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Closed-Loop Supply Chain Decision-Making and Coordination Considering Fairness Concerns under Carbon Neutral Rewards and Punishments

Sustainability 2023, 15(8), 6466; https://doi.org/10.3390/su15086466

by Yan Shen^*, Tian Gao, Zizhao Song and Ji Ma

Reviewer 1: Anonymous

Reviewer 2: Anonymous

Reviewer 3:

Zhengyang Hu

Sustainability 2023, 15(8), 6466; https://doi.org/10.3390/su15086466

Submission received: 24 February 2023 / Revised: 3 April 2023 / Accepted: 6 April 2023 / Published: 11 April 2023

(This article belongs to the Section Sustainable Management)

Round 1

Reviewer 1 Report

The title is excellent. The way of approaching of the abstract is fantastic but findings are missing in abstract. Kindly include findings in abstract. The introduction lacks clarity and needed more past studies to back up arguments. Introduction is written very bad and it's not aligning with title and abstract. The entire stature of paper is not up to the journal. If possible, please offer a clear motivation, gap, and research question in the introduction.

Literature review

Again, the same issues as the previous sections, reference support is very less. Most of the statements are given as their own. The literature review is ok. Authors may discuss more recent studies here (2021-2022) in relation to the statement of problem and objective of the study that will provide readers more insights regarding the study. Some pictorial illustrations to summarize the story could be beneficial for improving the article. This section has been written very well. But a separate research gap as a sub-section could improve the article's strength as well as offer novelty.

Although, the section clearly expresses the problem statement. Still, it would be good if we had more references while offering the arguments in this section. See the following

Designing Value Chains for Industry 4.0 and a Circular Economy: A Review of the Literature. Sustainability. 2022; 14(12):7084. https://doi.org/10.3390/su14127084

A review of factors affecting closed-loop supply chain models. Journal of Cleaner Production 253 (2020): 119823.

Results & Discussion

This section needs more elaboration. Very limited interpretation is given. Discussion is more like elaborating on the empirical results rather than interpreting the results. Significance of this study is also ignored in the discussion. Implications are ignored during the discussion. This section lacks clarity. Improve the structure of this section and add the limitations and future research directions more clearly. Authors may add separate section for Implications (Future Directions of Study) as theoretical and practically. Limitations can be mention in conclusions.

Extensive proofreads are required. there are grammatical errors at many places.

See the following articles

The role of healthcare supply chain management in the wake of COVID-19 pandemic: hot off the press, Foresight. https://doi.org/10.1108/FS-07-2021-0136

The impact of carbon pricing, climate financing, and financial literacy on COVID-19 cases: go-for-green healthcare policies. Environmental Science and Pollution Research (2022): 1-13. https://doi.org/10.1007/s11356-022-18689-y

Author Response

Please see the attachment.

1-1 “The title is excellent. The way of approaching of the abstract is fantastic but findings are missing in abstract. Kindly include findings in abstract.”

Response:

Thanks for your constructive comments, we have added findings of this paper in absrtact.

The specific modifications are as follows:

(1) Compared with the other two contracts, the cost-revenue sharing contract performs better and can effectively achieve Pareto optimum; (2) The cost-sharing contract performs better in realize the carbon neutrality of the CLSC. (3) Excessively high carbon sink price is not only detrimental to enterprise efficiency, but also to the realization of carbon neutrality goal. (4) Higher supply chain utility is pursued by enterprises when the unit reward and punishment are not expensive enough, otherwise the carbon neutrality. (Page 1, 24-29)

1-2 “The introduction lacks clarity and needed more past studies to back up arguments.”

Response:

Thanks for your constructive suggestion. Through the collection of more literature, data and reports, we have added more background research support to the introduction.

The specific modifications are as follows:

Classical cases of carbon neutrality in multinational corporations not only provide examples, but also reveal problems [1, 4]. First, measures for enterprises to realize carbon neutral, such as carbon sequestration and carbon removal, requires a large amount of capital investment. Enterprises that blindly pursuing of carbon neutrality will undoubtedly facing money problems [5]. Then, with the promulgation and implementation of various government subsidies and incentive and punishment measures, the government is more inclined to encourage carbon emitters to participate in the process of carbon neutrality by means of guidance, reward and punishment [2]. In addition, it is not always rational that enterprises in the supply chain usually tend to punish each other for "fairness" due to profit differences caused by income gap. This phenomenon is also known as fairness concern [6]. Fairness concern can not only change the profits of the entire supply chain, but also lead to the decline of enterprises' enthusiasm to participate in carbon neutrality, which brings risks to the function of the supply chain. So contracts are designed to achieve a state of coordination in the supply chain [6]. Therefore, in order to accelerate the goal of reaching carbon neutrality while pursuing supply chain stability and profit maximization, it is particularly important for leading enterprises in the supply chain to make the right decisions when purchasing carbon sinks and choosing contract. Moreover, due to the immature restrictions of the existing carbon emission accounting technology and the lack of rewards and punishments related to carbon emissions, the existing measures to promote low-carbon emission reduction of enterprises are mainly fines. In addition, studies have found that compared with subsidies and carbon constraint policies, carbon tax and carbon trading can better reduce the impact of manufacturers on the environment [7, 8]. (Page 2-3, 66-87)

1-3 “Introduction is written very bad and it's not aligning with title and abstract. The entire stature of paper is not up to the journal. If possible, please offer a clear motivation, gap, and research question in the introduction.”

Response:

Thanks for your constructive suggestion. We have carefully revised the quality of the introduction and the paper, matching the introduction with the title, abstract and research results, and emphasizing the research motivation, gap and research questions in the introduction.

