Outsourcing sustainability: a game-theoretic modeling approach

As a response to stakeholders’ interest in sustainable products and services, an organization may change its approach to sustainability issues, from isolated social and environmental projects to corporate sustainability strategies and practices that are part of their core business. However, many of the efforts associated with these sustainability strategies cannot be directly exerted by focal organizations. We consider the situation in which a focal organization (sustainability buyer) outsources sustainability efforts to another organization (sustainability seller). While buyers cannot directly exert sustainability efforts, they can provide economic or technical support to their sellers in order to incentivize these efforts. We investigate how the effort and support decisions change according to characteristics of stakeholders, buyers, and sellers. Additionally, the presence of sustainability-minded stakeholders may lead to buyers’ competition on the sustainability effort exerted by their sellers. Therefore, we extend our analysis of sustainability efforts and incentives to the case of two competing buyers, and we determine conditions under which sharing a seller is preferred by the buyers to having a separate seller for each buyer.