Green investment in a sustainable supply chain: The role of blockchain and fairness

• The manufacturer’s incentive to adopt blockchain depends on a not sufficiently high operational cost. • Fairness can encourage blockchain implementation if and only if the blockchain-driven increment in customers’ green sensitivity level is nominal. • Blockchain adoption may weaken the positive impact of fairness on the supply chain performance. • Blockchain adoption can help achieve an “all-win” situation for the supply chain. We study a green investment problem of a sustainable supply chain with one manufacturer who decides whether to implement blockchain and one retailer who has emotional fairness concerns. Although blockchain adoption is costly, it can raise customers’ green sensitivity level and exempt a firm from environmental taxes. A fair-minded retailer cares about disadvantageous inequity in addition to monetary payoffs. We compare the supply chain performance with and without blockchain, each in combination with and without emotional fairness concerns. We show that the manufacturer has the incentive to adopt blockchain if the operational cost is below a certain threshold, and this threshold increases in both tax rate and the blockchain-driven increment in customers’ green sensitivity. We find that fairness can encourage blockchain implementation if and only if the blockchain-driven increment in customers’ green sensitivity level is nominal. Moreover, blockchain adoption may weaken the positive impact of fairness on the supply chain performance such as the mitigation of double marginalization and consumer welfare improvement. We also find that blockchain can encourage green investment and benefit the retailer only if the blockchain-driven increment in customers’ green sensitivity level is relatively high; that is, an “all-win” situation for the supply chain can be achieved by blockchain adoption. Extended studies on consumption-based emission taxes and blockchain setup cost are also provided.