Sustainability in Global Production Networks: Rethinking Buyer-Driven Governance
A thesis submitted to the University of Manchester for the degree of Doctor of Philosophy in the Faculty of Humanities
2016
Rachel Alexander School of Environment, Education and Development
Table of Contents
1: INTRODUCTION ...... 17
1.1) INTRODUCTION ...... 17 1.2) SITUATING THIS STUDY ...... 18 1.3) CORE CONCEPTS AND ANALYTICAL FRAMEWORK ...... 20 1.4) THE CASE OF INDIAN PRODUCTION OF COTTON CLOTHING FOR UK RETAILERS ...... 27 1.5) RESEARCH OVERVIEW ...... 31 1.6) RESEARCH FINDINGS ...... 33 1.7) THESIS STRUCTURE ...... 35
2: CONSIDERING VERTICAL AND HORIZONTAL GOVERNANCE OF PRODUCTION IN EXTENDED SUPPLIER NETWORKS ...... 37
2.1) INTRODUCTION ...... 37 2.2) SUSTAINABILITY CHALLENGES FOR MANUFACTURED PRODUCTS ...... 38 2.3) UNDERSTANDING THE ORGANISATION OF GLOBALISED OUTSOURCED PRODUCTION ...... 42 2.3.1) Production in Global Value Chains ...... 43 2.3.2) Production in Global Production Networks ...... 48 2.3.3) Drawing from the GVC and GPN Frameworks ...... 59 2.4) PRODUCTION ACROSS AN ESN ...... 60 2.4.1) Considering Producers as Connected through an ESN ...... 60 2.4.2) Governance Flows across the ESN ...... 62 2.5) LEAD BUYER GOVERNANCE FOR SUSTAINABLE PRODUCTION ...... 67 2.5.1) Vertical Approach to Buyer-Driven Governance ...... 67 2.5.2) Alternate Approaches to Buyer-Driven Governance ...... 73 2.5.3) Lead Buyers and Governance for Sustainability across ESNs ...... 76 2.6) CONCLUSION ...... 78
3: RESEARCH DESIGN AND METHODOLOGY ...... 80
3.1) INTRODUCTION ...... 80 3.2) RESEARCH DESIGN ...... 80 3.2.1) Research Philosophy ...... 81 3.2.2) Research Questions ...... 88 3.2.3) Conceptualising the Network ...... 90 3.2.4) Choosing the Case ...... 90 3.2.5) Exploring the Structure of the Case Study ESN ...... 102 3.3) APPROACH ...... 105
2 3.3.1) Using a Case Study with Five Embedded Comparative Cases ...... 105 3.3.2) Using Institutional Ethnography...... 107 3.3.3) Overview of Activities ...... 108 3.4) DATA COLLECTION ...... 110 3.4.1) Interviews ...... 110 3.4.2) Documentary Analysis ...... 113 3.4.3) Additional Data Sources ...... 114 3.4.4) Research Journal ...... 114 3.4.5) Ensuring Validity...... 115 3.5) DATA ANALYSIS ...... 116 3.5.1) Understanding the Structure of the ESN ...... 116 3.5.2) Vertical Governance through Sourcing Relationships across the Case Study ESN ...... 116 3.5.3) Horizontal Governance in Local Productive Systems ...... 117 3.5.4) Retailer Governance over ESN Producers ...... 118 3.6) CHALLENGES AND LIMITATIONS OF STUDY ...... 118 3.7) CONCLUSION ...... 122
4: UK RETAILERS’ POSITION AT THE TOP OF THE CASE STUDY COTTON GARMENT EXTENDED SUPPLIER NETWORK ...... 124
4.1) INTRODUCTION ...... 124 4.2) RETAILERS AS LEAD BUYERS ...... 124 4.3) GOVERNANCE OF RETAILERS SELLING IN THE UK ...... 129 4.4) RETAILERS ’ VERTICAL SOURCING CONNECTIONS ...... 136 4.5) RETAILERS ’ HORIZONTAL NON -SOURCING CONNECTIONS ...... 154 4.6) CONCLUSION ...... 157
5: MAPPING THE PRODUCTION NETWORK CONNECTING INDIAN COTTON TO INDIAN COTTON CLOTHING ...... 158
5.1) INTRODUCTION ...... 158 5.2) CHARACTERISTICS OF SUPPLIERS ...... 159 5.2.1) Garment Manufacturing ...... 162 5.2.2) Wet Processing ...... 165 5.2.3) Textile Manufacturing and Yarn Spinning ...... 166 5.2.4) Cotton Production ...... 169 5.2.5) Intermediaries ...... 170 5.3) CONNECTIONS BETWEEN BUSINESSES ...... 174 5.3.1) Sourcing Connections ...... 177 5.3.2) Selling Connections...... 180 5.4) PRODUCTIVE SYSTEMS WITHIN INDIA ...... 181
3 5.4.1) Production in Local Productive Systems ...... 181 5.4.2) Difference between Local Productive Systems within the ESN ...... 191 5.5) FEATURES OF THE CASE STUDY ESN ...... 192 5.5.1) ESN Feature 1: UK Retailers as Lead Buyers ...... 193 5.5.2) ESN Feature 2: Varying Levels of Integration and Fragmentation, Many Intermediaries and Diverse Business Structures ...... 193 5.5.3) ESN Feature 3: Links Represent Multiple Forms of Sourcing Connections ...... 195 5.5.4) ESN Feature 4: Businesses are Concentrated in LPSs with Distinct Characteristics ...... 195 5.6) CONCLUSION ...... 196
6: GOVERNANCE IN VERTICAL PATHWAYS ACROSS THE EXTENDED SUPPLIER NETWORK ...... 198
6.1) INTRODUCTION ...... 198 6.2) BUYER -DRIVEN GOVERNANCE IN DYADIC CONNECTIONS ACROSS THE ESN ...... 199 6.2.1) Understanding the Role of Buyer Governance in Sourcing Relationships ...... 199 6.2.2) Variation in Buyer Governance Structures in Direct Sourcing Relationships ...... 201 6.2.3) Producer Agency & Limitations of Buyer Defined Production Practices ...... 219 6.3) LEAD BUYER -DRIVEN GOVERNANCE FLOWING DOWN VERTICAL PATHWAYS ...... 221 6.3.1) Understanding the Role of Buyer Governance Flowing Down Vertical Pathways ...... 222 6.3.2) Limitations to Retailers Creating Governance Pressure through Sourcing from the Top of Multiple Vertical Pathways ...... 223 6.4) CONCLUSION ...... 230
7: HORIZONTAL GOVERNANCE ACROSS THE EXTENDED SUPPLIER NETWORK ...... 232
7.1) INTRODUCTION ...... 232 7.2) WHY LOOK AT LOCAL PRODUCTIVE SYSTEMS ? ...... 234 7.3) CHILD LABOUR IN DELHI GARMENT PRODUCTION ...... 236 7.3.1) Delhi Garment Production ...... 237 7.3.2) Key Governance Actors and Forces Promoting Change and Stability in the Delhi Local Productive System ...... 237 7.3.3) Intersection of Vertical and Horizontal Governance Related to Child Labour in Delhi Garment Production ...... 240 7.4) WATER POLLUTION IN TIRUPUR WET PROCESSING ...... 245 7.4.1) Tirupur Wet Processing ...... 245 7.4.2) Key Governance Actors and Forces Promoting Change and Stability for Tirupur Wet Processing ...... 246 7.4.3) Intersection of Vertical and Horizontal Governance Related to Water Pollution in the Tirupur Wet Processing ...... 248 7.5) SUMANGALI SYSTEM IN TAMIL NADU COTTON SPINNING ...... 251 7.5.1) Cotton Spinning in Tamil Nadu ...... 251
4 7.5.2) Governance Promoting Change and Stability for Tamil Nadu Spinning Mills ...... 252 7.5.3) Intersection of Vertical and Horizontal Governance Related to Sumangali in Tamil Nadu Spinning Mills ...... 254 7.6) WORKING CONDITIONS IN GUJARAT GINNING ...... 257 7.6.1) Ginning in Gujarat ...... 257 7.6.2) Governance Promoting Change and Stability for Gujarat Ginners ...... 258 7.6.3) Intersection of Vertical and Horizontal Governance Related to Working Conditions at Gins in Gujarat ...... 259 7.7) LOW YIELDS FOR FARMERS IN GUJARATI COTTON PRODUCTION ...... 261 7.7.1) Cotton Farming in Gujarat ...... 261 7.7.2) Governance Promoting Change and Stability for Gujarat Cotton Farmers ...... 262 7.7.3) Intersection of Vertical and Horizontal Governance Related to the Use of BT Cotton for Gujarat Farmers ...... 263 7.8) IMPLICATIONS FOR HORIZONTAL AND VERTICAL GOVERNANCE INTERACTING WITHIN LPS S ...... 266 7.8.1) Horizontal Governance Forces Involved in Sustainability Issues within LPSs ...... 266 7.8.2) Retailers’ Connections with LPSs across their ESNs ...... 277 7.9) CONCLUSION ...... 278
8: LEAD BUYER GOVERNANCE FOR SUSTAINABILITY ACROSS AN EXTENDED SUPPLIER NETWORK ...... 281
8.1) INTRODUCTION ...... 281 8.2) UNDERSTANDING VERTICAL AND HORIZONTAL GOVERNANCE IN ESN S ...... 282 8.2.1) Retailers and Vertical Governance ...... 283 8.2.2) Retailers and Horizontal Governance ...... 285 8.3) MULTIPLE ROLES INVOLVED IN BUYER -LED GOVERNANCE FOR SUSTAINABILITY ...... 287 8.3.1) Five Model Approaches of Buyer-Led Governance for Sustainability ...... 289 8.3.2) Comparing Strategies for Promoting Sustainable Production ...... 294 8.3.3) Utility of Different Approaches of Buyer-Led Governance for Sustainable Production ...... 301 8.3.4) Different Perspective on the Role of Buyer-Driven Governance ...... 303 8.4) RETAILERS ' GOVERNANCE FOR SUSTAINABLE PRODUCTION FOR EARLY STAGE INPUTS ...... 306 8.4.1) Governance through Vertical Sourcing Relationships ...... 306 8.4.2) Governance through Horizontal Connections to LPSs ...... 312 8.5) RETAILER ALLIANCES IN GOVERNANCE FOR SUSTAINABILITY ...... 314 8.6) CONCLUSION ...... 319
