Purchasing Managers’ Willingness to Pay for Attributes that Constitute Sustainability

Considering the increasing international division of labor, as well as stakeholders’ growing awareness of sustainability, assuring that business practices are sustainable is a major challenge. Companies have to account for the fact that any misconduct at a supplier's premises may have spillover effects that reach the manufacturer or retailer. Therefore, purchasing managers have to assure that their suppliers are compliant with sustainability standards. This, however, may induce higher purchasing costs and, as a consequence, force a trade-off between (short term) economic (i.e., purchasing cost reduction) and social/environmental sustainability criteria. How purchasing managers evaluate this trade-off is particularly interesting because they often receive performance-based salaries that incentivize the reduction of purchasing costs. Our paper sheds light on this trade-off by examining how much purchasing managers are willing to pay to assure compliance along different sustainability dimensions when selecting new suppliers in a mature market setting, namely Germany. Additionally, we identify potential (individual, professional, and organization-related) factors that may impact the purchasing managers’ willingness to pay (WTP), and examine their effects. Among the most surprising findings, purchasing managers on average are willing to pay a price premium for manuals that demonstrate compliance with the United Nationals Global Compact (UNGC). Furthermore, the results show that this WTP is mostly influenced (negatively) by self-enhancement (on the individual level) and/or obedience to authority (on the organizational level), but the effects of company, affiliation with the UNGC, gender, or years of experience have no influence. Moreover, the WTP is higher for the social than for the environmental dimension, and the marginal effect of accreditation on WTP depends on which combinations of dimensions are accredited.