Global Journal of Business Research, Vol. 4, No. 2, pp. 27-38, 2010
12 Pages Posted: 5 Jul 2010
Date Written: 2010
The triple bottom line (economic, environmental, and social performance) is an important approach to long-term sustainability of a manufacturing company. However, a manufacturer will always feel pressure to focus on the economic bottom line and to give at least equal importance to the second and third bottom lines (environmental and social performance). As environmental issues become more important to citizens, they demand enhanced environmental performance from companies by exerting pressure on public policy makers to enact regulations, taxes, permits, and penalties that motivate companies to improve their environmental performance. We present a model that could be used by governmental policy makers to predict the effects from reducing the number of emissions permits and increasing the penalties for exceeding allowable emission limits. Our model is for a product that has a limited selling season. We propose a newsvendor model to estimate a manufacturing company’s optimal production quantity based on maximization of expected profits given the cost of emission permits and penalties for exceeding emission limits allowed by the permits. In addition, the newsvendor model provides insights to policy makers on the effects of adjusting the regulatory levers of emission permits and penalties.
Keywords: Triple Bottom Line, Manufacturing, Sustainability, Green
JEL Classification: M11, R38
Suggested Citation: Suggested Citation
Manikas, Andrew and Godfrey, Michael, Inducing Green Behavior in a Manufacturer (2010). Global Journal of Business Research, Vol. 4, No. 2, pp. 27-38, 2010. Available at SSRN: https://ssrn.com/abstract=1633599