9: CONCLUSION ...... 321
9.1) INTRODUCTION ...... 321 9.2) ANSWERING RESEARCH QUESTIONS ...... 322 9.3) CONTRIBUTION AND IMPLICATIONS ...... 327 9.4) AREAS FOR FUTURE RESEARCH ...... 331
5 9.5) CONCLUSION ...... 333
REFERENCES ...... 335
APPENDIX A: EVOLUTION OF STANDARDS ...... 353
APPENDIX B: OVERVIEW OF INTERVIEWS AND INDUSTRY EVENTS ...... 355
B.1) INTERVIEW CODES ...... 355 B.2) INTERVIEW REFERENCE LIST ...... 356 B.3) RETAIL LEVEL INTERVIEWS : INDUSTRY GROUP ‘R’ ...... 363 B.4) GARMENT LEVEL INTERVIEWS : INDUSTRY GROUP ‘G’ ...... 364 B.5) WET PROCESSING LEVEL INTERVIEWS : INDUSTRY GROUP ‘W’ ...... 365 B.6) TEXTILE LEVEL INTERVIEWS : INDUSTRY GROUP ‘T’ ...... 366 B.7) COTTON LEVEL INTERVIEWS : INDUSTRY GROUP ‘C’ ...... 367 B.8) EXPERT INTERVIEWS : INDUSTRY GROUP ‘E’ ...... 369 B.9) INDUSTRY EVENTS ATTENDED ...... 369
APPENDIX C: RETAILER COALITIONS ...... 370
APPENDIX D: WORLD PRODUCTION SYSTEMS ...... 371
D.1) GARMENT MANUFACTURING ...... 371 D.2) TEXTILE MANUFACTURING ...... 371 D.3) YARN SPINNING ...... 373 D.4) COTTON GINNING ...... 375 D.5) COTTON FARMING ...... 377
APPENDIX E: CHARACTERISTICS OF LPSS INVOLVED IN COTTON GARMENT PRODUCTION IN INDIA .... 378
E.1) GARMENT MANUFACTURING ...... 378 E.2) TEXTILE MANUFACTURING ...... 386 E.3) COTTON PRODUCTION ...... 393
APPENDIX F: TYPES OF BUSINESSES IN DELHI GARMENT CLUSTER ...... 398
APPENDIX G: TIMELINE OF KEY EVENTS RELATED TO WATER POLLUTION CHALLENGE IN TIRUPUR ..... 399
6 List of Tables
TABLE 2.1: OVERVIEW OF GOVERNANCE ACTORS AND FORCES ...... 50
TABLE 2.2: UNDERSTANDING GOVERNANCE FOR SUSTAINABLE PRODUCTION ...... 59
TABLE 3.1: OVERVIEW OF RESEARCH ACTIVITIES ...... 109
TABLE 3.2: FIELD RESEARCH SITES ...... 109
TABLE 4.1: OVERVIEW OF CASE STUDY RETAILERS ...... 127
TABLE 4.2: GOVERNANCE OF RETAILERS ...... 135
TABLE 4.3: RETAILERS OBJECTIVES AND METHODS OF INFLUENCE ...... 138
TABLE 4.4: RETAILERS’ CODES OF CONDUCT ...... 141
TABLE 4.5: OVERVIEW OF RETAILERS’ SOURCING BASES ...... 147
TABLE 4.6: SELECTED RETAILER MEMBERSHIP IN COALITIONS ...... 156
TABLE 5.1: EXAMPLES OF LARGE INDIAN GARMENT MANUFACTURERS ...... 163
TABLE 5.2: ACTIVITY-WISE CLASSIFICATION OF INDIA’S GARMENT INDUSTRY UNITS...... 165
TABLE 5.3: EXAMPLES OF LARGER SOURCING FIRMS INVOLVED IN THE CASE STUDY ESN...... 172
TABLE 5.4: GARMENT MANUFACTURERS’ SOURCING THROUGH NOMINATION ...... 180
TABLE 6.1: DETERMINANTS OF GOVERNANCE POTENTIAL ...... 201
TABLE 6.2: IMPORTANCE OF ESN BUYERS TO PRODUCERS ...... 206
TABLE 6.3: IMPORTANCE OF ESN SUPPLIERS TO PRODUCERS ...... 208
TABLE 6.4: MAIN VERTICAL PRESSURES AT EACH STAGE OF PRODUCTION ...... 215
TABLE 6.5: DRIVERS AND BENEFITS OF TRACEABILITY PROGRAMMES ...... 228
TABLE 7.1: ROLE OF BUYERS IN LPS GOVERNANCE ...... 268
TABLE 7.2: GOVERNANCE FOR SUSTAINABILITY IN PROFILED LOCAL PRODUCTIVE SYSTEMS ...... 270
TABLE 8.1: RETAILER GOVERNANCE FOR SUSTAINABLE PRODUCTION MODELS ...... 300
TABLE 8.2: APPROACHES CONSIDERING BUYER-DRIVEN GOVERNANCE ...... 305
TABLE A.1: TYPOLOGY OF GLOBAL STANDARDS ...... 353
TABLE A.2: DIFFERENT GENERATIONS OF GLOBAL SOCIAL AND ENVIRONMENTAL STANDARDS ...... 353
TABLE B.1 INTERVIEW REFERENCE LIST ...... 356
7 TABLE B.2.A: RETAIL LEVEL ESN MEMBER INTERVIEWS ...... 363
TABLE B.2.B: ADDITIONAL RETAILER LEVEL INTERVIEWS (INDUSTRY GROUP ‘R’) ...... 363
TABLE B.3.A: GARMENT MANUFACTURING ESN MEMBER INTERVIEWS (INDUSTRY GROUP ‘G’) ...... 364
TABLE B.3.B: ADDITIONAL GARMENT LEVEL INTERVIEWS (INDUSTRY GROUP ‘G’) ...... 364
TABLE B.4.A: WET PROCESSING ESN MEMBER INTERVIEWS (INDUSTRY GROUP ‘W’) ...... 365
TABLE B.4.B: ADDITIONAL WET PROCESSING INTERVIEWS (INDUSTRY GROUP ‘W’) ...... 365
TABLE B.5.A: TEXTILE LEVEL ESN MEMBER INTERVIEWS (INDUSTRY GROUP ‘T’) ...... 366
TABLE B.5.B: ADDITIONAL TEXTILE INTERVIEWS ...... 366
TABLE B.6.A: COTTON LEVEL ESN MEMBER INTERVIEWS (INDUSTRY GROUP ‘C’) ...... 367
TABLE B.6.B: ADDITIONAL COTTON INTERVIEWS (INDUSTRY GROUP ‘C’) ...... 368
TABLE B.7: EXPERT INTERVIEWS ...... 369
TABLE B.8: INDUSTRY EVENTS ATTENDED ...... 369
TABLE D.1: TOP 10 SOURCES OF COTTON CLOTHING IMPORTS TO THE UK IN 2013 ...... 371
TABLE D.2: WOVEN FABRIC PRODUCTION FOR SELECT COUNTRIES ...... 371
TABLE D.3: PRODUCTION OF KNITTED FABRICS FOR SELECT COUNTRIES ...... 372
TABLE D.4: COTTON SPUN-YARN PRODUCTION (INCLUDING CORE YARNS) FOR SELECT COUNTRIES ... 373
TABLE D.5: GLOBAL PRODUCTION COSTS FOR SHORT STAPLE SPINNING MILLS ...... 374
TABLE D.6: GLOBAL GIN-RELATED FACTORS FOR 2013/14 ...... 375
TABLE D.7: TOP 10 COTTON PRODUCING COUNTRIES 2013/14 ...... 377
TABLE D.8: FARMING PRACTICES AMONG TOP COTTON PRODUCERS ...... 377
TABLE E.1: NUMBER OF FIRMS AND EMPLOYMENT LEVELS IN INDIAN GARMENT CLUSTERS ...... 378
TABLE E.2: EXPORT ORIENTATION OF INDIAN GARMENT CLUSTERS ...... 381
TABLE E.3: SIZE BREAKDOWN OF UNITS IN GARMENT CLUSTERS ...... 382
TABLE E.4: OPERATING FACTORIES AND PERSONS ENGAGED IN SPINNING, WEAVING & FINISHING ... 386
TABLE E.5: OPERATING FACTORIES AND PERSONS ENGAGED IN OTHER TEXTILES MANUFACTURING .. 387
TABLE E.6: STATE-WISE CHARACTERISTICS OF PRODUCTIVE SYSTEMS FOR FORMAL SECTOR SPINNING, WEAVING, FINISHING AND OTHER TEXTILE MANUFACTURING ...... 389
TABLE: E.7: LOCATIONS OF INDIAN COMPOSITE MILLS ...... 390
TABLE E.8: LOCATIONS OF NON-SMALL SCALE INDUSTRY WEAVING MILLS ...... 390
8 TABLE E.9: INDIAN SPINNING MILLS IN 2014 ...... 392
TABLE E.10: GINNING CLUSTERS ...... 393
TABLE E.11: GINNING & PRESSING UNITS WITH COMPLETED TECHNOLOGY MISSION ON COTTON PROJECTS ...... 393
TABLE E.12: GINNING OUTPUT OF 6 HIGHEST PRODUCING STATES IN INDIA FOR 2012-2013 ...... 394
TABLE E.13: COTTON PRODUCTION IN INDIA 2013-2014 ...... 394
TABLE E.14: STATE-WISE BREAKDOWN OF COSTS OF COTTON CULTIVATION AND PRODUCTION 2010-11 ...... 395
TABLE E.15: STATE-WISE COTTON YIELDS 2013-2014 ...... 396
TABLE E.16: COVERAGE OF IRRIGATION FOR COTTON FARMING 2010-11 ...... 397
TABLE F: TYPES OF BUSINESSES IN DELHI GARMENT CLUSTER ...... 398
TABLE G: TIMELINE OF KEY EVENTS RELATED TO WATER POLLUTION CHALLENGE IN TIRUPUR ...... 399
9 List of Figures
FIGURE 1.1: AN EXTENDED SUPPLIER NETWORK ...... 23
FIGURE 1.2: ESN SEEN AS CONNECTING PRODUCERS IN DIFFERENT LOCAL PRODUCTIVE SYSTEMS ...... 25
FIGURE 2.1: GEREFFI AND LEE’S CONFLUENCE OF ACTORS IN GVC AND CLUSTER GOVERNANCE ...... 63
FIGURE 2.2: ESN WITH VERTICAL AND HORIZONTAL GOVERNANCE ...... 64
FIGURE 2.3: LPS’ EXPERIENCES OF VERTICAL AND HORIZONTAL GOVERNANCE ...... 66
FIGURE 3.1: SAYER’S SIGNPOSTS REGARDING THE NATURE OF REALISM ...... 82
FIGURE 3.2: PRODUCTION OF COTTON GARMENTS ...... 95
FIGURE 3.3: MAJOR GARMENT PRODUCTION CLUSTERS IN INDIA ...... 98
FIGURE 3.4: SPINNING, WEAVING, FINISHING AND OTHER TEXTILE FACTORIES IN INDIA ...... 99
FIGURE 3.5: STATE-WISE COTTON PRODUCTION 2013-2014 ...... 100
FIGURE 3.6: DEPICTION OF FOUR ESN FEATURES ...... 104
FIGURE 4.1: THE TOP 20 UK RETAILERS’ SHARES OF SPENDING ON CLOTHING & FOOTWEAR 2012 ..... 125
FIGURE 5.1: FORMS OF VERTICAL INTEGRATION ...... 161
FIGURE 5.2: SIZES OF COTTON HOLDINGS ...... 170
FIGURE 5.3: NETWORK CONNECTIONS ACROSS DIFFERENT FORMS OF VERTICAL INTEGRATION WITHIN CASE STUDY ESN ...... 176
FIGURE 5.4: GARMENT CLUSTERS IN INDIA ...... 183
FIGURE 5.5: STATE-WISE DISTRIBUTION OF SPINNING, WEAVING AND FINISHING FACTORIES ...... 184
