Rethinking How Global Value Chains Shape the Environment

Global value chains account for roughly 60 percent of global carbon emissions and sit at the centre of today’s most pressing environmental challenges, from deforestation and biodiversity loss to pollution and resource depletion. Yet the international business literature has tended to frame the environmental story of GVCs in binary terms: Firms either upgrade (adopt cleaner practices) or downgrade (move polluting activity to jurisdictions with weaker standards).

In this study, Michael Sartor and his co-authors argue that this binary view is too simple, because the same firm-level activity can produce meaningfully different outcomes depending on where in the world it takes place.

The researchers develop a conceptual framework that brings together two dimensions the literature has typically treated separately: the extent of environmental upgrading or downgrading within the GVC, and the ecological condition of the local environment—ranging from less to more degraded.

Crossing these dimensions yields a four-quadrant typology of GVC environmental impact. Doing Good describes environmental upgrading in a relatively healthy ecosystem (illustrated by Patagonia’s sustainable wool sourcing in the grasslands of South America). Reducing Harm describes upgrading in a degraded ecosystem, where activity is restorative rather than merely protective (illustrated by Unilever’s sustainable palm oil commitments in Indonesia). Eroding Resilience describes downgrading in an initially healthy environment, such as agribusiness-driven deforestation in the Amazon. Doing Damage describes downgrading in an already degraded environment, such as continued oil-industry pollution in the Niger Delta.

Drawing on instrument choice theory, the authors connect each quadrant to the mix of policy tools most likely to move the needle. Where GVCs are already Doing Good or Reducing Harm, financial tools (such as Canada’s Zero Plastic Waste Initiative or Australia’s Clean Energy Finance Corporation) and organizational tools (such as the Equator Principles, ISO 14001 and the MSC Fisheries Standard) are best suited to enhance the positive impact by encouraging environmental innovation. Where GVCs are Doing Damage or Eroding Resilience, authoritative tools (such as national environmental codes and nature conservation acts) and informational tools (such as pollution transparency indices and toxics release inventories) are better suited to transform the negative impact by tightening regulation and applying reputational pressure.

The framework also highlights the importance of time. Ecological conditions are dynamic—shaped by climate variability, shifting governance priorities and prior environmental harm—and GVCs can migrate between quadrants. Sustained upgrading in a degraded environment can gradually shift a GVC from Reducing Harm toward Doing Good, while persistent downgrading in a healthy environment can push it from Eroding Resilience toward Doing Damage. Changes in governance, such as Brazil’s swings in deforestation policy across political administrations, can accelerate these transitions in either direction.

For policymakers, the research provides a structured way to tailor interventions to the environmental realities of each GVC node, rather than applying uniform recommendations across very different contexts. For multinational managers and sustainability leaders, it is a reminder that the same sustainability program can register as industry-leading in one geography and as inadequate in another—making ecological context a central input to credible impact claims. For scholars, the paper moves the GVC–environment conversation beyond its binary framing and opens space for new empirical research on how and why GVC impacts shift across space and time.