Using social work donation as a tool of corporate social responsibility in a closed-loop supply chain considering carbon emissions tax and demand uncertainty

Abstract

Companies are increasingly realizing the benefits of adopting Corporate Social Responsibility (CSR) and including it into their supply chain strategy and operations. We consider two CSR tools: social work donation (SWD) and recycling investment. We integrate the CSR investments into a closed loop supply chain where the stochastic demand depends on the sales price and social work donation. We consider four decisions jointly: donation amount, recycling investment, pricing, and order quantity. Mathematical models are proposed for expected profit maximization under a carbon emissions tax. A two-stage approach and a distribution-free approach are used if limited information is available on the random demand. Optimality conditions and sensitivity of the expected profit functions are analysed. The investment function reflects the joint effect of two different environmental/social investments allowing to study the interactions of the decisions together with the price decision. The study reveals that a company is motivated to use SWD as a tool of social responsibility if the demand has a higher SWD elasticity parameter than price sensitivity parameter. Our models demonstrate that the increment of customers' SWD elasticity has a positive impact on recycling that will also help to reduce the carbon emission tax.