FIGURE 5.6: STATE-WISE DISTRIBUTION OF OTHER TEXTILE MANUFACTURING FACTORIES ...... 185
FIGURE: 5.7: STATE-WISE NUMBERS OF COMPOSITE MILLS ...... 186
FIGURE 5.8: LOCATIONS OF NON-SMALL SCALE INDUSTRY WEAVING MILLS...... 187
FIGURE 5.9: LOCATIONS OF SPINNING MILLS 2015...... 188
FIGURE 5.10: GINNING OUTPUT IN TOP 6 STATES IN 2013 ...... 189
FIGURE 5.11: COTTON PRODUCTION 2013-2014 ...... 190
FIGURE 7.1: PRESSURES FOR CHANGE AND STABILITY RELATED TO CHILD LABOUR ...... 238
FIGURE 7.2: SIGN POSTED OUTSIDE A DELHI GARMENT MANUFACTURING FIRM ...... 242
FIGURE 7.3: PRESSURES FOR CHANGE AND STABILITY RELATED TO WASTE TREATMENT ...... 246
10 FIGURE 7.4: PRESSURES FOR CHANGE AND STABILITY RELATED TO THE SUMANGALI SYSTEM ...... 253
FIGURE 7.5: PRESSURES FOR CHANGE AND STABILITY RELATED TO POOR WORKING CONDITIONS ..... 258
FIGURE 7.6: PRESSURES FOR CHANGE AND STABILITY RELATED TO LOW YIELDS FOR FARMERS ...... 262
FIGURE 7.7: BT COTTON FARMING IN GUJARAT ...... 263
FIGURE E.1: PROPORTION OF EXPORT AND DOMESTIC TURNOVER IN GARMENT CLUSTERS ...... 380
FIGURE E.2: SIZE BREAKDOWN OF UNITS IN GARMENT CLUSTERS ...... 381
FIGURE E.3.A: DIRECT EMPLOYMENT OF WOMEN BY FORMAL SECTOR GARMENT MANUFACTURING FIRMS ...... 383
FIGURE E.3.B: WOMEN WORKERS AT UNINCORPORATED GARMENT MANUFACTURERS...... 384
FIGURE E.4: EMPLOYMENT THROUGH CONTRACTORS AT FORMAL SECTOR GARMENT MANUFACTURING FIRMS...... 385
FIGURE E.5: STATE-WISE CHARACTERISTICS OF PRODUCTIVE SYSTEMS FOR FORMAL SECTOR SPINNING, WEAVING, FINISHING AND OTHER TEXTILE MANUFACTURING ...... 388
FIGURE E.6: PROPORTION OF NON-SMALL SCALE INDUSTRY SPINNING FIRMS ...... 391
FIGURE E.7: COTTON YIELDS 2013-2014 ...... 395
FIGURE E.8: COVERAGE OF IRRIGATION FOR COTTON FARMING 2010-11 ...... 396
11 Abbreviations
Acceptable Quality Level (AQL) Agricultural Produce Market Committee (APMC) Apparel Export Promotion Council (AEPC) Associated British Foods (ABF) Better Cotton Initiative (BCI) Business Social compliance Initiative (BSCI) Causal Process Tracing (CPT) Corporation Social Responsibility (CSR) Cut-Make-Trim (CMT) Department for International Development UK (DfID) Directory Manufacturing Enterprise (DME) Economic Times (ET) Ethical Trade Initiative (ETI) Extended Supplier Network (ESN) Factory Capability and Capacity Audit (FCCA) Global Commodity Chain (GCC) Global Production Network (GPN) Global Value Chain (GVC) High Volume Instrument (HVI) International Labour Organisation Life-Cycle Analysis (LCA) Life-Cycle Sustainability Analysis (LCSA) Local Productive System (LPS) Multi-Commodity Exchange (MCX) National Capital Region, Delhi (NCR) Non-Directory Manufacturing Enterprises (NDME) Nongovernmental Organisation (NGO) Office for National Statistics UK (ONS) Own Account Enterprise (OAE) Own Account Manufacturing Enterprise (OAME) Prayas Centre for Labor Research and Action (Prayas) Registration, Evaluation, Authorisation (and Restriction) of Chemical Substances (REACH) Socio Economic and Educational Development Society (SEEDS) South India Mills' Association Supplier Ethical Data Exchange (SEDEX) Textile Industry Platform (TISP) United Nations Conference on Trade and Development (UNCTAD) United States Department of Agriculture (USDA) World Trade Organisation (WTO)
12 Sustainability in Global Production Networks : Rethinking Buyer -Driven Governance Doctor of Philosophy, The University of Manchester Rachel Alexander - December 27, 2015 Achieving sustainable production is a critical task in today’s globalised world. This is especially the case in the cotton garment industry where globally dispersed suppliers feed rapidly expanding demand across international markets. Practices associated with cotton garment production face numerous sustainability challenges from cotton farming to textile and garment manufacturing. Retailers are under increasing pressure to address these challenges and leading retailers are now actively trying to promote more sustainable production across all stages of production from raw material to final product. While numerous studies have investigated the relationship between retailers and their upper tier suppliers, there is little understanding of how sustainability challenges can be addressed across fragmented production processes. It is this gap that this thesis seeks to fill. Promoting sustainable production from raw materials to the final stages of manufacturing involves influencing practices of a diverse set of businesses responsible for different stages of production. This thesis defines the set of businesses that turn raw materials into final products as an ‘extended supplier network’ (ESN). Drawing on global value chain (GVC) and global production network (GPN) approaches to understanding how production is organised, the core question of this thesis is: To what extent is buyer- driven governance sufficient for promoting sustainable production across fragmented production processes in an ESN? GVC and GPN research provides insight into this issue as it offers a way to conceptualise how lead firms influence their suppliers. The GVC approach highlights the importance of lead buyers. The GPN approach incorporates this argument but further emphasises the importance of spatiality and the roles of a wider set of actors and processes. While both approaches theoretically incorporate all stages of production, garment industry studies using these approaches have tended to focus on relationships between brands and retailers and upper tier suppliers, paying insufficient attention to lower tiers. Considering the case of Indian cotton clothing production for major UK retailers, this study explores retailers’ governance relationships with producers at different points in their ESNs. Producers’ experiences of vertical governance through buyer-seller relationships across all stages of production within an ESN are explored. These producers’ experiences with horizontal governance within distinct local productive systems are also considered. Diverse producers’ locations within the ESN and within local productive systems are found to involve different governance experiences within the same ESN. Across the ESN, vertical governance flows are found to be limited by variation in potential for buyer governance across buyer-seller relationships in the multiple vertical pathways connecting retailers to raw material producers. Alternatively, retailers can connect to producers by making non-sourcing horizontal connections with actors in local productive systems. While dominant methods in retailers’ efforts at governance for sustainability have been vertical, horizontal connections are increasing across the industry. However, despite the emergence of new connections, this research finds that retailers’ influence over lower tier production processes remains limited. Empirically, this thesis provides insight into the complexity of sustainability challenges involved in the production of cotton garments. Conceptually, it shows the nature of diverse governance relationships across an ESN. It also emphasises that effective governance for sustainability cannot be achieved simply through vertical buyer- driven governance. Instead a more nuanced, and more complex, understanding of the interplay between vertical and horizontal is required, particularly considering the role of alliances. This has significant implications for policy, including the public and private governance for sustainability in the global cotton garment industry. 13
Declaration
No portion of the work referred to in the thesis has been submitted in support of an application for another degree or qualification of this or any other university or other institute of learning.
