing firms in Mombasa. Babu (2013) did a study on green supply chain
practices and operational performance of personal care manufacturing firms in Nairobi
and established that respondents are aware of the effects of GSCM practices but not very
conversant on how it impacts on a firms‟ operational performance
Most of the past studies are on green supply chain management and green manufacturing.
Although eco design is one of the practices of GSCM, most studies have not done it in
details to include the whole product life cycle. Therefore, there is a need to conduct a
study on eco design practices in manufacturing firms. The researcher is also not aware of
a study done on adoption of eco design in manufacturing firms in Mombasa County.
Hence the researcher is posing the following questions; to what extent has ecodesign
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practices been adopted by manufacturing firms in Mombasa County? What are the
challenges of adopting ecodesign practices by manufacturing firms in Mombasa County?
What is the relationship between adoption of ecodesign practices and financial
performance of manufacturing firms in Mombasa County?
1.3 Research Objectives
The general objective is to establish the effect of adoption of eco design practices on
financial performance. The specific objectives are to:
i. Determine the extent to which ecodesign practices have been adopted by
manufacturing firms in Mombasa County.
ii. Establish the challenges of adopting ecodesign practices by manufacturing firms in
Mombasa County.
iii. Establish the relationship between adoption of ecodesign practices and financial
performance of manufacturing firms in Mombasa County.
1.4 Value of the study
Understanding of green issues can assist firms in establishing successful operational and
new product development; this study will provides firms with useful references for
improving overall firm performance, gaining competitive advantages and market
leadership. The findings will also contribute to the understanding of green issues and
green innovations since these issues are both a challenge and an opportunity in the
current competitive markets situation. The study will provide the Commission with very
relevant information for the upcoming revision of the Ecodesign implementing measures
in 2015 in order to maximize the innovation impact and the positive involvement of
companies‟ legislative processes.
The results will enhancing the positive impact of regulation on R&D, while easing
communication and knowledge transfer between the Commission and manufacturers
about upcoming innovations and technologies in the legislative process. Finally, the
research seeks to contribute to the development of future environmental public policy.
Formulation of effective environmental public policies relies on a clear understanding of
the link between environmental management and firm performance (Johnstone, 2007).
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CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
This chapter focuses on the literature already in existence, written by other scholars on
the issue of eco design and financial performance. The information is divided into both
theoretical and empirical review of the literature.
2.2 Theoretical Foundation
Eco design is grounded on four major theories. These are resource dependence theory,
resource based view, institutional theory and stakeholder theory.
2.2.1 Resource Dependence Theory
Resource dependence theory has been examined and greatly supported in studies of inter-
organizational relationships (Oliver and Elsers 1998). The assumption of resource
dependence theory is that the firm cannot be independent in regard to critical resources
for its survivors. It depends on resources from outside parties to be competitive (Wathne
& Heide, 2004) thereby develops a need to manage this dependence with other firms for
sustainable development (Ulrich & Barney, 1984). Firms that lack the required resources
to achieve its goals are left with no choice but to partner with others to acquire these
resources. Where partnership and resource sharing are beneficial for environmental and
productivity improvement this leads to diffusion of environmental practices between the
partners (Sarkis, Gonzalez-Torre & Adenso-Diaz, 2010).
Eco-design practices require firms‟ partnerships to ensure performance benefits (Sarkis et
al., 2010). Inter-organizational relationship is crucial for environmental management to
gain performance outcomes, where partnership and resource sharing are important for
environmental and productivity improvements (Zhu & Sarkis, 2004). Resource
dependence argues for the diffusion of environmental practices among the partners
involved. Lack of self-sufficiency creates dependence on suppliers by the customer
organization. Thus, integration of supply chain management with quality management
helps an organization establishing a competitive advantage.
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2.2.2 Resource-Based View
Resource-Based View (RBV) provides a good theoretical foundation to discuss the
contribution of resources and capabilities to firm‟s performance. The theory gives an
insight on the relations among internal resources, capabilities and performance. The
principal idea of the RBV and Natural RBV is that for a firm to achieve competitive
advantage then it all depends on its heterogeneous resources, which are inimitable,
valuable and non- substitutable. It is perhaps one of the most influential frameworks in
environmental management (Barney, 1991).
