The changing environment and the deterioration of the natural resources have triggered organizations to identify, understand and manage the issues of environmental sustainability. This change has led to new paradigms in supply chain management strategies which have shifted the attention towards the impact to the natural environment. This shift in the supply chain management has evoked due to the growing social, political and legislative pressures [1].

Business organizations are considered to be the source of most of the environmental problems. They are subjected to pressures and scrutiny from various parties inside and outside the country to produce environmentally friendly products [2-4]. Industrial wastes severely damage, pollute the environment and cause ozone depletion.

Conservation issues have triggered the manufacturers on their substantial developments and production responsibilities towards a sustainable environment for all [1]. Consumers are becoming more attuned to and involved in the growing green interests [5] and customer loyalty is shifting towards environmentally friendly products. Consequently, businesses are increasingly trying to make their supply chains greener by introducing sustainability strategies throughout their organizations and supplier networks [6].

According to Daugherty et al., Awareness of the art and science of logistics continues to increase due to the increasing need for competitive advantage.

Statement of the Problem

The sugar processing industry in Kenya faces the challenge of environmental sustainability and resource scarcity. The challenge of high prices of sugar and the barn on the use of plastic bags persists. The raw material scarcity problem got worse with the establishment of the companies in close proximity. Kenya’s sugar production is expensive compared to the costs in the region and also internationally. The wastes and by-products from the sugar processing pose serious concerns to the health of individuals and the environment. Air pollution occurs from the bagasse-fired boilers, sugar drying and packing. The filter mud from the production process is also dumped in the open air endangering the health of the surrounding communities. The disposal of non-bio-degradable matter is also of concern. Kipkorir and Wanyoike [7] and Nderitu and Ngugi [8] suggest that most organizations in Kenya have not fully adopted green practices in their operations.

Research Objective

To determine how reverse logistics affects the financial performance.

Research Hypothesis

Reverse logistics has no significant effect on the financial performance.

Theoretical Review

The theory seeks to promote appropriate development. The pursuit for sustainability implies that the goal is to maintain or improve beneficial conditions, particularly with improved capacity to extend desirable conditions over the long term.

However, Hannington [9], introduced the more complex, interwoven concepts of sustainability applications, key ideas have to be followed. Therefore, a solution based on economic analysis alone is less sustainable than one that incorporates economic, ecological and social understanding.

The OECDs environmental outlook highlights the need for new models of development centered on human well-being and the interface with the natural environment. Tackling environmental issues require a multi-stakeholder partnership, from community to national levels. It requires strong governance, institutional capacity, engagement and resources [10]. Businesses impact. It is possible for companies to engage proactive behaviors on social and environmental issues. These include assessing the surroundings, designing the facilities and operating with integrity to restore the environment. Thus, with the efforts to make profit, organizations are tasked to care for the environment and avoid being wasteful by recycling, reusing and disposing off waste properly.

Empirical Review

According to the research conducted by Sarhaye reverse logistics significantly affects the supply chain performance of an organization. Waste management reduces waste leading to a healthy and ecologically sound environment.

Findings of a research conducted by Onyikwa show that inventory recovery which is part of reverse logistics is widely adopted. Moreover, reverse logistics gives a firm the competitive advantage, reduction of operating costs, customer loyalty and increased customer base. The findings by Alshura and Awawdeh [11] emphasized on the significant impact that reverse logistics has on the firms environmental performance. The studied reverse logistics practices are product returns, material reuse, recycling and disposal of wastes. On the same wavelength, Mogeni and Kiarie [12] found an improved performance of an organization after the uptake of reverse logistics. This resulted in backward distribution management, lead time management and increased product returns by saving on energy, material use and overall inventory cost. It also increased customer loyalty and improved the end of product life cycle.

According to study by Szmelter [13] reverse logistics is applicable in food sector. The research comes up with a possibility of reverse logistics in the sugar industry. The wastes produced include beep pulp, sludge from washing and cleaning, calcium carbonate and sugar chalk. From the wastes, fertilizer can be produced. This would in turn lead to the firms making savings and improve their financial performance. The study conducted by Toke established that reverse logistics increases the rate of returns for purposes of asset recovery. It decreases the costs at reduced prices and develops a firms market for promoting green products.

Amemba et al. [14] found out that reverse logistics can also promote efficiency and synergy among business partners. Chien and Shih [15] found out that reverse logistics has a positive relationship with environmental performance of corporations. The implementation of reverse logistics can provide benefits to organizations including cost reduction, market share growth and profit increase whose effects on the financial performance of the firm are positive.

