Environmental Management Practices Of Small And Medium Scale Enterprises (SMES) In Sri Lanka

The SMEs and the environmental issues are comparatively under research or ignored by the academia,instead focusing its attention on the large firms. It is widely quoted that, as a sector SMEs couldcontribute up to70%of industrial pollution (Hillary,1995).The influence is more serious in the Asia–Pacific region because of the rapid economic growth of the region today. Therefore, it is need to directconceptual emphasis upon investigations on the relationship between SMEs and the environmentespecially for developing economies. The environmental solutions designed for larger organizationscannot be applied for SMEs since they differ from larger organizations in their management style,organizational structure and the characteristic of owners/managers. Therefore SMEs need their ownunique answers to understand of difficulties they face with environmental issues. Within this contextthis study focused to investigate the low level of environmental management practices (EMPs) ofSMEs and the factors which influence on EMPs. Therefore, the main objective of this study is toidentify the causes for low level EMPs of SMEs and to propose a framework to the policy makers toencourage SMEs towards better EMPs. The Western Province of Sri Lanka was selected for theempirical study since there are deficit of studies on this issue in developing countries.In order to obtain a better understanding of the issue, an extensive literature survey was conducted ontheories as well as on previous studies. As a result of reviewed literature of the concept, thestakeholder theory and institutional theory was identified as fundamental theories to the research issue.According to the stakeholder theory and institutional theory, environmental issues have become realand urgent challenge for organizations. Because those theories explains that organizations success orfailures depends on the facts whether the organizations satisfies the expectations of its stakeholders.This study more emphasized on stakeholder theory which argues that the responsibility ofmanagers/owners in the stakeholder management context is not limited to shareholders, but variousstakeholders.Based on the research findings of the previous studies, organization’s resources, legal regulation andregulators, supplier involvement, owners/managers attitudes and awareness on environmental issues,public green ethics, and environmental information were identified as key influencing factors(determinants) of EMPs in SMEs. These factors were categorized in to five major areas; resources,stakeholders, information, environmental legislation and owners/managers attitudes/awareness onenvironmental issues and environmental protection. Based on the nature of relationships as explainedin the literature survey, the conceptual framework was developed for the study. Then altogethereleven hypotheses were developed for this study in focusing on the relationships among variables. With the purpose of achieving study objectives, both primary and secondary data were employed toobtain study findings. The empirical study basically depends on primary data. Primary data wascollected through questionnaires and interviews. In addition to the questionnaire some interviewswere conducted with selected respondents to verify the environmental protection laws in relation toindustries, legal enforcement process and the strengths and weaknesses of existing environmentalregulatory system with relating environmental management in industries. The Food and Beverage(F&D) industry was selected for the empirical study since F&B industry dominate the SMEs sector inSri Lanka both in employment generation and in industrial value addition.400respondents wereselected for the survey from the organizations with5–99employees. First registered SMEs in theWestern province under F&B category were selected for the sample and then organizations wererandomly selected, proportionately to the number of organizations in each district. Descriptivestatistics, correlation analysis and multivariate analysis were utilized to obtain the research findings.The study found that there is a positive relationship between environmental legislation and EMPs.However, the relationship is not significant according to the statistical findings. Because even thoughthe environmental legislation is strong enough to prevent environmental issues, the enforcementprocess is weak. The stakeholders positively impact on organization’s EMPs. But only suppliers andregulators were identified as strong influencers on organizations relating to environmental issues.Environmental information is positively and significantly impacts on EMPs of SMEs andorganizations’ resources also a significant determinant of EMPs of SMEs, however human andfinancial resources were identified as key factors determining EMPs in SMEs. Even though there is apositive relationship between attitudes/awareness and EMPs, the relationship is statistically notsignificant. Their positive environmental attitudes and awareness was not translated in toenvironmental behavior, since their EMPs is low. Overall, resources, stakeholders and environmentalinformation were identified as key determinants of EMPs of SMEs. Human resources, financialresources, lack of time, lack of market incentives and insufficient support from the government andother organizations were identified as major barriers to implement better EMPs in SMEs.The study proposes to the policy makers to support SMEs to improve their knowledge and skills andprovide financial support to update existing technology and access to new technology. Further, it isimportant to strength the relationship within SMEs as well the other supporting organizationsincluding local authorities. Further, it is important to strengthen the public participation inenvironmental protection, which will be able to influence SMEs to act environmentally responsible inimproving both economy and the environment.