Cleaner Logistics and Supply Chain 6 (2023) 100100

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Cleaner Logistics and Supply Chain

journal homepage: www.journals.elsevier.com/cleaner-logistics-and-supply-chain

The role of green supply chain management practices on environmental

performance: A case of Indonesian small and medium enterprises
Muhammad Akbar Dzikriansyah, Ilyas Masudin *, Fien Zulfikarijah, Muhammad Jihadi,
Rohmat Dwi Jatmiko
University of Muhammadiyah Malang, Jl. Raya Tlogomas 235 Malang, Indonesia

A R T I C L E I N F O A B S T R A C T

Keywords: This article investigates the role of green supply chain management practices on environmental performance in
Green supply chain management Indonesian small and medium enterprises (SMEs). A quantitative method is used to examine a particular pop­
Environmental performance ulation or sample, and research instruments with partial least squares - structural equation modeling (PLS-SEM)
Strategic orientation
are applied in this study. The respondents of this study are 89 Indonesian small and medium business managers
Government regulation
and owners. The results indicate that internal factors such as strategic orientation and internal environment
management are not driving SMEs to consider green supply chain management. Meanwhile, external factor as
government regulation plays a significant role in adopting green supply chain management. Moreover, it reveals
that adopting green supply chain management would affect SME’s environmental performance. The findings also
prove that internal factors did not affect environmental performance through green supply chain management.
On the other hand, green supply chain management adoption could mediate government regulation on
improving SMEs’ environmental performance.

1. Introduction
Poor environmental performance causes the importance of applying
the concept of sustainability, where this concept is commonly called
GSCM (green supply chain management). Green supply chain manage­
ment integrates environmental thinking in the supply chain. It includes
product design, raw material selection, manufacturing processes, and
product delivery to consumers, including the end of its useful life,
product management after its useful life, or reverse logistics (Fitrin,
2017). The research results regarding green supply chain management
have an increasing effect on environmental performance. Many re­
searchers have carried out, including Antin Rakhmawati et al. (2019),
Zhu et al. (2017), and Younis et al. (2016). In these studies, it is found
that there is a positive influence of the Green Supply Chain Management
variable on environmental performance. It means that organizations
that apply the concept of green supply chain management have a high
level of environmental performance compared to organizations that do
not apply the concept of green supply chain management (Fig 1) and
(Table 1).
Implementing green supply chain management requires the organi­
zation’s external and internal driving factors. Djunaidi et al. (2018) and
Rakhmawati et al. (2019) include driving factors from external parties:
government regulation, strategic orientation, community demands, and
consumer behavior. Meanwhile, according to Jermsittiparsert et al.
(2019) and Djunaidi et al.(2018), the internal driving factors include
green knowledge management capability, internal environment man­
agement, top management support, and organizational strategy.
Furthermore, research conducted by Yang et al. (2020) shows that the
driving factors for implementing green supply chain management would
result in the positive performance of an organization.
Concerning the driving factors required in implementing GSCM, it is
believed that only a prominent and reputable organization with
knowledge management capability, management support, and organi­
zational strategy could apply GSCM. Meanwhile, small and medium
enterprises (SMEs) with limited resources have difficulty implementing
GSCM in their production processes. Consequently, most SMEs have an
insignificant relationship between GSCM practice and environmental
performance. Namagembe et al. (2019) found that several GSCM vari­
ables such as green procurement, customer cooperation, eco-design, and
investment recovery in SMEs were unrelated to environmental perfor­
mance. However, they found a relationship between internal environ­
mental management and environmental performance. In another study,

* Corresponding author.
E-mail address: masudin@umm.ac.id (I. Masudin).

