Cost allocation and incentive mechanisms for the environment, climate protection and resource conservation along global supply chains

The research project “Cost allocation and incentive mechanisms for the environment, climate protection and resource conservation along global supply chains” commissioned by the German Environment Agency, analyses (dis)incentives for and barriers to the implementation of environmental measures as well as the exchange of information between different actors along selected global supply chains. It aims to provide guidance to business and policy makers to facilitate the practical implementation of effective environmental upgrading measures along global supply chains and to allocate the distribution of the resulting costs and benefits more equitably.

This report summarizes the findings of the entire research project and investigates four selected supply chain management instruments which have a high potential to increase incentives for environmental protection in global supply chains:

• price premiums,
• pay-per-performance contracts,
• collaborative financing of supplier investments in environmental upgrades, and
• offtake agreements.

Each instrument is discussed regarding its contribution to effective cost-benefit between buying and supplying companies, design options, necessary framework conditions and the roles of various stakeholders to mainstreaming the instrument.