Integrating Corporate Social Responsibility in a closed-loop supply chain under government subsidy and used products collection strategies

Abstract

Due to rapid advancement of the society, recently many manufacturing and retailing companies are showing their interests in Corporate Social Responsibility (CSR) in addition to maximizing their profits. This study introduces CSR activity of the retailer, and develops an integrated model (Model I) and three manufacturer-led decentralized models (Model M, R, and C) depending on different collection options of used products under selling price and CSR effort dependent market demand. The aim of this study is to explore how CSR effort of the retailer can influence the optimal decisions of the supply chain members. In order to stimulate the CSR effort, the government provides CSR dependent subsidy to the retailer. Besides deriving closed-form optimal solutions, this research also determines optimal consumer surplus, environmental damage and social welfare for the proposed models. A comparative study is performed to determine the best sustainable decentralized model. The numerical results show that among the three decentralized models, Model M gives the best performance but fails to challenge with Model I, and government subsidy plays a key role in improving channel performance. A two-part tariff contract is considered to address channel coordination issue. The effects of some key model-parameters on the optimal profitability and the social welfare are investigated through sensitivity analysis, which can help managers to implement CSR activity as well as improve channel performance.