14
Copyright Statement
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15 Acknowledgements
This thesis is dedicated to Shirley Ander and Professor Roxanna Ng, two people without whom this project would not have come to fruition. My mother, Shirley Ander, has given me ongoing support stretching far beyond the confines of my graduate work. She read countless drafts of chapters of my thesis and shared in a lot the stress involved along the way. Thank you for always believing in me. Unfortunately, Roxanna, my mentor, passed away in 2013. She fundamentally shaped my outlook and perspective as a researcher and global citizen. I will forever be grateful. Completing this thesis was only possible because of my supervisors. The ongoing guidance provided by Professor Khalid Nadvi and Professor Stephanie Barrientos, from developing my initial research questions to developing my arguments, has helped me to learn immensely during the course of my PhD. Dr. Rory Horner’s conscientious feedback during the final stages of writing was instrumental in helping me pull everything together into a cohesive piece of writing. I would also like to thank the people who enabled my field research in India. Professor Alakh Sharma and Professor Dev Nathan were gracious to provide me with office space at the Institute of Human Development in Delhi. During my stay in Ahmedabad, the support and guidance I received from Professor Keshab Das, who hosted me at the Gujarat Institute for Development Research, was invaluable. The conversations we had during this time helped to shape the direction of my research and the way that I approached the topic. Dr. Meenu Tewari also provided friendship and support during my fieldwork. Additionally, I would like to thank my examiners Dr. Martin Hess and Dr. Peter Lund-Thomsen. Their careful review and critique of my thesis has helped me to sharpen my work to create this final version. Throughout the process of completing my PhD my family and friends provided much appreciated moral support. At the final stages Corinna Braun-Munzinger, Dr. Judith Krauss, Aarti Krishnan, Natalie Langford, Dr. Gale Raj-Reichert, and Ryo Seo- Zindy all graciously helped in reviewing draft versions of my chapters. Finally, I would like to thank all the participants who contributed to building the content of my thesis. I greatly appreciate the generosity of the many people who I met during the course of the field work who were willing to support me to carry out this study. These people volunteered to spend their time answering my many questions about cotton garment production and some also introduced me to others who they thought could provide additional information. This study would not have been possible without their assistance.
Rachel Alexander April 22, 2016
16
1: Introduction
1.1) Introduction
Industrialised production has brought many benefits but has also been the source of many sustainability challenges. Since the early days of cotton textile manufacturing in Manchester, local communities involved in industrial textile production have had to face challenges associated with production practices. The use of unsustainable practices has continued, and changed, as globalisation and the way production has been organised has evolved. Modern production, for many consumer goods, involves brands and retailers purchasing products made by diverse groups of producers located around the world. For many consumer goods, this process has been seen as buyer-driven, with global brands and retailers seen as playing a large role in controlling production carried out by independent producers (Gereffi 1994). Pressures related to addressing on-going sustainability challenges are now being placed by public and civil society organisations on brands and retailers who are expected to ensure that the products they sell were made sustainably from raw material production to final product assembly. However, the role that governance by brands and retailers plays in shaping the sustainability of production carried out by globally fragmented producers is poorly understood, particularly when considering the early stages of production. To provide insight into this issue, this thesis asks: “ to what extent is buyer-driven governance sufficient for promoting sustainable production across fragmented production processes in an extended supplier network?”
When sourcing is footloose, there is potential for production to move to the lowest cost and potentially least regulated locations. Placing responsibility on lead buyers to regulate production provides a way to counteract this pressure. However, for brands and retailers to play a leading role, the potential for their governance to shape production processes involving large and diverse sets of producers must be better understood.
Exploring the role played by these lead buyers in promoting sustainable production is important because globally fragmented production brings up new governance challenges. Production processes involve multiple sets of relationships which take place between businesses often working in a variety of institutional contexts. This thesis shows that brands and retailers cannot simply set policies from their position as 17 buyers at the top of multi-stage production processes. Promoting sustainable production over fragmented processes is more complex and brands and retailers need to play multiple roles.
1.2) Situating this Study
To address sustainability challenges it is important to understand the role that lead buyers1 can and do play in governing production at all stages. This requires exploring the dynamics that exist between lead buyers and the businesses involved at all stages of production. Analytical frameworks developed using Global Value Chain (GVC) and Global Production Network (GPN) approaches can provide insight into understanding the dynamics of how brands and retailers relate to those businesses involved in producing the products they sell. However, to date, the academic research focusing on private governance involved in organising global production of garments has been narrow in its concentration on relationships between lead firms and the upper tiers of production (Ruwanpura and Wrigley 2011; Locke and Romis 2010; De Neve 2009). This research has not sufficiently explored the more complex sets of relationships that connect lead buyers to businesses involved in all stages of production, particularly those involved with the early stages, to form the broader analysis needed to understand how buyer governance can promote sustainable production across all stages from raw material generation to final assembly across an extended supplier network (ESN).
This study attempts to build on a body of literature that has explored the connections between businesses in global production systems through the GVC and GPN perspectives (Coe and Yeung 2015; Henderson et al. 2002; Gereffi 1994; Gereffi et al. 2005). While the GVC and GPN concepts are similar and related, research using each has focused on different issues. GVC analysis has concentrated on interactions between firms involved in successive stages of production of consumer goods and services. The GPN framework incorporates the concept of GVCs and provides a wider context of analysis integrating the involvement of other factors affecting production processes, particularly
1 From this point on the term ‘lead buyers’ will be used synonymously with the term ‘brands and retailers.’
18 drawing attention to a wider group of diverse governance actors and the importance of territorial context.
The research in this thesis moves forward the agenda set out by these past studies. The approach draws insight from what has been learned by GVC and GPN research which has explored aspects of the relationships and sustainability challenges involved in producing manufactured products. As mentioned above, a limitation of past applications of the GPN and GVC approaches to examining manufactured goods is their concentration on upstream activities, with particular emphasis on how lead firms shape production processes of upper tier suppliers without sufficient consideration of the rest of the chain (Bair 2008). When looking at issues of sustainability, the impacts of all stages of the production process must be considered including those carried out by lower tier suppliers. Expanding the focus of analysis onto all stages of production more explicitly into GVC and GPN research can strengthen these frameworks’ usefulness for addressing issues related to sustainability.
This study addresses limitations with the narrow focus of past GPN and GVC studies on the garment industry. While these studies have focused on relationships between lead buyers and upper tier producers, this study considers governance for sustainability for an entire ESN. Specifically, this thesis considers a case study of how lead garment buyers in the UK connect to producers involved in every stage of cotton garment production in India.
The results of this study build on the emerging academic literature on governance dynamics within GVCs and GPNs. In order to understand challenges with sustainable production, the research focuses on understanding the experiences of sets of GPN producers responsible for the variety of production activities that involve multiple buyer seller relationships connecting raw materials to final manufactured products. Within a GPN approach, the set of producers considered is conceptualised as a network involving diverse businesses being connected through multiple and intersecting vertical pathways that link cotton production to garment retailing. Described as an ESN, this conceptual framework provides a new way to explore governance for sustainable production.
Additionally, considering producers at all stages of production provides an empirical contribution to past research that has focused on first tier suppliers when exploring governance dynamics involved in the garment industry (Mayer and Pickles
19 2014; Mezzadri 2012). The empirical case explored in this study challenges the idea of garment production being a model of a buyer-driven industry (Gereffi 1994). Relationships found across this case can involve situations in which buyers have very little power over members of their diverse ESNs. The dynamics considered provide insight into the evolving and multi-faceted roles played by lead buyers in providing governance for sustainable production. By looking at how governance is experienced differently by producers at distinct points in the production processes involved in the course of creating products for UK retailers, this study provides new insights into processes of buyer-led governance.
1.3) Core Concepts and Analytical Framework
As the focus of this study is governance for sustainable production, it is important to be clear on what is considered a sustainability challenge. The term sustainability has been given multiple meanings in different contexts. According to Seuring and Muller (2008, p.1700) supply chain management literature generally refers to the Brundtland definition of sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Considering this perspective, this work proceeds with the understanding that sustainability is a contested term that will almost always have different meanings for different stakeholders. Members of the OECD agree that sustainable development stands on economic, social and environmental pillars (Johnston 2004). In this thesis, while ‘sustainability’ is seen as a subjective term, it will be considered as comprising these three economic, social and environmental dimensions.
This study particularly focuses on sustainable production. While the organisation of production generally affects all three dimensions, this study focuses on understanding governance processes related to production practices associated with key social and environmental challenges. Two main ways that sustainability of production is seen to be determined is through the design of a product’s physical characteristics and the processes that are used to make the product. This study considers governance challenges for retailers attempting to control production processes.
Addressing challenges related to governance for sustainable production requires considering how an item is produced. While GPN and GVC research provide insight into how firms relate to other actors, their uses have not focused on understanding how production is organised within production facilities. Production can be considered to
20 have been seen as taking place in a ‘black box’ (Coe et al. 2008). Production of manufactured products in reality often involves sets of businesses responsible for fragmented stages of production taking place in different locations. In order to better understand how production is organised, production practices can be seen as being determined by the nature of the productive system in which production takes place.
Wilkinson (1983, p.417) describes that, “productive systems exist where the forces of production combine in the process of production.” Productive systems can be defined as, involving “labour, the means of production, the social system in which production is organised, the structure of ownership and control over the productive activity and the social, political and economic framework within which the processes of production operate (Wilkinson 2003, p.10).” The way a productive system is organised determines the sustainability of production.
Productive systems can be considered at multiple scales. This study focuses on productive systems involved in GPNs with a particularly interest in understanding differences at the local scale. Local productive systems (LPSs) are defined as encompassing a territorial area in which businesses take similar forms. These can be closely knit industrial clusters or broader regions with few inter-firm connections. Within LPSs businesses often use similar production practices while facing common sustainability challenges and governance pressures.
Considering how production practices determine the sustainability of production, a key aspect of this research is the way that production is seen to be organised. The GVC approach has mainly focused on linear inter-firm relationships, often drawing out issues related to inter-firm governance (Gereffi et al. 2005). The GPN approach has drawn attention to the broader set of actors and forces involved in governing production and the important role played by embeddedness (Henderson et al. 2002; Coe and Yeung 2015). While drawing insights from research carried out using both approaches, this study considers production as taking place across a set of relationships structured as a complex network which is strongly shaped by processes of territorial embeddedness and thus relies on a GPN framework as its base.
