A new coopetitive mode in a sustainable supply chain: Energy performance contracting and supplier encroachment

Abstract

Energy performance contracting (EPC) is considered to promote the cooperation of low-carbon investment between supply chain members; however, few studies have examined the impact of supplier encroachment on EPC cooperation. This study investigated a new coopetitive mode in a sustainable supply chain with EPC and supplier encroachment. The supplier may provide an EPC service to curb carbon emissions for the downstream manufacturer and obtain a partial savings in carbon costs by bearing the entire cost of the EPC investment. However, the supplier is motivated to develop a new direct selling channel that engages in Cournot competition with the manufacturer in the final market. The consumer acceptance of a new encroaching channel and the unit incompatibility cost of EPC are two critical factors in supplier and manufacturer decisions. The results demonstrate that the lower the consumer acceptance of a new encroaching channel, the more radical the decision that will be made by the supplier to abate emissions after encroachment to reduce the manufacturer's emissions cost. Moreover, in contrast to the traditional result, encroachment might cause the supplier to charge a higher wholesale price when implementing EPC services. Furthermore, there exist win-win situation in the EPC scenario and lose-lose situation in which the two supply chain members are worse off whether the supplier provides either encroachment or EPC services.