Sustainability and SMEs: A case study of SMEs in the Mexican Auto Parts Industry

Vera Franken

Student thesis: Master thesis


The thesis investigates sustainable practices in SMEs from the Mexican auto parts industry and whether they can benefit from engaging in these practices. A case study approach is taken with interviews from seven case companies. Two published cases complement the analysis on the chosen topic. One case regards SMEs from the auto parts industry that participated in the Green Supply Chain Program of Mexico. The second case is a study on SMEs in the auto parts industry from Taiwan. To analyze evidence and benefits the theories of Corporate Social Responsibility (CSR), Green Supply Chain Management (GSCM) and institutional theory have been chosen to form the basis of the theoretical framework. The study finds evidence on sustainable practices within SMEs from the Mexican auto parts industry. Six out of seven SMEs that were taken as case studies are found to engage in some kind of sustainable practices ranging from resource efficiency and waste management to integrated environmental management systems. Evidence shows that these six SMEs benefit from sustainable practices in terms of cost reduction, increased sales, customer retention, or employee satisfaction. Moreover a positive relationship between GSCM practices, and environmental and financial performance of SMEs were found in the published cases. Common success factors between the studied SMEs are largely industry specific and emanate from characteristics of the auto parts industry. Regulation, export dependence and customer requirements are found to be the main drivers for the adoption of sustainable practices within SMEs. SMEs tend to adopt reactive CSR strategies as a response to customer requirements and regulation from institutions. Furthermore sustainable practices are largely introduced in response to external GSCM practices from the larger companies in the supply chain. Internal environmental management in the form of environmental certifications is also found to be popular among the studied SMEs. However evidence shows that such certifications are expensive to obtain and to maintain, since all of the case companies mentioned this fact. Those costs thus represent a barrier to the adoption of legitimate sustainable practices. A second barrier is the limited knowledge of strategies to implement “green” practices and the benefits from doing so. The results from the study show that the auto parts industry is a special case. The greening of SMEs within the industry is largely successful due to the presence of large companies and the global aspect of the supply chains. These factors push for sustainable practices due to the high regulation of the car manufacturing and auto parts industries. However it is evident that the SMEs under investigation require financial and technical support from their parent companies, the focal company within their supply chains and financing options. The evidence further implies the need of targeted support for SMEs in the process of adopting sustainable practices. The Mexican government has implemented initiatives to support SMEs. However funds and policies are not clearly directed towards the greening of SMEs. Financial institutions in Mexico have started to provide credit lines for sustainable SMEs. However the lack of competition in the Mexican banking sector still shows a reduced product offering that does not cover the needs of the SME sector. Consequently it is proposed, that platforms for knowledge exchange and improved cooperation between large companies and their suppliers should be promoted to bring about the greening of SMEs within the auto parts industry and in general.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2015
Number of pages86