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Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
59
Determining the Environmental Performance of
Indonesian SMEs influence by Green Supply
Chain Practices with Moderating Role of Green
HR Practices
Kittisak Jermsittiparsert#1, 2*, Parinya Siriattakul#3, Samanan Wattanapongphasuk#4
1Department for Management of Science and Technology Development, Ton Duc Thang University, Ho
Chi Minh City, Vietnam
2Faculty of Social Sciences and Humanities, Ton Duc Thang University, Ho Chi Minh City, Vietnam
Corresponding author: kittisak.jermsittiparsert@tdtu.edu.vn
3,4Political Science Association of Kasetsart University, Bangkok, Thailand
3siriattakul@hotmail.com
4samanan24@gmail.com
Abstract---In today’s globally competitive world the
phenomenon of Green Supply Chain Management
(GSCM) has emerged and gained attention for
environmental concerns around the globe. The research
study aims to examine the relationship between GSCM
and environment related outcomes among Indonesian
manufacturing SMEs. Literature review depicted that
there are various important and crucial factors today,
important in determining the environmental
performance. The current study entails the green HRM
practices as moderating effect between dependent and
independent constructs of the study. The data was
collected by questionnaire from SMEs of Indonesia and
examined the collected responses by using SMART-
PLS. Interestingly; findings have been shared by the
study that green supply chain practices influence the
environmental performance. The study found that
moderating role of Green HRM was not observed
between green purchasing and environmental
performance but green HR practices moderate the
relationship between green logistics and environmental
performance.
Key words: Environmental Performance, Green Supply
Chain Practices, Green HR Practices.
1. Introduction
Green supply chain management is concern of
multinational companies around the world these days
due to its long lasting and strategic benefits.
Multinational companies focus on improvement of
their supply chain to become effective and now
struggle to greening the supply chain for gaining long
term strategic objectives. Global competition has
increased the concerns of firms to reduce cost,
increase in growth and sustainability of environment
[1]. Academician has embarked on the issue of green
aspect and need to green the supply chain activities
for environmental friendly activities since last
decade. Number of firms has considered the concept
of environmental friendly supply chain activities
while focuses on environmental issues. The greening
supply chain activities include green procurement,
green production or manufacturing, distribution and
green logistics [2]. Firms plan for adopt green supply
chain activities for reduction in environmental impact
and to increase competitive edge for meeting the
demands of stakeholders, therefore, firms develop
policies for adoption of environmental
considerations. Now customers have become much
more aware with green products and prefer to use
green products as they believed to environmental
friendly [3, 4].
Organizations adopt new value added activities in
order to gain benefits and competitive advantage to
manage environmental problems and for the purpose
they try to avail new opportunities to adopt green
practices for managing business operations including
production, supplies, products and logistics. For
______________________________________________________________
International Journal of Supply Chain Management
IJSCM, ISSN: 2050-7399 (Online), 2051-3771 (Print)
Copyright © ExcelingTech Pub, UK (http://excelingtech.co.uk/)
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
60
achievement of above stated exemplary goals firms
adopt such production methods to get clean and
environment friendly products and green managerial
practices [3]. The organizations worldwide face
global competitive environment in services or
manufacturing strive to sustain their efficiency in
managing global supply chain [5]. Researchers have
stated that green supply chain management practices
include integrated environmental thinking, green
product design, resources and selection, process of
manufacturing and final product delivery which
includes green logistics. Researchers have stated the
role of green supply chain management for
sustainable development of industrial supply chain
management practices [5].
Currently in business world eco-friendly product
image has become important factor which integrate
processes, technological adoption and systems to
implement the business [6]. The firms found to be
more sustainable in their practices as compare to their
competitors as green practices are effective in
achievement of savings and profits. The additional
benefits can be generated by securing environment
from pollution by adopting green supply chain
activities for healthier life. The adoption of green
practices in business operations brings benefits at
large scale for society and it shows socially
responsible side of firms [7]. The literature on green
activities depicts that firms define green business
activities for maximizing wealth, growth and same
time preserve environment by production, design and
logistics management [6]. The literature and
empirical studies have shown that environmental
concerns and sustainability plays critical role in
organizational survival and competitiveness edge in
highly competitive business environment in global
market [8]. Firms strive to implement green
managerial practices for effectiveness of company’s
survival and improvement for sustainable
performance [8]. The adoption of green practices for
supply chain has grown rapidly among highly
competitive firms as being green is understood as
source of competitiveness. Firms follow EMS system
(Environmental Management System) for developing
and monitoring environmental policies for green
performance in firms to reduce waste and emission in
atmosphere, it also helps to implement green
practices within various functions of firms for better
performance in financial and environmental aspect
[9, 10].