The specific modifications are as follows:

In order to solve the increasingly serious climate problem, governments all over the world have formulated their own emission reduction and energy saving strategies, and encouraged enterprises to participate in the emission reduction plan by issuing various environmental protection policies, among which the most popular one is the Carbon Peak and Carbon neutrality plan issued by the Chinese government in 2021. So, not only in response to the government's call, but also in response to reflect corporate values and demonstrate social responsibility, more and more enterprises have taken carbon neutrality as their core strategy and developed their own carbon neutrality plans [1]. Enterprises usually use carbon emission reduction, carbon transfer and carbon sink purchase to achieve the goal of decarbonization [2]. However, these carbon neutralization measures will bring huge initial investment, cause instability of capital flow in the supply chain, and eventually discourage enterprises from participating in carbon neutralization [3]. Therefore, the government needs to reasonably set subsidies, rewards and penalties and other policies. This study mainly analyzes and solves the carbon sink purchasing decision-making and coordination problem in the closed-loop supply chain, which considers the retailer’s fairness concerns under government subsidies and carbon neutral rewards and punishments. This study aims to design a contact that can help leading closed-loop supply chain enterprises that trying to achieve carbon neutrality to enhance their utility, promote carbon neutrality and realize supply chain coordination through reasonable pricing and carbon sink purchase decisions. (Page 1-2, 35-53)

In addition, studies have found that compared with subsidies and carbon regulation policies, carbon tax and carbon trading can better reduce the impact of manufacturers on the environment [7, 8], but barely directly consider the carbon neutral behavior together with carbon policies and carbon trading of enterprises. So, how to use carbon trading to achieve carbon neutral through reasonable rewards and punishments is particularly important. (Page 3, 85-89)

The structure of this paper is as follows: in Section 2, the literature in related research fields is summarized; In Section 3, the model background, relevant assumptions and parameters are elaborated. In Section 4, the model is established, the equilibrium solution is obtained and the comparative analysis is carried out. In chapter 5, numerical simulation and analysis are carried out to obtain the management enlightenment and explain the possible reasons; Finally, Chapter six describes the conclusions, deficiencies and future research directions of this paper. (Page 3, 102-107)

1-4 “Again, the same issues as the previous sections, reference support is very less. Most of the statements are given as their own. The literature review is ok. Authors may discuss more recent studies here (2021-2022) in relation to the statement of problem and objective of the study that will provide readers more insights regarding the study. Some pictorial illustrations to summarize the story could be beneficial for improving the article. This section has been written very well. But a separate research gap as a sub-section could improve the article's strength as well as offer novelty.”

Response:

Thanks for your constructive suggestion. We carefully collected relevant studies and increased the number of citations in the literature review, especially citing more recent studies, and we also use tables to more intuitively compare the different contracts used in the literature to deal with different problems. We have also created new separate sub-section for research gap.

The specific modifications are as follows:

“2.1. Carbon neutral in supply chain

Carbon neutrality, which lies in maintaining the balance between carbon emission and carbon utilization, as well as the balance between carbon source and carbon sink, with a focus on the development of carbon circular economy based on carbon trading [9]. Some scholars have reviewed a large number of existing studies from the perspective of value chain to verify the importance of circular economy [10]. In carbon circular economy, carbon trading commodities are mainly carbon emission allowance (CEA) and carbon sink projects. Carbon emission enterprises can purchase carbon sink projects through carbon trading market to offset their carbon emissions so that they can reach the stipulated carbon emission requirements, so as to realize the ecological value of carbon sink carriers such as forests [11]. Among them, since the carbon pricing of carbon allowance in the existing carbon trading market is generally higher than that of carbon sink trading, enterprises are more inclined to choose carbon sink trading as their main way of carbon offset [2]. As an important part of circular economy, scholars have reviewed a large number of literatures on the game theory of closed-loop supply chain and found that incentive is an important factor affecting closed-loop supply chain [12]. So, how can governments create incentives for closed-loop supply chains? Policies, especially subsidies, incentives and market mechanisms. Not only its efficiency of the emission reduction based on market mechanism is much higher than that of administrative order, carbon trading is also favored by the government and enterprises because of its economy, stability and controllability [7, 13, 14]. Plenty of studies has been done on carbon market trading in supply chain, which mainly focus on decisions in production, pricing and emission reduction of enterprises in the supply chain under the carbon cap-and-trade market. Benjaafar et al. introduced carbon allowance trading into the supply chain for the first time and discussed the impact of carbon emission costs on production decisions and total costs of enterprises [15]. Then scholars found that enterprises’ decision-making are influenced by fairness concerns to a certain extent [16, 17]. Therefore, with the continuous improvement of carbon trading market and mechanism, supply chain coordination issues arising from carbon emission allowance allocation and its reward and punishment system have become the focus of research.

