Green Credit Financing and Emission Reduction Decisions in a Retailer-Dominated Supply Chain with Capital Constraint

Abstract

In the context of low-carbon transformation, many small and medium-sized suppliers face financial difficulties. How to encourage and motivate capital-constrained suppliers to implement low-carbon strategies has become an important problem. There is a lack of quantitative research on green financing problems in the supply chain, especially considering the bank’s green credit financing (GCF) with discounted interest rates related to a low-carbon level. This paper formulates a Stackelberg game model to analyze the green financing and emission reduction decisions of a retailer-dominated supply chain consisting of one capital-constrained supplier and one capital-sufficient retailer. The retailer’s environmental purchasing requirement is considered. The result shows that the retailer’s procurement requirement cannot always motivate the capital-constrained supplier to improve their emission reduction rate. The mixed credit mode, which includes the bank’s GCF and the retailer’s partial prepayment, can help relieve the financing pressure of the capital-constrained supplier. It is found that the GCF at a discounted interest rate can effectively improve the supplier’s emission reduction enthusiasm. This paper tries to provide some meaningful insights for the government and supply chain members when making sustainable strategies.