https://doi.org/10.1016/j.clscn.2023.100100
Received 13 March 2022; Received in revised form 25 January 2023; Accepted 25 February 2023
Available online 28 February 2023
2772-3909/© 2023 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-
nc-nd/4.0/).
M.A. Dzikriansyah et al.
Fig. 1. Conceptual model.
Table 1
Hypotheses.
Hypothesis Effect description
H1 Strategic orientation has a positive effect on green supply chain
management
H2 Internal environment management has a positive effect on green
supply chain management
H3 Government regulation has a positive effect on green supply chain
management
H4 Green supply chain management has a positive effect on
environmental performance
H5 Strategic orientation affects environmental performance through
green supply chain management
H6 Internal environment management affects environmental performance
through green supply chain management
H7 Government regulations affect environmental performance through
green supply chain management
it proved different findings in SMEs. Sharma et al. (2017) indicated that
internal environmental management and government regulation are the
most dominant factors in GSCM implementation. Moreover, Diabat et al.
(2013) clearly stated that internal environmental management and
government regulation drive GSCM practices in automobile industries.
However, Namagembe et al. (2016a) indicated that environmental
regulations are not significant predictors of SMEs’ GSCM adoption. In
summary, from previous studies, there is a controversy in the results
obtained regarding the driving factors for GSCM implementation and its
relationship with environmental performance between SMEs and repu­
table industries. Therefore, this study investigates further the internal
and external driving factors for GSCM implementation and the rela­
tionship of GSCM on environmental performance in Indonesian SMEs.
The rest of this article is organized as follows. In Section 2, we
recalled the internal and external drivers of GSCM adoption and its
relationship on environmental performance. After that, the proposed
research method is presented in Section 3. Section 4 focuses on the
presentation of the results and discusses the findings. This section also
presents the managerial implication and theoretical contributions.
Finally, Section 5 describes the conclusion of this study and further
potential research.
2. Literature review
2.1. Strategic orientation and green supply chain management
Strategic orientation is essential for green supply chain management,
ultimately increasing organizational performance. Strategic orientation
also assists managerial decision-making, including the company’s
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Cleaner Logistics and Supply Chain 6 (2023) 100100
relationship with the environment (Rakhmawati et al., 2020). A stra­
tegic orientation makes it possible for companies to minimize waste and
pollution generated by the company. At the same time, green supply
chain management helps to revive the sustainable environment. Rakh­
mawati et al. (2019) and Chu (2016) stated several terms in strategic
orientation. The first is environmental orientation, which concerns
management or companies’ awareness of the importance of environ­
mental care for their business. Moreover, Bu et al. (2020) stated that it is
the extent to which a company integrates ecological issues into its
business strategy to reduce the harmful effects of business activities
related to the natural environment. The items used in the research from
Habib et al. (2021) used environmental orientation terms, including
environmental regulations and environmental conservation. The second
strategic orientation is supply chain orientation. Supply chain orienta­
tion refers to a strategic capability for the company. Companies with a
robust supply chain orientation have members who tend to see the
supply chain as an integrated entity and fulfill chain needs in an inte­
grated manner Hult et al. (2008). In the supply chain orientation, Hasan
and Ali (2015) believed several items from the Supply Chain Orienta­
tion, including relying on supply chain parties with trust.
According to Meng et al. (2021), green supply chain management
considers the environmental influence of business activities on processes
ranging from raw materials to finished products within a company.
Several activities are included in green supply chain management. The
first is green purchasing, which is purchasing goods by complying with
legal regulations and environmental considerations Green, Zelbst,
Meacham, and Bhadauria (2012). The second is green distribution,
which consists of green logistics and green packaging Ninlawan et al.
(2010). The green distribution includes timeliness and number of
customer purchase items, the efficiency of using transportation fuel in
the product distribution, and optimal transportation capacity in
distributing the product. The third is reuse, which concerns reducing
waste in the supply chain (Li et al., 2014). According to the shipping
companies’ green efforts, reuse is related to treating empty and loaded
containers. The volume and weight of the container are included to
indicate potential obstacles to reforestation efforts. The cost of storing
empty containers is a component of added value originating from green
efforts, cost/economic benefits, corporate image, and social re­
