Abstract
1. Introduction
2. Literature review
3. Model
4. Bank Financing
5. Trade credit financing
6. Supply chain contract
7. Conclusions
Acknowledgements
Appendix.
References
Abstract
To determine how carbon emissions reduction affects supply chain operations and financing decisions, this paper examines a green supply chain, which consists of one manufacturer (playing the leading role) and one capital-constrained retailer; in this supply chain, bank financing and trade credit financing are viable. This research explores the retailer’s optimal order quantity, the manufacturer’s optimal wholesale price, the optimal level of carbon emissions (for both bank financing and trade credit financing), and the design of the contract to coordinate the supply chain. We find that the supply chain achieves a win-win outcome in terms of production quantity and emissions reduction when the manufacturer invests in emissions reduction. In addition, we find that a supply chain with a contract outperforms a non-contract supply chain in production quantity and emissions reduction. Furthermore, the effect is more remarkable when trade credit financing is viable.
Introduction
The costly effects of global warming are continuously increasing and impacting economies all over the world. One of the main causes of global warming is the greenhouse effect, which is triggered by the increase of carbon dioxide emissions into the atmosphere (Gleick et al., 2010). To solve this problem, almost 200 countries committed to participating in the Paris Agreement in 2015. This agreement aimed to control and mitigate the negative effects of climate change (such as the world’s rising average temperature and greenhouse gas emissions). Due to an increasing recognition of the importance of environmental protection, there is currently a trend of attempts to address the issue of pollution caused by industrial development within the supply chain management process. Recent research has discussed this trend under the term “green supply chain management” and has introduced the concepts of sustainability and environmental thinking to green supply chain management (Sheu et al., 2005). Green supply chain management incentivizes manufacturers and retailers to take emission reduction into consideration when making business decisions. Researchers have found that green supply chain management is a win-win strategy for both retailers and manufacturers. Zhao et al. (2012) discovered that economic profits can be enhanced by improving a company’s environmental performance (from production to sales). Ma and Gao (2013) suggested that, by determining the wholesale price together, the supply chain can make more returns by reducing carbon emissions.