Adopting CER Technology and Coordination in Capital-Constrained Low-Carbon Supply Chains: A Fairness Concern Perspective

Abstract

Low-carbon transformation requires substantial investments, challenging capital-constrained manufacturers to adopt carbon emission reduction (CER) technologies. While external financing alleviates capital shortages, it cannot address potential profit imbalances that trigger fairness concerns. We investigate a low-carbon supply chain where a capital-constrained manufacturer adopts CER technologies via a preferential bank loan and sells to a capital-abundant retailer. Unlike prior studies treating CER investments as one-time costs, we model CER technology as a quadratic per-unit royalty licensing fee. We find that, given consumers’ willingness to pay for low-carbon products, financing encourages CER upgrades but creates profit disparities unfavorable to the retailer. Incorporating the retailer’s fairness concerns, results show that compared to the non-fairness scenario, the manufacturer sets a lower wholesale price and cannot earn more. Conversely, the retailer strategically maintains or increases its order quantity, attaining higher profits. Furthermore, the optimal CER level remains invariant regardless of fairness preferences. Finally, supply chain coordination is achievable under specific conditions, yielding a win–win outcome where the manufacturer adopts CER technologies and the retailer’s fairness concerns are accommodated. The quadratic per-unit technology licensing fee we investigated maintains the manufacturer’s motivation and ensures the retailer’s fairness, contributing to the stable and sustainable evolution of low-carbon supply chains.