Blockchain and green investment redefine profit strategy in global supply chains

A new study details how manufacturers and e-retailers can optimize profitability through strategic deployment of green investment and blockchain technology in dual-channel supply chains. The research investigates key pricing decisions and investment choices that align with market dynamics and evolving consumer preferences.

Published in Sustainability under the title “Green Investment Strategies and Pricing Decisions in a Supply Chain Considering Blockchain Technology”, the study constructs a series of Stackelberg game models to evaluate the profitability of three distinct strategic scenarios: no investment (NN), green investment only (LN), and the combination of green investment and blockchain technology (LB). The research highlights how pricing, consumer trust, and demand interact to inform supply chain strategies for sustainability-focused businesses.

What determines the best strategy for supply chain participants?

A dual-channel supply chain is composed of a manufacturer and an e-retailer. The manufacturer sells through its own direct (online) channel and wholesales to the e-retailer. The e-retailer, as the follower in the Stackelberg model, then sets its pricing in response to the manufacturer's decisions. The study outlines three strategy combinations: NN (neither green investment nor blockchain), LN (green investment only), and LB (green investment plus blockchain adoption).

The choice of strategy depends heavily on several market variables: consumer preference for low-carbon products, the level of trust in the e-retailer's product claims, the market share distribution between the direct and retail channels, and the intensity of price competition.

When consumer preference for low-carbon products is low, the study finds that both supply chain participants achieve maximum profitability under the NN strategy. This is due to the minimal benefit in consumer demand derived from sustainability attributes, making the added cost of investment unjustifiable.

As consumer preference strengthens, the LN strategy becomes more attractive. Green investment enhances the manufacturer's product differentiation and aligns with rising sustainability demand. However, unless the e-retailer can increase consumer trust in its product claims, such as through blockchain-enabled transparency, blockchain investment may not offer sufficient return, especially when the e-retailer holds either a very high or very low market share.

The LB strategy, integrating both green investment and blockchain technology, proves optimal under specific market conditions. When consumers display strong preferences for low-carbon goods and the e-retailer faces moderate consumer trust, blockchain enhances the credibility of product claims and improves purchase confidence. This allows both supply chain actors to set higher prices, justifying their investments. However, the fixed cost associated with blockchain infrastructure means its benefits depend on sufficient sales volume and market conditions.

How do market share, consumer trust, and preferences influence profitability?

The model demonstrates that as the market share of the manufacturer’s direct channel increases, the profitability of the manufacturer rises steadily, while the e-retailer’s profit tends to decline. This is attributed to the channel conflict and intensified price competition. When the market share is either extremely low or extremely high, the e-retailer is better off avoiding blockchain investment, as the marginal returns from increased trust do not outweigh the fixed costs of implementation.

Consumer trust in the e-retailer's ability to deliver authentic green products, quantified in the study as the green trust coefficient, also plays a decisive role. When this trust level is high, the e-retailer can achieve high profitability without relying on blockchain. However, when consumer trust is low or moderate, blockchain technology becomes critical for building confidence and unlocking the value of green products. In such contexts, the LB strategy not only boosts credibility but also facilitates price premiums.

Low-carbon preference, another key parameter, shapes both demand and pricing power. When this preference is weak, green investment fails to create sufficient differentiation. As the preference increases to moderate levels, green investment alone starts to yield value, particularly for the manufacturer. Once consumer preference crosses a certain threshold, both the manufacturer and the e-retailer benefit most from implementing the LB strategy. Blockchain serves as a necessary complement to green investment, especially in capturing the purchasing power of environmentally conscious consumers.

What strategic and managerial insights can be drawn from the findings?

The study makes it clear that no single strategy suits all market scenarios. Instead, optimal decisions require alignment with both consumer behavior and channel dynamics. For manufacturers, green investment generally becomes favorable as consumer environmental preferences strengthen, irrespective of the e-retailer’s technology adoption. It supports long-term brand positioning and allows for price differentiation in the online channel.

For e-retailers, however, blockchain adoption must be more selectively applied. If they enjoy high consumer trust or dominate the market, the incremental benefits of blockchain are marginal. In such cases, the cost of blockchain may erode profits. Conversely, in scenarios where consumer trust is lacking but environmental concerns are strong, blockchain serves as a crucial trust-building mechanism.

The findings also suggest that green investment and blockchain adoption jointly create synergies when deployed under the right conditions. This synergy is most visible when the market features strong demand for sustainable products, moderate consumer trust, and balanced channel competition. In such cases, the LB strategy becomes a win–win for both supply chain actors.

Managerially, the study advocates for data-driven customization of supply chain strategies. Companies should actively monitor consumer sentiment toward environmental products and invest in communication tools like blockchain only when trust gaps threaten to suppress demand. In cases where trust is already established, less capital-intensive strategies, such as third-party environmental certifications, may suffice.