sponsibility recycling (Li et al., 2014; Zhu et al., 2010).
Previous research indicated that strategic orientation significantly
positively affects green supply chain management. For example, the
research by Liu et al. (2020) on 296 manufacturing companies in China
showed that strategic orientation significantly positively affects green
supply chain management. Other studies also indicated that strategic
market orientation could enhance firm performance through green
supply chain adoption (Butt et al., 2021). Moreover, Güemes-Castorena
and Ruiz-Monroy (2020) believed that organizational ambidexterity
(strategic exploitation and exploration) play a significant role in supply
chain performance. Therefore, this study tests a hypothesis:
H1: Strategic orientation has a positive effect on green supply chain
management
2.2. Internal environment management and green supply chain
management
Internal environmental management refers to the company’s policies
to protect the environment to ensure environmental safety. Internal
environmental management practices ensure the support of all man­
agers and employees in managing the environment. It also requires
cooperation between different departments regarding environmental
improvement and system building (Jermsittiparsert et al., 2019).
Vanalle et al. (2017) stated that the indicator of internal environment
management is an environmental management system and quality
environmental management. Meanwhile, Fianko et al. (2021) indicated
several indicators of internal environment management, including
support for applying GSCM and cross-functional cooperation for
M.A. Dzikriansyah et al.
environmental improvement, commitment to implementing GSCM, and
the establishment of regulations on the environment.
Previous research results stated that internal environment manage­
ment positively affects green supply chain management. This has been
proven by Vanalle et al. (2017) and Yang et al. (2020), who undertook
their studies in manufacturing industries. They found that the support
from managers of the companies plays an essential role in the successful
green supply chain adoption. However, Some discussions indicated that
for small and medium businesses, it is suggested that firms should
encourage the intellectuality of the middle management and employees
to adopt green practices that can improve their financial and environ­
mental performance (Khan et al., 2021). Another study also indicated
that managerial initiative significantly improves SMEs’ organizational
performance through green supply chain management adoption
(Masudin et al., 2021). Moreover, Butt et al. (2021) found the critical
role of green supply chain adoption on organizational performance
through internal management involvement. Therefore, this study at­
tempts to posit a hypothesis as follows:
H2: Internal Environment Management has a positive effect on green
supply chain management
2.3. Government regulation and green supply chain management
The government is one of the crucial stakeholders in adopting a
green supply chain. The government can easily regulate companies by
influencing their internal and external resources (Nezakati et al., 2016).
In addition, the government can impose sanctions on stakeholders who
do not comply with the policies in supply chain management that have
been issued. According to Zhu et al. (2017), government regulations
related to environmental issues are regulations or regulations that bind
all parties involved in the company’s entire supply chain. Previous
studies such as Masudin et al. (2022) and Laosirihongthong et al. (2013)
found that government regulation plays a significant role in the green
supply chain management of established companies. However, in small
and start-up organizations, government regulation on environmental
issues has no significant effect on green supply chain adoption (Nama­
gembe et al., 2016b). Environmental regulation is one of the barriers for
small businesses to adopting green supply chain management (Govindan
et al., 2014). Moreover, Agarwal et al. (2018) found that regulatory
pressures from the government do not affect green supply chain man­
agement performance in small and medium organizations. Based on the
controversial relationship between government regulation and the green
supply chain above, we posit a hypothesis:
H3: Government regulation has a positive effect on green supply
chain management
2.4. Environmental performance and green supply chain management
Environmental performance is the ecological result of a company’s
commitment to preserving and improving the natural environment
(Rakhmawati et al., 2019). According to Zhu et al. (2017), the organi­
zation can reduce air, liquid, and solid waste, and the organization can
reduce the consumption of hazardous and toxic materials, and reduce
the frequency of environmental accidents. The environmental perfor­
mance dimensions used by Darwish et al. (2021) and Vanalle et al.
(2017) included the decreased consumption of hazardous or toxic ma­
terials and decreased frequency of environmental accidents. In addition,
they reduced air emissions, solid/liquid waste, the amount of energy
used, the consumption of hazardous or toxic materials, and the fre­
quency of environmental accidents.
Prior discussions have found that green supply chain management