Within a GPN framework, the focus of analysis is on the set of businesses directly involved in production processes for each stage of production from raw materials to final products. These businesses are seen as being connected through multiple and intersecting
21 vertical pathways tying together a diverse set of producers to lead buyers and are considered as an ESN. An ESN is defined as including all businesses, including producers and intermediaries, directly involved in the creation of a final product (see Figure 1.1). In the ESN, businesses are linked vertically through buyer-seller relationships.
The businesses in an ESN are the same as those which could be considered as making up a GVC. However, for analysing the complex sets of relationships involved in all stages of production that can face sustainability challenges, which include diverse forms of buyer-seller links happening in parallel across multiple locations, a network metaphor is more appropriate for understanding how these processes are organised. By explicitly considering an ESN, the object of analysis is the set of businesses directly responsible for production. The term ESN is specifically used to draw attention to this group of actors within the broader GPN.
The conception of suppliers being connected through a network allows for an exploration of the diverse connections that exist across multiple different vertical pathways that are involved in linking producers during the creation of one product. The ESN conception used in this study emphasises the diversity of relationships involved in production. An understanding of this diversity is critical for understanding many sustainability challenges but can be minimised when considering production as taking place through a linear GVC connecting a simple sequence of clearly differentiated stages of production. Focusing on an ESN involves an explicit understanding that multiple processes are simultaneously being used by a diverse group of producers connected through multiple vertical pathways.
22 Figure 1.1: An Extended Supplier Network
Source: Author’s Construction
As described, an ESN can be seen as involving multiple and intersecting vertical pathways that lead from raw material producers to lead buyers. Tiers of suppliers are seen as successive vertical relationships among suppliers. The number of the tier indicates the position of a producer in relation to the lead buyer. A first tier supplier is responsible for the final stages of production. A second tier supplier sells to a first tier supplier. The second tier supplier may be responsible for different types of activities depending on how vertically integrated the first tier supplier may be.
Focusing on links within the set of businesses responsible for productive activities helps analyse inter-firm governance. This focus brings out the fragmented nature of production and the diversity of vertical connections involved in a product’s lifecycle. Research which has explored lead firm governance through conceptualising production as taking place through a linear GVC is drawn upon to explore vertical governance relationships in the ESN (Gereffi et al. 2005; De Marchi, Di Maria and Ponte 2013).
A focus of this research is how brands and retailers connect with producers at different points across their ESNs. While businesses in an ESN can be seen to have a vertical location within the network, the GPN framework draws attentions to how producers are territorially embedded (Henderson et al. 2002; Coe and Yeung 2015). An important consideration when looking at production in fragmented ESNs is understanding that the ESN connects businesses housed in diverse ‘productive systems’. Businesses in different local productive systems within an ESN are working in diverse
23 institutional contexts yet are all contributing to the production of products sold by the same brand or retailer.
The way that businesses in the same ESN can be located in different LPSs is depicted in Figure 1.2. This thesis focuses on the scale of LPSs to explore governance for sustainability related to challenges experienced within a local context. Considering production as being territorially embedded in LPSs allows for an exploration of horizontal governance within a specified region, driven by a wide set of GPN actors (commercial and non-commercial). This approach emphasises that while participating in an ESN implies a connection to a vertical governance system, producers are working within a local context that also involves experiences of horizontal governance.
24
Figure 1.2: ESN Seen as Connecting Producers in Different Local Productive Systems
Source: Author’s Construction
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With this understanding of how production is organised, with producers experiencing vertical and horizontal pressures, the concept of governance for sustainable production can be explored. Governance in this study is considered to follow Pickles and Mayer’s (2010, p.1) definition of, “institutions that constrain or enable market actor behaviour.” 2 Governance actors can be divided into three types as private, social and public (Gereffi and Lee 2016). Private governance, driven by buyers, is often seen to flow through the buyer-seller relationships involved in vertical pathways. This study expands this conception to include how lead buyers can engage in horizontal governance by creating connections within the horizontal governance systems that surround LPSs. Private governance can also operate among producers through horizontal connections within a local productive system. Public governance, driven by government actors, is often felt horizontally, within producers’ territorial locations. International public organisations can be involved in shaping vertical governance processes by creating pressures for buyers in GPNs or be involved in horizontal governance by connecting to horizontal governance systems. Social governance, driven by civil society actors, can involve both vertical and horizontal pathways.
This study focuses on understanding processes of private governance. However, private governance is considered as taking place in a GPN in which producers are influenced by multiple governance sources. Particularly, experiences of diverse governance pressures are seen as shaping how private governance is carried out by lead buyers, as well as by producers within their ESNs.
To understand the interactions between multiple governance processes, a modular approach is used, following Ponte and Sturgeon’s (2014) emphasis on the benefits of bringing together multiple perspectives of governance in order to understand the dynamics of fragmented production processes. Particularly, this study focuses on understanding the interactions between vertical and horizontal governance processes. Producers’ governance experiences are seen as being shaped by their vertical location within a network and horizontal location within a particular LPS.
2 Institutions can be considered as being divided into regulative, normative and socio- cognitive pillars (Scott 2014). This is discussed in further detail in Chapter 2.
26
The overall analytical framework can be considered as follows. Challenges related to sustainable production are seen as based on how production is organised. Production for brands and retailers can be seen as taking place through an ESN that involves multiple and intersecting vertical pathways. Producers in the ESN are embedded within distinct territories. In this study local territorial embeddedness is considered at the scale of a LPS, which involves similar businesses working within the same institutional context. Governance affecting producers is seen as flowing through both vertical and horizontal pathways. This study considers how lead buyers can promote sustainable production from their place at the top of an ESN with producers considered as embedded within distinct network and territorial locations.
1.4) The Case of Indian Production of Cotton Clothing for UK Retailers
The research for this thesis is based on a study that involves UK retailers sourcing cotton garments from India. Focusing on a case with these three features (UK retailers, cotton garments and production in India) allows for an investigation into the role of lead buyer governance across a fragmented ESN. With these choices this study includes industrial activities that affect a large level of production and high numbers of people. The justification of this case selection is briefly considered below and a more in depth discussion is provided in Chapter 2.
This study particularly focuses on the roles that major UK retailers play in promoting sustainable production for cotton clothing in India. UK retailers were chosen because of their prominent role in global sourcing practices. In 2012 the UK was the fourth largest global importer of clothing (UN Statistics Division 2015). UK retailers have been major players in global efforts to address sustainability challenges within garment production, as can be exemplified by the activities of the Ethical Trade Initiative.3
Within the UK, the bulk of clothing is sold by a small number of large retailers. This study particularly focuses on the top 20 businesses contributing to UK clothing sales in 2012. These firms were responsible for 58% of national sales (Mintel 2013). Exploring
3 The Ethical Trade Initiative is a UK founded international coalition of companies, NGOs and trade union organisations, which seeks to promote respect for workers’ rights with a focus on employment practices involved in production for major retailers, brands and suppliers.
27 the governance roles played by these firms provides insight into governance processes that cover a large set of producers.
The UK retailers considered are lead buyers at the top of ESNs responsible for producing clothing. As the focus of this study is understanding the governance role that these firms play in promoting sustainable production, it is important to consider the responsibility that has been placed on these firms related to sustainable production. Under pressure from consumer groups related to working conditions involved in garment manufacturing, many brands and retailers developed corporate social responsibility (CSR) policies in the 1990s, which often involved developing codes of conduct for their suppliers (Bartley 2003; O’Rourke 2003). These initiatives have since become widespread with sourcing policies generally focused on first-tier suppliers (O’Rourke 2003; Welford and Frost 2006). While such CSR programmes continue to face challenges (Barrientos and Smith 2007; Locke 2013), growing concern with promoting sustainable production 4 has led major retailers selling manufactured products to begin to confront sustainability challenges across the ESNs responsible for the entire production stage of their products’ lifecycles.
The dominant approach taken by retailers has been to promote sustainability through vertical sourcing relationships. A notable example is Marks and Spencer’s August 2011 announcement of plans to publically reveal the identities of all producers involved in creating their garments through a project called String (Marks and Spencer 2011). As most companies are not aware of all the businesses in their ESNs, which often incorporate small and large firms in multiple countries, Marks and Spencer’s declaration about String represented a big step forward. However, this project was not successful for reasons which are discussed in the body of this thesis.
An alternate, and expanding, approach that retailers can take to promote sustainable production is to make non-sourcing connections to horizontal governance systems. This can involve creating connections to communities housing producers responsible for early stages of production that may not only involve businesses that are
4 Sources of pressure for retailers to address broad sustainability concerns are discussed in Chapter 4.
28 traced to be involved in a retailer’s ESN. An example of this type of approach is the participation of major retailers, such as H&M and Marks and Spencer in the Better Cotton Initiative (BCI).5 This project involves working directly with farmers in an effort to promote sustainable production processes for cotton which is then sold through regular channels that feed into the production of multiple end products.
A major concern in this study is how the structure of an ESN shapes private governance flows. This thesis explores the governance dynamics involved in both vertical and horizontal approaches to lead buyer governance for sustainable production by empirically exploring how retailers connect to producers in the branches of their ESNs that incorporate Indian production of cotton garments. Addressing the issue of sustainable production in the ESNs of cotton garments is important because of the large- scale global impact of their production processes.
Cotton garment production can broadly be considered as being divided into cotton production, textile production and garment production. Approximately 25 million tonnes of cotton were produced world-wide in the 2010/11 growing season which would have a value of approximately 90 billion USD if measured at Cotlook’s 6 season average rate (USDA 2015a). In 2010, the global textile industry generated 251 billion USD in exports and the global apparel industry 351 billion USD, together making up 4.1% of the value of total world merchandise exports (WTO 2011). 7 Specific social and environmental challenges in cotton garment production include: occupational health and safety concerns, child labour, instability of income, discrimination of workers by gender and other classifications, high levels of water and chemical inputs in fibre production and textile treatments, improperly managed waste disposal, volatile commodity markets, and a hugely uneven distribution of gains through the value chain.
