Examining the environmental performance of first tier suppliers in the oil and gas supply chain industry

The increasing interest in environmental sustainability and supply chain performance is creating a pressure on firms to pay more attention to their environmental footprints. This pressure is felt more in high polluting industries; therefore, these companies tend to pass these pressures to their suppliers. Thus, environmental performance of supply chains has become an extension of the individual firms’ performance and a reflection of their environmental commitment to the natural environment. The objective of this Master Thesis is to examine the environmental performance of upstream companies in the oil and gas supply chain. Using the Uppsala model and the resource-based view (RBV) of the firm as a theoretical foundation, the firm resources and capabilities, its environmental commitment, and the degree of environmental collaboration are identified as three potential drivers for environmental performance. The interaction between environmental commitment and environmental performance is influenced by the environmental regulations that act as a moderator for compelling environmental behavior, and the need for incentives as a motivator for self-regulating. The study is exploratory in nature and based on interviews and online survey with six companies in the offshore oil and gas industry. The aim is to examine the path process between the variables and their implication on environmental performance. The findings reveal that a proactive environmental commitment has a direct influence on setting goals and priorities manifested in the firm’s actions. Green purchasing activities, to include selecting, evaluating, and monitoring suppliers are central in communicating an environmental commitment and conducing a better environmental behavior in the supply chain. The findings also show that commitment acts as a driving mechanism for environmental collaboration and investment decisions to develop appropriate environmental resources and capabilities. The valuable resources and capabilities of the firm are found to have specific advantage in capturing opportunities, creating sustainable products, and responding to customers’ environmental requirements. Environmental collaboration is found to be task specific and emphasizes more collaboration with customers than with the supplier. In addition, it is regarded as inhabited with relational risks, therefore, it is only exercised to the extent it does not compromise competitiveness. iii The findings also show that environmental regulations are perceived complicated and lacking guidance in the design and use of environmental indicators. They are also seen as open for broad interpretation and inefficient in resolving issues of environmental responsibilities. The difference in the interpretation and application of environmental standards across countries challenges the competitiveness of companies when competing in more relaxed regions. In addition, the findings show that environmental commitment is focused on the business areas and on locations that are subject to stronger control. Therefore, the findings imply that regulations would yield better results if they are applied with tighter control. The introduction of an incentive approach is seen as a positive motivator to reinforce environmental commitment. Incentives help companies preserve their competitiveness in the international market without compromising their sustainable performance. Supplier’s incentives are useful in fostering a deeper commitment to a proactive environmental performance. However, the findings reveal that companies are not interested in committing efforts to the suppliers’ development programs. Based on these findings, the study discusses some implications regarding green purchasing decisions and activities; in addition to implication concerning environmental regulations and controls. The study also highlights limitations encountered and postulate recommendation for future research