has a significant positive effect on environmental performance. For
example, research has been carried out by Green et al. (2012) on 159
Managers of manufacturing companies in the United States and Cousins
et al. (2019) on 248 manufacturing companies in the UK suggest that
green supply chain management has a significant positive effect on
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Cleaner Logistics and Supply Chain 6 (2023) 100100
environmental performance. However, some studies indicated that
green supply chain management partially moderates the relationship
between intellectual capital and environmental performance (Khan
et al., 2021). Another study also showed that adopting several GSCM
activities, such as green purchasing and eco-design, negatively affect
environmental performance, especially economic performance (Ken­
neth W. Green, Pamela J. Zelbst, Jeramy Meacham, & Vikram S. Bha­
dauria, 2012). Moreover, Khan and Qianli (2017) revealed that some
GSCM practices (green purchasing and eco-design) are not essential key
predictors of organizational performance. Thus, this study tests a
hypothesis:
H4: Green supply chain management has a positive effect on envi­
ronmental performance
2.5. Research method
This study uses a quantitative method to examine a particular pop­
ulation or sample and research instruments. This study focuses on SMEs
in the food and beverage sector in Indonesia. The respondents are the
owners and managers of SME who run the businesses and are respon­
sible for implementing organizational policy. The analysis uses quanti­
tative techniques and is processed using statistical techniques. The
statistical technique used in this study is partial least squares-structural
equation modeling (PLS-SEM). Ghozali and Latan (2015) argue that the
PLS analysis method is a robust measurement approach. It does not have
to assume data with a specific scale measurement and the number of
samples used. Furthermore, it can use a small sample. In addition, using
PLS can test complex relationships and influences among variables.
This study uses the PLS-SEM to determine the effect of latent vari­
ables in influencing environmental performance. Respondents in this
study were owners of small and medium industries in Indonesia. Asia­
mah et al. (2017) suggest that the population can be a collection of
subjects, variables, concepts, or phenomena. The population in this
study is 89 small business owners who run the food and beverage in­
dustries. The Likert scale is used to measure the questionnaires and
analyzed using SPSS and Smart-PLS 3.0 software to help descriptively
test data such as the validity and reliability of the measurement sub-
model (outer model). It also evaluates the influence between variables
with the structural sub-model (inner model). In this study, the mea­
surement of indicators of each research variable using a questionnaire
through the Google Form media. The questionnaire was prepared based
on the indicators of each variable specified in the conceptual model.
There are five types of questionnaire measurement; then the intensity of
the answers is given a score from the lowest value of 1 (Strongly
disagree), 2 (Disagree), 3 (Quite Agree), 4 (Agree), and the highest 5
(Strongly agree).
3. Conceptual model and hypotheses
The framework below describes the strategic orientation variable,
the internal environment management variable, and the government
regulation variable influencing the green supply chain management,
producing the Environmental Performance variable. Based on the con­
ceptual model, this study tested seven hypotheses, as shown in the
following table:
3.1. Operational variable definition and structural equation model
The operational definition containing attributes or nature or value of
people, objects, or activities with certain variations set to be studied and
concluded is presented in Table 2.
The equations in SEM are mathematical and statistical properties
that the model and its structural features imply. They are then estimated
with statistical algorithms (usually based on matrix algebra and gener­
alized linear models) run on experimental or observational data. From
Fig. 2, it shows that the ovals and observed variables by rectangles
M.A. Dzikriansyah et al.
Table 2
Operational variable definition.
Variable Definition
Strategic A set of practices intended to
orientation influence, control and
support environmental
performance by allocating
enabling human resources
and redefining
organizational
responsibilities and
procedures.
Internal Internal environmental
environment management is an
management organizational policy,
managerial control, and
employee participation for
sustainable development.
Therefore, internal
environment management is
vital in environmentally
friendly sustainable
development.
Government The government is a vital
regulation stakeholder in the green
supply chain because it can
easily bring order to the
company by influencing its
internal and external
resources.
Green supply Green supply chain
chain management is the concept
management of considering the
environmental influence of
business activities on
processes ranging from raw
materials to finished
products within a company
Environment the organization’s ability to
Performance reduce emissions of air,
liquid, and solid waste and
the organization’s ability to
reduce the consumption of
hazardous and toxic
