Corporate Social Responsibility (CSR) Issues in Supply Chain Competition: Should Greenwashing Be Regulated?

Abstract

Corporate social responsibility (CSR) has been treated as an instrument to differentiate firms in a competitive market. However, due to the credence good nature of CSR, when considering product quality dimension, firms can only signal their quality through advertising or labeling. These signaling mechanisms may be exploited by some dishonest firms who claim to be green (“greenwashing”). Many critics argue that greenwashing needs to be regulated because it deceives the market and discourages firms from going genuinely green. In this article, instead of focusing on the ethical side of this issue, we try to explore the market outcome from an economic perspective. We show that regulating greenwashing may not necessarily increase the positive environmental externality of green products. In particular, even if greenwashing is regulated, firms may not act green when the additional CSR cost is too high or when the corresponding CSR issue is not as important. On the other hand, we find that allowing greenwashing may incentivize some firms to go genuinely green as long as there are some informed customers in the market.

Pricing and coordination in a dual-channel supply chain with a socially responsible manufacturer

“…Under the supply chain environment, CSR is especially important to meet business needs [21]. That is because that CSR affects not only the purchase intention of consumer [7] but also the social reputations of firms [22,23]. Therefore, CSR has emerged frequently under supply chain environment.…”

“…It is shown that 70% of consumers would like to pay an extra price for these products, which leads to more profit of these manufacturers [6]. Therefore, more and more manufacturers take part in designing socially responsible business operation [7,8]. For example, in China, Volkswagen launched "Child Safety Action" to promote consumers to use child safety seats; HP has become the first batch enterprises to implement an environmental management system (EMS) to save energy and recycle used products, and has become one of the international enterprises certified by ISO 14001.…”

Subsidy-Related Deception Behavior in Energy-Saving Products Based on Game Theory

“…Manufacturers may engage in multiple dishonest behaviors, which primarily include fraud, the misuse of eco-labels, and the use of counterfeit products. These issues are the subject of longterm research, as the problem is global (Hamilton and Zilberman, 2006;Lee et al, 2018). Ibanez and Grolleau (2008) proposed that a polluting firm may also claim eco-labels by paying a fee because consumers cannot observe production technology or pollution related to production.…”

Social and Environmental Sustainability: An Empirical Analysis of Supply Chain Profitability and the Recession

“…Supporters of CSR suggest that investments in CSR activities are necessary for firms to undertake. Many studies have shown a positive relationship between CSR and corporate performance (Shen and Chang, 2008;Wang et al, 2008;Lee et al, 2018). Moreover, Heal (2005) suggested that externalization of part of the production cost is one of the reasons why some firms select to act irresponsibly.…”

“…Other views argue that CSR activities represent a costly diversion of limited resources. This view is discussed and studied by many researchers (see, for example, Brammer et al, 2005, Becchetti et al, 2007, Shen and Chang, 2008, Barnett, 2007, Wang et al, 2008, Lee et al, 2018.…”