The empirics of and policies for sustainability in global value chains

An important share of global production takes place in global value chains (GVCs), where many of the goods and services transacted across borders are intermediate inputs rather than final goods. On the one hand, integration into GVCs is often associated with benefits for economic development, growth, and job creation (Constantinescu et al., 2019, Del Prete et al., 2017, Pahl and Timmer, 2020, World Bank, 2019). On the other hand, the environmental and social sustainability of production in GVCs is increasingly contested. We can observe – at times simultaneously and in the same country – both the potential benefits of GVC participation and the adverse social and environmental impacts. Bangladesh is a case in point: empirical studies highlight that its accelerated economic development is associated with the strong integration into global apparel supply chains, while working conditions are often debated, see, e.g., Anner (2019) or Narula (2019). Social (e.g. working conditions, labor rights) and environmental (e.g. greenhouse gas (GHG) emissions, deforestation) aspects of production in GVCs are on the political agenda, which has given rise to due diligence regulations, for example in France, Germany and at the European level. These regulations oblige (larger) companies to mitigate and potentially remedy adverse impacts of their operations on human rights and the environment. This trend towards mandatory regulation results from the failure of the private sector to address unsustainable practices at scale and is yet another manifestation that consumers, particularly in richer economies, increasingly care about sustainability.