materials and reduce the
frequency of environmental
accidents.
Indicator
1. The company has strict
regulations regarding
environmental awareness in
every operation.
2. Environmental preservation
actions in the company
3. The company exerts
concerted efforts to enable
every employee to
understand the importance
of preserving the
environment
4. Customer orientation
5. Supplier orientation,
6. Operation orientation.
1. Commitment to
implementing GSCM from
the senior manager/
manager/owner of the
company
2. Support for the
implementation of
GSCM from various
internal companies
3. Cross-function cooperation
for
environmental
improvement
4. There is a total
environmental management
initiative
5. Compliance with
regulations in
managing the
environment
1. Regional environmental
regulations
2. Initiatives to implement
GSCM as a form of corporate
responsibility to the
environment
3. Government inspections
that are often carried out in
companies
4. Have a business license
5. Have waste management
and
garbage transport site
1. Safety of raw materials and
products for use
2. Availability of product
information
3. The company has efficient
use of transportation fuel in
the product distribution
process
4. Companies use optimal
transportation capacity in
distributing products
5. The company has the time
and number of customer
who purchase items.
6. Reuse recycled materials
(plastic bags, plastic
packaging, and cardboard).
1. Reduction in consumption
of hazardous/toxic
materials
2. Environmental accident
reduction
3. Reduction of solid/liquid
waste
4. Air emission reduction
5. Reducing energy
consumption (fuel)
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Cleaner Logistics and Supply Chain 6 (2023) 100100
usually indicate latent variables. The structural equation formulation
from the model in Fig. 2 can be formulated as follows:
1. η1 = γ1ξ1 + γ2ξ2 + γ3ξ3 + ς1
2. η2 = β1η1 + γ1ξ1 + γ2ξ2 + γ3ξ3 + ς2
Where:
ξ1, ξ2, and ξ3 are the latent variables.
ς1 and ς2 are errors for the latent variables of green supply chain
management and environmental performance, respectively.
ẟ1 to ẟ4 is the error for each indicator for the independent variable of
strategic orientation.
ẟ5 to ẟ8 are the error for each indicator for the independent variable
of Internal environment management.
ẟ9 to ẟ10 is the error for each indicator for the independent variable
of the government regulation.
ε1 and ε2 are the error for each indicator for the dependent variable
of green supply chain management.
ε3 and ε4 the error for each indicator for the dependent variable of
environmental performance.
4. Results and discussion
4.1. Respondent information
The sampling technique in this study uses the saturated sampling
technique, which is that all members of the population are used as
samples. This is often done when the population is small. A total of 89
respondents were sampled, with an age range of 36 to over 46 years (see
Table 3) (Fig 3). Respondents were females (84.2%) and males (15.8%).
The screening found that the age of those who have SMEs in the food and
beverage sector in Eastern Java province, Indonesian, between the ages
of 36–45 (28%) and over 46 years by 72%. Moreover, from the
perspective of the business duration, 84.3% of respondents run a busi­
ness for six to ten years, and 15.7% for more than ten years.
4.2. Measurement model evaluation
The evaluation of the measurement results of the model in this study
uses two sub-models: the outer model and the inner model. The outer
model is used to determine the validity and reliability of the model by
measuring the influence between each statement and its latent variables.
The outer model test is divided into three categories: convergent val­
idity, discriminant validity, and reliability. Convergent validity test is
done by looking at the value of the outer loadings/loading factor, which
aims to measure the relationship between the construct and its latent
variables. In this study, the variable is considered valid if the value of the
outer loadings/loading factor is >0.5 and the average variance extracts
(AVE) is 0.5 (Ghozali & Latan, 2015). The discriminant validity test
compares the relationship between the indicator, latent variable, and
other latent variables. The two constructs do not test the same thing.
Hair et al. (2017) stated that if Composite reliability and Cronbach’s
alpha function to measure the reliability of a variable, it can be done by
looking at Cronbach’s alpha and composite reliability if the Cronbach’s
alpha value is >0.6 then it is declared reliable. The results of the outer
model testing in this study are shown in Table 4.
Table 4 shows that the indicators of each variable have outer load­
ings ≥ 0.7. All indicators to measure the construct of research variables
can be declared convergent and valid (Ghozali & Latan, 2015). The outer
loading/factor loading value of 0.5 to 0.6 is considered sufficient for
early-stage research. Meanwhile, it is considered high if the loading
factor value is ≥0.7. The variable is valid if it has an average extracted
(AVE) value of ≥0.5.
Furthermore, the discriminant validity test results were obtained by
looking at the Fornell-Larcker value and cross-loading. The discriminant
validity test is carried out by comparing the Fornell-Larcker value with
M.A. Dzikriansyah et al. Cleaner Logistics and Supply Chain 6 (2023) 100100

