Lean and green? An empirical examination of the relationship between lean production and environmental performance

Production and Operations Management, Fall 2001 by King, Andrew A, Lenox, Michael J

LEAN AND GREEN? AN EMPIRICAL EXAMINATION OF THE RELATIONSHIP BETWEEN LEAN PRODUCTION AND ENVIRONMENTAL PERFORMANCE*

Lean production may have a significant public good spillover-improved environmental performance. However, empirical evidence of the link between lean production practices and environmental performance has not resolved the nature of the relationship. To explore this issue, we conduct an empirical analysis of the environmental performance of 17,499 U.S. manufacturing establishments during the time period 1991-1996. We find that those establishments that adopt the quality management standard ISO 9000 are more likely to adopt the environmental management standard ISO 14000. We also find strong evidence that lean production, as measured by ISO 9000 adoption and low chemical inventories, is complementary to waste reduction and pollution reduction.

(LEAN PRODUCTION; ENVIRONMENTAL PERFORMANCE; ISO 9000; ISO 14000)

A number of authors have proposed that the adoption of lean production can directly improve the public good by improving the environmental performance of the adopting firms (Florida 1996; Hart 1997). According to this logic, the "good housekeeping" practices associated with lean production have the subsidiary benefit of reducing spills and other forms of waste. Hence, scholars propose that the adoption of lean production practices will improve the environmental performance of manufacturing establishments; in other words, lean is green.

Empirical evidence of the link between lean production practices and environmental performance is sparse. Much of the work remains anecdotal, relying on individual success stories to support a relationship between lean production and environmental performance (Graedel and Allenby 1995). A few studies use questionnaires to demonstrate a possible association between leanness and greenness (Maxwell, Rothenberg, and Schenck 1993; Florida 1996; Rothenberg 1999). Unfortunately, they cannot rule out the possibility that both lean production and environmental improvement may be caused by other underlying firm attributes. For example, lean production may be related to pollution reduction only because both are the manifestation of the firm's innovative nature.

In this paper, we extend the debate both theoretically and empirically. The adoption of lean practices may lead inadvertently to pollution reduction, may reduce barriers to implementing pollution reducing measures, or may simply provide information about the value of reducing pollution. We propose that lean may beget green because they are complements. Adopting lean production practices reduces the marginal cost of environmental management and leads to improved environmental performance. Thus we hypothesize that lean production will increase the likelihood that establishments will adopt advanced environmental management systems. Furthermore, we hypothesize that these gains will be achieved by source reduction, not end-of-pipe treatment. Finally, we hypothesize that facilities that adopt lean production systems will reduce emissions.

Empirically, we combine large-scale databases from several sources and cross-link the records, allowing far more detailed quantitative analysis of interactions between operational variables and environmental impact. We test our hypotheses through an empirical analysis of the environmental performance of 17,499 U.S. manufacturing establishments during the time period 1991-1996. We find strong evidence that establishments that minimize inventory and adopt quality standards are more likely to have lower emissions of toxic chemicals, and these facilities reduce emissions through pollution prevention rather than end-of-pipe treatment of waste. Finally, we find evidence that establishments that adopt the quality standard ISO 9000 are also more likely to adopt the environmental management standard ISO 14000.

Theory and Hypotheses

The concept of lean production arose from the study of Japanese manufacturing techniques, particularly in the automobile industry (Womack, Jones, and Roos 1990). Lean production relates to a number of practices touching on almost every aspect of a firm's operations. At its core are practices that relate to technical and human capabilities and to work place management (MacDuffie 1995). A chief issue is the management of inventory and rework "buffers," and the reduction of these buffers gives rise to the "lean production" name (Womack, Jones, and Roos 1990).

Proponents of a "lean is green" relationship provide several arguments (Florida 1996; Hart 1997). For one, the adoption of lean practices may lead inadvertently to pollution reduction. Some proponents observe that "zero waste" is the mantra of lean production and suggest that pollution reduction will inevitably follow from lean production. Critics point out, however, that reducing one factor of production may increase another. Efforts to increase the efficiency of throughputs may lead to a greater production of waste. Reducing inventory, for example, may lead to a greater production of waste. The small batch size production inherent in lean production entails more frequent changeovers, and these changeovers might require cleaning of production equipment and disposal of unused process material.