Environmental innovations may as well lead to complex, environmentally friendly
technologies, products and processes. These in turn lower overall company costs, ensure
long-term competitive advantage and finally boost financial performance (Christmann,
2000). Researchers should use resource-based view to investigate green issues (Dowell,
Hart & Yeung, 2000; Hart, 1995). Proactive environmental strategies that go beyond
regulatory compliance have a positive effect on firm performance when mediated by
valuable firm capabilities (Galdeano-Go´mez et al., 2008; Russo & Fouts, 1997; Sharma
& Vredenburg, 1998; Wagner, 2005).
2.2.3 Institutional Theory
Institutional theory has been applied ever since 1930 (Bansal & Clelland, 2004; Hoffman,
1999; Jennings & Zandbergen, 1995) in understanding response of the firm to increasing
pressures for management of the environment. Due to increased public awareness of
organizational failure and environmental demands, institutional theory recommend that
companies can only gain legitimacy through reduction of their environmental impact and
being socially responsible (Bansal, 2005; Bansal & Clelland, 2004).
Institutional pressure has led firms to adopt eco design practices. They can be;
conformance environmental strategies that complies with regulations and adopting
industry standards, or reducing environmental impact of operations beyond regulatory
requirements (Sharma, 2000). Firms can create good relationships with regulators by
participating in government sponsored voluntary program which develops a voluntary
agreement between government agencies and firms hence encourage technological
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innovation and reduction in pollution (Delmas & Toffel, 2008). Companies can also work
with their customers as well as their suppliers to improve their environmental
performance through exchange of ideas/information, suggestions and correction (Nelson
& Winter, 2002).
2.2.4 Stakeholder Theory
Stakeholder theory starts with the assumption that values are necessarily and the main
reason for doing business. It asks managers to be responsible and have a shared sense of
value and have knowledge on what bring core stakeholders together. It also forces
managers to be very clear about how they want to run the business, in particular what
kinds of relationships they want and need to create and maintain with their stakeholders
so as to deliver on their purpose and expectations. Firms should not narrowly focus their
strategic management decisions on creating shareholder value only but rather broaden
their objectives to include the expectations and interest of the wide group of stakeholders
(D‟Aunno, 2006).
Poor environmental performance will definitely lead to poor company‟s relationship with
its stakeholders. This will go ahead and affect the firm‟s reputation and shareholders will
suffer financial losses if a firm‟s is found liable to environmental damages. Shareholders
and financial institutions usually perceive companies with poor environmental reputation
as riskier to invest in therefore may demand a higher risk premium (Henriques &
Sadorsky, 1999). Increased consumer awareness has led them to demand for industrial
improvement on environmental management (Buysse & Verbeke, 2003). The threats
posed by various stakeholders in response to the poor environmental management thus
induce firms to comply and improve their corporate environmental practice.
2.3 Ecodesign Practices
Eco-design is an approach that might help reducing the damages of the industrial
activities. In Ecodesign strategy wheel and product life cycle explanation Hemel and
Brezet, 1997; Hemel, 1995 explain them as
2.3.1 Design for use of Raw Materials
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It involves selection of low-impact materials; materials which are non-hazardous, non-
exhaustible materials, low energy content materials, recycled materials and recyclable
materials. Also includes reduction of material; weight reduction and reduction in volume.
Some materials and additives are better avoided because they are toxic or may cause
toxic emissions during production, use or when dumped. Non-replenish able materials
should be avoided since the source can become exhausted with time.
2.3.2 Design for Manufacture
It includes production techniques optimization; having alternative production techniques;
low/clean energy use, fewer production processes, reduction in waste generation,
few/clean production consumables. Good design should also have production phase in
mind. Production techniques should have a low environmental impact: they should also
minimize the use of auxiliary materials and energy, should lead to limited losses of raw
material and generate little waste as possible.