The researcher in current study intends to consider
two important business functions supply chain and
HR management to determine the environmental
performance of firms in Indonesian manufacturing
industry.
Studies have been conducted on retail store operators
as supply chain is one of important factor in success
of firms and it found to be contributive in
consumption patterns. The studies have been
conducted on green supply chain management
investigation in manufacturing sector. The studies
have shown that in retailer or manufacturing sector
green supply chain activities have notable and
considerable impact on performance of firms [11,
12]. The researchers have stated that retailers or
downstream supply chain or distribution is less
discussed and empirically investigated in supply
chain aspect [13, 14]. The concerns for
environmental issues due to business activities and
taking initiatives for greening supply chain has
emerged the concept of green supply chain
management. Firms strive for integrating greening
aspect in their business operations and supply chain
on pressure of internal and external stakeholders for
gaining competitive edge and long term benefits [15,
16]. The researchers have argued that firms in
business of food items must prepare and serve
environment friendly products for consumption and
also must be able to demonstrate environmental
practices in supply chain activities [17].
The firms are required to upgrade and green their
upstream supply chain activities and integrate them
with environmental criteria and focus on downstream
supply chain activities including logistics to be green
and it must in greater benefits of consumers [18].
Further, researchers have reported the gap in
implementation of sustainability of supply chain and
retailers must focus on supply chain management. In
recent years firms has focused on green supply chain
phenomenon and it has increased in implementation
and further various measurement scale for different
constructs have been reported in studies for
measuring the green supply chain management [12,
19, 20]. The researchers have given different
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
61
viewpoints in greening the retail activities and
processes link of stores specially supply chain related
including logistics and purchasing related processes
must be followed and conducted under greening
aspect [21]. The above discussion and previous
researchers focused on green purchasing [22] and
sustainability aspect and it is justified to discuss
green supply chain management and its impact on
environmental performance as current study entails to
examine the relationship.
The researcher has intend to investigate the
relationship between independent variables green
purchasing, green logistics and dependent variable
environment performance with moderating role of
green HR practices in Indonesian industry.
2. Literature Review:
Since 1990s firms voluntarily implemented
environmental friendly activities in conducting their
business operations for improvement in
environmental performance and later many of the
organizations adopted green activities in response to
the pressures from internal and external stakeholders
and to meet the regulations related to environmental
issues. The researchers have debated on the
relationship between environmental performance and
financial performance, the argument against the
relationship highlights the rise in additional cost,
higher prices and it may cause reduction in
competitiveness [23]. Contrary, environmental
management raise innovation (product and process
innovation) to improve environmental performance
and found to be influential for sales and to reduce
cost [24].
The above shortly discussed phenomenon and
conflict in argument can be accessed through
resource based view theory for resolve the debate.
The RBV argues that the performance of firm
significantly depends on organizational resources,
capabilities and technological adoption in
improvement of quality and reduction in cost, further
greening aspect of supply chain or business activities
play significant role in environmental performance
which improve productivity and minimize
environmental issues [24]. Further, Porter hypothesis
is also suggested by various researcher to support
their argument as above stated, Porter hypothesis
suggests that innovation can be made on the
environmental based regulations and it can offset the
cost incurred further it can improve efficiency of
firms [23]. According to economic theory, it is
argued that environmental performance of firm based
on cost and benefit relationship to meet the
regulations and firms develop their environmental
management strategy [24, 25]. There is conflict
between firms to gain financial gains by
implementation of environmental management
strategy but all of the firms couldn’t enhance
performance only by implementing their
environmental strategy [3].
