The impact of CO2 pricing in SC Resilience – An optimisation model

Abstract

Abstract Environmental and resilience are currently vital concerns when managing Supply Chains (SC). Doing so in a competitive setting, with diverse stakeholders' perspectives and dealing with unforeseen disruptive events is challenging. Today, this is a reality where, with the actual COVID-19 pandemic, supply chains face reduced demand and stoppages at different levels, calling for the urgent need to invest in designing and planning resilient SC. But resilience must not leave apart other vital goals as is the environmental goal, which nowadays requires special attention. This is especially critical in the process industries where environmental concerns are often at stake. We address this challenge in the current work by representing the cost associated with CO2 emissions, considering the EU emissions trading system (EU ETS). This system makes the cost associated with emissions a variable value attributed by the market. A Mixed Integer Linear Programming model (MILP) is here presented which allows to understand the supply chain resilience of different supply chain structures. This is done with the objective of maximising the Expected Net Present Value (ENPV) while facing disruptions, and the presence of uncertainty in demand is considered. The results show that our model can help decision-makers to create resilient SC with good environmental behaviour and without compromising financial results.