2.3.3 Design for Distribution
This involves efficient distribution system; transport mode which is efficient; less/clean
packaging; and efficient logistics. Environmentally efficient distribution is there to ensure
that the product is transported efficiently from the factory doors to the retailer and finally
to the user for consumption. It relates to the product, its packaging, its mode of transport,
and the logistics involved. If a project involves analysis of packaging, then the packaging
should be regarded as a product in itself, with its own life cycle. The main aim is to
reduce transport by working with local suppliers to avoid long-distance transport.
Ecodesign includes the avoidance of environmentally harmful forms of transport hence
the choice of transport mode is important.
2.3.4 Design for Product Use
It includes reduction of the environmental impact in the user stage; consumption of low
energy, few/clean consumables needed during use, ensuring clean energy source and no
energy/auxiliary material use. What is important during use are energy and waste.
Products should be designed with use of the lowest energy consuming components. Clean
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energy sources greatly reduces the harmful emissions from the environment, especially
energy-intensive products. Product should be designed so that it uses the least harmful
source of energy as well as encourage the use of clean and renewable energy sources.
2.3.5 Design for End of Life
It involves optimization of end-of-life system; reuse of product; material recycling;
remanufacturing/refurbishing and clean incineration. Product‟s end-of-life system refers
to what happens to the product after its initial lifetime. It aims at ensuring reuse of
valuable product components and proper waste management. Reusing the product and its
components or materials can reduce the environmental impact of a product by reinvesting
the materials and energy involved in its manufacture while preventing hazardous
emissions.
2.4 Challenges of Adopting Ecodesign Practices
Among the main challenges are lack of technical knowledge on ecodesign, lack of
ecodesign tools based on technology, lack of knowhow in managing changes in design
procedures, differences in opinion among proponents and executors and lastly
organizational complexity (Theyel, 2000). Furthermore many companies begin using
ecodesign tools without transforming the operations of the company for the purpose of
improving environmental performance (Bahmaed, Boukhalfa & Djebabra, 2005).
Implementation of ecodesign requires a cross-sectional team, such as marketing,
production, design and purchasing, so as to meet the functional demands of development.
Even if eco design tools are at hand the problem is that they are not used enough. Early
findings within the field from Baumann, Boons and Bragd, (2002); Johansson, (2002) on
the main obstacles for successful ecodesign implementation, confirmed by Jonbrink and
Melin (2008) identify lack of integration of sustainability strategies in company and
unsuccessful integration of ecodesign in the product development process. In a study by
Boks (2006) the findings were that the barriers include; the big gap between ecodesign
proponents and the executors, organizational complexities, lack of appropriate
infrastructure and lack of cooperation between different departments.
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Although Pochat, Bertoluci, and Froelich, (2007) accounted for more than 150 tools for
ecodesign, several difficulties were still observed and discussed (Lofthouse, 2006;
Byggeth et al. 2006). Many tools fail because they are not focused on new products and
that designers requires specific information on materials and techniques to develop an
ecodesign project. Moreover, most of ecodesign tools require experts, which often hinder
the use of ecodesign practises by small businesses (Pochat et al. 2007). Knight and
Jenkins (2008) pointed out that current tools do not take into account graduation levels of
design which includes: product improvement, product redesign, new product concept and
new product system.
2.5 Empirical Review
Lo´ pez-Gamero, Molina-Azorı´n, and Claver-Corte´ s (2009) did a study on the whole
relationship between environmental variables and firm performance: Competitive
advantage and firm resources as mediator variables and found a positive relationship
between the early investment in environmental issues and the adoption of a proactive
environmental management. It was found out that this leads to improvement of
environmental performance and firm performance through reducing pollution, decreasing
costs and improving credibility and reputation while also contribute to the development
of valuable capabilities which increase the competitive advantage of the firm.
Borchardt, Wendt, Pereira and Sellitto (2011) did a study on redesign of a component
based on ecodesign practices: environmental impact and cost reduction achievements and
the results strengthened the ideas presented in the theoretical framework that the
introduction of new technologies based on ecodesign can help firm create competitive
advantage, improve the company‟s public image and address legal requirements. The
main contribution of the case has been the confirmation about ecodesign construct that
could be further researched in the industry. Further analysis of technological ability and
market potential to accept a redesigned product provide managerial support to the
ecodesign team.
