An empirical study of buyers willingness to pay for sustainable supply chain transparency

Research shows that when selecting new suppliers, buyers are not solely influenced by price. They do in fact consider a variety of non-financial criteria to inform their decision. The environmental and social performance of suppliers is one of those considerations. This is a buyer concern because contracting with a supplier that tolerates unsustainable practices in their supply chain could harm reputations. A new study asks just how important a factor it is. Are buyers willing to pay a premium for information about their suppliers’ commitment to sustainability? What signals might convince them to do so?

The paper “Putting your money where your mouth is”:An empirical study on buyers’ preferences and willingness to pay for blockchain-enabled sustainable supply chain transparency investigates how buyers assess the importance of a variety of attributes of supply chain sustainability disclosed by suppliers. This is an important study as currently, there is limited understanding of how buyers evaluate the authenticity and worth of supplier claims of a track record of sustainability. While it is expected that buyers prefer suppliers that claim to be more sustainable, the researchers have sought to understand what forms of sustainability disclosure are perceived as having greater value.

There have been two significant developments in sustainability reporting that are pertinent to the study: contents of disclosure and methods of disclosure. Firstly, suppliers in various industries such as clothing, food, and electronics now voluntarily disclose sustainability-related information such as certifications, social commitment, and environmental responsibility statements. The content of the disclosure could be categorised into three types: Product disclosure (i.e., What do we produce?), Process disclosure (i.e., How do we produce it?), and Sourcing network disclosure (i.e., whom do we source from?). Secondly, several new cost-effective reporting solutions that use blockchains have emerged in recent years. This method of disclosure offer buyers the ability to track suppliers' sustainability data. Overall, the study investigates how much trust buyers place in these different contents and methods of sustainability disclosure and their willingness to pay a premium.

Applying a Choice-Based Conjoint (CBC) experiment, validated by industry experts, to data collected from a sample of 234 managers with decision-making roles in procurement, the authors tested their hypotheses about buyer preferences for different forms of sustainability disclosure, and their willingness to pay for it. This research provides key insights for practitioners as below:

• Transparency is essential: Buyers value any level of disclosure over no disclosure at all. Suppliers can strategically use voluntary sustainability disclosure to gain a competitive advantage.
• Prioritise disclosure content: Focus on information that aligns with buyer preferences in this order: Product disclosure, Process disclosure, and Sourcing network disclosure. With limited resources, self-disclosing various types of information is often more beneficial than focusing on third-party verification for a single type.
• Blockchain as a tool, not a goal: While blockchain can facilitate disclosure, its direct benefits may be limited. To maximise its potential, the importance of the content being disclosed should not be overlooked.

This research contributes to our understanding of information disclosure in supply chain transparency and presents new avenues of inquiry into the value of blockchain-enabled platforms in supply chain sustainability reporting.

“Putting your money where your mouth is”: An empirical study on buyers’ preferences and willingness to pay for blockchain-enabled sustainable supply chain transparency is published in Journal of Purchasing and Supply Management. The authors are Sukrit Vinayavekhin, Dr Aneesh Banerjee, and Professor Feng Li.