Beyond market, firm, and state: Mapping the ethics of global value chains

• Date: 01 September 2019
• Published date: 01 September 2019
• Author: Hamish Ven,Abraham A. Singer
• DOI: http://doi.org/10.1111/basr.12178

Bus Soc Rev. 2019;124:325–343.

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325

wileyonlinelibrary.com/journal/basr

DOI: 10.1111/basr.12178

ORIGINAL ARTICLE

Beyond market, firm, and state: Mapping the ethics

of global value chains

Abraham A.Singer1

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Hamishvan der Ven2

© 2019 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by Wiley Periodicals, Inc., 350 Main Street, Malden,

MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.

1Department of Management, Quinlan

School of Business,Loyola University

Chicago, Chicago, Illinois

2Department of Political Science and

School of Environment,McGill University,

Montreal, Canada

Correspondence

Abraham A. Singer, Department of

Management, Quinlan School of Business,

Loyola University Chicago, Chicago, IL

60660.

Email: asinger2@luc.edu

Abstract

The growth of global value chains (GVCs) and the emer-

gence of novel forms of value chain governance pose two

questions for normative business ethics. First, how should

we conceptualize the relationships between members of a

GVC? Second, what ethical implications follow from these

relationships, both with respect to interactions between

GVC members and with respect to achieving broader trans-

national governance goals? We address these questions by

examining the emergence of transnational eco‐labeling as

an increasingly prominent form of GVC governance that is

redefining the relationship between nominally independent

firms. On the first question, we argue that GVCs occupy

a middle ground between intrafirm and interfirm transac-

tions, thereby posing a challenge to theoretical frameworks

that attempt to apply ethical standards based on transaction

types. On the second question, we argue that this unique

institutional status leads to a range of novel ethical con-

siderations and dilemmas for GVC members. Lead firms,

their suppliers, and third‐party standard‐setters all confront

new ethical quandaries when third‐party eco‐labeling is in-

troduced to a GVC. The nature of these quandaries means

that, while GVCs may be well‐positioned to serve as instru-

ments of transnational governance, they are frequently not

well‐oriented to do so. Our analysis marks an initial attempt

to map the ethical considerations that apply to members of

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SINGER aNd VaN dER VEN

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INTRODUCTION

In this article, we argue that the nature of the modern globalized economy presents a challenge for

how we understand ethics and moral responsibility in economic activity. One of the interesting recent

developments in normative business ethics has been the increasing appeal to institutional kinds as a

means of understanding moral obligation (see Hsieh, 2017). On this view, understanding actors' moral

duties requires understanding the institutional context and position they find themselves within. Such

approaches often distinguish between what a manager owes her workers and what she owes her com-

petitors by noting that corporate hierarchies and competitive markets are different sorts of institutional

contexts, imposing distinct normative concerns on different actors. While there are disagreements

around the edges regarding what sorts of ethical obligations each distinction implies (Heath, 2014;

Jaworski, 2013; Singer, 2019), there is a growing agreement that these distinctions are important for

normative business ethics.

However, the past decades of economic globalization have witnessed the emergence and grow-

ing complexity of global value chains (GVCs) that are messier and more difficult to characterize

(Gereffi, 2014; Gereffi, Humphrey, & Sturgeon, 2005). GVCs encompass the full range of activities

that multiple firms in multiple countries undertake to bring a product or service from its conception

to its end use (Gereffi & Fernandez‐Stark, 2016). They are a product of the vertical disintegration of

multinational corporations whereby larger and wealthier firms focus on innovation, marketing, and

high value‐added segments of manufacturing, while contracting “non‐core” functions like volume

production to independent firms, often based in markets where labor is cheaper (Gereffi et al., 2005).

For example, a cotton t‐shirt may be designed in Canada, but use cotton from China, be spun into

yarn in Indonesia, assembled in Bangladesh, and sold by retail outlets in the United Kingdom (Rivoli,

2009). Because these activities occur between independent firms in disparate countries, but in a co-

ordinated manner, it is less clear how to make sense of them as institutions. Insofar as understanding

the ethical nature of such activity requires us to understand what kind of actors are situated in what

kind of institutions, this intractability poses a problem for understanding theethical responsibilities

this class of activity entails.

The ethical obligations of members of a GVC, both to each other and to human society more broadly,

are further complicated by the emergence and mainstream acceptance of third‐party actors into the

social and environmental governance of GVCs. Practices like transnational eco‐labeling, where an in-

dependent organization awards a certification or label based on the ability of GVC members to uphold

a unitary standard of environmental performance across firms and borders, further blur transactional

boundaries and ethical obligations within GVCs. In the preceding t‐shirt example, the introduction of an

eco‐label like the bluesign® standard for environmental friendly and safe textile production increases the

network density1

of a GVC and introduces new ethical considerations to the t‐shirt vendor, its suppliers,

and third‐party eco‐labeling organizations (ELOs). In choosing to use an eco‐label, the t‐shirt vendor

a GVC, and in doing so, places the literature on normative

business ethics and transnational governance in a closer

conversation.

KEYWORDS

business ethics, corporate social responsibility, eco‐labeling, global value

chains, transaction costs, transnational governance