Carbon market sensitive sustainable supply chain network design

Abstract

Abstract Sustainable Supply Chain Network Design involves taking into account social, economic and environmental objectives at design time. While the social dimension is sometime harder to capture or quantify in mathematical terms, the Emission Trading Schema (ETS) introduces a natural trade-off between the economic and the environmental dimensions. This article addresses the design of supply chains that are also sensitive to the carbon market. Carbon emissions and total logistics costs are integrated in the design of the supply chain using a multi-objective mixed-integer linear programming model that is solved by goal programming. The proposed methodology provides decision makers with the ability to evaluate the trade-offs between total logistics costs and carbon offsetting under different supply chain operating strategies, environmental regulatory constraints and carbon market evolution. The approach is presented through an illustrative example derived from the steel industry where new legislation imposes regulatory carbon caps on emissions. The results show that this approach is a good starting point for a more comprehensive framework for sustainable supply chain network design.