3. Environmental Performance:
Firms of manufacturing sector increasingly focus on
environmental performance and economic
performance as they facing competition from global
market, community and regulatory authority. Internal
and external stakeholders have exerted pressure on
firms to adopt environment friendly production or
business activities specially related to supply chain
management. As a result firms found to be adopting
production methods and techniques which are
environment friendly and reduce the impact of their
products on environment [26]. Organizations has to
establish their positive environmental image therefore
they assess their purpose of existence in which they
present their environmental concerns and declare
their activities to be taken for better environment, as
these initiatives must be able add value to core
business programs. Various approaches adopted in
supply chain and other business activities including
cleaner production, environment management and
environment friendly efficiency have been considered
for implementation of green management practices
[27-29].
All business activities specifically supply chain
management plays important and crucial role in
environment as SCM has impact on product life cycle
and environment. Greening the SCM has emerged as
an important phenomenon which impact performance
of firms including environmental performance and it
found to be influential for eco efficiency aspect of the
firms [30]. Supply chain activities and processes
impact on environment and economic performance of
firms. Previous studies have investigated relationship
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
62
between environmental and economic performance
[13, 30]. Researchers have stated that measuring
green performance separately economic and
environmental constructs [30]. Further researchers
have conceptualized these constructs differently as
one argument is proposed that environmental
performance criteria server as order qualifiers to be
fulfilled [31]. Economic performance relates to the
financial position of firms as firms operating in loss
or not earning profit will not survive longer.
Accordingly; it is expected as previous research also
indicated that environmental performance influence
economic performance.
3.1. Green purchasing and Environmental
Performance:
Green purchasing or procurement is stated as an
important factor in green supply chain management
which must be environmentally friendly. Firms must
be able to make purchasing while considering that it
must not negatively affect environment so
organizations must be aware of environmental issues
before they make purchasing and they must be able to
consider that in green purchasing phenomenon firms
must be consider waste reduction, recycling, re-usage
of material and green logistics [4, 32]. For green
supply chain activities firms prefer to purchase raw
material which should be influential in reduction of
environmental footprints [33]. The reduction of
negative effects on environment due to operational
supply chain activities is required by stakeholders
and firms focus on sustainability on production to
have lower impact on environment [4]. Firms have
focused on their suppliers and procurement raw
material that it must fulfill environmental regulation
to become environmental friendly and performance
for ensuring that product must be produced and
supplied in environmentally friendly manners and
doesn’t harm or violate any environmental
regulations [31].
The aim of green supply chain such as procurement
and production is reduce raw material cost and
production cost with considering the reuse and
recycling facility. The literature has depicted concept
of 3R; which includes Reuse, Reduce and Recycle.
The reuse of material to reduce cost, reduce the cost
during business operation activities and recycle
products to reduce pollution and produce
environment friendly products. The efficient
production and procurement enable firms to gain
competitive edge in highly competitive environment.
For gaining long term profit and benefits all members
of supply chain activities must take responsibility and
participate through their effective efforts to meet
environmental friendly products and services [34].
The implementation of green aspect in supply chain
activities found to be expensive and its contribution
for economical performance which includes cost
reduction is disposal, conservation of resources and
building the image of organization that positively
impact the competitive position of firm. The green
purchasing process includes selection of green
suppliers; which refers to selection of eco-friendly
raw material, products, green criteria of selection of
suppliers and evaluation of supplier must be
according to greening aspect [34, 35]. The
researchers have stated that there is direct impact on
environmental performance by investments but same
time the studies have depicted that there is not direct
impact on economic performance on USA sample.
Contrary, the study reported that there is no positive
relationship between investment and environmental
performance on Chinese firm sample [34].
The current study intends to examine the relationship
between green procurement and environmental
performance as previous studies has mixed findings.
On the basis of above discussion following
hypothesis have been formulized.
H1: Green purchasing positively influence
environmental performance at Indonesian
manufacturing firms
3.2. Green Logistics and Environmental
Performance:
Various studies have been conducted on green supply
chain management practices which are based on
different activities associated with supply chain.
