Why One-Size-Fits-All Sustainability Fails

Global value chains, the sprawling beehive of suppliers, manufacturers and distributors that produce everything from smartphones to sneakers, have a big target on their back. They account for more than half of global carbon emissions, making them a prime target for both government regulation and corporate sustainability initiatives.

So it’s hardly surprising that the story of global value chain sustainability is told as a morality tale: good multinationals clean up their act by upgrading operations to reduce their ecological footprint, and bad ones don’t. The bodies that regulate these firms — and some multinationals themselves — have taken a similar absolutist approach, crafting one-size-fits-all rules for suppliers that leave little room for local realities.

That simple storyline needs to be revisited. A growing body of evidence shows that planet-friendly corporate upgrades do not necessarily translate into planet-friendly outcomes. In an influential 2023 study, a research team examined agricultural value chains in Kenya and found that suppliers often complied with environmental standards imposed by multinational buyers without producing corresponding improvements in ecological conditions. Farms did what the standards demanded, yet the arable land kept degrading.

Context matters, says Michael Sartor, Distinguished Research & Teaching Fellow of International Business at Smith School of Business. A firm that adopts the same emissions-reduction standard or cleaner production methods in two different countries can get a meaningful improvement in one and almost nothing in the other. Similarly, a factory operating in a heavily polluted watershed shouldn’t necessarily be judged by the same yardstick as one in a relatively healthy ecosystem.

Sartor offers the example of Nestlé, which invested in biodegradable packaging and waste reduction initiatives in its supply chain. In parts of Southeast Asia, however, these efforts have produced only limited benefits due to inadequate waste infrastructure, weak regulatory enforcement and widespread pre-existing pollution.

“Understanding variation in ecological conditions is important because two firms that execute the same environmental activities may exert vastly different outcomes depending on where and how the initiatives are implemented,” he says.

Four global value chain scenarios

What would a more strategic approach to sustainability regulation look like? In a recently published paper, Sartor and colleagues A. Erin Bass (University of Nebraska) and Maoliang Bu (Nanjing University) offer a new framework that helps match policy tools with desired outcomes. The framework is organized around two elemental questions: Is the company engaging in environmental upgrading or environmental downgrading? And is the surrounding ecosystem relatively healthy or severely degraded? From these two questions flow four scenarios. 

Scenario 1: Doing Good. Companies introduce environmentally responsible practices in ecosystems that remain relatively healthy. Investments in cleaner production, sustainable sourcing and conservation reinforce resilient natural systems. As these activities occur in comparatively healthy ecosystems, they have the potential not merely to reduce damage but to preserve ecological resilience for the future.

Outdoor apparel company Patagonia is the poster child in this scenario. The company invests heavily in renewable energy and clothing repair and reuse through its Worn Wear program, while working with ranchers in Argentina and Chile to promote sustainable wool production. Grazing practices are designed to preserve native grasslands, prevent soil degradation and protect biodiversity.

Scenario 2: Reducing Harm. Companies may adopt strong environmental practices while operating in places that have already suffered extensive environmental damage. In these circumstances, even stellar corporate behaviour cannot quickly restore ecosystems that have spent decades deteriorating. Instead, firms are engaged in reducing further harm.

The researchers point to Unilever’s palm oil sourcing program in Indonesia. The country has experienced some of the world’s highest rates of tropical deforestation, driven largely by expanding palm oil production. In response, Unilever committed to sourcing most of its palm oil sustainably while working with suppliers to eliminate further destruction of forests and peatlands. Satellite monitoring helps verify compliance across its supply network. 

The researchers note that firms operating in damaged environments often receive less recognition than ones working in healthier ones, despite confronting much larger environmental challenges.

Scenario 3: Doing Damage. Companies continue environmentally harmful practices in places where ecosystems are already severely degraded. The researchers cite Royal Dutch Shell’s long-running operations in Nigeria’s Niger Delta, where repeated oil spills compounded decades of environmental deterioration, contaminating waterways, farmland and fisheries.

Scenario 4: Eroding Resilience. Companies operate in ecosystems that are still relatively healthy but gradually weaken them through cumulative environmental degradation. Forests are slowly cleared, soils become less fertile, or biodiversity steadily declines until ecological tipping points are reached.

Agribusiness giant Cargill is a sorry illustration of this scenario. In parts of Brazil, suppliers linked to the company were associated with continued deforestation in relatively intact sections of the Amazon rainforest, despite Cargill’s supplier code prohibiting such practices. 

Matching policy to reality

There is still the matter of matching the right policy to the global value chain scenario. To Sartor and his colleagues, the key consideration is the amount of corporate behavioural modification that is required. Some situations call for coercion, others encouragement.

Where companies are already making genuine environmental progress — whether they are “Doing Good” or “Reducing Harm” — governments should encourage further innovation through financial incentives and organizational tools, Sartor says. These might include grants for clean technologies, green financing, environmental certification systems such as the MS Fisheries Standard or internationally recognized standards such as ISO 14001.

Where companies are “Doing Damage” or “Eroding Resilience”, however, stronger regulation is essential. Here the emphasis shifts toward authoritative measures such as environmental laws with real penalties, coupled with informational tools that increase transparency and public accountability. Public disclosure requirements, environmental performance rankings and mandatory reporting can all create reputational pressure that encourages firms to change course. 

Both policymakers and executives overseeing global value chains have something to take away from this study. Before applying a sustainability standard uniformly across a supplier network, the framework suggests that managers ask: What is the ecological starting condition at each site? For policymakers, the question is: Which tool — audit, subsidy, certification, penalty — is best matched to motivate firm behaviour in these contexts?

While they’re at it, they can also revisit their annual sustainability reports, the ones filled with familiar metrics: tonnes of carbon avoided, litres of water saved, percentage of recycled materials used and suppliers certified to environmental standards.

While those measures remain important, they should not be treated as the ultimate scorecard. A company may dramatically improve its own environmental performance while making only marginal improvements to the surrounding ecosystem. Another may achieve relatively modest operational gains yet make an outsized contribution because it operates in an ecosystem capable of rapid recovery. 

None of this lets bad actors off the hook. Shell would still have to answer for spills in the Niger Delta, as would Cargill for its Amazon-linked sourcing. But it does ask regulators, multinationals and investors to be sufficiently mindful of the messy environmental realities in far-flung networks that tidy scorecards often mask.