Implications for pure profit, environmental impact and social welfare in a socially responsible supply chain

Abstract

Purpose

Members in a supply chain account for corporate social responsibility (CSR) in different ways. This paper considers a socially responsible supply chain in which the manufacturer innovates in a sustainable product while the retailer exhibits CSR concerns. This paper aims to investigate how socially responsible behavior, namely, sustainable innovations or CSR concerns, affects the pure profit, environmental impact and social welfare, in such a socially responsible supply chain.

Design/methodology/approach

This paper first constructs an integrated case as a benchmark and then develops a Manufacturer-Stackelberg game in a decentralized scenario. The pure profit, environmental impact and social welfare are confirmed and analyzed in centralized and decentralized cases. Moreover, two unique coordinating contracts, i.e. wholesale price discount contract and revenue-sharing contract, are used in this socially responsible supply chain.

Findings

Analytical analysis shows that, under certain conditions, the optimal CSR strategies hold for maximizing pure channel profit, minimizing environmental impact and maximizing social welfare. Whether the performance in a centralized case outnumbers that in a decentralized case depends on the CSR concerns level and environment-friendly degree of the product. In addition, it is found that a wholesale price discount contract is better for the retailer whereas a revenue-sharing contract is better for the manufacturer in pure profit to improve coordinating efficiency.

Practical implications

These results can offer managerial implications to the socially responsible supply chain in terms of pricing decisions, CSR strategies and sustainability innovations. Specifically, under certain conditions, placing more CSR concerns level increases pure channel profit and the social welfare. A balance between the pure profit and the social welfare is hereby achieved for the two socially responsible individuals by designing a proper contract.

Originality/value

To the best of the authors’ knowledge, this paper is among the first studies so far to combine the CSR concerns strategy and sustainability innovation into a socially responsible supply chain.

Citation

Zhang, Z., Xu, H., Liu, Z. and Fang, Y. (2021), "Implications for pure profit, environmental impact and social welfare in a socially responsible supply chain", Kybernetes, Vol. 50 No. 3, pp. 757-784. https://doi.org/10.1108/K-12-2019-0852