Optimizing emission, risk-sharing, and sustainability strategies in supply chains: an analysis of cap-and-trade, shared investment, and considering consumer expectations

Jose M. Cruz

International Journal of Production Research, 2025, vol. 63, issue 20, 7659-7686

Abstract: Achieving sustainability in supply chains requires balancing economic performance, environmental responsibility, and regulatory compliance. This study develops and compares three sustainability models within a supply chain network comprising manufacturers, retailers, and demand markets with sustainability-conscious consumers. The first model implements shared sustainability investment and risk-sharing between manufacturers and retailers. The second model employs a cap-and-trade system, where firms independently trade emission permits. The third integrated model combines shared sustainability investment with cap-and-trade mechanisms. Using network equilibrium modelling and sensitivity analysis, we assess these models' financial and environmental performance under varying emission caps, investment costs, and consumer sustainability expectations. Results indicate that the integrated model (Model 3) achieves the highest profitability while maintaining the lowest emissions. This demonstrates that collaborative sustainability investment and market-based emission trading enhance supply chain resilience and economic performance. These findings suggest that businesses and policymakers adopt hybrid regulatory strategies incorporating cap-and-trade mechanisms and shared sustainability investments to create sustainable and profitable supply chains.

Date: 2025
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DOI: 10.1080/00207543.2025.2504166

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