2.2. Cost-sharing contract

To achieve the goal of carbon neutrality, enterprises in the supply chain often take various measures, including the use of low-carbon materials and low-carbon technologies, which undoubtedly bring huge burden of cost. Therefore, some scholars have studied the coordination effect of cost-sharing contract on risk aversion and investment behavior of enterprises in the supply chain. Zang et al. studied the two-stage supply chain of risk-averse suppliers and manufacturers that shared the external failure cost, and found that the leader of the supply chain did not always have the highest profit under the premise of a sufficiently high external cost ratio [18]. To further investigate the impact of cost-sharing contracts on remanufacturing, Chen et al. established a CLSC considering remanufacturing process innovation and its cost-sharing mechanism, and found that the cost-sharing mechanism could effectively coordinate the utility of the supply chain, but it would reduce the profits of those less power members [19]. However, most of these studies are in a certain context. Considering the uncertainty of supply chain information, Ma et al. proposed an alternative decision rule based on confidence. Under this rule, enterprises in the supply chain tend to maximize potential profits under confidence, and found that manufacturers can significantly improve profits through cost sharing [20]. For other uncertain parameters in the supply chain, Kuchesfehani et al. established a stochastic dynamic game model of a closed-loop supply chain composed of a manufacturer and a retailer, and found that sharing the manufacturer's green cost can promote product recovery [21]. While considering carbon allowances trading, Lee and Yoon found that cost-sharing contracts could effectively coordinate the profitability and sustainability of supply chains, and the operability of cost-sharing contracts was affected by government carbon allowance [22]. Li and Gong considered the impact of dual source supply and low-carbon manufacturing on the closed-loop supply chain system, constructed a two-stage CLSC model led by suppliers, and coordinated the supply chain through cost-sharing contracts. The results show that the cost-sharing contract is applicable and effective for both economic and environmental development [23]. Therefore, iIt can be seen that, in the green and low supply chain, enterprises tend to avoid the risks caused by green efforts through cost sharing contracts, but cost-sharing contract is rarely used to coordinate the fairness concerns issues. the cost-sharing contract is mostly used to coordinate the cost rise caused by the increase of input, which is conducive to the risk avoidance of enterprises in the supply chain, but rarely used in fairness concerns.

2.3. Revenue-sharing contract

As an important factor that reduces the utility of supply chain, fairness concern has been widely studied. It may exist in every aspect of the supply chain. Diao et al. studied the influence of consumers' fairness concerns on enterprises' dynamic pricing strategies and channel profits, and found that consumers' fairness concerns can bring a win-win situation to the whole chain [24]. Xia et al. studied fairness concerns in the remanufacturing process and found that fairness concerns have a large marginal effect on the quantity of remanufactured products, and so does the environmental impacts of the supply chain. Liu et al. established three Stackelberg game models that without fairness concern, retailer's fair concern and manufacturer's altruistic preference, and found that retailer's fairness concern increased its own profit, but reduced manufacturer's optimal emission reduction and profit [25]. So, in order to solve the decline of supply chain utility caused by fairness concerns, scholars propose to use revenue-sharing contract. Cachon and Lariviere et al., inspired by the video rental industry, studied the revenue-sharing contract under the general supply chain model where the revenue is determined by the retailer's purchase quantity and price. They found that the contract can not only realize the coordination of supply chain profits, but also reduce the quantity competition [16]. Many scholars have applied revenue-sharing contracts to various aspects of carbon policy, not just to coordinate fairness concern problem. Yuan et al. introduced the revenue-sharing contract into the supply chain of carbon emission cap-and-trade system, modeled and coordinated the self-cleaning technology input of manufacturers and the fairness concern of consumers, and found that the contract could coordinate and maximize the profit of the whole supply chain [17]. Considering the impact of carbon tax and carbon subsidy on the emission reduction of low-carbon supply chain, Ran and Xu enhanced the enterprise's enthusiasm for emission reduction by designing revenue sharing contracts under the constraints of low-carbon policies [28]. Under the constraint of carbon allowance, Wang et al. built a carbon emission reduction coordination game model for coal-fired power supply chain enterprises and designed a revenue-sharing coordination mechanism among the chain. They found that Pareto optimality could not always be achieved, so they analyzed the implementation conditions of the game model. Which shows that revenue-sharing contracts do not always guarantee Pareto optimal solutions in the supply chain [29]. It can be seen that although revenue sharing can be used to coordinate carbon policy and equity concerns, it does not always achieve Pareto optimization. Therefore, scholars turn to have coordinated the supply chain by combining multiple contracts.

2.4. Multiple contracts

Limited by the complexity of real-world scenarios, a single contract has been unable to fully coordinate the supply chain. While considering carbon emission reduction, Yang et al. studied the impact of retailer-led revenue-sharing and cost-sharing contract on manufacturers' carbon emission reduction efforts and the profitability of the two companies when consumers' environmental awareness and carbon tax increases. The results showed that revenue-sharing contract could improve utility and promote emission reduction, but failed to achieve Pareto optimality [30]. Under consumers' environmental concerns, Qiao et al. studied the impact of environmental investment by both suppliers and manufacturers on the sustainability and utility of the supply chain, and used quantity discounts and cost-sharing contracts to improve the utility of the supply chain. The results show that the contract can effectively make all the parties in the supply chain to achieve Pareto improvement [31]. Yin and Liu established a CLSC model with new energy vehicle manufacturers as the leader under carbon trading system, and used cost-sharing and revenue-sharing contract to coordinate the model. They found that when the cost of carbon emission reduction technology was too high, manufacturers' technology research and development and innovation were reduced, leading to the failure of the contract to achieve system optimization [32]. Tao et al. established four models of cost-sharing, revenue-sharing, cost-revenue sharing and no contract. Through comparison and analysis, they found that the coordination of supply chain depends more on the bargaining ability of both parties and the environmental awareness of consumers [33]. Mohamad et al. established a two-stage closed-loop supply chain model with uncertain demand under the impact of the pandemic, and used call option contract and revenue-sharing contract to coordinate the risks caused by uncertainty in the supply chain. The results showed that both contracts could bring win-win results for both companies, but green suppliers are more inclined to the call option contract, while retailers are more likely to accept revenue-sharing contracts in return [34]. Bai et al. studied a retailer-led supply chain under the supervision of the carbon cap-and-trade policy, and used the cost-sharing and revenue-sharing contract to coordinate the decentralized system. The results showed that this contract could effectively improve economic and environmental sustainability [35]. It can be seen that better coordination effect can be achieved when using multi-contract combination for coordination, but there are still limitations that cannot achieve Pareto optimization.

