Competitive environmental sourcing strategies in supply chains

This paper studies retailers' environmental sourcing strategies in supply chains by taking into consideration environmental quality investment and consumers' environment awareness. We attempt to identify the equilibrium sourcing strategies in two scenarios: with and without supplier competition, respectively. We find that environmental sourcing always arises, and the suppliers' incentives are also in line with the retailers’ sourcing strategies in equilibrium. However, adding more environmental sourcing channels does not necessarily benefit consumers and the whole society. Interestingly, retailers have better incentives to select environmental sourcing channels when supplier competition is present. In fact, even without risk consideration, we show that retailers should diversify procurement by choosing different suppliers, which better promotes environmental sourcing and enhances consumer welfare, if the synergy effect is weak or environmental investment is sufficiently inefficient. We also examine the supplier-initiated sourcing strategies and find that the equilibrium strategies depend upon factors including the synergy effect and environmental investment efficiency.