Green sustainable supply chain under cap and trade regulation involving government introspection

Abstract

This paper investigates Government intervention in a three-echelon supply chain comprising one manufacturer and one retailer. Government is the top level member trying to reduce environmental impacts based on the amount of carbon emission during the production process. Government controls the chain by collecting tax from the retailer which is indirectly paid by the customer and paying subsidy/imposing fine on the manufacturer. Government encourages manufacturer to reduce carbon emission by contributing some subsidy and also makes an effort to generate Government net revenue (GNR) by imposing tax. The GNR is generated by collecting tax from the retailer on the sold product and penalty from the manufacturer at the trading price for the extra amount of emissions. The retail price is decided based on the selling price, tax and greening level. We aim to determine optimal levels of pricing, greening and amount of tax to be levied. The models for both linear and iso-elastic demand patterns are developed. The aim of this piece research is two-fold: (i) review the existent literature on the relationship between environmental collaboration and sustainability performance and (ii) render a tenable prototype of supply chain to illuminate the relationship between sustainability and profitability. According to the aforesaid goals this paper has carried out a detailed empirical research by using advanced structural equation modelling approaches. The research findings will be particularly important for manufacturing companies struggling to find techniques to achieve sustainability performance. Also it will aid the supply chains in developing environmental collaboration with the Govt. in order to attain the targets of GSCM.