2.4. Research gap and conclusion

We collated most of the literature mentioned in this chapter and obtained Table 1,

Table 1. Key points of literature

Author(s)	Carbon policy?	Green efforts? (carbon trading and so on)	Fairness concern?	Cost-sharing?	Revenue- sharing?	Other contracts
Benjaafar et al.		√
Kahneman et al.			√
Cui et al.			√
Zang et al.				√
Chen et al.				√
Ma et al.				√
Kanani et al.		√		√
Li and Gong	√	√		√
Cachon et al.			√		√
Liu et al.			√		√
Yuan et al.		√	√		√
Wang et al.	√	√			√
Ran and Xu	√				√
Yang et al.	√	√		√	√
Qiao et al.		√		√		√
Yin and Liu		√		√	√
Bai et al.	√	√		√	√

In summary, most of the existing studies adopt cost-sharing contracts to solve the problems caused by enterprises' low-carbon efforts, while using revenue-sharing contracts to solve problems caused by fairness concerns or carbon policies, but fail to use them to solve both of the three problems. Moreover, most of these are coordination studies of one single contract model, and there are few studies that comprehensively compare and analyze the coordination contract situation under different situations and explore the optimal coordination method under different situations. Therefore, in order to explore how to make optimal decisions under carbon neutrality, this study considers manufacturer’s carbon neutrality efforts together with retailer’s fairness concerns, government subsidies and carbon neutrality rewards and penalties. By designing and analyzing three supply chain coordination contracts: cost-sharing contract, revenue-sharing contract and cost-revenue sharing contract, this study aiming to explore the best coordination way of the supply chain in different situations when the manufacturer has to purchase carbon sink to realize its goal of carbon neutral and the retailer has fairness concerns under government subsidies and carbon neutrality rewards and penalties.

1-5 “Although, the section clearly expresses the problem statement. Still, it would be good if we had more references while offering the arguments in this section. See the following

Designing Value Chains for Industry 4.0 and a Circular Economy: A Review of the Literature. Sustainability. 2022; 14(12):7084. https://doi.org/10.3390/su14127084

A review of factors affecting closed-loop supply chain models. Journal of Cleaner Production 253 (2020): 119823.”

Response:

Thanks for your constructive suggestion. We have carefully read the literature you provided and found that it is relevant to this study. Thanks again for the literature you recommended and we have quoted it in the appropriate part of the paper

The specific modifications are as follows:

Some scholars have reviewed a large number of existing studies from the perspective of value chain to verify the importance of circular economy [10]. (page 3, line 112-114)

As an important part of circular economy, scholars have reviewed a large number of literatures on the game theory of closed-loop supply chain and found that incentive is an important factor affecting closed-loop supply chain [12]. (page 3, line 123-125)

1-6 “This section needs more elaboration. Very limited interpretation is given. Discussion is more like elaborating on the empirical results rather than interpreting the results. Significance of this study is also ignored in the discussion.”

Response:

Thanks for your constructive suggestion. We have studied in detail the possible causes of the phenomena in the numerical simulation, and added in the discussion section where appropriate. At the same time, we also use words to emphasize the significance of the article as much as possible.

The specific modifications are as follows:

Therefore, it can be seen from Figure 2(b) that the retailer's fairness concern will hinder the carbon neutrality process in any case, but all the three contracts can coordinate well. This is because retailers are less motivated to participate in recycling due to fairness concerns, resulting in a lower proportion of remanufactured products in the supply chain and an increase in carbon emissions. At this time, manufacturers are more inclined to accept punishment rather than achieve carbon neutrality. Therefore, based on Figures 2(a) and 2(b), when the fairness coefficient of retailers increases, profit-oriented manufacturer can adopt cost-revenue sharing contracts to gain the utility, while manufacturer that prefers carbon emission reduction can consider using revenue-sharing contracts to perform better in carbon neutrality. (page 18, line 589-598)

This is because under the influence of retailer's fairness concern, manufacturers under cost-sharing contracts and cost-revenue sharing contracts need to bear extra recovery costs of retailers, resulting in a decline in their own benefits and government penalties for failing to complete the carbon neutral target. In this case, the benefits of the manufacturer are lower than that of the retailer. The revenue-sharing contract can balance this situation well, which leads to the increase of the manufacturer's utility. As shown in Figure 3(b), it can be found that the cost-revenue sharing contract can better improve retailer’s utility. This is because when the retailer cares more about fairness, it is increasingly unable to achieve the goal of carbon neutrality in the supply chain, so they can only choose to bear the penalty in pursuit of higher utility, which leads to the decline of manufacturer’s income, even lower than that of the retailer. At this time, cost-sharing contract can better balance the income gap and improve the efficiency of the retailer. This suggests that the manufacturer should try to eliminate the fairness concerns of the retailer, otherwise it will not only fail to achieve carbon neutrality in the supply chain, but also lead to the decrease of the manufacturer's own utility and bring double losses. (page 18-19, 604-623)

