Retailer involvement in eco-conscious consumer-oriented carbon footprint reduction

Abstract

Retailer involvement and consumer eco-consciousness are two critical considerations for firms when designing comprehensive carbon footprint reduction (CFR) plans. This paper constructs a supply chain (SC) where one manufacturer and one retailer make CFR and pricing strategies in response to eco-conscious consumers. Eco-conscious consumers form a reference carbon footprint to assess the product's green level. To achieve SC coordination, a cost-sharing contract is introduced. Our results suggest that retailer involvement in CFR always benefits the environment, SC performance, consumer surplus, and social welfare. During CFR cooperation, the manufacturer strategically affects the retailer's CFR decision by adjusting the CFR level, impacting environmental and economic outcomes. Although higher CFR efficiency by the manufacturer can benefit the environment, SC performance, consumer surplus, and social welfare, a similar emphasis by the retailer may have adverse effects. Surprisingly, a lower reference carbon footprint for eco-conscious consumers may be worse for the environment, depending on the retailer's CFR efficiency. Furthermore, implementing a cost-sharing contract under the retailer's different CFR efficiency yields two distinct impacts: a multi-win situation or an incentive conflict. Extended studies are further examined to validate the robustness of these main results.