How environmental collaboration with suppliers and customers influences firm performance: evidence from Dutch food and beverage processors

• Understanding the influence of environmental collaboration on firm performance.
• Exploring indirect effect through sustainable process improvements.
• Collaboration with suppliers has only direct effect, it stimulates cost savings.
• Collaboration with customers has only indirect effect.
• Indirectly, collaboration with customers induces cost savings and market gains.

Searching for sustainable growth opportunities, manufacturing firms are increasingly embedding sustainability concerns into their relationships with supply chain partners. In the present paper, we explore the potential of environmental collaboration with suppliers and customers to induce environmentally sustainable improvements to internal processes to address external sustainability pressures and to contribute to business performance. Grounded in resource based view spin-offs, this study claims that environmental collaboration can enhance the performance of the focal firm not only directly, but also indirectly – by stimulating the focal firm to implement more environmentally sustainable processes that in turn contribute to firm's performance. Providing manufacturing managers with a better understanding of the direct and indirect relationships between environmental collaboration and firm performance can gain them more control over the outcomes of environmental collaboration. Proposed relationships were tested in a sample of 139 Dutch food and beverage processors using structural equation modelling. The results indicate that environmental collaboration with suppliers can improve the performance of Dutch food and beverage processors directly as it induces cost savings. Nevertheless, such collaboration is not likely to assist firms seeking to improve environmental sustainability of their internal processes as one of the outcomes of environmental collaboration. On the contrary, environmental collaboration with customers induces performance indirectly, by stimulating food and beverage processors to implement sustainable process improvements that subsequently bring about cost savings and market gains.