As shown in Figure 4(a), when the cost-sharing behavior between manufacturers and retailers in the supply chain becomes deeper, the utility of the whole supply chain increases significantly. When deep enough, no matter which contract is adopted, the enterprise can effectively realize the Pareto improvement of the overall utility of the supply chain, and among the three contracts, and the cost-revenue sharing contract can always achieve better improvement of the supply chain utility. This is mainly because when the cost-sharing of the two sides is the same, the revenue-sharing can better balance their revenue gap, so that the supply chain benefit is higher than the single use cost sharing contract. Also, it can be seen from Figure 4(b) that the deepening of their cost-sharing can also promote their carbon neutrality progress, and it performs the best among the three kinds of contracts. This is because the retailer who has been shared the recycling cost is more active in participating in recycling, which leads to an increase in the proportion of recycled products in the supply chain, and thus a decrease in carbon emissions. Moreover, since the manufacturer has been shared the carbon neutrality effort, they will be more motivated to participate in carbon neutrality and will buy more carbon sinks for carbon offsets. Therefore, if the decision makers in the supply chain want to accelerate their carbon neutrality process as much as possible while pursuing the optimal profit, they should try to deepen their cost-sharing degree between manufacturers and retailers. (page 19, 635-650)

As can be seen in Figure 5(a), the cost-revenue sharing contract have the best performance on coordinate the utility in the supply chain when the unit carbon sink price is cheap, as the revenue-sharing contract become the best choice when the carbon sink price is too expensive. This is because the enthusiasm of the enterprise to participate in the carbon neutral declines when the price of carbon sink increase. As is shown in Figure 5(b) that extremely expensive carbon sink price is not conducive to the realization of carbon neutrality. At this time, sharing the cost of carbon neutrality efforts can better balance the revenue gap between the two sides, so as to improve the overall utility of the supply chain. Therefore, when facing the price fluctuation, enterprises should both make contracts and negotiate the price with the carbon sink suppliers to ensure the healthy growth of the overall utility of the supply chain and the effective realization of the carbon neutrality process. (page 20, 663- 673)

Moreover, it can also be seen in Figure 6(b) that the increase of government subsidies and unit carbon neutral rewards and punishments can well promote enterprises to achieve carbon neutrality, but carbon neutral rewards and punishments performs better. This is because rewards and punishments based on carbon emissions are more likely to influence optimal decision-making than piecework subsidies, especially when they are not too high. In consideration of this matter, the cost-revenue sharing contract becomes the first choice for enterprises. (Page 20-21, 707-713)

1-7 “Improve the structure of this section and add the limitations and future research directions more clearly. Authors may add separate section for Implications (Future Directions of Study) as theoretical and practically. Limitations can be mention in conclusions.”

Response:

Thanks for your constructive suggestion. We have followed your suggestion to add a separate section on Limitations and future research to the conclusion of the article to explain the theoretical and practical effects of future directions of study.

The specific modifications are as follows:

6.3 Limitations and future study

There are still shortcomings in this study, which need to be further explored:

(1) In addition to fairness concerns of retailers, other aspects of the supply chain, such as manufacturers, consumers and suppliers, will also have fairness concerns and even other psychological tendencies, such as altruistic preference, which will also have a great impact on the utility of the supply chain. In future research, we will research more on psychological factors that may affect the utility of supply chain and coordinate them to ensure better utility of enterprises in supply chain.

(2) This study only takes wholesale price, sales price, market recovery price, manufacturer recovery price and carbon sink purchase as decision variables, and will take other decision factors such as recycling effort input, carbon emission reduction and product greenness in the supply chain into consideration in further studies to ensure that the supply chain can be more environmentally friendly while maintaining utility.

(3) In this study, a two-stage model of one manufacturer and one retailer is constructed. However, multi-stage supply chain that involving suppliers and recyclers may be considered in future studies, as well as a model involving multiple manufacturers and multiple retailers, so as to better fit the realistic scenario. (page 23-24, line 801-816)

1-8 “See the following articles

The role of healthcare supply chain management in the wake of COVID-19 pandemic: hot off the press, Foresight. https://doi.org/10.1108/FS-07-2021-0136

The impact of carbon pricing, climate financing, and financial literacy on COVID-19 cases: go-for-green healthcare policies. Environmental Science and Pollution Research (2022): 1-13. https://doi.org/10.1007/s11356-022-18689-y”

Response:

Thanks for your constructive suggestion. We have carefully studied the section of discussion and conclusion in these articles, and optimized this paper. However, because article “The role of healthcare supply chain management in the wake of COVID-19 pandemic: hot off the press, Foresight” is not closely related to this study, it is not quoted.

The specific modification is as follow:

As scholars have found that climate finance and carbon pricing can significantly affect air quality and even help improve people's health [11]. (Page 3, 114-115)

Author Response File: Author Response.pdf

Reviewer 2 Report

I have read your paper " Closed-loop supply chain decision-making and coordination considering fairness concerns under carbon neutral rewards and punishments " with great interest. I believe there some small improvements need to be made before the paper can be published. Please, see my attached report.

Comments for author File: Comments.pdf

Author Response

Please see the attachment.

2-1 “In the introduction, the author should substantiate the statements made, introducing the appropriate citations. For example, the author state: “In order…neutrality plans” and “Classical cases…capital investment”. It needs theoretical foundation.”

Response:

Thank you very much for your constructive suggestions, We have added references to the parts you mentioned in the introduction and other places where references are needed

The specific modifications are as follows:

So, not only in response to the government's call, but also in response to reflect corporate values and demonstrate social responsibility, more and more enterprises have taken carbon neutrality as their core strategy and developed their own carbon neutrality plans [1]. Enterprises usually use carbon emission reduction, carbon transfer and carbon sink purchase to achieve the goal of decarbonization [2]. However, these carbon neutralization measures will bring huge initial investment, cause instability of capital flow in the supply chain, and eventually discourage enterprises from participating in carbon neutralization [3]. (Page 1-2, Line 39-46).

