Essays in sustainable operations.

Abstract

My dissertation, titled <italic>Essays in Sustainable Operations </italic>, comprises three essays which analytically and numerically study managerial decisions and trade-offs at the interface between firms' operations and the environment. I investigate managerial options for compliance under market-based and goal-oriented policies that are increasingly being implemented. In the first essay, I take the perspective of a profit-maximizing firm and model three firm strategies for compliance under a regulatory scheme based on auctioned permits for emissions - abatement, procurement of permits, and output levels. I find that clean firms perform better than dirty firms in terms of profitability. Under Cournot competition in the output market, firms in a relatively clean industry benefit from increasing stringency in the emissions cap since production capacities are limited by the number of available permits, translating into higher profits for all firms. The second essay explores optimal design choices by firms in response to Extended Producer Responsibility (EPR) legislation. I model a manufacturer supplying a remanufacturable, durable good to a customer and analytically investigate how various attributes of EPR influence upstream environmental design choices by the manufacturer, given that the customer makes equipment replacement decisions optimally. I find that design choices are environmentally superior when firms are coordinated than when they are uncoordinated. From the viewpoint of firm profitability as well, the integrated firm always secures a profit larger than the total supply chain profit in the uncoordinated case. I therefore present contracts that can help achieve coordination in the supply chain. The third essay treats environmental constraints and compliance strategies over a larger subset of the product life-cycle. I comprehensively treat trade-offs to the manufacturer as a result of environmental regulation at various stages starting with product design, through production, to the end of the product's economic life, and across multiple time periods and products. I formulate a non-linear programming model of the multi-period multi-product manufacturing and remanufacturing problem with environmental considerations. I populate and solve the model with test data representing regulatory scenarios of environmental costs and constraints and discuss the important interactions that emerge from widening the set of available compliance strategies.