Integration of environmental and social responsibilities in managing supply chains: A mathematical modeling approach

Abstract

Social and environmental awareness of consumers force supply chains to be more sustainable. This paper studies the coordination problem for a single manufacturer-single retailer sustainable supply chain model in presence of consumers’ environmental and social awareness. It is assumed that the consumers are sensitive to both environmental quality of product, as well as social responsibility of supply chain. For the first time, both social and environmental awareness of consumers are integrated as a unified model in the area of supply chain coordination. In the investigated SC, the manufacturer decides the level of environmental quality of products while the retailer determines the social responsibility level. Mathematical models are developed in the decentralized, centralized, and coordinated scenarios. A game theoretic approach is applied to optimize the investigated supply chain and a contract model is developed to create a win-win outcome for both supply chain players. Our numerical experiments illustrate that the proposed contract coordinates the supply chain and creates a Pareto improving outcome for both supply chain members. In addition, we observe that the proposed contract enhances both environmental and social commitments of the supply chain simultaneously.