In addition, studies have found that compared with subsidies and carbon constraint policies, carbon tax and carbon trading can better reduce the impact of manufacturers on the environment [7, 8], so how to promote the development of carbon trading through reasonable rewards and punishments is particularly important. (Page 2-3, 85-88)

2-2 “I also suggest that some information be provided in the introduction that highlights the existing gap in the literature and reinforces the contribution of the study. Also, indicate, in this section, how the paper is organized.”

Response:

Thanks for your constructive suggestion. We have added research contributions in the introduction and the structure of this paper in the introduction, and added the existing gap both in the introduction and literature review.

The specific modifications are as follows:

This study mainly analyzes and solves the carbon sink purchasing decision-making and coordination problem in the closed-loop supply chain, which considers the retailer’s fairness concerns under government subsidies and carbon neutral rewards and punishments. This study aims to design a contact that can help leading closed-loop supply chain enterprises that trying to achieve carbon neutrality to enhance their utility, promote carbon neutrality and realize supply chain coordination through reasonable pricing and carbon sink purchase decisions. (Page 2, 47-53)

Moreover, due to the immature restrictions of the existing carbon emission accounting technology and the lack of rewards and punishments related to carbon emissions, the existing measures to promote low-carbon emission reduction of enterprises are mainly fines. In addition, studies have found that compared with subsidies and carbon regulation policies, carbon tax and carbon trading can better reduce the impact of manufacturers on the environment [7, 8], but barely directly consider the carbon neutral behavior together with carbon policies and carbon trading of enterprises. So, how to use carbon trading to achieve carbon neutral through reasonable rewards and punishments is particularly important. (Page 2-3, 82-89)

Therefore, in order to prevent the risk of capital chain break and benefit decrease caused by fairness concerns due to various carbon neutral efforts of enterprises under various carbon policies, and to provide better management enlightenment for the government to formulate relevant policies, this study focuses on one manufacturer and one retailer in CLSC with government's subsidy, carbon neutral reward and punishment policy, the decision-making and coordination while the retailer has fairness concern. By proposing three different coordination contracts, which are cost-sharing contract, revenue-sharing contract and cost-revenue sharing contract, the optimal equilibrium solutions under different situations are obtained and compared. The research results can provide decision support for CLSC enterprises in product pricing, carbon sink reserve and supply chain contract selection under the goal of carbon neutrality. It has theoretical value and practical significance to realize the goal of carbon neutrality while taking corporate profits into account. (Page 3, 90-101)

2-3 “I suggest that for a more fluid reading of the text, Table 1 with the parameter symbols and their descriptions, be placed right at the beginning of section 3. The identification of each of the graphs (a) and (b) should be in the appropriate place to better their identification in Figure 2, Figure 3, Figure 4, Figure 5, Figure 6 and Figure 7. In line 561, review the text and replace one of the repeated words with a synonym.”

Response:

Thanks for your constructive suggestion. We have modified the position of parameter table and picture name according to your comments. We placed the parameter table at the beginning of Section 3. Place the names of figures 3,4,5,6, and 7 above, and (a) and (b) below and center of the figures in the appropriate position. And the synonym is replaced.

The specific modifications are as follows:( To save space, only a few images are shown)

3.1. Problem description

In this section, a CLSC model consisted of a single manufacturer and a single retailer is established, in which the manufacturer plays a leading role while the retailer plays a subordinate role. And specific parameter symbols and their descriptions in the model are shown in Table 1:

Table 2. Parameter symbols description.

	Parameter	Meaning		Parameter	Meaning
Decision variables		The wholesale price	Consumer		Actual quantity demand
		The retail price			Actual quantity recycling
		Quantity of carbon sink reserves			The expected price of recycling
		Unit price of recycling products			Nominal quantity demanded
		Price of recycled materials			Nominal quantity recycled
					The consumer price sensitive coefficient
Government		Government subsidy per unit			Coefficient of recovery efforts
		Government rewards and punishments for each unit			The coefficient of recycling price sensitivity
		Proportion of subsidy distribution in the supply chain			The coefficient of consumer green perception

Manufacturer		Cost of new products	Retailer		The coefficient of fairness concerns
		Cost of remanufacturing	Retailer		Recycling efforts
		Price per unit of carbon sink
		Carbon emission per unit of new products	Contract		Coefficient of cost-sharing
		Carbon emissions per unit of remanufactured products	Contract		Coefficient of revenue-sharing

(Page 6-7, 253-258)

Figure 2. Supply chain utility and carbon offset situation under the change of fairness concern.

Figure 2(a) Utility of supply chain. Figure 2(b) Carbon neutrality of the supply chain. (Page 16-17, 570-573)

Moreover, it can also be seen in Figure 6(b) that the increase of government subsidies and unit carbon neutral rewards and punishments can well promote enterprises to achieve carbon neutrality, but carbon neutral rewards and punishments performs better. This is because rewards and punishments based on carbon emissions are more likely to influence optimal decision-making than piecework subsidies, especially when they are not too high. In consideration of this matter the cost-revenue sharing contract becomes the first choice for enterprises. (Page 21-22, 707-713)

2-4 “In the conclusions, I would like to see the contributions of the study in theoretical and managerial terms more highlighted.”

Response:

Thanks for your constructive suggestion. We have highlighted the theoretical and practical contributions of this research in the conclusion.

The specific modifications are as follows:

6.2 Contributions

Since existing studies barely consider supply chain decisions under carbon neutral behavior under subsidies and carbon neutral rewards and punishments when retailers have fairness concerns, this study has four main contributions.

