Implementing the United Nations sustainable development Goals to supply chains with behavioral consumers

Abstract

We identify that the United Nations (UN) Sustainable Development Goals (SDGs) of 7, 9, 12 pertaining to industry investment, innovation, affordability, clean product, and responsible consumption/production are relevant for the firms operating in closed-loop supply chain (CLSC) structures. We show how these goals can be implemented into a CLSC in which downstream manufacturer serves different types of consumers and engages in vertical relations with a supplier in the upstream. While the supplier invests in a green component, the manufacturer produces the final green product. The manufacturer diversifies its customer base and meet their demands through contracts and a variety of pricing options. Specifically, at the end of the supply chain there are three different customer groups: “contract customers”, “green-conscious customers”, and “wholesale market customers”. While the firms execute sustainability Goals of 7 and 9, the behavioral consumers who are the contract and green-conscious customers are altruistic, consume responsibly, and hence fulfill the Goal 12. We show that green consciousness and altruism play an important role on firm profitability and production. Furthermore, the SDGs proposed by the UN have welfare-improving implications. In particular, when the SDGs are implemented, all parties (firms and consumers) are better off compared to the benchmark case under which no SDGs are applied.