Addressing Carbon Emissions through Operational Excellence and Supply Chain Coordination


  • Yanzhi David LI (Principal Investigator)Department of Management Sciences
  • Saif BENJAAFAR (Co-Investigator)


Carbon dioxide (CO2) emissions are increasingly viewed as a leading cause of global warming. Many firms, on their own in some cases and with significant public and governmental prodding in other instances, are undertaking initiatives to reduce their carbon footprint. Following Japan and the EU, the US, China, and India have recently announced plans to enact legislation aimed at limiting carbon emissions. In Hong Kong and China, increased concern about the environment, is placing growing pressure on large manufacturer and logistics service providers to significantly reduce their carbon emissions.In most industries, current practice has focused on reducing direct emissions. For example firms are replacing energy inefficient equipment and facilities, finding less polluting sources of energy, or instituting energy savings programs. While there can be value in such efforts, they tend to ignore a potentiallymore significant source of emissions, one that is driven by business practices and operational policies. A focus on direct emissions also ignores important factors that emerge from theinteraction among the multiple firmsthat constitute the supply chain. Independent firms taking actions based on their own self-interests are not likely to reduce emissions as much, or to do it as cost-effectively, as a system-wide approach could. Furthermore, a focus on reducing direct emissions ignoresopportunities for firms to offset each other’s emissions via a sharing of the carbon reduction burden.In this project, we propose to address carbon emissions through operational excellence and supply chain coordination. We argue that (1)operational excellencecan help reduce carbon emissions significantly, (2)supply chain-wide collaborationcan lead to lower emissions at lower cost for the entire supply chain, and (3)imposing supply chain-wide emissions limits(instead of individual firm limits) can make emission reductions more economical for the entire supply chain by recognizing the differential capabilities of firms to meet emission standards and by allowing internal carbon offsetting to take place between firms within the same supply chain.We have locked the support from two international firms, METRO Group and GREE Electric Appliances. They will help us collect data, verify and validate our models, and construct several case studies. In the proposed research, we plan to develop models to support operational decisions that take into account both cost and carbon footprint. These models can be used by individual firms to reduce their individual carbon footprints (or to adhere to restrictions on carbon emissions) without compromising profitability. They can also be used by firms to coordinate and share the burden of reducing carbon emissions across the entire supply chain. We will develop these models for a variety of regulatory settings, including settings with and without opportunities for carbon offsets and with and without markets for carbon trading. We will identify coordination mechanisms and incentives systems under which firms voluntarily choose to collaborate with other firms on carbon emission reductions. In addition to guiding managerial decisions, we expect results from our research to be useful to policy makers in devising regulatory policies for emission mitigation and control.


Project number 9041607
Status Finished
Effective start/end date 1/10/10 -> 27/05/14