Coordinated Decision-Making in Embedded Supply Chain from a Sustainable Development Perspective

Abstract

Government carbon policies and consumers’ preferences are forcing companies to reduce their carbon emissions. Due to financial and technical constraints, carbon-dependent manufacturers are seeking embedded services from energy service companies. By considering these government carbon policies and consumer preferences, this paper constructs a revenue-sharing contract and a two-part contract model for an embedded low-carbon service supply chain using the Stackelberg game to investigate the contractual coordination between the manufacturer and energy service company and their optimal decision making. The equilibrium decisions and the selection of contracts in the supply chain with different parameter levels were obtained. The model’s validity was verified through numerical simulation analysis, and the impacts of the main parameters on the equilibrium decisions and expected utility for the supply chain were analyzed. The results showed that both contracts would enable manufacturers and low-carbon service providers to achieve profit maximization goals when the parameters meet certain constraints. Changes in consumers’ low-carbon and low-price preferences can cause manufacturers to change their business strategies. In addition, the level of technology of ESCOs affects the selection of the type of contract between manufacturers and energy service companies. The findings described in this paper can provide management insights for manufacturers regarding carbon reduction in practice.