Co-opetitive Improvement of Multi-Win Green Performance: Is Horizontal Order Pooling More Effective Than Vertical Cost-Sharing?

Leading brands such as Apple, Lenovo, Volkswagen, and BMW have increasingly enhanced their green performance by reducing carbon emissions. However, the most significant challenge is posed by their upstream supply chain partners, as there is generally a lack of incentive for suppliers to participate in downstream brands’ sustainability plans in addressing the Scope 3 problem. To address this challenge, this study examines two prevalent supply chain cooperation methods, i.e., (1) the vertical cooperation method via cost-sharing (denoted by Strategy S); and (2) the horizontal cooperation method via order pooling (denoted by Strategy P). That is, to incentivize suppliers to invest in carbon emission reductions, downstream brands can either share the reduction costs or consolidate their orders with a common supplier. The main findings include: (a) Given a high initial emission intensity, order pooling is more effective at carbon emission reductions. (b) While cost-sharing may reduce carbon emissions and improve social welfare, it is less likely to perform well in a cost-benefit analysis. By contrast, order pooling can achieve triple-win situations regarding carbon emission reductions, social welfare improvement, and cost-benefit efficiency enhancement. This study sheds light on the fact that for managers of leading brands, cooperating with competitors through order consolidation may be a more effective way to achieve green goals.