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Other studies do not identify a positive impact of environmental proactivity on financial
performance, Watson, Klingenberg, Polito and Geurts (2004) in a study on the Impact of
environmental management system implementation on financial performance found that
the data analyzed did not show any significant difference in financial performance
between environmental management adopters and non-environmental management
adopters. Hence that environmental management adopters experience significantly higher
levels of profitability and market values compared to non-environmental management
adopters could not be substantiated in the findings.
While the results from Wagner (2005) in a study on how to reconcile environmental and
economic performance to improve corporate sustainability confirmed inversely U-shaped
relationship between environmental management and economic performance in the fixed
effects models. The positive part of the relationship was found to be relatively weak. For
the input-oriented environmental performance index, no significant relationship could be
detected.
Momanyi (2013) did a study on adoption of green manufacturing practices by food
processing firms in Mombasa County, Kenya and found the benefits of adopting green
manufacturing practices to be waste water reduction, minimization of environmental
accidents, improved firm‟s reputation, and decrease in scrape rate. Other benefits include:
improved innovation performance, decrease in fine for environmental accidents, and cost
saving. The overall indication from the study was that there are significant benefits of
adopting green manufacturing practices. Although both studies are on GSCM practices in
Mombasa county, the researcher did a study on green manufacturing while this study will
be on eco design, also the researcher didn‟t have an objective of establishing the
relationship between environmental management and firms financial performance this
study will have an objective of establishing if it‟s worth being environmental friendly and
also to find out the challenges of being environmental friendly.
Mohammed (2012) did a study on green supply chain management and performance of
manufacturing firms in Mombasa, Kenya and found out that GSCM has a positive impact
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on the performance of most manufacturing firms in Mombasa. The adoption of GSCM
has greatly benefited most manufacturing firms in Mombasa through minimization of
waste and thereby leading to increase in demand for the product and profit maximization.
Although both studies are on Mombasa County and are on environmental management
the researcher was generally on GSCM and performance while this study will specifically
be detailed on eco design, one of GSCM practices and financial performance. And this
study will also determine the extent to which environmental management has been
adopted by Mombasa firms which the researcher did not looked at.
Babu (2013) did a study on green supply chain practices and operational performance of
personal care manufacturing firms in Nairobi, Kenya and found out that respondents are
aware of the effects of GSCM practices but not very conversant on how it impacts on a
firms‟ operational performance, thus there is no alignment between the practices and
performance because they are unaware that the effects are already in place. GSCM
practices influenced the firm efficient operational performance. This study is different
from the researchers study in that it is generally on GSC practices and operations
performance in manufacturing firm in Nairobi while this study is specifically on eco
design practices on financial performance in manufacturing firms in Mombasa, while this
study also looks at the challenges of environmental management.
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2.6 Conceptual Framework
Independent variables Dependent variables
Control variables
The framework looks at the relationship between eco design practices (Design for use of
raw materials, Design for manufacture, Design for distribution, Design for product use
and Design for end of life ) and financial performance (Return on investment) with
control variables being Size of the firm and years of existence of the firm.
Financial performance
Return on investment (ROI),
Eco design
-Design for use of raw materials
-Design for manufacture
-Design for distribution
-Design for product use
-Design for end of life
-Size of the firm
-Years of existence of
the firm
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CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
This chapter outlines the methodology employed to study the adoption of eco design
practices in manufacturing firms in Mombasa County. The chapter includes the following
segments: research design, the population, sampling design, data collection, and data
analysis.
3.2 Research design
Cross sectional survey research design will be used as it is appropriate where the overall
aim is to establish whether significant associations among variables exist at some point in
time. It aims at exploring and describing the issues in eco design to gain background
information, clarify problems and develop answers to questions. Cross sectional survey
design was effectively used by Zutshi and Sohal (2004) in analyzing the relationship
between environmental motivation and ISO 14001 certification and also Zhu and Sarkis
(2004) used it in studying green supply chain management implications.