5 BCI is an international NGO with the mission to “make global cotton production better for the people who produce it, better for the environment it grows in and better for the sector’s future (BCI 2015a).” 6 Cotlook is a service that publishes global cotton prices. 7 These figures include textiles and clothing made with both natural and synthetic materials. In 2002, 39.7% of textiles produced were cotton (UNCTAD 2012).00}.
29 Research in different disciplines including business and management (Welford and Frost 2006; Joshi and Singh 2010; Bruce and Daly 2011), science and engineering (Woolridge et al. 2006; Ghoreishi and Haghighi 2003), gender studies (Ng 2002; Kantor 2003), labour studies (Mezzadri 2008; Chakravarty 2012) and geography (Ruwanpura and Wrigley 2011; Moseley 2005) has explored components of sustainability in the cotton, textile and garment industries. However, previous studies have not sufficiently looked at the processes that shape sustainability challenges across cotton garments’ ESNs. Addressing a need for further research, this project develops an approach that considers production from a different perspective by focusing on ESNs and exploring the issue of private governance along cotton garment ESNs among and between distinct and diverse actors at different points. Through this investigation, this doctoral study provides greater insight into challenges related to governance for sustainable production in ESNs.
Finally, in order to explore sustainability challenges in cotton garment production for UK retailers, India was chosen as a case study location. As one of the top five sources of cotton garment imports, India is an important supplier of cotton clothing for the UK (UN Statistics Division 2015). Additionally, India provides a location where all stages of production occur within one country, which was important for being able to carry out the field work with the resources available for this study.
Furthermore, all stages of cotton clothing production are important to India. Together, organised sector wearing apparel and textile production engaged approximately 2.3 million people, accounting for 18% of people engaged in India’s organised sector industrial units in 2012-13 (Central Statistics Office 2015a). Considering the production of cotton, organised sector cotton ginning, cleaning and baling along with seed processing for propagation engaged 112,137 people in 2011-12 (Central statistics Office 2014). 8 Additionally, unincorporated businesses involved in cotton garment production provide even higher levels of employment. Together, unincorporated businesses responsible for cotton ginning, cleaning and baling;
8 A disaggregated number for persons engaged solely in cotton ginning, cleaning and baling was not available.
30 manufacture of textiles; and manufacture of garments had an estimated 12.4 million workers in 2010-11 (National Sample Survey Office 2013).9
As the scale of the industry demonstrates, cotton clothing production is an important industry in India and globally. By considering Indian production of cotton clothing for UK retailers, this thesis explores a case that is globally important. Furthermore, developing a better understanding of the dynamics shaping governance for sustainability across the ESN in this case can provide insight into how to better understand sustainability challenges that affect many stakeholders linked to multiple ESNs world-wide.
1.5) Research Overview
This study focuses on understanding governance processes that link major UK clothing retailers with businesses in their ESNs. While the sustainability challenges being considered are diverse and take place across multiple locations, the focus of this study is on the governance roles played by retailers in promoting sustainable production. The lead firms considered are a relatively homogenous group. At least to some degree these businesses are all involved in initiatives aimed at promoting sustainable production.
Within India production for UK retailers is considered as taking place within distinct LPSs. The study particularly focuses on comparing how producers within five of these LPSs have experienced vertical and horizontal governance related to key sustainability challenges. Each LPS selected is responsible for a different stage of production. This allows for an exploration of the diverse types of links that take place between retailers and producers responsible for all stages of production.
To explore the main research question, “to what extent is buyer-driven governance sufficient for promoting sustainable production across fragmented production processes in an extended supplier network?”, the project asks four sub-questions:
9 These workers are mainly in textiles (5,862,524) and garments (6,535,563) with a small number involved in ginning (13,372). However informal and hidden hiring arrangement in ginning (as will be discussed in Chapter 7) may make the number a low estimate.
31 1. How can the organisation of production be conceptualised to explore how lead buyers are involved in governance for sustainable production across fragmented production processes? 2. What is the structure of the ESN linking UK retailers to all stages of Indian garment production? a. Who are the lead buyers and how do they attempt to promote sustainable production? b. Who is involved in production, how are fragmented producers linked together and where are they located? 3. To what extent do vertical governance pathways allow lead buyers to control production processes in their ESNs? 4. How can experiences of horizontal governance within local productive systems provide insight into buyer-driven governance for sustainable production in an ESN? These questions help to facilitate a research approach shaped by a critical realist philosophy and as such have the goal of developing a better understanding of causal mechanisms which shape observed outcomes (Sayer 1992; Sayer 2000).
The questions were explored through a combination of desk based study and field work. Field research for the study involved spending three months in London, UK and seven months in various cities in India. Primary data was collected through interviewing people directly involved with the case study ESN, supplemented by observation during site visits to production facilities, as well as interviews with other actors in the broader GPN. Additionally, a wide range of secondary sources, which include documents and databases, were drawn upon to develop a well-rounded study based on multiple perspectives.
Specifically, the first sub-question is answered through an exploration of existing literature and theories which provide insight into how to answer the main research question. The second question is explored through reviewing secondary data available on the case study and evidence collected during field work conducted for this study. The third and fourth sub-questions involve analysis of empirical data acquired for the case study from two perspectives. The analysis for sub-question three was based on exploring governance dynamics found in vertical governance pathways in the case. Analysis for sub-question four involved exploring horizontal governance experiences within the five
32 selected LPSs within the broader case. The main research question was answered by drawing together the answers to the four sub-questions.
1.6) Research Findings
Through the set of research questions described, this PhD study expands past explorations of lead buyer governance to consider governance processes across all stages of production, considering lead buyers’ relationships with producers responsible for every step of making cotton garments from cotton farming to garment manufacturing. An exploration of how producer businesses experience both vertical governance, through their sourcing relationships, and horizontal governance pressures, through their embedded locations in LPSs, is used to identify opportunities and limits for buyer-driven governance for sustainability. This analysis shows buyer-driven governance to be a multifaceted process, not a single force as past studies have generalised it to be.
As mentioned above, a major component of attempts to promote sustainable production by leading UK retailers has been introducing sustainability requirements in their commercial relationships . Exploring this case has uncovered diverse governance dynamics across a set of vertical pathways connecting multiple producers through fragmented production processes, with retailers’ commercial connections limited to top tier suppliers. The structure of relationships connecting producers responsible for subsequent stages of production is found to limit flows of vertical governance. Requirements for product qualities can pass across multiple relationships, however requirements for processes are more difficult to implement across multiple connections.
In contrast to considering production as taking place through multiple vertical pathways, focusing on territorial groupings within LPSs provides an alternate way to understand how retailers connect to producers responsible for all stages of production. Across the five LPSs considered, lead buyers were found to connect to producers through vertical links in one case, which involved a group of first tier suppliers, and through horizontal links to producers at multiple tiers in their ESN. Additionally, exploring how sustainability challenges have been faced within LPSs responsible for different stages of production within India highlighted the important roles of multiple sources of horizontal governance across the ESN. All five LPSs were found to experience horizontal governance pressures promoting both change and stability. Across the LPSs considered, both mandatory and voluntary initiatives involving local governance actors have
33 contributed to effectively stimulating change to production practices. The experiences in these cases point to possibilities for alternate forms of buyer-driven governance for sustainability beyond sourcing standards.
Analytically this thesis posits that a more nuanced understanding of buyer-driven governance is needed when production takes place across fragmented ESNs. This understanding can be facilitated by focusing on intersecting processes of vertical and horizontal governance. While lead firms connect to producers through diverse relationships, a critical challenge is that lead firms have limited vertical governance over production systems that involve products passing through multiple stages of production carried out by separate producers. New forms of connections and governance processes must be considered to address this challenge.
In order to address sustainability concerns at all stages of production, retailers are beginning to create new connections with producers through strengthening vertical connections and developing horizontal connections. In terms of strengthening vertical connections, this study finds that in some cases retailers are working with vertically integrated producers to address sustainability challenges in earlier stages of production. Retailers are also developing direct non-sourcing horizontal connections with producers in selected LPSs experiencing sustainability challenges. Both pathways for governance for sustainability often involve building alliances with governance actors that have the ability to promote changes to production practices within LPSs.
Retailers were found to use a range of governance for sustainability mechanisms through vertical and horizontal connections. The nature of the governance relationships developed was determined by the configurations of relevant governance actors and producers along with the nature of the sustainability challenge being faced. To better understand buyer-driven governance processes, they can be grouped into five model approaches: Hierarchical, Compliance, Support Services, Partnership and Promotion of Voluntary Change. These model approaches can be variously combined in different situations and can be used through both vertical and horizontal connections. However, despite the emergence of new connections, this research finds that retailers’ influence over lower tier production processes remains limited.
34 1.7) Thesis Structure
Overall this thesis considers the role of buyer-driven governance when looking at governance for sustainability. The findings contribute to a more nuanced conceptualisation of buyer-driven governance when considering issues of sustainability. The rest of this thesis is organised as follows.
Chapter 2 presents the conceptual framework used in this study. The chapter lays out the main concepts of how production is organised through ESNs that involve producers working within LPSs and considers the processes through which producers in ESNs experience governance shaping their production practices. Key contributions made by past research are used to explain the development of the conceptual framework.
Chapter 3 provides an overview of the research design and methodology. This chapter describes the critical realist approach used in the study and discusses the research methods that were used to address the questions being asked. Additionally, this chapter considers this study’s key challenges and limitations.
Chapters 4 and 5 provide an overview of the structure of the case study ESN. This provides the context through which governance processes are considered in this study. Specifically, Chapter 4 focuses on the role of UK retailers in providing governance for sustainable production. Chapter 5 then considers how production processes are organised within India. By highlighting variation in the organisation of production across the case study ESN, Chapter 5 shows that a simple buyer-driven narrative may not encapsulate the experiences of Indian producers with diverse business structures, connected by different types of commercial links and working within distinct LPSs.
