Environmental upgrading of apparel firms in global value chains: Evidence from Sri Lanka

Abstract

Buyer firms in the apparel industry are using environmental standards to coordinate their global value chains (GVCs). In turn, supplier firms are complying with environmental standards as a way to increase their competitiveness. This article addresses the nascent gap in the GVC literature in relation to firm- and chain-level responses to environmental concerns, which enable apparel firms to upgrade. The article examines the drivers and conditions under which apparel firms embrace environmental upgrading in Sri Lanka. Findings suggest that GVCs represent both the drivers of environmental upgrading and the means by which to obtain the knowledge needed to upgrade particularly for firms in relational networks. The strategic intent and capability of the suppliers to assimilate the transfer of knowledge and upgrade are critical. However, upgrading does not necessarily yield higher profits for supplier firms. The incentive for upgraded firms to maintain their environmental performance is competitive advantage arising from reduced costs.