Fig. 2. Structural equation model.

latent variables have a value ≥0.6. Thus, all variables have good reli­
Table 3
ability in accordance with the specified conditions.
Respondents’ profile.
Profile Frequency Percentage (%)
4.3. Structural model evaluation
Gender
Male 14 15.8%
Female 75 84.2% To test the correlation between variables, use a structural model or
Age inner model. For example, hypothesis testing looks at the R-Square, T-
26–35 0 0 statistical, and P-values results using the bootstrap algorithm (Setiaman,
36–45 25 28%
2020).
>46 64 72%
Education Level Based on the R-Square value (Table 8)., the value of green supply
Senior High School 68 76.4% chain management (GSCM) obtained (R2) is 0.615 or 61.5%. This in­
Bachelor 21 23.6% dicates that Government regulation, internal environment management,
Master 0 0
and strategic orientation affect green supply chain management at
Business was established
1–5 years 0 0
61.5%. Meanwhile, the value of the R-square of environmental perfor­
6–10 years 75 84.3% mance obtained is 0.913 or 91.3%. It means that environmental per­
>10 years 15 15.7% formance is influenced by green supply chain management, government
regulation, internal environment management, and strategic orienta­
tion, with a value of 91.3%. The relationship and significance between
the correlation between latent variables while cross-loading by looking
variables can be seen from the significance value between constructs, t-
at the magnitude of the correlation between each indicator and its latent
statistics, and p-values. In this study, the t-statistical uses significance
variables and indicators with other latent variables.
value > 1.96 and p-value < 0.05 (Setiaman, 2020). Evaluation with the
The cross-loading value (Table 5) shows that the indicator correla­
bootstrap technique affects the acceptance of this research hypothesis.
tion value with its latent variable is greater than the correlation value of
This is explained further in Table 9.
the indicator with other latent variables. Thus, the results of cross-
H1: Strategic orientation does not affect green supply chain
loading and Fornell-larcker have met the discriminant validity re­
management.
quirements, so they are considered valid. Furthermore, it means that
The calculation of the statistical value between strategy orientation
each indicator can test its respective latent variables (Table 6
and GSCM obtained a t-statistic value of 0.964 and a p-value of 0.335.
andTable 7).
The study results show that strategic orientation does not positively
The outer model’s analysis is carried out by assessing convergent and
influence green supply chain management in food and beverage SMEs in
discriminant validity and looking at construct reliability or latent vari­
Indonesia. This result is because most respondents did not determine
ables as measured by Cronbach’s alpha and composite reliability values.
their company strategic direction in creating an environmentally
According to Hair et al. (2017), composite reliability and Cronbach’s
friendly supply chain. Most respondents still use many plastic materials
alpha function to measure the reliability of a variable can be done by
(plastic bags, plastic packaging, plastic ropes, plastic sacks, etc.). In
looking at Cronbach’s alpha and composite reliability so that it is
addition, many suppliers and SMEs still cannot reduce fuel oil use when
considered reliable, and both values are expected to be ≥0.6. The value
distributing products in the supply chain process. Limited knowledge of
of Cronbach’s alpha and composite reliability in this study shows that all
human resources and costs are why they could not reduce plastics and