Chapters 6 and 7 sequentially focus on vertical and horizontal governance within the ESN. Chapter 6 considers how governance flows through vertical pathways that involve multiple connections across fragmented production processes. This chapter shows that buyer pressure in sourcing relationships has limited ability to shape suppliers’ production practices. Chapter 7 proposes that considering the scale of LPSs can provide a better understanding of how lead buyers can play a role in governance for sustainable production. This chapter shows that looking at horizontal governance processes can help to address the challenges identified with vertical governance in Chapter 6. Looking at examples of five LPSs within the broader case highlights the diversity of sustainability
35 challenges experienced across the case study ESN. This chapter shows that producers within LPSs experience horizontal governance pressures which can promote change and stability related to local sustainability challenges. Considering diversity of local pressures is seen to be crucial to understanding governance for sustainable production. Lead buyers can connect to these LPSs through both vertical and horizontal connections but their role must be considered within the context of the multiple governance pressures that producers experience within their LPSs.
Chapter 8 focuses on the role of lead buyers and considers what buyer-driven governance means when looking at governance for sustainability across an ESN that involves production taking place in diverse LPSs. Bringing together insights developed through looking at how governance takes place within the case study ESN through both vertical pathways and through horizontal processes within distinct LPSs, this chapter presents a framework of different models which can be used to understand lead buyers’ roles in governance for sustainable production. These models of governance for sustainable production provide a way to categorise how lead buyers interact with producers at different points in their ESNs through both vertical and horizontal governance pathways.
Chapter 9 provides a conclusion. The chapter summarises the findings and considers the implications of this study. Additionally, potential future areas of research are discussed.
Through these chapters, this thesis seeks to explore the process of buyer-driven governance for sustainability. The main question being addressed is: “to what extent is buyer-driven governance sufficient for promoting sustainable production across fragmented production processes in an extended supplier network?” The findings show that buyer-driven governance on its own is not enough to reach producers that are connected to retailers through fragmented commercial connections. Production must be considered as taking place within diverse LPSs with fragmented commercial connections to lead buyers. Providing governance to producers located in distinct LPSs requires understanding how these LPSs are linked in to the network and understanding that vertical or horizontal governance pressures created by buyers will be felt in conjunction with local experiences of horizontal governance.
36 2: Considering Vertical and Horizontal Governance of Production in Extended Supplier Networks
2.1) Introduction
This chapter presents the conceptual framework which is used to explore the role of buyer governance in promoting sustainable production. The chapter asks, “How can the organisation of production be conceptualised to explore how lead buyers are involved in governance for sustainable production across fragmented production processes?” To answer this question, analytical frameworks which view production as taking place through GVCs and GPNs are drawn upon.
When considering the role that brands and retailers can play in promoting sustainable production, two main issues become apparent. The first is developing an understanding of how these lead buyers connect to the wide range of producers involved in producing the products they sell. The second is how governance can flow through these connections. Specifically, considering how these connections facilitate lead buyer governance for sustainable production, this chapter considers these issues sequentially.
First, the organisation of globalised production is addressed. Research conducted through the GVC approach provides insight into the dynamics of vertical sourcing relationships involved in production. The GPN framework expands the scope of analysis and highlights the importance of considering a broader group of governance actors and the role of embeddedness. Adopting the network concept from GPN analysis and guided by insights into inter-firm relationships provided by GVC analysis, this work considers the set of actors responsible for production activities as being linked through a network described as an ESN. Within the ESN, producers with vertical connections are considered as working within distinct LPSs involving common experiences of horizontal governance.
With production seen as taking place within an ESN structure, the way that lead buyers engage in governance for sustainable production is considered. Research on the garment sector has tended to focus on vertical relationships between lead buyers and first tier suppliers (Ruwanpura and Wrigley 2011; Pickles 2012; Mezzadri 2012). This study
37 however seeks to explore the broader set of relationships which connect lead buyers to all stages of production.
While brands and retailers are often considered as lead firms, exploring the nature of governance dynamics across fragmented ESNs in which producers work within distinct LPSs draws out the complexity and diversity of the roles played by lead buyers in governance for sustainable production. This leads to questioning whether retailers are “lead firms” for all members of their ESNs. Broadly, the framework presented in this chapter highlights the need to question what is meant by “buyer-driven governance” when looking at sustainability challenges occurring at different stages of production. The potential for diversity of governance roles played by brands and retailers working through vertical and horizontal pathways to connect to businesses involved in all stages of production is emphasised.
The chapter is structured as follows. Section two considers how sustainable production is conceived in this study. Section three shows how past research looking at GVCs, GPNs and institutions contributes to how this study looks at lead buyer governance for sustainable production. Section four outlines the conceptual framework which is used to understand governance of production within this study. Section five considers how processes of lead buyer governance have been explored in past studies. The discussion explains how this study contributes to developing a broader understanding that is needed when looking at the role that lead buyers play in governance for sustainable production when considering all stages of production. Section six provides a conclusion.
2.2) Sustainability Challenges for Manufactured Products
Before the rest of this chapter presents the theoretical framework in more detail, this section discusses how the idea of sustainable production is conceptualized in this work. For manufactured products, sustainability challenges can occur during any stage in the production, use and after-use segments of a product’s life-cycle. This study focuses on sustainable production. Specifically, the focus is on the role of lead buyers in shaping production practices that are perceived to involve sustainability challenges.
The choice of the term ‘sustainability’ in this research is intended to draw out the fact that practices used in LPSs can create challenges for the long-term viability of
38 production. Production that faces strong sustainability challenges cannot be maintained. Limitations related to sustainability can be created by social or environmental reactions. For example, Sumner (2005) discusses how local resistance can develop when practices used within a community do not support sustainability. Additionally, environmental degradation can create physical challenges for carrying out production processes.
Deciding to focus on ‘sustainability’ does involve conceptual challenges. Identifying practices that would be considered sustainable can be a contested process (Krauss 2015). When looking at producers’ decisions, it would be easy to say “are the businesses making the sustainable choice?” However, this would involve a fixed definition of “sustainable”. Considering the concept of sustainable development mentioned in Chapter 1 as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” and looking at individual business’ actions, we could ask “are the businesses taking actions that meet the needs of the present?” and “do these actions compromise the ability of future generations to meet their own needs?” These are complicated questions and bring up a number of additional questions. A particularly salient one is “whose needs are being prioritised in the present or future scenario?”
The identification of sustainability challenges can be based on how an issue is framed. For example, pressures to use a new technology which reduces pollution from small scale manufacturers can be framed as an action that addresses an environmental challenge or as one that may result in the closure of small businesses and increased unemployment. Framing can influence how different stakeholder groups perceive a sustainability challenge. Changes to how sustainability issues in the past have been framed has led to shifting perceptions and responses (see McAdam 1996; Zald 1996).
Changes to framing can shape what actions are considered as norms and what actions are considered as problematic practices. Consequently identifying key sustainability challenges can be a process which is shaped through discourse and not necessarily something that can be clearly measured. The same situation can be perceived differently by different stakeholder groups.
Research often provides examples of win-win-win situations, where social, environmental and economic objectives are aligned, but that is not necessarily the circumstance in every situation (Seuring and Müller 2008). Even if one is to take the
39 perspective of an individual stakeholder who may have clearly defined economic, social and environmental priorities, often actions which could be considered as improving sustainability in one dimension can involve using practices that could be considered unsustainable with regards to another dimension. Considering trade-offs in sustainable production is complex because of the wide variety of stakeholders affected by production processes. In this study, production practices associated with sustainability challenges are considered as those that have identifiable negative social or environmental impacts from the perspective of any stakeholder.
From the perspective of producers, making changes to production practices to address sustainability challenges could be seen as upgrading. As is discussed in more detail below (in Section 2.3.1), research on GVCs and GPNs has considered processes of upgrading involving economic, social and environmental components (Bazan and Navas- Alemán 2004; Humphrey and Schmitz 2002; Barrientos et al. 2011; Pickles 2012; De Marchi, Di Maria and Micelli 2013). These processes can be considered as a way that producers deal with economic, social and environmental sustainability challenges. However, changes that could be considered as upgrading may or may not reduce sustainability challenges.
Seeking to understand challenges with sustainable production requires this study to explicitly consider practices carried out at all stages of production. As described in more depth below, this study’s consideration of how governance takes place across an entire ESN allows for the development of a deeper understanding of the challenges involved in sustainable production. This understanding is crucial for being able to better understand the role that lead buyers can play in providing governance for sustainable production.
Addressing sustainability challenges involves several key components. One component is identifying the challenge. Technical tools for identifying sustainability challenges have been developed, such as life-cycle analysis (LCA) and life-cycle sustainability analysis (LCSA) (Guinée et al. 2011). However, as discussed above the identification of sustainability challenges can be contested and based on how an issue is framed.
A second component is identifying potential solutions. Multiple production methods for cotton garments are known and new processes are being developed that are
40 more sustainable than many of the processes that are currently being used. Alternate options for organising production create possibilities for production to take place through processes that do not create sustainability challenges.
However, the existence and development of alternative practices does not mean that dominant practices will change. While these first two components are important, improving the sustainability of production is not simply a technical challenge that involves matching an identified sustainability challenge with a new process that addresses the challenge. Two additional components of addressing sustainability challenges are identifying why the problematic practice is being used and how to change the existing productive system to involve more sustainable practices. This thesis focuses on these latter two components.
Understanding why a practice is being used can be a critical factor in how a producer will react to pressures to change the practice. As highlighted by Wilkinson (2003), productive systems involve mutually dependent relationships. This study considers production as taking place in a local context which involves producers experiencing a variety of horizontal governance pressures within the LPS in which they are located. These horizontal drivers can originate inside or outside the LPS. Additionally, producers may feel distinct vertical governance pressures based on their links to particular buyers. Both horizontal and vertical governance can involve pressure for change and stability.
