Incentives or Sanctions: An enforcement theory perspective to sustainable consumerism

In the last decade, consumers across the world have embraced the idea of sustainable consumerism. Various industrial reports have claimed that sustainable consumerism will be a major paradigm shift across the globe with spillover effects into developing economies as well. This shift in consumer preferences has posed challenges to the business communities to revamp their supply chains. Owing to the trans-national capabilities of all major supply chains, the consumers and producers are geographically separated. This geographical separation comes with associated socio-economic boundaries that characterize consumer and producer economies. While developed markets with strong institutional frameworks offer ample support to establish, enable and pay for the sustainable consumerism, the producer economies, especially in developing economies are not in a position to enable or take up the excess cost. Hence, from the supply chain perspective, the firms need to take responsibility for their producer to ensure their products are sustainable. This becomes particularly difficult in the developing market owing to the market dynamic (price-based competition) and/or institutional voids. This study explores this aspect of the dilemma and explores what economic levers, incentives or penalties, can be used incentivize the relevant stakeholder in the supply chain to improve their sustainability performance.