Evidence in light of theory

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49 auto parts manufacturers implement external GSCM practices to “green” suppliers. The studied SMEs however do not engage themselves in external GSCM practices; they rather react to those adopted by their large customers. A reason for this could be that SMEs do not have as much power over suppliers than large companies do.

Recovering investments from materials for production is important for SMEs, since their financial resources are limited compared to that of larger companies. Nevertheless there is a lack of evidence that the case study companies engage in investment recovery practices. None of them has considered recycling. The SMEs only consider waste management meaning that resources are used more efficiently. But this does not mean that the companies engage in recycling to recover materials from a previous investment. Companies have to consider the tradeoff between investment recovery and the costs of implementing systems and design processes necessary to recover those investments, an undertaking that is costly. Recycling stations and processes need to be considered. Thus it seems that recycling and designing for material recovery is a task left to car manufacturers that specify the requirements for their parts in the first place.

GSCM theory further suggests design as a practice to follow. However no evidence on eco-design among the case studies could be found. Eco-eco-design is mainly led by the focal company within a supply chain, in this case the car manufacturer, which designs products for the end consumer. Furthermore it can be argued that eco-design is a proactive CSR strategy. It was found that SMEs engage in reactive CSR strategies, which can explain the lack in evidence for eco-design practices. Moreover these SMEs provide parts for larger products that are eco-designed in car manufacturing companies. It is possible that a supplier of auto parts that redesigns its products to make them eco-friendly might not be able to sell them because customers have their own requirements regarding their parts.

Internal environmental management as GSCM practice refers to an internal management of environmental issues. Consequently ISO 14001 or other environmental certifications could be regarded as internal GSCM practices. Since four out of seven SMEs were found to have such certifications, it could be argued that SMEs actively engage in internal environmental

50 management. Waste management practices that were found in SMEs can further be regarded as internal environmental management practices because they too require an active management and reporting system within the organization. The evidence thus suggests support for the argument provided by Lin and Lan (2013) that SMEs tend to perform more internal environmental management.

The car manufacturing industry faces many environmental requirements from institutions such as governments and the international community in the form of laws and regulations. Consequently the auto parts industry that supplies car manufacturers also faces environmental requirements.

Hawley (1968) argues that governments and their institutions exert isomorphism on organizations in these industries to make them behave in the same manner as others that face the same environmental conditions. Research on these two industries and evidence from the case studies shows that companies tend to comply with institutional requirements in order to gain legitimacy and to avoid sanction. This finding further provides support for the argument from institutional theory researchers such as DiMaggio and Powell (1983) and Meyer and Rowan (1977) that no organization is able to avoid external pressures from institutions.

Environmental laws and regulations stipulate environmental pollution standards regarding the use of hazardous materials and greenhouse gas (GHG) emissions. The United States Environmental Protection Agency (EPA) has put various regulations and standards into place to limit the environmental impact of the car and auto parts industry. Some examples include toxic substance control in auto parts, emission standards for vehicles and sulfur content in vehicle gasoline for compliance with the Clean Air Act, a federal law introduced in 1970 (EPA, 2015). Canada has also established vehicle emission requirements that are largely compatible with requirements from the United States (Environment Canada, 2015). Mexico has a general law on ecological equilibrium and protection of the environment that includes regulation on emissions from vehicles and the auto parts manufacturing industry (Cámara de diputados del H. Congreso de la Unión , 2014). Compliance with regulations has become a question of survival for companies operating in the car and auto parts industry. Regulation pressures on car manufacturers are passed

51 on to suppliers of parts, who have to comply with government requirements and management practices of their large customers (Lin & Lan, 2013). These laws and regulations represent coercive pressures from institutions that have the ability to sanction contrary behavior. They can entail sanctions such as product bans and fines to companies that do not comply. These coercive pressures have the ability to influence the future behavior of producers because they are costly and pose a risk to company image. The recent case of Volkswagen AG cheating on emission test of its vehicles is a primary example (Hotten, 2015).

Certifications for business practices such as voluntary standards from the International Organization for Standardization (ISO) can be regarded as normative pressures. The legitimacy of normative pressures depends on the moral governance of the institutional environment (Scott W. , 2001). Environmental practices are considered morally correct and important by the international community and governments worldwide, since climate change and environmental pollution have become visible issues. The car manufacturing and auto parts industries are considered high polluting industries and are regulated worldwide. Thus ISO certifications provide companies with legitimacy within the institutional environment in which car and auto parts manufacturers operate.

Three out of the seven case SMEs have acquired ISO 14001 standards for environmental management systems and one has a certification for “Industria Limpia”. All of these companies export part of their products or sell them to customers that export later on in the supply chain.

This finding could indicate that export dependence is an important normative driver for conforming to environmental standards such as ISO. Christmann and Taylor (2001) also find support for this in their study of Chinese manufacturers. Additionally, the evidence on ISO 14001 and Industria Limpia certifications in the case studies shows support for the argument provided by Scott (1992) that companies facing environmental requirements attempt to gain legitimacy from institutions and adjust their strategies to meet those requirements.

Since the car manufacturing and auto parts industries are largely regulated in regards to environmental impacts, increasing regulation is an expectation. Thus the propagation of

52 certifications and environmental management systems can be viewed as the result of mimetic behavior among companies within these industries. Automotive Maquiladora and Meximotor stated that environmental practices are still flexible and open to interpretation. Their decision on implementing “green” practices also relied on the observation that various companies in the remanufacturing business were profiting from introducing environmental practices. DiMaggio and Powell (1983) argue that mimetic pressure is especially dominant under uncertainty.

Evidence from the case studies suggests the existence of uncertainty regarding environmental practices. Since it is a relatively new area with no clear guidelines many companies seem to resort to mimicking the practices of successful ones.