Who should lead the decarbonization transition? Leadership and shared responsibility in decarbonization supply chains

Abstract

Growing concerns over global climate change, net-zero targets and the urgency to fulfill Sustainable Development Goals (SDGs) have intensified the need for effective decarbonization strategies. Collaborative efforts among manufacturers and retailers can accelerate the transition from high-carbon products (HCPs) to decarbonization products (DCPs). This paper analyzes a two-period supply chain with two leadership strategies for guiding the decarbonization level: the manufacturer-led decarbonization (M-DCPs) strategy and the retailer-led decarbonization (R-DCPs) strategy. Supported by a shared responsibility mechanism, these strategies influence both the supply chain's long-term profitability and its overall emission reductions. Our findings show that when either firm adopts a long-term perspective and assumes the leadership role in the decarbonization level, the leader can enhance its own profitability. In contrast, focusing on a short-term perspective may cause firms to bypass the decarbonization transition, suggesting that such a transition does not necessarily offer immediate profitability. Moreover, we find that although DCPs may exhibit a lower second-period price and demand after the decarbonization transition relative to the pre-transition period, from a profitability perspective, the M-DCPs strategy yields higher overall profitability for the supply chain; while from an environmental perspective, the R-DCPs strategy achieves more emission reductions. Notably, only the M-DCPs strategy achieves a Pareto improvement while this outcome cannot achieve under the R-DCPs strategy. Our findings emphasize the need for a forward-looking commitment to decarbonization, supported by an effective shared responsibility mechanism, to advance environmental goals, enhance supply chain profitability and guide industry professionals in fostering collective decarbonization transitions in multi-period contexts.