The hidden costs of environmental upgrading in global value chains

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.