This paper focuses on optimal retail pricing and procurement decision of a retailer, and wholesale pricing and product’s greening level decision of a manufacturer under two-period supply chain frameworks. In manufacturer-Stackelberg vertical game setting, three procurement scenarios are considered. It is found that the product greening level cannot achieve its optimum level if the retailer and manufacturer remains strict to imply the conventional single period procurement decision. If the retailer decides to buildup strategic inventory then the supply chain members receive higher profits and the manufacturer can invest more in improving product greening level. The consumer also receives product at its highest greening level. If the retailer procures products in a single lot to satisfy demand of two selling consecutive periods, then consumer receives the product at its lowest greening level and the manufacturer receives lowest amount of profits among three procurement scenarios. If the retailer participates with the manufacturer’s green supply chain initiatives then the retailer can receive highest amount of profit, but the greening level of the product reaches at its lowest level. Therefore, the retailer’s participation does not always motivate the manufacturer to produce greener product. Overall, the retailer’s procurement decision is a key factor for the green supply chain initiatives of the manufacturer.

Introduction

Consumer demand for green products has achieved growing attention for years. For example, products such as energy star home appliances, phosphate-free detergents, green cars or green fashionable ornaments are gaining rapid popularity among consumer due to the use of less amount of environment-damaging chemicals, energy, or recyclable materials. Therefore, Green Supply Chain Management (GSCM) becomes an emerging research topic because of rising consumer awareness about manufacturing processes and corresponding carbon footprint, logistics design, way of recycling, business partner selection, raw material selection etc. Some regulatory agencies such as United States Environmental Protection Agency (USEPA) or Bureau of Energy Efficiency (BEE) are also serving consumer to recognize home appliances and electronic product that reduce greenhouse gas emissions and consume less energy by introducing Energy Star programs. European Environment Agency (EPA) publishes white paper on regular basis to intensify consumer awareness. To make the supply chain greener, global manufacturers are giving consistent effort to integrate innovative and environment friendly technologies while designing the supply chain process. It induces many companies to assimilate technologies for improving resource utilization efficiency and reducing the impact of manufacturing on the environment (Sancha et al. 2016). For example, companies such as Apple Inc. helps their suppliers in reducing the amount of energy they use. As a part of clean energy program, in 2015 Apple has installed 485 megawatts of wind and solar projects across six provinces of China so that their suppliers can get rid of the difficulty in accessing clean energy. The government of several nations are also providing continuous subsides to motivate companies to introduce green initiative (Albared et al. 2008). There is large body of literature on GSCM from various perspectives such as supply chain coordination, game theoretic models, dual-channel supply chain, government influences. For example, Ghosh and Shah (2015) explored green supply chain coordination issues under price and greening level sensitive demand.