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Abstract
Sustainability has become important in the operation of the global economy and its regulatory structure, leading significant shifts in the way powerful ‘lead firms’ in global value chains approach sustainability. In this paper, I argue that private, value chain-oriented forms of sustainability governance are not addressing the environmental problems they are putatively designed to solve. Through the analysis of how lead firms stimulate environmental upgrading along their value chains, I show that the mainstreaming of sustainability in business operations has allowed global buyers to accumulate ‘green’ profits and capital in ways that extract value from suppliers – especially those based in the global South. Drawing from analyses of the wine and coffee value chains, I show how lead firms push the hidden costs of sustainability compliance and related risks upstream towards producers. These processes have important redistributive repercussions as they raise entry barriers for smaller, less organized and/or more marginalized actors. Under the mantle of achieving environmental sustainability, lead firms in value chains stealthily capture value for themselves, while extracting more demands from their suppliers and promoting a further consolidation of their supply base. In the meanwhile, serious environmental challenges remain unaddressed.
Acknowledgements
The author is thankful to the editors of this special issue and to three anonymous reviewers for their constructive feedback on previous drafts of this paper.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 See, inter alia, Ahi and Searcy (2013), (2015), Gold et al. (Citation2010), Seuring and Müller (2008) and Lund-Thomsen and Lindgreen (2014).
2 See, for example, Epstein and Buhovac (2014), Levy and Newell (2005), Matten and Moon (2004, 2008), Meckling (2015), McWilliams et al. (2006).
3 See Dallas et al. (2019), Gereffi (1994), Gereffi et al. (2005), Gibbon and Ponte (2005), Milberg and Winkler (Citation2013), Ponte and Sturgeon (2014).
4 See work examining ‘value capture trajectories’ (Coe & Yeung, 2015; Yeung & Coe, 2015; Neilson et al., 2018) and related upgrading and downgrading trajectories that are emerging (see, i.e. Bernhardt & Pollak, 2016; Blažek, 2016; Cattaneo et al., 2010; Gereffi & Lee, 2016; Gibbon, 2001; Gibbon & Ponte, Citation2005; Glückler & Panitz, Citation2016; Hansen et al., 2014; Mitchell & Coles, 2011; Ponte & Ewert, Citation2009; Tokatli, Citation2007, Citation2013).
5 Other scholars have sought to further widen the classic typology of economic upgrading (product, process, functional, and inter-chain) by adding other forms such as: whole chain upgrading, a shift of the whole GVC ‘towards more demanding segments of a market’ (Blažek, 2016, p. 855) possibly as a result of strengthening backward linkages (Morris & Staritz, 2014) and/or better horizontal coordination (Bolwig et al., 2009; Mitchell & Coles, 2011); strategic coupling (and decoupling/recoupling), which occurs when local actors, supported by regional institutions and policies, interact dialectically with global actors in GVCs (Coe & Yeung, 2015; Horner, 2014; Liu, 2017; MacKinnon, 2012; Yeung, 2016), or more narrowly when government policy paves the way for upgrading trajectories (Larsen, 2016; Ponte & Sturgeon, 2014); reversal of power hierarchies, when producers succeed in reshaping governance structures and manage to capture a larger share of value (Patel‐Campillo, 2011; Blažek, 2016); and relational upgrading, when firms achieve better positionality in production networks thus improving their ‘know-who’, in addition to their ‘know-how’ (Glückler & Panitz, 2016; Krishnan, 2017a, Citation2017b). Distinctions have also been made within the category of functional upgrading (and downgrading). Blažek (2016), for example, distinguishes between: lower tier suppliers moving to upper tier positions; abandoning lower value functions; transferring some high value functions from buyers to their suppliers; developing new markets, products and functions (see also Morris & Staritz, 2014; Ponte & Ewert, Citation2009); and buying up firms to improve technological capabilities, a kind of functional upgrading that occurs through M&As (Hansen et al., 2016).