Researchers have mentioned relationship between
supply chain management and environmental
practices [36], other researchers have focused on
logistics management and greening aspect in logistics
which is believed to be influential and environmental
performance [37]. Various studies have examined the
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
63
GSCM practices and adopted the guidelines for
adoption green practices and found to be influential
for various different long term benefits. Researchers
have investigated the link on Chinese textile,
automobile firms, chemical and electrical and
electronic industries and power generation sector for
assessing the green supply chain management
practices [38]. These under discussion practices
include internal environmental management,
greening the purchasing department, cooperation
with clients, investment and eco-design which is
referred as environmental friendly supply chain
activities [38]. In recent years researchers have
investigated green logistics practices and stated that
manufacturing firms didn’t consider green logistics
aspect and its importance in design phase and found
negative impact of logistics on environmental
performance [39][61].
The extension of supply chain management which
includes environmental concerns refers green supply
chain management as stated by various researchers
[40]. The researchers have depicted it is set of
internal organizational management practices and
useful for logistics management. The green logistics
management has designed for environmental issues
for decision making in inbound logistics management
and on consumer disposal [35, 40].
Researchers have stated five green supply chain
management (GSCM) practices which include
integration of cross functions, eco-design, green
procurement, cooperation with clients, internal
management for environment and investment which
used to assess the green supply chain management.
The studies have found that ecological concerns plays
crucial role supply chain management and now it is
need of time to consider environmental concerns for
managing supply chain [35, 40, 41]. Researchers
have found and stated antecedents of model of green
processes; which include energy and water
management, management of wastage material.
Further it is motivated to implement supply chain
activities and these activities involve green logistics,
purchasing, and cooperation with suppliers in order
to be effective supply chain and to enhance the
performance [4][62].
The researchers have stated that these green supply
chain activities influence economical and
environmental performance. The study has
investigated the direction relationship between green
supply chain activities and performance of firms
empirically [41]. The researchers have stated that in-
store activities and antecedents of green supply chain
processes, which states logistical process and
purchasing for strategic collaboration. Further, it is
stated that specifically, energy management and
green logistics constructs are related to each other.
The research has shown that clear link has
established that effective waste management
influence performance of firms, and waste
management based on related logistics operations and
location of warehouse also related to effective
logistics and greening the logistical operations. It is
also depicted that waste management, purchasing of
raw material according to green manners directly
linked and logistics play crucial role, further,
cooperation with suppliers also influence
environmental performance. Environmental
performance found to be influenced by energy
resources, cooperation with suppliers for being green,
purchasing and green design of product, while
transportation required for raw material and to supply
to end users also influence GSCM [41].
On the basis of above discussion the current study
intends to investigate the relationship between
independent variables including green purchasing and
green logistics and dependent variable environment
performance at Indonesian manufacturing firms. The
following hypothesis has formulated to investigate
the relationship:
H2: Green logistics positively influence the
environmental performance at Indonesian
manufacturing firms.
3.3. Green Human Resource Management:
Human resource is considered as key factor which
contribute to the success of firm financially and non-
financially as well. The researchers have shown that
HR management influences the environmental
performance of firms and it was establishing since
mid-nineties [42]. The researchers depicted positive
consequences of effective HR management on
environmental performance as explored in previous
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
64
studies [43, 44]. Researchers have stated various HR
practices for identified environmental values
throughout the firms and to take long term benefits
on the basis of effective and competitive HR and
human capital [45, 46]. Researchers also stated that
human resource management has influence on
environmental management initiatives. Recently
researchers have found empirical link and studies
stated that HR practices strategically influence
environmental performance; literature has stated
these HR practices as Green HR management
practices [47][60]. The consistent and relevant HR
practices which aims to improve environment plays
key role in implementing greening the organizations.
The GHRM practices include different basic HR
practices including green hiring, green training, green
performance and green compensation [48].
Green HR practices enable firms to adopt green
aspect in hiring, training, performance evaluation and
compensation as green HR practice; which suggest
generating synergistic effect of adopting green
aspects and adoption of green practices [7]. The
similar researchers have been found and suggested
the Green HR practices influence sustainable
performance [49][58].
On the basis of above discussion following
hypothesis is formulated:
H3: Green HR practices positively influence
environmental performance at Indonesian
manufacturing industry.
