Abstract
Carbon emissions are receiving greater scrutiny in many countries due to international forces to reduce anthropogenic global climate change. Carbon taxation is one of the most common carbon emission regulation policies, and companies must incorporate it into their production and pricing decisions. Activity-based costing (ABC) and the theory of constraints (TOC) have been applied to solve product mix problems; however, a challenging aspect of the product mix problem involves evaluating joint manufactured products, while reducing carbon emissions and environmental pollution to fulfill social responsibility. The aim of this paper is to apply ABC and TOC to analyze green product mix decision-making for joint products using a mathematical programming model and the joint production data of pharmaceutical industry companies for the processing of active pharmaceutical ingredients (APIs) in drugs for medical use. This paper illustrates that the time-driven ABC model leads to optimal joint product mix decisions and performs sensitivity analysis to study how the optimal solution will change with the carbon tax. Our findings provide insight into ‘sustainability decisions’ and are beneficial in terms of environmental management in a competitive pharmaceutical industry.
Highlights
There are many companies using the same raw materials in continuous production processing and that use the same processes to output joint products of two or more different characteristics or uses, such as the petroleum industry, chemical industry, steel industry and pharmaceutical industry
The Paris Agreement was signed by 195 nations on the 12 December 2015 to strengthen the global response to the threat of environmental climate change, which was in the context of sustainable development and efforts to eradicate poverty, after the 1992 United Nations Framework Convention on Climate Change (UNFCC) and the 1997 Kyoto Protocol
Carbon taxation is one of the most common carbon emission regulation policies that companies must incorporate in their production and pricing decisions
Summary
There are many companies using the same raw materials in continuous production processing and that use the same processes to output joint products of two or more different characteristics or uses, such as the petroleum industry, chemical industry, steel industry and pharmaceutical industry. Such split-off joint products may be sold immediately or be further processed before being sold. Activity-based costing (ABC) and the theory of constraints (TOC) have been applied to solve product mix problems; a challenging aspect of the product mix problem involves evaluating joint manufactured products, while reducing carbon emissions and environmental pollution to fulfill social responsibility. It enables enterprises to recognize value-added and non-value-added activities in order to improve the use of resources; the model is suitable for long-term decision-making
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