3.3 Population of the Study
The study population will consist of all firms in Mombasa County. According to the
Kenya Bureau of Standards, there are firms 753 manufacturing firms in Mombasa County
(KEBS 2015)
3.4 Sample and Sampling Technique
The study will employ the purposive sampling technique by using a sample comprised of all
65 firms registered by the Kenya Association of Manufacturers (KAM, 2014). The primary
reason why the sample was strictly limited to these firms is because they are perceived to be
well organized and structured, and getting information from them will easier.
Table 3.1: Sample of the Study
Sector Sample
Pharmaceutical and Medical equipment 1
Metals and Allied 11
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Textiles and Apparels 11
Energy, Electrical and Electronics 1
Paper and Board 4
Plastic and Rubber 8
Chemicals and Allied 3
Food and Beverages 19
Building, Mining and Construction 5
Motor vehicles and Accessories 2
Total 65
3.5 Data Collection
Both primary and secondary data will be collected and used for this study. Secondary
data will be obtained from published financial reports of the manufacturing firms.
Primary data will be collected using well structured questionnaire that will be
administered using „drop and pick later‟ method. The questionnaire will allow for a more
flexible and comprehensive view in obtaining relevant information through structured
open and closed ended questions. It is divided into four parts. The first part consists of the
company‟s basic information, the second section consists of questions relating to eco
design practices adoption, the third section comprises of questions on the challenges of
adopting eco design practices, and the last section establishes the relationship between
adoption of eco design practices and financial performance of manufacturing firms in
Mombasa County.
3.6 Data Analysis
The data will first be checked for completeness, consistency and accuracy, it will then be
coded. The data collected will be analyzed using descriptive statistics (percentages,
frequency, average scores and standard deviations). This is because the data collected
will be descriptive in nature. The percentages and frequency will be used to examine the
company‟s basic information. Mean scores and standard deviations of the survey will be
used to give extent, to which eco design practices were adopted, challenges of adopting
eco design practices and relationship between adoption of eco design practices and
financial performance of manufacturing firms in Mombasa County.
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Tables and other graphical presentations as appropriate will be used to present the data
collected for ease of understanding and analysis. The information generated will be
interpreted and explained. The data will be summarized and interpreted with the aid of data
analysis computer software‟s which are Microsoft Excel and SPSS. Financial ratios will be
used to present the findings of the quantitative data. Regression analysis will be used to
test the influence of eco design practices on the financial performance of the 65
manufacturing firms.
Regression Model
Y = β + β 1 X1 + β2 X2 + β3 X3 + β4 X4 + β5 X5 + β6 X6 + β7 X7 + Ɛi,
Where:
Y = financial performance of manufacturing firms
X1 = Design for use of raw materials
X2 = Design for manufacture
X3 = Design for distribution
X4 = Design for product use
X5 = Design for end of life
X6, X7 are control variables
X6 = Size of the firm
X7 = Years of existence of the firm
Ɛi= random errors.
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APPENDICES
Appendix 1: Operationalisation of Research Variables
The eco design variables that were used to test the relationship between eco design
practices and financial performance are as per Table 3.2 below.
Operationalisation of Independent Variable
The independent variable was the eco design practices that has been broken into five
components namely, design for use of raw materials, design for manufacture, design for
distribution, design for product use and design for end of life. These components have
been operationalised in table 3.2
Table 3.2: Operationalisation of the Independent Variable.