Theoretical contribution:

(1) This study extends the research of carbon neutrality game in supply chain theoretically, and provides theoretical reference for the effective realization of carbon neutrality goal in supply chain by comprehensively considering the carbon neutrality efforts of manufacturers, the fairness concerns of retailers, and the government subsidies and rewards and punishments in the supply chain under the background of carbon neutrality

(2) This study theoretically proves the possibility of fair concern behavior of retailers under this model, and analyzes and compares the coordination effects of three contracts, which provides theoretical basis for supply chain coordination under carbon neutrality.

Practical contribution:

(1) Through numerical simulation, this study simulates the effects of retailers' fairness concerns, government subsidies, rewards and punishments, and cost sharing degree changes on supply chain utility and carbon neutrality, which can provide practical guidance for enterprises to make decisions on carbon neutrality.

(2) This study also discusses the impact of the fluctuations of the carbon sink market under government subsidies, rewards and punishments on the utility of the supply chain and the realization of carbon neutrality through numerical simulation, which provides management enlightenment for the progress of carbon neutrality in enterprises. (Page 23-24, Line 779-800).

Author Response File: Author Response.pdf

Reviewer 3 Report

1. In the abstract, authors describe motivation and model results. However, what not clear to me are the contributions of this article and research gaps this article tries to bridge

2. One of major challenges in supply chain is uncertainties. It is not clear to me whether all parameters in the article are assumed to be fixed. Please clarify

3. Please clarify key takeaways from this article for someone in industry. What practical challenges can this article address ?

Author Response

3-1 “In the abstract, authors describe motivation and model results. However, what not clear to me are the contributions of this article and research gaps this article tries to bridge”

Response:

Thanks for your constructive suggestion. I am very sorry for not clearly describing the contribution of the paper and the gap in existing research in the abstract. We have optimized the description of this part and introduction.

The specific modifications are as follows:

At the same time, existing supply chain game model studies barely take the fairness concerns of enterprises, carbon neutral behavior, and government subsidies and rewards and punishments into consideration. So a centralized and two-stage Stackelberg game model of closed-loop supply chain(CLSC) of one manufacturer and one retailer is constructed, and cost-sharing contract, revenue-sharing contract, and cost-revenue sharing contract are used to coordinate, as to take fairness concerns of downstream enterprises into account while pursuing carbon neutrality, ensure the overall benefits of the supply chain, and consider the impact of government subsidies and rewards and punishments on carbon neutrality of the supply chain. (Page 1, 14-21)

The research results can not only provide decision support for the product pricing, carbon sink reserve and contract design of CLSC enterprises under the goal of carbon neutrality, but also provide reference for the setting of government subsidies and rewards and punishment. (Page 1, 29-32)

Therefore, the government needs to reasonably set subsidies, rewards and penalties and other policies. This study mainly analyzes and solves the carbon sink purchasing decision-making and coordination problem in the closed-loop supply chain, which considers the retailer’s fairness concerns under government subsidies and carbon neutral rewards and punishments. This study aims to design a contact that can help leading closed-loop supply chain enterprises that trying to achieve carbon neutrality to enhance their utility, promote carbon neutrality and realize supply chain coordination through reasonable pricing and carbon sink purchase decisions. (Page 2, 46-53)

In addition, studies have found that compared with subsidies and carbon constraint policies, carbon tax and carbon trading can better reduce the impact of manufacturers on the environment [7, 8]. However, there are few models that directly consider the carbon neutral behavior of enterprises, so how to promote the development of carbon trading to achieve carbon neutral through reasonable rewards and punishments is particularly important. (Page 2-3, 85-89)

3-2 “One of major challenges in supply chain is uncertainties. It is not clear to me whether all parameters in the article are assumed to be fixed. Please clarify.”

Response:

Thanks for your constructive suggestion. The parameters in this article are fixed. Supply chain resilience is an extremely important part of related research. Uncertainty in supply chain, including raw material price fluctuation, stock shortage and so on, will undoubtedly bring risks to the smooth operation of supply chain. However, the research focus of this paper is not on the random optimization and robust optimization of supply chain and other uncertainty related content, so the uncertainty of parameters is not considered in this paper. Thank you for your suggestion, and we will further consider the decision-making and coordination of carbon neutrality in supply chain under uncertain parameters in the following research.

3-3 “Please clarify key takeaways from this article for someone in industry. What practical challenges can this article address?”

Response:

Thanks for your question. This study has practical significance in product pricing, recycling pricing, carbon sink purchase and supply chain contract design. (1) This study selected product price parameters such as wholesale price, retail price and product recovery price as decision variables to find the equilibrium solution under the optimal decision. Through numerical analysis, the factors affecting the optimal pricing were found, which provided management implications for product pricing. For example, in order to achieve the optimal use of products while pursuing the overall healthy development of the supply chain, how manufacturers and retailers should set prices; (2) This study compares and analyzes the performance of the three contracts under the influence of different factors in the supply chain utility and the completion of supply chain carbon neutrality through numerical simulation, which provides decision-making reference for enterprises' future strategic choice and contract choice. For example, in order to pursue the overall decarbonization of supply chain, manufacturers with dominant supply chains should choose contracts to avoid the utility damage caused by retailers' fairness concerns; (3) This study takes enterprise carbon neutral behavior as an important innovation point, which can provide management enlightenment for enterprises in the supply chain to achieve the goal of carbon neutral while ensuring enterprise profits.

Author Response File: Author Response.pdf

Round 2

Reviewer 1 Report

The authors have carefully reviewed the comments of reviewers. The manuscript was considerably improved, and all my previous recommendations have been acted upon in this revision. This facilitated them to address most of the remarks suitably and acceptably. As a result, the quality of the manuscript has improved. However, there are still a few points that the authors could consider to enhance the present paper further. The submitted manuscript needs significant improvement to meet the scholarly criteria practices to evaluate the arguments' quality and satisfy the expected level for publication.

