Open AccessDesign of an environmental contract under trade credits and carbon emission reduction
Author(s) -
Chong Zhang,
Yaxian Wang,
Haiyan Wang
Publication year - 2022
Publication title -
journal of industrial and management optimization
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.325
H-Index - 32
eISSN - 1553-166X
pISSN - 1547-5816
DOI - 10.3934/jimo.2021141
Subject(s) - trade credit , supply chain , profit (economics) , revenue sharing , business , revenue , profit sharing , emissions trading , industrial organization , context (archaeology) , microeconomics , economics , greenhouse gas , finance , marketing , ecology , paleontology , biology
Most of the previous literatures proposed a single coordination contract to increase the total profit of the supply chain, while this paper focuses on how to design environmental contracts to increase economic and environmental performance in the context of sustainable development. This paper designs the environmental contract based on cap-and-trade mechanism and trade credits which has rarely been studied before, especially the impact of trade credit on environmental performance. We consider a green supply chain, assuming that the demand rate is linear with retail prices, joint carbon emission reduction efforts and trade credit. Two models, a decentralized one and a centralized one, are compared; four contracts are proposed. Via numerous examples and sensitivity analysis, we gain some insight into how to select supply chain contracts to better improve environmental performance. The results reveal that the manufacturer sharing the retailer's revenue and cost contract obtains the highest profit. While revenue sharing contract between both parties is the optimal environmental contract, but it is difficult to increase the profit of supply chain. Furthermore, it is found that trade credit works well in protecting the environment and plays a significant role in achieving coordination.