Who will undertake corporate social responsibility in supply chain encroachment? Manufacturer or retailer

Abstract

As the sustainable economy has become more of a consensus, supply chain members, both manufacturer (e.g., Apple, Huawei, Xiaomi, Nike, and P&G) and retailer (e.g., Uniqlo, Walmart, and Bravo), are concentrated on corporate social responsibility (CSR). The literature in this area has investigated the role of CSR, but the optimal preference for CSR concern of supply chain members is not well understood, especially when manufacturer sells directly by implementing encroachment. This paper studies the optimal preference for CSR concern of supply chain members with considering manufacturer encroachment. We develop the supply chain with a manufacturer (M) and a retailer (R), where the manufacturer sells products via a retail channel which in turn sells them to the final consumers. The manufacturer can also implement encroachment to meet consumers directly. Meanwhile, by considering the manufacturer or retailer may have CSR concern, we explore four scenarios using a game-theoretic framework. Several interesting findings are as follows. First, for the sake of profits, retailer CSR should be encouraged, which may achieve Pareto improvement under certain conditions. Notably, manufacturer encroachment may narrow the “win–win” situation. While for the sake of environmental protection and consumer well-being, manufacturer CSR should be encouraged. Second, manufacturer implementing encroachment may not be blind, because it may be worse for itself when retailer has CSR concern. Third, manufacturer CSR may aggravate the cannibalization effect of encroaching, while retailer CSR may relieve it.

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