5
M.A. Dzikriansyah et al. Cleaner Logistics and Supply Chain 6 (2023) 100100

Fig. 3. Structural Equation Modeling - Partial Least Square.

Table 4
Convergent validity.
EP GR GSCM IEM SO AVE Remark

EP 0.835
EP 3 0.914 Valid
EP 5 0.913 Valid
GR 0.806
GR 1 0.870 Valid
GR 5 0.925 Valid
GSCM 0.966
GSCM 4 0.983 Valid
GSCM 6 0.983 Valid
IEM 0.690
IEM 1 0.884 Valid
IEM 2 0.931 Valid
IEM 3 0.768 Valid
IEM 4 0.721 Valid
SO 0.642
SO 1 0.843 Valid
SO 2 0.813 Valid
SO 3 0.784 Valid
SO 6 0.763 Valid

fossil fuels for distributing products. This finding is in line with other
prior studies. For example, Habib et al. (2021) study in the textile
manufacturing industry revealed that knowledge management orienta­
tion does not positively impact GSCM practices. Moreover, Lintukangas
et al. (2016) believed that costs and price risks could hinder the adoption
of green supply chain management. In the context of small and medium
enterprises, Wooi and Zailani (2010) and Simmou et al. (2023) indicated
that small firms have difficulties driving their suppliers into green
initiatives.
H2: Internal environment management does not affect green supply
chain management.
The statistic value to test the relationship between internal
environment management and GSCM obtained a t-statistic value of
1.415 and a p-value of 0.158. The study results show that internal
environment management does not positively influence green supply
chain management in food and beverage SMEs in Indonesia. The results
obtained from internal environment management do not positively
affect green supply chain management. These results are because most
of the internal SMEs in Indonesia do not support the existence of a green
supply chain. Most SMEs believe that the costs incurred by internal SMEs
are much cheaper by using un-environmental materials their business
activities. A study by Simpson et al. (2004) found that most SMEs
believed that adopting a good environmental practice as green supply
chain management could not gain an advantage in competitiveness.

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M.A. Dzikriansyah et al. Cleaner Logistics and Supply Chain 6 (2023) 100100

Table 5 explained by indicators of Indonesian government regulations that

Result of discriminant validity test based on Cross-loading. provide rules for industry players to maintain environmental stability.
EP GR GSCM IEM SO This finding is relevant to the most discussion regarding the role of
government regulation on green supply chain management initiatives
EP 3 0.914 0.905 0.738 0.329 0.100
EP 5 0.913 0.694 0.904 0.485 0.197 for both SMEs and large and established firms. In the perspective of
GR 1 0.649 0.870 0.635 0.487 0.133 SMEs, government regulations play a critical role in SMEs’ adopting
GR 5 0.914 0.925 0.738 0.329 0.100 green supply chain management (Masudin, 2019; Namagembe et al.,
GSCM 4 0.884 0.764 0.983 0.462 0.157 2016b). Government regulations are a factor Government regulations
GSCM 6 0.903 0.748 0.983 0.457 0.158
IEM 1 0.412 0.394 0.433 0.884 0.045
are a form of coercion that can make all companies obey the rules related
IEM 2 0.413 0.413 0.439 0.931 0.048 to environmental care (Huang et al., 2012; Masudin et al., 2018). Gov­
IEM 3 0.280 0.274 0.312 0.768 0.067 ernment regulations can also take the form of physical or non-physical
IEM 4 0.354 0.367 0.349 0.721 0.055 support or assistance for all organizations to implement
SO 1 0.191 0.068 0.137 0.058 0.843
environmental-based supply chain activities. Other studies by Liu et al.
SO 2 0.128 0.150 0.167 0.064 0.813
SO 3 0.048 0.058 0.074 0.004 0.784 (2022) and Gonzalez et al. (2022) also revealed that the external factors
SO 6 0.085 0.118 0.092 0.052 0.763 such as government regulation and institutional pressure on
environmental-based supply chain activities play an important role for
organization to adopt green supply chain management.
Table 6 H4: Green supply chain management affects environmental
Discriminant validity test based on Fornell-Lacker. performance.
Data analysis generated that green supply chain management’s effect
EP GR GSCM IEM SO
on environmental performance values obtained a t-statistic value of
EP 0.914 9.536 and a p-value of 0.000. The study results show that green supply
GR 0.886 0.898
GSCM 0.909 0.769 0.983
chain management positively influences environmental performance in
IEM 0.445 0.442 0.468 0.830 food and beverage SMEs in Indonesia. These results can be explained by
SO 0.162 0.127 0.160 0.062 0.801 indicators of using safe raw materials and reusing recycled packaging
materials in business activities. Previous discussions regarding the pos­
itive impact of green supply chain practices on environmental perfor­
Table 7 mance indicate both in small-medium enterprises and well-established
Analysis result of reliability. organizations. In the perspective of the well-established food and
Cronbach’s alpha Composite reliability Evidence
beverage industry, Diab et al. (2015) showed that green supply chain
management plays a significant role in the improvement of financial
EP 0.802 0.910 Reliable
performance also the environmental performance of the food industry.
GR 0.764 0.893 Reliable
GSCM 0.965 0.983 Reliable Moreover, Al-Ghwayeen and Abdallah (2018) found that green supply
IEM 0.847 0.898 Reliable chain management mediates the improvement of the company’s export
SO 0.822 0.878 Reliable and environmental performances. Other studies in the food cold chain
business reveal that green supply chain management practices such as
blockchain technology and traceability systems could significantly
Table 8 impact the firm’s environmental performance (Masudin et al., 2021;
Variant analysis (R2). Okorie et al., 2022).
R-Square H5: Strategic orientation does not affect environmental performance
through green supply chain management.
EP 0.913
GSCM 0.615
The statistical test result for the strategic relationship orientation and
environmental performance through GSCM obtained a t-statistic value
of 0.284 and a p-value of 0.777. From the study results, it can be proven
They also believed that green supply chain management practices could that the green supply chain management variable has not been a
add financial costs to businesses. Moreover, Seman et al. (2012) found mediator of strategic orientation on environmental performance. This
that the high cost of green supply chain management is the main barrier means that the strategic orientation of SMEs in Indonesia does not affect
for SMEs. increasing environmental performance through green supply chain
H3: Government regulation affects Green Supply Chain management. This finding is consistent with the previous results
Management. explained in the first hypothesis, which mentioned that the firm’s stra­
Based on the statistical calculation, the level of relationship between tegic orientation does not affect green supply chain management in
government regulation and GSCM obtained a t-statistic value of 6.781 Indonesian SMEs in the direct relationship. Thus, green supply chain
and a p-value of 0.000. The study results provide information that management initiatives do not indirectly affect environmental perfor­
government regulation positively influences green supply chain man­ mance. This study’s results align with a study by Silva et al. (2021). They
agement in food and beverage SMEs in Indonesia. These results can be believed there are asymmetric effects between strategic organizational

