Green level and environmental labeling strategies in a dual‐channel green supply chain considering consumer trust

Abstract Environmental labeling has emerged as a crucial method for consumers to gain information related to the eco‐friendly attributes of a product. This paper examines environmental labeling strategies in a green supply chain. The manufacturer has the option to use either self‐labeling or external certified labeling, and consumers have different levels of trust in the two types of environmental labels. We find that under both strategies, supply chain decision makers should fully consider the impacts of consumer trust in environmental labeling, green research and development (R&D) cost, and the demand share of the direct channel on the supply chain. Besides, the retailer realizes higher profit under external certified labeling. A higher green R&D cost or smaller market proportion of the direct channel would dampen the motivation of the manufacturer to choose external certified labeling. Lastly, we explore the case of a risk‐averse retailer and find that the external certified environmental labeling is optimal when the risk aversion is high. Moreover, under both strategies, the risk‐averse attitude of the retailer leads to a more significant channel utility.