Independent variable Indicators
Design for use of raw materials Selection of low-impact materials
Non-hazardous materials
Non-exhaustible materials
Low energy content materials
Recycled materials
Recyclable materials
Design for manufacture
Optimization of production techniques
Alternative production techniques
Fewer production processes
Low/clean energy consumption
Low generation of waste
Few/clean production consumables
Design for distribution
Efficient distribution system
Less/clean packaging
Efficient transport mode
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Efficient logistics
Design for product use
Reduction of the impact on environment in the
stage of use
Consumption of low energy
Use of clean energy source
Few consumables needed during use stage
Use of clean consumables during use
No energy consumed/auxiliary material use
Design for end of life
Optimization of end-of-life system
Reuse of product; remanufacturing
Recycling of materials
Clean incineration
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Operationalization of Dependent Variable
The dependent variable was financial performance that was represented by the ROI and
was obtained from secondary sources. This is shown in table 3.3
Table 3.3: Operationalization of the Dependent Variable
Dependent Variable Indicator
Financial Performance Return on Investment
Operationalisation of Control Variables
The study also considered two control variables that are believed to have a significant
influence on financial performance. These are shown in table 3.4
Table 3.4: Operationalisation of the Control Variable
Control variable Indicator
Size of the firm Number of full time employees of the firm
Years of existence of the firm Years of operation of the firm
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Appendix 2: Questionnaire
The questionnaire contains four parts: The first part will consist of the company‟s basic
information, the second section will consist of questions relating to eco design practices
adoption, the third section will comprise of questions on the challenges of adopting eco
design practices, and the last section will establish the relationship between adoption of
eco design practices and financial performance of manufacturing firms in Mombasa
County.
Section A: Company’s Basic Information
Please answer the following questions concerning information about your organization.
1. Please select the sector in which your firm belongs and the product you manufacture (Tick
one).
Sector Tick Major products
Pharmaceutical and Medical equipment
Metals and Allied
Textiles and Apparels
Energy, Electrical and Electronics
Paper and Board
Plastic and Rubber
Chemicals and Allied
Food and Beverages
Building, Mining and Construction
Motor vehicles and Accessories
Other(s) please specify
2. How long your firm has been operating? …………………………………………………
3. What is the size of the staff of your company? …………………………………………..
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4. Is your company registered with any environmental management body?
a) Yes
b) No
5. Does your firm have environmental management department?
a) Yes
b) No
6. Does your firm have an environmental management policy?
a) Yes
b) No
Section B: Eco design Practices
7. Please tick extent to which your organization has implemented the listed eco design
practices using the following scale: 1- not being considered, 2-future consideration, 3-
planning to implement, 4-currently implementing, 5-successfully implemented.
1 2 3 4 5
Design for use of raw materials
1. Selection of low-impact materials
2. Non-hazardous materials
3. Non-exhaustible materials
4. Low energy content materials
5. Recycled materials
6. Recyclable materials
Design for manufacture
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1. Optimization of production techniques
2. Alternative production techniques
3. Fewer production processes
4. Low/clean energy consumption
5. Low generation of waste
6. Few/clean production consumables
Design for distribution
1. Efficient distribution system
2. Less/clean packaging
3. Efficient transport mode
4. Efficient logistics
Design for product use
1. Reduction of the environmental impact
in the user stage
2. Low energy consumption
3. Clean energy source
4. Few consumables needed during use
5. Clean consumables during use
6. No energy/auxiliary material use
Design for end of life
1. Optimization of end-of-life system
2. Reuse of product; remanufacturing
3. Recycling of materials
4. Clean incineration
Section C: The challenges of Adopting Eco design Practices
7. Please rate the following challenges of Adopting Eco design Practices to your
organization using a five point scale: 1) No impact 2) Little impact 3) Moderate
impact 4) Strong impact 5) Very strong impact
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Challenges 1 2 3 4 5
Lack of technical knowledge about ecodesign
Lack of ecodesign tools based on technology
Lack of knowhow in managing changes in design
procedures
Differences in perspective between proponents
and executors
Organizational complexity
Use ecodesign tools without transforming the
company‟s operations for the sole purpose of
improving environmental performance
Tools are at hand but they are not used enough
Unsuccessful integration of ecodesign in the
product development process
The big gap between ecodesign proponents and
those that have to execute it
Organizational complexities
Lack of appropriate infrastructure
Lack of cooperation between departments
Many tools for ecodesign require experts
Any other challenge (please specify)
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Appendix 3: Secondary Data Collection Form 1
