Joint Sustainability Development in a Supply Chain

In: Decision sciences, Volume 53, Issue 2, p. 239-259

Abstract

ABSTRACTIntense media scrutiny and public backlash stimulate consumers to be conscientious about sustainability issues from the supply chain (SC) perspective. Accordingly, our focus in this article is on joint sustainability issues in a manufacturer–supplier relationship under a contract that possibly shares sustainability‐related costs, when there exists a supplier's potentially deficient sustainability effort. We find that the manufacturer may prefer indirect (i.e., paying a higher component price to its supplier) rather than direct support (i.e., increasing subsidies for a supplier's sustainability expenditures) when consumers are sensitive to the supplier's sustainability. We further find that as consumers' sensitivity to the supplier's sustainability increases, an uncoordinated SC will gradually approach the coordinated SC. This occurs because the increased sensitivity encourages greater cooperation among SC members. Our findings will help establish a better understanding of the joint sustainability development issues in an SC.