-As a crucial improvement needed, without which the paper can be improved, it is paramount to clearly show the relevance of your work to the study objectives in relation toyour title. Please consult the journal scope for more details. Consider the following for the manuscript quality improvement. Here is some suggestions

The impact of IoT on the performance of vaccine supply chain distribution in the COVID-19 contex. IEEE Transactions on Engineering Management: DOI: 10.1109/TEM.2022.3157625

- In the last paragraph must be done a summary (resume) of the paper, i.e., a clear idea about, what will be studied in the paper. I could not identify this. The last paragraph's purpose in the Introduction section is to summarize the main points, restate the paper's main idea, and show how the paper statements were proven. It should have the general objective of the work that the authors must write

Author Response

Please see the attachment.

PART Ⅰ: Responds to Comment I (Reviewer #1)

“As a crucial improvement needed, without which the paper can be improved, it is paramount to clearly show the relevance of your work to the study objectives in relation to your title. Please consult the journal scope for more details. Consider the following for the manuscript quality improvement. Here is some suggestions

The impact of IoT on the performance of vaccine supply chain distribution in the COVID-19 contex. IEEE Transactions on Engineering Management: DOI: 10.1109/TEM.2022.3157625”

Response:

Thanks for your constructive comments. We carefully read the article you recommended and learned how to show the relevance of the work to the study objectives in relation to the title, and we have optimized the abstract and introduction this paper to ensure that they all have all better related to the title.

The specific modifications are as follows:

Abstract: The cheap price of carbon sink trading in Certification Emission Reduction(CER) makes it more popular than the Carbon Emission Allowance(CEA) trading in carbon neutral, enterprises are more inclined to purchase carbon sinks to achieve their own carbon neutrality goals and promote decarbonization of the whole chain. Companies urgently need to figure out how to achieve carbon neutrality with government rewards and punishments. Moreover, as an important factor affecting the effectiveness of supply chain, it is particularly important to study how to coordinate the fairness concerns in such object. So a centralized and two-stage Stackelberg game model of closed-loop supply chain(CLSC) of one manufacturer and one retailer is constructed, and cost-sharing contract, revenue-sharing contract, and cost-revenue sharing contract are used to coordinate, as to take fairness concerns of downstream enterprises into account while pursuing carbon neutrality, ensure the overall benefits of the supply chain, and consider the impact of government subsidies and rewards and punishments on carbon neutrality of the supply chain. (Page 1, 9-22)

In addition, considering that fairness concerns may affect the utility of closed-loop supply chains and hinder the realization of supply chain carbon neutrality, and in order to solve the risk of supply chain utility decline caused by fairness concerns, this study aims to find out how to make pricing, recycling and carbon sink purchase decisions in the closed-loop supply chain with carbon neutrality target when the retailer has fairness concerns considering government subsidies and carbon neutral rewards and punishments, and to design a contract that can effectively coordinate the retailer's fairness concerns. (Page 2, 47-54)

For instance, the Apple Inc. has announced at its product launch in September 2021 that it had successfully achieved carbon neutrality in its operations by adopting measures such as auctioning 38.4 million tons of carbon sinks in 2015 to offsetting its own carbon emissions, using clean energy and environmentally friendly materials. Moreover, Apple Inc. continuously evaluates how well other members of its supply chain are decarbonizing and calls on them to do the same to decarbonize their entire supply chain. (Page 2, 57-62)

So, when a supply chain leading enterprise like Apple requires other members of its supply chain to decarbonize, will its supply chain utility be damaged due to the irrational behavior of member enterprises? Can contracts coordinate such problems? How can contracts be designed to better solve this problem? How can government play a facilitating role here? (Page 2, 82-85)

1-2 In the last paragraph must be done a summary (resume) of the paper, i.e., a clear idea about, what will be studied in the paper. I could not identify this. The last paragraph's purpose in the Introduction section is to summarize the main points, restate the paper's main idea, and show how the paper statements were proven. It should have the general objective of the work that the authors must write”

Response:

Thanks for your constructive suggestion. We have carefully revised the last part of the introduction to ensure that it summarized the research focus and objectives of the paper.

The specific modifications are as follows:

Therefore, in order to prevent the risk of capital chain break and benefit decrease caused by retailer’s fairness concerns due to various carbon neutral efforts required by manufacturer under various carbon policies, and to provide better management enlightenment for the government to formulate relevant policies, this study establishes a closed-loop supply chain consisting of a manufacturer and a retailer with government subsidies and carbon neutral rewards and punishments. In the supply chain, manufacturers need to purchase carbon sinks to achieve carbon neutrality, and retailers have a tendency to concern about fairness. How should the manufacturer and retailer make decisions to ensure their own profits? How to design contracts to distribute the benefits of manufacturer and retailer to coordinate the decrease of supply chain utility caused by retailer's fairness concern? Which contract can better improve the supply chain utility? Through the numerical simulation, what kind of subsidies and carbon neutral reward and punishment policies can better promote the enthusiasm of enterprises to participate in carbon neutral? The research results can provide decision support for CLSC enterprises in product pricing, carbon sink reserve and supply chain contract selection under the goal of carbon neutrality. It has theoretical value and practical significance to realize the goal of carbon neutrality while taking corporate profits into account. (Page 3, 98-118)

Author Response File: Author Response.pdf

Reviewer 3 Report

Accept in present form

Author Response

Thank you very much for your review and suggestions!

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Closed-Loop Supply Chain Decision-Making and Coordination Considering Fairness Concerns under Carbon Neutral Rewards and Punishments

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