Table 9
Bootstrapping.
Description T statistic P values Evidence

GR EP government regulations affect environmental performance 10.196 0.000 significant

GR GSCM government regulations affect GSCM 6.781 0.000 significant
GSCM EP GSCM affects government regulation 9.536 0.000 significant
IEM EP internal environmental management does not affect environmental performance 0.430 0.667 not significant
IEM GSCM internal environmental management does not affect GSCM 1.415 0.158 not significant
SO EP Strategic orientation does not affect environmental performance 0.284 0.777 not significant
SO GSCM Strategic orientation does not affect GSCM 0.964 0.335 not significant

7
M.A. Dzikriansyah et al.
orientations and green supply chain management in entrepreneurial
businesses. Their discussions indicated that micro, small and medium
enterprises that have limited knowledge of the benefit of strategic
organizational orientations of management could positively impact on
green supply chain management adoption and environmental perfor­
mance (Kumar et al., 2018; Minović et al., 2017).
H6: Internal environment management does not affect environ­
mental performance through green supply chain management.
The calculation of statistical values between internal environment
management and environmental performance through GSCM obtained a
t-statistic value of 0.430 and a p-value of 0.667. From the study results, it
can be proven that green supply chain management has not been able to
mediate internal environment management on environmental perfor­
mance. This means that according to respondents who are SME business
owners, internal environment management would not increase envi­
ronmental performance through green supply chain management. These
results are consistent with previous findings regarding the insignificant
relationship between internal environmental management and green
supply chain management. The result that most of the internal envi­
ronmental management of SMEs in Indonesia does not support green
supply chain management to improve organizational environmental
performance is relevant to other studies. Namagembe et al. (2016a)
found that internal environment management variables such as
competitive aggressiveness and perceived pressure from environmental
regulations were not significant predictors for green supply chain
practice adoption in SME manufacturing firms. In other studies, Thong
(1999) and Machado et al. (2020) found that internal environment
management variables such as environmental pressure and competitor
pressure are not directed at micro, small and medium businesses.
H7: Government regulation affects environmental performance
through green supply chain management.
The calculation of statistical values between government regulation
and environmental performance through GSCM obtained a t-statistic
value of 10.196 and a p-value of 0.000. From the study results, it can be
proven that the green supply chain management variable can mediate
government regulation on environmental performance. Therefore,
government regulation positively affects environmental performance
through green supply chain management. The results indicate that the
Indonesian government regulations to maintain environmental stability
for the business players could support SMEs to adopt green supply chain
management to improve environmental performance. These findings
show that the involvement of government regulations is the core vari­
able for SME businesses to initiate green supply chain management
practices in their business activities. Lin et al. (2020) conducted a study
on Malaysian SMEs and found that the local government supports might
affect the decision-makers of SMEs to adopt green supply chain man­
agement. Moreover, Lin et al. (2020) believed that the government ef­
forts such as regulation, policy, and assistance could motivate SMEs to
implement green supply chain management to improve environmental
performance.
4.4. Managerial implications and theoretical contribution
The SME’s internal management needs to provide employees with
the necessary insight and guidance for green innovation. For example,
SMEs can organize seminars or involve people from different de­
partments to explore emerging technological developments (Yang et al.,
2020). Furthermore, SME’s internal parties can start implementing
green supply chain management practices with confidence that these
practices will increase environmental and economic performance and
the company’s operations and brand image. Moreover, the need for
strategic orientation as the company’s strategic direction to create the
proper behavior in implementing green supply chain management
practices can improve the company’s ability to maintain the environ­
ment and strengthen the company’s economic viability (Younis et al.,
2016). Therefore, it is necessary to continuously improve both the
8
Cleaner Logistics and Supply Chain 6 (2023) 100100
strategic orientation and the company’s internal environment to support
green supply chain management implementation to improve environ­
mental performance. The government can also create an optimal policy
environment to encourage green supply chain management, for
example, by creating targeted tax levies to encourage pro-environmental
activities along the supply chain. The government can also raise
awareness for small industry players by disseminating information
about the importance of implementing an environmentally friendly
supply chain. In addition, the government can create norms or rules
regarding pro-environmental industries by facilitating and encouraging
knowledge sharing between companies related to green supply chain
management issues (Liu et al. 2020). Therefore, support and pressure
from government regulations significantly affect green supply chain
management to improve environmental performance.
The Indonesian government is interested in helping the SME industry
consider environmental factors in its business. This is in line with the
government’s global participation by ratifying Article 5 of the Paris
Agreement, which encourages countries to reduce emissions based on
sustainability principles. By ratifying the agreement, the Indonesian
government aims to reduce emissions by 29–41% in 2030 from all in­
dustry sectors, including the SME sectors. The government should apply
a more progressive emissions reduction scheme to achieve the emission
target. The scheme would regulate the carbon trade and impose a levy
on carbon emissions. The type of goods and activities that will be taxed,
the applicable tax rate, and the calculation, payment, and reporting of
the tax are expected to be further regulated in a Government Regulation.
Businesses in carbon-intensive sectors related to green materials used by
SMEs such as coal-fired power generation, mining products, paper,
plastics, electronics, and metals, would be the most affected. As a result,
Indonesian SMEs, which contribute 58 percent of the national GDP
(Rizvi et al., 2020), is one of the main businesses impacted by the
regulation. Anticipating the regulation, the owners and associations of
SMEs include should encourage the business sector to adopt green
supply chain management and recalculate their strategies in response to
a carbon tax that directly puts a price on greenhouse gas emissions.
Theoretically, the findings of this study provide some insight
regarding the effects of internal factors of SME organizations on the
adoption of GSCM and its implication for environmental performance.
For example, the results indicated that internal factors such as strategic
orientation and internal environment management are not the key
predictors for SMEs adopting green supply chain management. It is
believed that owners and managers of SMEs have a different under­
standing of the benefits of GSCM adoption on their businesses. Seman
et al. (2012) and Mishra et al. (2022) revealed that the high cost of green
supply chain management is the main barrier for SMEs. Moreover, the
findings of this study also indicate that small firms tend to have diffi­
culties driving their supply chain networks in green initiatives. This is in
line with a prior study by Wooi and Zailani (2010), who found that SMEs
do not have enough power to initiate green supply chain management
practices on their suppliers.
5. Conclusion
This study investigates the factors that affect environmental perfor­
mance in Indonesian small and medium businesses. The findings indi­
cate that strategic orientation and internal environment management
are not the driving factors for SMEs considering green supply chain
management. Meanwhile, the external factor, government regulation,
plays a significant role in Indonesian SMEs adopting green supply chain
management. Moreover, green supply chain management would affect
SMEs’ environmental performance. This study also produces relevant
results regarding the mediation role of green supply chain management
on the connection between strategic orientation and internal environ­
ment management on environmental performance. It shows that inter­
nal factors do not affect environmental performance through green
supply chain management. On the other hand, green supply chain
M.A. Dzikriansyah et al.
management adoption could mediate government regulation on
improving SMEs’ environmental performance.
The focus of this study investigated the role of green supply chain
management practices on organizational environmental performance.
Most small and medium enterprises have a small and unestablished
capital and human resources to adopt GSCM practices. For further po­
tential research, this study’s framework could consider other dimensions
of performance, such as operational and financial performances to un­
derstand more complex relationships between GSCM practices and
organizational performance in the SME sector.
Declaration of Competing Interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data will be made available on request.
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