A blessing in disguise: paying for the manufacturer’s clean energy transformation allows brands to win more

It is widely acknowledged that the manufacturing sector generates the most greenhouse gas (GHG) emissions, but can hardly bear the green transformation cost by itself. This paper, therefore, investigates how the brands can issue green bonds to financially support their manufacturers in using clean energy. Under such a green bond project, the brand incurs the bond cost (including the principal and interest), whereas the manufacturer uses the principal to cover the green transformation cost. We find that the brand’s dual sales channel structure plays an important role in the success of the green bond project. When the bond cost is moderate, two similar-sized channels make the green bond project detrimental to the brand, while two unbalanced channels give the brand opportunities to increase the profit. To elaborate on this result, we examine the interactions between the decisions of the brand and its manufacturer, finding that the brand’s green bond cost is partially transferred to the manufacturer, and the supply chain power structure is altered. This changes the manufacturing fee and the competition dynamics of the brand’s dual sales channels. As a result, the manufacturer and the brand share the cons and pros of the green bond project, leading to all-win outcomes for the brand, the manufacturer, and the supply chain’s environmental sustainability.