Kushwaha and Sharma [16] concluded that green initiatives such as reverse logistics have direct relationship with financial performance of a firm. Reverse logistics has a strong relationship with sustainable development. A firm that does little or no reverse logistics has no contribution to sustainable development. Kamarulzaman established that many firms practice reverse logistics without familiarization with the term. The application of reverse is partial. Major practices include inventory management, product taken back and waste management. Firms that employ reverse logistics benefit in terms of quality management, reduction on the rate of goods returned and better waste management.

The area expounds on the research design, population, sampling methodology, data collection procedures and instruments, pilot test, data processing and analysis.

Research Design

The research design provides a framework for the collection and analysis of data and subsequently indicates which research methods are appropriate [17]. This study adopted a descriptive research design. Both quantitative and qualitative approaches were used [7].

Target Population

A population is all the people or items that one wishes to carry a study on under this study targeted 3004 employees.

Sampling Frame

The employees in the companies under investigation were clustered per company (Table 1).

Table 1: Sampling Frame

Sample and Sampling Technique

Sampling draws is a representative of 353 officers from the four companies. Which were the staff in the sugar factories in western Kenya.

Yamane [18]   formula   was   used   to   determine the sample size. For a 95% confidence level and e = 0.05, size of the sample should be is determined by the formula:

n = N / (1 + N·e²)

n = 3004 / (1 + 3004(0.05²)) = 353

Therefore, the sample size for the study was 353 respondents.

Research Instruments

The questionnaires was the primary data collection method. Data was collected primarily using questionnaires which the researcher administer personally to the target population. The data was obtained from employees. Permission was sought from the companies and an introduction letter handed in to the management of the companies for permission to carry out the study.

The data collected from the field was coded, summarized, analyzed and tabulated.
 

Response Rate  

Out of 353 respondents who were sampled out as the targeted population above. Only 318 responded. This represents a response rate of 90.08%. Baruch and Holtom, noted that, the average level of response of 52.7% is considered acceptable for sampling.

Reverse Logistics

The study sought to determine the respondent’s level of agreement with effect of reverse logistics on the performance of sugar companies. Table 2 shows the findings.

Table 2: Descriptive Statistics for Reverse Logistics

Grand Mean = 4.326, Valid N (Listwise) = 353

Effect of Organization Reverse Logistics on Financial Performance

The correlation analysis results of the effect of Reverse Logistics on organizational performance of the sugar processing companies in Western Kenya sugar zones was presented in Table 3.

Table 3: Reverse Logistics

**Correlation is significant at the 0.05 level (2-tailed)

The study showed effect of reverse logistics on organizational performance (r =0.842; p<0.05). which has a direct influence on organizational performance. The findings of this corroborated the study by findings of Toke which established that reverse logistics increases the rate of returns for purposes of asset recovery. It decreases the costs at reduced prices and develops a firm’s market for promoting green products.

Simple Linear Regression Analysis

The study established an effect of reverse logistics on financial performance. The results of multiple regression analysis shown in Table 4.

Table 4: Simple Linear Regression Model Summary

^aPredictors: (Constant), Reverse Logistics, ^bDependent Variable: Financial performance

From Table 4, the predictor variable (Reverse logistics) explains 80.6% of the variations in financial performance of sugar factories. This implies that a change in reverse logistics has a strong and a positive effect on financial performance of sugar factories. This study thus assumes that the difference of 19.4% of the variations is as a result of other factors.

The result indicated that reverse logistics is positively and significantly related with financial performance. This implied that a reverse logistics is critical factor for financial performance.

This study concluded that reverse logistics was predictor for financial performance. The study also concluded that streamlining the company functions in terms of reverse logistics helps to eliminate and cut unnecessary costs thereby improving the financial performance of the sugar company.

Recommendations on Policy Formulation and Practice

This study recommended the management of factories in Western Kenya Sugar Zone should stop taking for granted the reverse logistics processes and initiatives. From the farmers’ words, the management of the various sugar factories has failed in proper implementation of such logistics and in most cases such processes have been seen as backward and of immaterial value to the organizations. It is therefore a recommendation that such green practices should be put into full implementation in order to not only make the farmers happy but also to improve on the financial performance of such sugar factories.

Acknowledgment

The authors acknowledge the effort made by friends and professors during this research.

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