Green Investment Cost Optimization Model in the Supply Chain

Abstract

The objective of this study is to develop a model that determines the optimal points for investment in green manage-ment by defining a mathematical relationship between carbon trading profits and investments in green management using a company's supply chain information. To formulate this model, we first define and analyze a green supply chain in a multi-dimensional and quantitative manner. The green investment alternatives considered in our model are as fol-lows: 1) purchasing eco-friendly raw materials that cost more than conventional raw materials but whose use in produc-tion results in lower CO 2 emissions; 2) replacing current facilities with new eco-friendly facilities that have the capabil-ity to reduce CO 2 emissions; and 3) changing modes of transport from less eco-friendly to more eco-friendly modes. We propose a green investment cost optimization (GICO) model that enables us to determine the optimal investment points. The proposed GICO model can support decision-making processes in green supply chain management environments.