A Theory of Market-Based Sustainability: Integrating Economics-Based Supply and Demand Theory with Doing Good, Warm Glow, and Price Fairness

Abstract

A variety of entities are increasingly concerned with sustainability (e.g., customers, firms), and these entities will often increase their sustainability actions if there is a performance and/or quality-of-life incentive to do so. But such a simplistic portrayal of sustainability leaves out the boundaries of what firms would opt to do given certain market conditions and what customers (and other stakeholders) would be willing to sacrifice, if anything, to be sustainable. In response, we develop a theory of market-based sustainability and delineate its core tenets. The theory facilitates a deeper analysis of sustainability actions for firms and customers (but also other primary and secondary stakeholders) – via a focus on sustainability levels and changes – involving direct (doing good), indirect (warm glow), and synergy-related sustainability impacts as well as price fairness. Without such integrative theorizing, firms will likely allocate cost estimates (and price points) that are too high for the undertaken sustainability actions or impact estimates that are too low, or both, instead of achieving a maximum point of sustainability yield.