Corporate Social Responsibility (CSR) Issues in Supply Chain Competition: Should Greenwashing Be Regulated?

ABSTRACT Corporate social responsibility (CSR) has been treated as an instrument to differentiate firms in a competitive market. However, due to the credence good nature of CSR, when considering product quality dimension, firms can only signal their quality through advertising or labeling. These sig...

Full description

Saved in:
Bibliographic Details
Published in:Decision sciences 2018-12, Vol.49 (6), p.1088-1115
Main Authors: Lee, Ho Cheung Brian, Cruz, Jose M., Shankar, Ramesh
Format: Article
Language:English
Subjects:
Advertising
Companies
Corporate Social Responsibility
Customers
False information
Green Marketing
Greenwashing
Markets
Regulation
Signal quality
Social responsibility
Supply
Supply Chain Management
Supply chains
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:ABSTRACT Corporate social responsibility (CSR) has been treated as an instrument to differentiate firms in a competitive market. However, due to the credence good nature of CSR, when considering product quality dimension, firms can only signal their quality through advertising or labeling. These signaling mechanisms may be exploited by some dishonest firms who claim to be green (“greenwashing”). Many critics argue that greenwashing needs to be regulated because it deceives the market and discourages firms from going genuinely green. In this article, instead of focusing on the ethical side of this issue, we try to explore the market outcome from an economic perspective. We show that regulating greenwashing may not necessarily increase the positive environmental externality of green products. In particular, even if greenwashing is regulated, firms may not act green when the additional CSR cost is too high or when the corresponding CSR issue is not as important. On the other hand, we find that allowing greenwashing may incentivize some firms to go genuinely green as long as there are some informed customers in the market.
ISSN:0011-7315
1540-5915
DOI:10.1111/deci.12307