Supply chain structure and risk attitude in the selection of environmentally friendly products

Compared with ordinary products, environmentally friendly products (EFPs) usually have higher cost for R%D and uncompetitive price. Also, there may be technological renovation and policy uncertainty leading to volatility of demand, which causes high risk to firms in green supply chains. Therefore, risk reduction and risk attitude of decision-makers (manufacturers and retailers) should be considered. In this study, we investigate the selection of EFPs with the consideration of the tradeoff between risk and return in two supply chain structures: vertical integration and a decentralised setting. A case study of a green supply chain offering household electrical appliances in China is presented to illustrate related issues. The results suggest that risk attitude has a significant impact on the selection of EFPs and a green supply chain with vertical integration achieves better environmental performance than a decentralised one.