Supply chain management with uncertainty in consumer perception of product greenness under an eco-label policy

Abstract

The urgency of environmental preservation necessitates green manufacturing and supply chain advancements. This research examines a green supply chain problem influenced by eco-label policies, focusing on two prevalent market eco-label types. One allows the manufacturer to determine product greenness, while the other requires compliance with standards set by a non-governmental organization (NGO). We also explore the variability in consumer comprehension of eco-label implications and purchasing behaviors with different eco-labeled products. Through consumer utility and manufacturer profit models, we discover that the manufacturer's production and pricing choices significantly impact consumer behavior. Increased investigation costs may enhance consumer utility through improved product greenness, potentially boosting manufacturer profit via price hikes. However, if investigation costs are minimal, the NGO-label may be rejected due to decreased utility and profit. These insights could help direct supply chains by providing a theoretical foundation for green production decisions and future eco-label policies, whether determined by an NGO or the manufacturer.