Involving suppliers in a low-carbon supply chain: The role of symbolic awards

As firms face increasing pressure to reduce supply chain (Scope 3) carbon emissions, buyers urgently need more actions to incentivize suppliers' low-carbon efforts. Granting a symbolic “low-carbon supplier” or “green supplier” award offers a cost-effective alternative. However, it remains unclear the effectiveness of such a symbolic award and how it works in supply chains. When a good supplier is rare and announced to be rewarded, it may lead to competition among buyers. A two-period game model with two buyers and two suppliers is developed to explore the role of the symbolic award in a competitive setting. Suppliers are classified as high- or low-type based on their preference for symbolic recognition, and three award setting modes are analyzed: No Award (NA), Non-Disclosed Award (ND), and Disclosed Award (DA). Findings indicate that the award setting modes significantly influence the award's effectiveness: 1) High-type suppliers always choose to invest additional low-carbon efforts to get symbolic awards even without a higher price provided by a buyer, while low-type suppliers choose not to make these efforts. 2) DA generally drives greater low-carbon efforts by suppliers but may intensify competition between buyers, potentially reducing buyers' utility. Disclosure is the most effective when buyers have strong scope 3 carbon emission reduction targets. 3) The ND mode performs better than DA in carbon emission reduction when suppliers highly value symbolic awards or buyer commitments to scope 3 carbon emission reductions are low. Comparisons of results among all three modes reveal that buyer's utility and the total scope 3 carbon emission reductions increase with suppliers' utility from awards and decrease as costs for low-carbon efforts rise. These findings suggest that while symbolic awards are promising for motivating low-carbon efforts, their setting modes must be carefully managed to maintain buyers' utility. We further extend the modes to consider uncertainty of supplier's low-carbon efforts and dual sourcing with buyers' competition. Our study provides managerial insights into designing symbolic awards to enhance scope 3 carbon emission reductions and optimize buyer-supplier decisions in competitive supply chains.