A Bi-objective cap-and-trade model for minimising environmental impact in closed-loop supply chains

Abstract

A Closed-Loop Supply Chain (CLSC) is a complex network with unique environmental features and attributes that requires specific managerial policies and strategies. Quantitative models can provide a solid basis for these policies and strategies. This study expands the work of Shoaeinaeini et al. (2021) on Green Supply Chain Management. We propose a bi-objective facility location, demand allocation, and pricing model for CLSC networks. The proposed model considers two conflicting objective functions: maximising profits and minimising emissions. We show consumer environmental awareness can predict the products’ rate of return and determine a more suitable price for new products and the acquisition price for used products. The cap-and-trade policy has been implemented at its fullest potential, allowing the trading of carbon quotas. Therefore, companies may decide to produce less to sell more quotas or vice-versa, effectively picking the most profitable option. The model is solved and tested with the commercial solver BARON. The model effectively shows the trade-off between generating profits and emission reduction. Companies are able to turn a profit while abiding by the government’s intention of reducing emissions. The comparison with a single-objective version of the model highlights that the concurrent optimisation of economic and environmental objectives yields better results. The acquisition price of used products is a value worthy of monitoring. The government should focus on policies to assist the reverse flow of used products.