FIRMS 2012 2013 2014
Total
capital Profit
Total
capital Profit
Total
capital Profit
1 Revital Healthcare (EPZ)
Ltd
2 African Marine & General
Engineering Co. Ltd
3 Brollo Kenya Limited
4 Cook „N Lite Ltd
5 Corrugated Sheets Ltd
6 Greif East Africa Ltd
7 Kenya General Industries
Ltd
8 Kenya United Steel
Company (2006) Ltd
9 Narcol Aluminium Rolling
Mills Ltd
10 Southern Engineering Co.
Ltd
11 Standard Rolling Mills Ltd
12 Tarmal Wire Products Ltd
13 Ashton Apparel EPZ Ltd
14 Kamyn Industries Limited
15 Kapric Apparels EPZ Ltd
16 Company Ltd
17 Kikoy Mall
18 Leena Apparels Ltd
19 Mega Garment Industries
Kenya (EPZ)
20 Mombasa Apparells
21 Senior Best Garments
Kenya EPZ Ltd
22 Shin-Ace Garments Kenya
EPZ Ltd
23 Summit Fibres Limited
24 Sollatek Electronics
(Kenya) Ltd
25 Flora Printers Ltd
26 L.A.B international Kenya
Limited
27 Packaging Manufacturers
(1976)Ltd
28 Uneeco Paper Products Ltd
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29 Cables & Plastics Ltd
30 Kenya Suitcase
Manufacturers Limited
31 Mombasa Polythene Bags
Ltd
32 Polly Propelin Bags Ltd
33 Raffia Bags (K) Ltd
34 Thermos Limited
35 Umoja Rubber Products
Limited
36 Zaverchand Punja Ltd
37 Eastern Chemicals
Industries
38 Milly Glass Works Ltd
39 Shreeji Chemicals Limited
40 Bunge East Africa Ltd
41 Buzeki Dairy Limited
42 Chai Trading Company
Limited
43 Coast Silos (K) Ltd
44 Coastal Bottlers Limited
45 CoffTea Agencies
46 Diamond Industries Ltd
47 Global Tea & Commodities
(K) Limited
48 Gold Crown Beverages (K)
LTD
49 Gold Crown Foods
(EPZ)Ltd
50 Juja Coffee Exporters
51 Kensalt Ltd
52 Mombasa Maize Millers
53 Mzuri Sweet Ltd
54 Nesfoods Industries Ltd
55 Pwani Oil Products Ltd
56 Sweet Rus Limited
57 T.S.S Grain Millers
Limited
58 Wanainchi Marine
Products (K) Limited
59 Kemu Salt Packers
60 Kay Salt Ltd
61 Kurawa Industries Ltd
62 Malindi Salt Works
63 Mombasa Cement Ltd
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64 Assemblers Ltd
65 Transtrailers Limited
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Appendix 4: Secondary Data Collection Form 2
ROI
(Y)
X1 X2 X3 X4 X5 Size
of the
Firm
Years of
existence
of the
Firm
1 Revital Healthcare
(EPZ) Ltd
2 African Marine &
General Engineering
Co. Ltd
3 Brollo Kenya Limited
4 Cook „N Lite Ltd
5 Corrugated Sheets Ltd
6 Greif East Africa Ltd
7 Kenya General
Industries Ltd
8 Kenya United Steel
Company (2006) Ltd
9 Narcol Aluminium
Rolling Mills Ltd
10 Southern Engineering
Co. Ltd
11 Standard Rolling Mills
Ltd
12 Tarmal Wire Products
Ltd
13 Ashton Apparel EPZ
Ltd
14 Kamyn Industries
Limited
15 Kapric Apparels EPZ
Ltd
16 Company Ltd
17 Kikoy Mall
18 Leena Apparels Ltd
19 Mega Garment
Industries Kenya
(EPZ)
20 Mombasa Apparells
21 Senior Best Garments
Kenya EPZ Ltd
22 Shin-Ace Garments
Kenya EPZ Ltd
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23 Summit Fibres
Limited
24 Sollatek Electronics
(Kenya) Ltd
25 Flora Printers Ltd
26 L.A.B international
Kenya Limited
27 Packaging
Manufacturers
(1976)Ltd
28 Uneeco Paper
Products Ltd
29 Cables & Plastics Ltd
