Why and how do suppliers develop environmental management capabilities in response to buyer-led development initiatives?

Purpose Although buying firms increasingly adopt supplier development to help suppliers enhance their ability to deal with environmental issues, little is known about the mechanisms by which buyer-led environmental supplier development (ESD) affects the environmental management capabilities (EMC) of suppliers. Focusing on the supplier perspective and specifically on the role of psychological mechanisms at the supplier level, the authors adopt the stimulus–organism–response framework from functionalist psychology to investigate the mediating role of environment-related supplier perceived relationship value in the association between ESD, in the form of environmental requirements and audits (indirect development – ID) vs. direct development projects (direct development – DD), and supplier EMC. Design/methodology/approach The authors used structural equation modeling and regression analysis to test the hypotheses using survey data from 221 supplying organizations in China. Findings Results reveal that each of the three considered dimensions of the environment-related supplier perceived relationship value (i.e. economic, strategic and co-creation) helps enhance EMC. However, while DD influences positively all three dimensions, ID has a positive effect on only the economic and strategic dimensions. Moreover, the mediation analysis suggests that, while DD affects EMC both directly and via the three dimensions of environment-related supplier perceived relationship value (partial mediation), ID affects EMC only through its impact on environment-related supplier perceived relationship economic and strategic value (full mediation). Originality/value The study sheds light on the psychological mechanisms that drive suppliers’ involvement in green supplier development activities. By doing so, it contributes to the understanding of ESD practices and processes and their effectiveness.