Green supply chain contracts with eco-labels issued by the sales platform: profitability and environmental implications

Abstract

Considering environmentally conscious consumers, a manufacturer, and a sales platform which provides eco-labels for qualified manufacturers, this paper develops a supply chain model to study how eco-labels affect green supply chain operations, from the profitability and environmental perspectives. The results show that the sales platform prefers the agency contract, but the manufacturer prefers the wholesale price contract. Considering the performance of the supply chain, the agency contract brings a higher profit while the wholesale price contract results in a bigger environmental improvement. An unexpected but interesting result is that when the agency contract is used and consumer green awareness increases, the sale price declines rather than increasing as it does under the wholesale price contract. This decline happens because the required marketing effort of the sales platform will be lower, which incentivises the platform to reduce the commission rate. Consequently, the manufacturer faces a lower commission rate and a higher margin when consumers display greater green awareness. Moreover, as the core and more powerful player of the supply chain, the sales platform can propose a platform-led revenue sharing contract to fully coordinate the supply chain, which improves the performance of the supply chain both in profitability and environmental perspectives.

Keywords:

• green supply chain
• sustainable supply chain
• sustainable operations
• sales platform eco-label
• agency contract
• wholesale price contract

Acknowledgments

The authors are grateful to the associate editor and the anonymous referees for their valuable comments, constructive suggestions, and encouragements. The quality of this article was improved substantially as a result of their precious feedbacks.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Xiaolong Guo  http://orcid.org/0000-0002-1261-6852

Notes

1 http://www.ecolabelindex.com/

2 Red Star Macalline hosts several ‘Green and Environmental Week’ activities in multiple cities each year, which provide consumers with opportunities to ‘run for greenness’, visit green brand factories, and view green product testing in the lab. These activities can enhance consumers' awareness of green environmental protection, increase the visibility of green goods and green brands, and stimulate the consumers' green buying behaviour.

Additional information

Funding

This work is supported by the National Natural Science Foundation of China under [grant numbers 71871207, 71520107002, 71771201 and 71921001], the Fundamental Research Funds for the Central Universities of the University of Science and Technology of China [grant number WK2040160028], and the financial support of the USTC Research Institute of Modern Logistics Engineering.