30 Kenya Suitcase
Manufacturers
Limited
31 Mombasa Polythene
Bags Ltd
32 Polly Propelin Bags
Ltd
33 Raffia Bags (K) Ltd
34 Thermos Limited
35 Umoja Rubber
Products Limited
36 Zaverchand Punja Ltd
37 Eastern Chemicals
Industries
38 Milly Glass Works
Ltd
39 Shreeji Chemicals
Limited
40 Bunge East Africa Ltd
41 Buzeki Dairy Limited
42 Chai Trading
Company Limited
43 Coast Silos (K) Ltd
44 Coastal Bottlers
Limited
45 CoffTea Agencies
46 Diamond Industries
Ltd
47 Global Tea &
Commodities (K)
Limited
48 Gold Crown
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Beverages (K) LTD
49 Gold Crown Foods
(EPZ)Ltd
50 Juja Coffee Exporters
51 Kensalt Ltd
52 Mombasa Maize
Millers
53 Mzuri Sweet Ltd
54 Nesfoods Industries
Ltd
55 Pwani Oil Products
Ltd
56 Sweet Rus Limited
57 T.S.S Grain Millers
Limited
58 Wanainchi Marine
Products (K) Limited
59 Kemu Salt Packers
60 Kay Salt Ltd
61 Kurawa Industries Ltd
62 Malindi Salt Works
63 Mombasa Cement Ltd
64 Assemblers Ltd
65 Transtrailers Limited
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Appendix 5: List of Manufacturing Firm in Mombasa Registered by KAM
SECTOR FIRMS
Pharmaceutical and Medical
Revital Healthcare (EPZ) Ltd
Metals and Allied
African Marine & General Engineering Co. Ltd
Brollo Kenya Limited
Cook „N Lite Ltd
Corrugated Sheets Ltd
Greif East Africa Ltd
Kenya General Industries Ltd
Kenya United Steel Company (2006) Ltd
Narcol Aluminium Rolling Mills Ltd
Southern Engineering Co. Ltd
Standard Rolling Mills Ltd
Tarmal Wire Products Ltd
Textiles and Apparels
Ashton Apparel EPZ Ltd
Kamyn Industries Limited
Kapric Apparels EPZ Ltd
Company Ltd
Kikoy Mall
Leena Apparels Ltd
Mega Garment Industries Kenya (EPZ)
Mombasa Apparells
Senior Best Garments Kenya EPZ Ltd
Shin-Ace Garments Kenya EPZ Ltd
Summit Fibres Limited
Energy, Electrical and Electronics
Sollatek Electronics (Kenya) Ltd
Paper and Board
Flora Printers Ltd
L.A.B international Kenya Limited
Packaging Manufacturers (1976)Ltd
Uneeco Paper Products Ltd
Plastic and Rubber
Cables & Plastics Ltd
Kenya Suitcase Manufacturers Limited
Mombasa Polythene Bags Ltd
Polly Propelin Bags Ltd
Raffia Bags (K) Ltd
Thermos Limited
Umoja Rubber Products Limited
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Zaverchand Punja Ltd
Chemicals and Allied
Eastern Chemicals Industries
Milly Glass Works Ltd
Shreeji Chemicals Limited
Food and Beverages
Bunge East Africa Ltd
Buzeki Dairy Limited
Chai Trading Company Limited
Coast Silos (K) Ltd
Coastal Bottlers Limited
CoffTea Agencies
Diamond Industries Ltd
Global Tea & Commodities (K) Limited
Gold Crown Beverages (K) LTD
Gold Crown Foods (EPZ)Ltd
Juja Coffee Exporters
Kensalt Ltd
Mombasa Maize Millers
Mzuri Sweet Ltd
Nesfoods Industries Ltd
Pwani Oil Products Ltd
Sweet Rus Limited
T.S.S Grain Millers Limited
Wanainchi Marine Products (K) Limited
Building, Mining and Construction
Kemu Salt Packers
Kay Salt Ltd
Kurawa Industries Ltd
Malindi Salt Works
Mombasa Cement Ltd
Motor Vehicles and Accessories
Assemblers Ltd
Transtrailers Limited