6 See, inter alia, Barrientos et al. (2011), Barrientos and Visser (2013), Bernhardt and Pollak (2016), Coe and Hess (2013), Gereffi and Lee (2012, 2016), Milberg and Winkler (Citation2013), Pegler (2015), and Rossi (2013).
7 Gereffi and Lee (2016) have highlighted several possible trajectories of social upgrading: a market-driven trajectory, when demand for goods produced with higher social standards pushes producers to improve work conditions; a CSR-driven trajectory, when the same process is stimulated by private standards or codes of conduct set by global buyers/retailers (Lund-Thomsen & Lindgreen, 2014; Lund-Thomsen & Nadvi, 2010); a multi-stakeholder path, based on the cooperation of private (business, industry associations, NGOs) and sometimes public actors; a labour-centred trajectory, where workers and their labour unions assert their rights and succeed in promoting social upgrading (O’Rourke, 2006; Selwyn, 2013); and a public governance path driven by public regulation (Locke et al., 2013; Mayer & Gereffi, 2010). These paths coexist and interact, sometimes displacing, other times complementing each other.
8 These observations also hold at the level of country/GVC combinations (see Bernhardt & Pollak, 2016; Bernhardt & Winkler, 2011; Milberg & Winkler, 2011) and are confirmed by other case study research (Pegler, 2015; Riisgaard, 2011; Rossi, 2013) showing that process upgrading is linked to social upgrading in terms of working conditions, but not in terms of enabling rights. Because of the possible effects of the fallacy of composition in upgrading, in situations where most suppliers upgrade to meet new or more stringent demands from buyers, they may not succeed in capturing more value added; but even when they do, it does not necessary lead to social upgrading (Milberg & Winkler, 2013, p. 282).
9 Tewari and Pillai (2005), for example, observed successful environmental upgrading via regulatory intervention in the India-to-Germany leather value chain. This occurred as a result of two policy changes: new standards applied by regulators in Germany (one of the main importers of Indian leather), who banned Azo dyes and the use of pentachlorophenol; and the decision by the Indian government to institutionalize compliance with the new German regulation by banning not just the use of these chemicals but also their production in India – thus affecting the whole leather value chain rather than only firms exporting to the German market.
10 Source: http://www.sawis.co.za
11 Source: http://www.sawis.co.za
12 There are also a number of initiatives seeking to address social issues, which are particularly important in South African due to the history of apartheid and labour exploitation. Among these, the most important are various Black Economic Empowerment initiatives and legislation (Du Toit et al., Citation2008).
13 Source: H. Krige, ‘Writing on the wall for haphazard finances – Deloitte benchmarking study’, Wineland, Cape Town, July 2005.
14 Source: Mike Veseth, ‘South Africa Wine Industry: Serious Problems, Lofty Goals, Progress Update,’ Wine Economist, 14 February 2017. https://wineeconomist.com/category/south-africa/
15 See, inter alia, Ibanez and Blackman (2016), Blackman and Naranjo (2012), Rueda et al. (2015), Takahashi and Todo (2013), Solér et al. (2017), and Nguyen and Sarker (2018).
16 The short empirical analysis provided in this article provides mainly a snapshot of the contemporary situation. A historical analysis of how these dynamics have changed in time is available elsewhere (Ponte Citation2019).
Additional information
Notes on contributors
Stefano Ponte
Stefano Ponte is Professor of International Political Economy and the Director of the Centre for Business and Development Studies at Copenhagen Business School. His primary interest lies in transnational economic and environmental governance, with focus on overlaps and tensions between private governance and public regulation. Stefano’s work analyzes governance dynamics and economic and environmental upgrading trajectories in global value chains — especially in developing countries and in Africa. He is the author of several books on these topics, including Business, Power and Sustainability in a World of Global Value Chains (Zed Books, 2019) and Handbook on Global Value Chains (Edward Elgar, 2019; co-editor with Gary Gereffi and Gale Raj-Reichert).