3.4. Moderating Role of GHRM:
The greening HR phenomenon requires all
employees to be aware of greening aspect and
involvement of all employees is required in
organization to initiate greening HR practices [44].
Each employee of the firms must consider and
implement greening practices at their workplace.
Green practices must be integral part of the processes
and workplace; various activities such as hiring,
training, compensation and performance evaluation
must be kept green in order to implement GHRM
practices [50][54][55][56].
A positive outcome of green HR practices should be
established through effective processes [51].
Researchers have found that GHRM practices have
connected to various business practices that serves as
adhesives [52]. Recently researchers have stated that
in order to achieve environmental performance and
sustainability firms must acquire effective HR and
adopt effective HR policies and practices for
effective and efficient utilization of human resources.
The effective HR practices enable firms to drive
organization to engage in environmental behaviors
which helps organizations to implement green HR
practices and further influence environmental
performance [53][59]. Any organization operating in
business environment cannot act without involvement
of employees; employees posses employee
knowledge, skills, productivity and commitment
towards their duties and being green and implement
green HR practices [10]. Green HR practices and
employee with intention to implement and adopt
green aspect enhance competency with business
processes, reduction in cost and waste material,
eliminate any damage to environment, the greater
efficiency must be achieved in order to reduce cost
and adopt effective and beneficial business processes
[46]. Literature has found and stated that greening
function of HR plays important role in enhancing
financial and environmental performance of
organizations [25][57].
The current study argues that green supply chain
practices influences the environmental performance,
such as green purchasing and green logistics as
independent variables are investigated. Further HR
practices are important and crucial for success in any
organization in highly competitive environment,
GHRM practices believed to be influential on
environmental performance at manufacturing
industry of Indonesia; current study intends to
investigate the moderating role between green SCM
practices and environmental
performance[50][51][52][53]. Therefore, on the basis
of above discussion following hypothesis is
formulated:
H4: GHRM practices moderate relationship between
green purchasing and environmental performance
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
65
H5: GHRM practices moderate relationship between
green logistics and environmental performance
3.5. Research Framework:
Abbreviations:
GP (Green Purchasing); GL (Green Logistics);
GHRM (Green Human Resource Management); EP
(Environmental Performance)
3.7. Research Methodology:
Measurement Scales of study:
The questionnaire was adopted of each scale to
collect data from manufacturing industry of
Indonesian SMEs. The survey was conducted on
small and medium enterprises of Indonesia as they
contribute in economy of country and provide jobs to
huge population of country. The questionnaires was
adopted for each scale to determine the relationship
between green supply chain practices and
environmental practices; the study also investigates
the moderation role of green HR practices. All items
of each scale was measured on five point Likert
scale, where 5 represents strongly agree and 1
represent strongly disagree; as the scale was adopted
from previous literature. Independent variable green
production was considered as one of construct;
originally derived from GSCM practices as one of the
most striking practice. The scale to measure the
independent constructs ‘Green Purchasing’ and
‘Green Logistics’ were adopted from the study of
Zsidisin and Hendrick, (1998) and Carter et al,
(2000). The constructs construct consists of four
items. Environmental performance consists on six
items and adopted from the study of Qinghua Zhu
(2003). The moderating role of GHRM was
investigated and measurement scale of 11 items was
adopted from the study of Zaid AA, (2018).
3.6. Sampling:
The study was conducted on Indonesian SMEs to
measure their environmental performance based on
Green SCM practices with moderating role of GHRM
practices. The population of the study includes
manufacturing SMEs of Indonesia which includes
chemical, food and pharmaceutical industries. It has
been depicted in previous studies that number of
respondents for acceptable limits to be tested by
using PLS-SEM. Therefore, minimum sample size
for analysis required to conduct study is 80 Hair el
al., (2017).
4. Statistical Analysis:
4.1. Analysis and discussion:
The collected data was analyzed by using SAMRT-
PLS, while Measurement Model and Structural
Equation Modeling technique was used in phases
respectively. In first phase the study demonstrate the
measurement model procedure to conduct analysis on
collected data.
4.2. Measurement Model:
The first phase of analysis shows results of
convergent validity as suggested by Gefe, Straub and
Boudreasu (2000); the resulted values of both
measure convergent and composite reliability must
be higher than 0.7 and AVE must be higher than 0.5.
