Green procurement strategies as determinants of financial performance of small and medium enterprises in Eldoret town, Kenya

Abstract

Owing to strong influence on economic and social issues, environmental impact attributed by SMEs activities is significant, not only for their magnitude but also in diversity. However SMEs are often unaware of their environmental impact and lack the resources to implement environmental initiatives and since their environmental footprints are small and localized they easily go unnoticed. Nevertheless the cumulative environmental impacts of countless SMEs constitute major environmental challenges to both regulators and stakeholders. Environmental issues is now considered strategic and there has been debate all over the world concerning environmental issues (Green procurement).Many SMEs are reluctant to adopt green procurement strategies until they find financial benefit for themselves. Thus the general objective of the study was to determine if green procurement strategies had an effect on SMEs financial performance. The specific objectives were to determine the extent to which recycling of waste, use of non pollutants, waste management and use of energy saving products determined SMEs financial performance in Eldoret town, Kenya. The study area was Eldoret town, Kenya and the research design adopted was explanatory research design (bivariate analysis) because it compares two variables, the dependent variable being financial performance and independent variable is green procurement strategy. The research used stratified and simple random sampling and Hotels, restaurants, bars and supermarkets were the study units. There are more than 8175 SMEs in Eldoret town and the researcher used stratified sampling and targeted 80 respondents in supermarkets and 197 respondents in hotels/restaurant/bars. Data collection instruments used was five point likert scale questionnaire and structured interview. Data analysis used was descriptive statistics, explanatory factor analysis, Pearson Moment correlation and regression model analysis. Data was presented using tables, figures and in prose form. The study showed that there is a relationship between green procurement strategies adopted by SMEs on their financial performance and it found that most SME’s in Eldoret have an understanding of what green products are, recycling of wastes, what pollution is and what needs to be done to curb pollution and lastly about waste management and the need to use energy saving products to reduce on the cost of energy. From multiple regression tests the study findings; r=0.509 and r2=0.740, which shows that 74% of the growth of financial performance can be explained by the adoption of green procurement. The findings show that the null hypotheses were rejected in each hypothesis and thus there was a relationship. The study recommends that an awareness programme should be organized in schools, offices, through multimedia houses to educate the masses on the need to recycle waste and thus save on their costs and as a way to generate income. The study further recommends that SMEs require greater access to financial services and investment capital. The study will be useful to various stakeholders such as the government, policy makers and purchasing managers who will benefit on knowing that green procurement strategy is an important aspect in any organizations and it can impact environmental and financial performance of SMEs as well as all organizations