Supply chain disclosure and ethical sourcing

This paper explores the question of whether ethical sourcing and disclosure of supply chain sources is linked to competitiveness. We model competition between two firms, both of which produce the same consumer good. One sources ethically and the second does not, and market share is affected by the nature of their sources and whether or not they disclose them. Costs include procurement and disclosure. We investigate the tradeoffs involved and the incentives for a firm to disclose the nature of its sourcing in response to its cost and market structure, as well as the characteristics of its competitors. We find that a firm׳s decision to disclose its sources should depend not only on its cost of disclosure, but also on the actions of its competitor and the effect that its actions will have on its own market share.