Optimal financing decision with financial constraints for a manufacturer in a low-carbon supply chain

In this paper, bank financing (BF) and trade credit financing (TCF) are viable. We investigate the financing choice problem for an emission-dependent manufacturer with capital constraints. Each supply chain member pursues its profit maximization. In the literature on the financing supply chain, enterprises and consumers become increasingly aware of environmental protection. A growing number of manufacturers produce low-carbon products, such as environmentally friendly bags, through a green supply chain system. We use the Stackelberg game to study the equilibrium financing choice and optimal decisions. We also perform numerical analysis to verify the impact of certain parameters on financing decisions. The results show no direct relationship between the degree of carbon reduction and the total amount of carbon emissions as defined by the government. In addition, when the trade credit interest rate is higher than the bank interest rate, the manufacturer chooses bank financing. When the credit interest rate is lower than a certain threshold, the retailer provides trade credit financing. Our study also provides useful insights for managers to understand and make financing decisions in a low-carbon supply chain with a capital-constrained manufacturer.