The NGO's Dilemma: How to Influence Firms to Replace a Potentially Hazardous Substance

Abstract

We study an NGO's decisions when it attempts to remove a potentially hazardous substance from commercial use in a market with competing firms. Specifically, we determine under what market and regulatory conditions an NGO should target the industry versus the regulatory body in order to influence firms to replace the substance.We examine how the NGO's strategy changes as the NGO's pragmatism (i.e., the extent to which the NGO incorporates firms' profits into its decision making) increases. Our results demonstrate that when the NGO is less pragmatic, it should examine the existing market structure to determine whether to target the industry or the regulatory body. However, as the pragmatism of the NGO increases, the NGO should increasingly leverage the competition between firms to ensure that a replacement is available to consumers. We examine multiple extensions including varying the competition dynamics, the NGO targeting both the industry and the regulatory body, the time discounting of replacement costs, and a firm potentially lobbying to counteract an NGO's activism.We show that the ability of a firm to lobby can benefit consumers by motivating the NGO to exert more effort and increase the market sensitivity to a substance, thereby forcing the firm to replace.

Impact of Supply Chain Transparency on Sustainability under NGO Scrutiny

“…Kraft et al (2018) studied the impact of a firm's supply chain visibility, that is, "the extent to which a company has information about the social responsibility practice in its supply chain," and information disclosure decisions on customers' valuation of the firm, through a set of incentivized laboratory experiments. Kraft et al (2013) considered the NGOs' role in providing the customers with information about the use of potential hazardous substances in the supply chains, which will influence a firm's market share in a competitive business environment. Kalkanci and Plambeck (2017) considered a buyer's decision on whether to reveal her supplier, knowing that once revealed, the supplier may attract other buyers to compete for the supplier's limited capacity.…”

“…Although related, our study has new features that are distinct from the above-mentioned studies of supply chain transparency. First, we focus on the buyer's decision to reveal her relationship with the supplier; this is in contrast to previous studies, which focused on disclosure of information regarding what the buyer knows about the supplier's social and environmental impact (e.g., Kalkanci et al 2016, Kraft et al 2013, the buyer's inspection effort (Cho et al 2019), the supplier's sustainability efforts (e.g., Kraft et al 2018), or the supplier's violations (e.g., Kim 2015, Plambeck andTaylor 2015). To the best of our knowledge, the only exception to this is Kalkanci and Plambeck (2017), who also investigated the buyer's revelation of her relationship with the supplier.…”

Subsidy scheme or price discount scheme? Mass adoption of electric vehicles under different market structures

“…-(25). We can take the derivative of each of the four variables with respect to the price discount rate β, obtaining ∂p pd Taking the derivative of the profit functions of the two manufacturers with respect to the price discount rate β, we have ∂Π pd e /∂β = q pd e [(c + 2δ)(1 + δ)+ kc(1 + 2δ)(1 − β)]/[(3 + 4δ)(1 − β) 2 ]…”

OM Forum—Operations Management Challenges for Some “Cleantech” Firms

“…The OM research community has critical knowledge and skills for addressing these environmental problems as well as climate change. For example, in this special issue on the environment, Kraft et al (2013) suggest how activists can motivate firms to eliminate hazardous chemicals from their products. This paper focuses on questions for OM and multidisciplinary research that arise from the OM challenges faced by existing cleantech firms.…”