The analysis is shown in the table below.
Table 1:
4.3. Discriminate Validity:
Discriminate validity and shared AVE is
demonstrated in table below as part of phase 1 to
determine the correlation among variables. The
characteristics of discriminate validity were
suggested in the study of Fornell and cha, (1994);
Fornell and Lacker, (1981).
GP
GL
EP
GHRM
Fig 1: Research Framework
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
66
Table 2:
5. Structural Equation Model:
5.1. Hypothesis test: Direct effects:
The second phase of the study investigates the direct
relationships between constructs. The results are
given in table 3; the relationship was examined on
statistical grounds, the first hypothesis H1 was
examined at first which investigates the influence of
green purchasing on environmental performance at
manufacturing industry of Indonesia. The results of
PLS shows that β = 4.212, p<0.01; and t-value found
to be positive and higher than 1.96, and observed as
2.99; hence, H1 was accepted on statistical grounds.
The second hypothesis H2 examined the relationship
between green logistics and environmental
performance; the results shows that β = 3.201, p<0.01
and t-value was observed as 2.121 which is higher
than 1.96 the cutoff point, hence H2 accepted on
statistical grounds. The third hypothesis H3
investigates the relationship between GHR and
environmental performance. The statistical results
shows that β = 3.293 and p<0.01 whereas t-value is
higher than cutoff point 1.96 and observed as 2.451;
therefore, H3 was accepted on statistical grounds.
The Table below demonstrated the direct
relationships of the study.
Table 3:
H#
Relation
β
t-value
Results
H1
GPEP
4.212
2.99
Accepted
H2
GLEP
3.201
2.12
Accepted
H3
GHRMEP
3.293
2.45
Accepted
4.4. Moderating Role of GHRM: Indirect
Relations
The current phase of the study examines the
moderating role of green HRM practice between
green SCM practices and dependent variable
environmental performance at manufacturing SMEs
of Indonesia. The statistical data depicted that β = -
1.245, p<0.01; whereas t-value was observed as
1.456; the hypothesis H4; examines the moderating
role of GHR between green purchase and
environmental performance. The statistical results of
the hypothesis testing demonstrated that there is no
moderation between GP and EP by GHRM. Hence
the H4 was rejected on statistical grounds. Further,
hypothesis H5 was observed on statistical grounds as
well, the H5 investigated the relationship between
green logistics and environmental performance and
moderation effect of GHRM. The results
demonstrated as β = 4.236, p<0.01; whereas t-value
was found as 2.09; hence H5 was accepted
statistically as all values meet the given criteria to be
accepted statistically.
Table 4:
H#
Relation
β
t-
value
Results
H4
GP*GHRMEP
-1.24
1.45
Rejected
H5
GL*GHRMEP
4.25
2.09
Accepted
6. Conclusion:
The primary task of the study was to investigate the
relationship between green SCM practices adopted
by manufacturing firms SMEs in Indonesia. These
firms included food, pharmaceutical and chemical
industries as data was collected from 80 firms from
their HR managers and relative consultants. The
study was focused to investigate the relationship
between green SCM practice such as most striking
and crucial practices were considered in the study to
examine the influence on environmental
performance. Environmental performance has
emerged as most concerning issue among the
business world. The green SCM practices considered
in the present study as green purchasing and green
logistics, as these two crucial supply chain nodes play
important role in success of business to be green. The
study presents its unique contribution by assessing
moderating role of green HR practices between
independent and dependent variables of the study.
The results of the study found that green purchasing
and logistics influence the environmental
performance of firms; therefore, all direct hypotheses
H1, H2 and H3 were accepted statistically. On the
other hand, moderating role of green HR practices
between green purchasing and environmental
performance was not observed, therefore, H4 was
rejected on statistical grounds. Contrary, the
Int. J Sup. Chain. Mgt Vol. 8, No. 3, June 2019
67
hypothesis H5 was accepted on the basis of statistical
grounds, as it observed moderating role of green HR
practices and green logistics and environmental
performance. The study assists Indonesian SMEs to
be more proactive for adoption of green SMC
practices and make sure employees to behave green
and adopted green HR practices.
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