When considering how to promote the adoption of more sustainable production practices, there are multiple actors that could be involved and multiple approaches these actors could use. While this study does not propose that any one group of actors should be responsible, this thesis does focus on understanding the role played by lead buyers. These businesses are large, powerful actors that are often considered by a wide group of stakeholders as having responsibility for production processes used in manufacturing the products they sell to the public. The types of pressures lead buyers feel to be responsible for promoting sustainable production are discussed further in Section 4.3. The analysis in this study considers the types of governance approaches that lead buyers use to promote sustainable production for all stages of fragmented production processes.
41 2.3) Understanding the Organisation of Globalised Outsourced Production
In order to understand the way that businesses are connected throughout the production of manufactured goods, this thesis draws on theories which have explored how globalised production is organised. Understanding how globally dispersed production and distribution systems function requires an approach that looks beyond traditional state-based perspectives. The GPN and GVC approaches provide a cross- border framework that goes beyond state based analysis, bringing the focus onto businesses and the range of (national and international) interactions that affect their practices (Henderson et al. 2002). This section considers how GVC and GPN approaches to understanding globalised production supplemented by additional literature focused on institutions can be used for understanding processes of buyer-led governance for sustainable production.
The conceptual framework elaborated in the next section brings together two perspectives from GVC, GPN and broader institutional approaches, which can be used to understand how modern manufacturing processes are organised. This section provides an overview of what existing literature conveys about these perspectives.
The first perspective, which forms the basis of this study, involves research that has looked at vertical business relationships involved in globally outsourced production under the various headings of global commodity chains, GVCs and GPNs (Gereffi et al. 2005; Henderson et al. 2002). Particularly, the GVC approach is seen to have strengths in exploring vertical relationships between buyers and sellers.
The second perspective focuses on how production takes place in multiple locations that involve horizontal connections within a territorial space. This second perspective draws on the GPN framework’s emphasis on a wide group of actors that contribute to governing production and the importance of territorial embeddedness (Henderson et al. 2002; Coe and Yeung 2015).
Considering challenges related to sustainable production requires combining both vertical and horizontal perspectives in order to conduct a holistic analysis of governance experienced by producers. Both perspectives can be enhanced by drawing from literature which has explored the roles of institutions in governing businesses (Wilkinson 2003;
42 Scott 2014). The rest of this section discusses the main literature that has shaped how these perspectives are understood within this study.
2.3.1) Production in Global Value Chains
The concepts of GVCs and GPNs were developed separately but are highly complementary for analysing global production systems. The concept of a ‘global value chain’ was first described as a ‘global commodity chain ’ (GCC). According to Bair (2008, p.348), the GCC framework described the systems of production that developed since World War II, moving away from the World Systems tradition by focussing less on the “macro, holistic structure of the world capitalist economy and more [on] the organisational field of contemporary global industries.” This new focus on business interactions provided a way to understand the dynamics and importance of industry in a world where companies can work across national borders and their activities affect people’s lives all over the world.
Gereffi (1994) proposed that GCCs are governed by lead firms, which control access to major resources such as product design, new technologies, brand names, or consumer demand and are the most profitable in an industry. These firms can be located upstream or downstream from manufacturing, with chains divided into those that are buyer-driven and those that are producer-driven. Buyer-driven industries are seen as those in which brands and retailers are lead firms and producer-driven industries are seen as those in which manufacturers are lead firms. While this work brought valuable insight for certain industries, it was shown not to be applicable in all cases (Gereffi et al. 2001; Henderson et al. 2002). It has since been argued that all production is moving towards the buyer-driven model (Gibbon et al. 2008). This type of governance, which has been described as “governance as driving” by Gibbon et al. (2008) is a major focus of this research as lead buyers seek to address issues of sustainability along their ESNs.
Gereffi (1999) stated that a major hypothesis of the GCC approach was that development for supplier firms required linking up with the industry’s lead firms. While this work drew attention to the role of lead firms in governing ESNs, the extent of lead firms’ power throughout their ESNs is under explored. This is an important dynamic that is considered in this research project.
43 A major area of focus within GVC research has been upgrading. Firms’ positions within GVCs have been seen to shape their potential for upgrading. While much work on GVCs has focused on how lead firms shape opportunities for economic upgrading (Schmitz 2006), more recent approaches have expanded conceptions of upgrading from focusing on purely economic considerations to include social and environmental components (Pickles 2012; De Marchi, Di Maria and Micelli 2013). Both GVC concepts of governance and upgrading can provide insight into understanding processes of lead buyer governance for sustainability.
Buyer-Driven Vertical Governance
Lead firms can be seen to engage in a process referred to as chain governance which involves setting and/or enforcing terms for others in the chain (Schmitz 2006). Supply chain management literature refers to dominant firms as “focal” companies. Seuring and Muller (2008, p.1699) describe these companies as those who “(1) rule or govern the supply chain, (2) provide the direct contact to the customer, and (3) design the product or service offered [208,220].” Lead firm governance has also been referred to as inter-firm governance (Coe and Hess 2007) and industrial governance (Gereffi and Mayer 2006).
Theories of new governance have shifted the responsibility for corporate behaviour from strict governmental regulation to softer approaches with more responsibility placed on companies for self-reporting (Lobel 2012). This shift has created a situation which is in line with the potential for how corporations could be involved in the governance of their ESNs which cross national borders and consequently cannot be regulated by individual governments. This study considers the role that lead buyers play in governing their ESN in conjunction with the other forces which are involved in governing ESN systems.
Throughout many studies using GVC and GPN approaches, lead buyers are seen as playing a large role in governing production. While some studies using GVC approaches have drawn attention to diversity of governance across chains by introducing the idea of bi-polar and multi-polar governance (Fold 2002; Ponte and Sturgeon 2014) these dynamics require further investigation. This study particularly considers how lead buyers can play a role in governing producers related to concerns surrounding sustainable production at all points in their ESNs.
44 Gereffi et al.’s (2005) theory of GVC governance proposed multiple forms that buyer-driven governance can take. They wrote that “the global commodity chains framework did not adequately specify the variety of network forms that more recent field research has uncovered (2005, p.82).” Their theory places market-based relationships and vertically integrated firms at opposite ends of a spectrum of coordination, with various types of network relationships existing in between. This idea presented a perspective that focuses on the factors that may shape governance in direct relationships between firms. While other theories of lead firm governance can be seen as considering governance across an ESN, the type of relationships in the Gereffi et al. theory of GVC governance can be used to consider connections between businesses at isolated levels of the ESN, such as between raw material producers and initial processors.
Gereffi, Humphrey and Sturgeon (2005) identified three key determinants of value chain governance patterns as complexity of transactions, codifiability of information, and capability of suppliers. These factors are evaluated on whether they have a “high” or “low” value, which gives eight possibilities of which five are actually found. The five types of network governance they proposed are: markets, modular value chains, relational value chains, captive value chains and hierarchy. Markets involve price focused transactions and are seen to have low costs of switching between suppliers. Modular value chains involve suppliers creating products based on a buyers’ design specifications. Relational value chains feature mutual dependence and are likely to involve family or ethnic ties, benefit from spatial proximity or rely on trust and reputation with long term relationships. Captive value chains generally involve small suppliers who are largely dependent on larger buyers that have a high degree of monitoring and control. Hierarchy involves complete vertical integration.
This theory draws from transaction cost economics and provides insight into individual bilateral relationships between firms. As Bair (2008) has indicated, this typology shifted the GVC concept to have a stronger focus on the upper tiers of production systems. While the original conception of buyer-drive governance generally considered how firms used their immediate suppliers to govern activities further down the chain, this new approach focused directly on the nature of the relationship between lead firms and individual suppliers (Gibbon et al. 2008). While this model provides a way to look at inter-firm transactions, it has limitations related to understanding how other factors such as conventions (Ponte and Gibbon 2005) and embedded behaviours
45 (Hess 2004) affect these relationships and does not consider the variety of relationships that may occur within a single supplier network (Ponte and Gibbon 2005).
More recently, a theory has been developed which considers inter-firm environmentally focused governance. De Marchi et al. (2013) consider environmental governance in value chains and identify two forms as a standard-driven approach and a mentoring-driven approach. This approach is a step towards developing a theory of governance for sustainability. However, the focus remains on the relationship between a lead buyer and its top tier suppliers.
Governance theories developed through the GVC framework have been narrow in their focus on relationships between lead buyers and first tier suppliers. Ponte and Gibbon (2005) describe the Gereffi et al. (2005) GVC governance model as one of ‘coordination’ which can take different forms within a single chain. They contrast this with ‘governance’ that shapes the entire chain. Ponte and Sturgeon’s (2014) discussion sees this form of coordination within direct buyer-seller relationships as micro governance and governance of an entire chain as macro governance.
Ponte and Sturgeon (2014) also introduce the term meso governance which is seen as the process through which governance flows across micro connections. Understanding how this process works requires looking at connections between multiple stages of production. Nadvi and Raj-Reichert (2015) have explored governance relationships for second tier suppliers. However, further research is needed to explore the dynamics of what buyer-governance means when looking at production processes fragmented between multiple producers.
Upgrading in GVCs
As mentioned above, upgrading among businesses involved in creating products in GVCs has been a topic explored by past research (Bazan and Navas-Alemán 2004; Humphrey and Schmitz 2002; Barrientos et al. 2011; Pickles 2012; De Marchi, Di Maria and Micelli 2013). Early approaches focused on industrial upgrading, which was seen to take four forms: product, process, functional and inter-sectoral or chain (Humphrey and Schmitz 2002; Gereffi et al. 2001). Product upgrading involves improving a product. Process upgrading involves improving the processes used to make a product. Functional upgrading involves firms incorporating additional functions, such as design or packaging.
46 Finally, inter-sectoral or chain upgrading involves moving into a different industry. Upgrading was initially seen as a way to improve economic outcomes for producers (Giuliani et al. 2005; Schmitz 2006).
The concept of upgrading has now been expanded. Notably, Capturing the Gains was a global collaborative research network focused on exploring social upgrading and its interaction with economic upgrading (Barrientos et al. 2011). Additionally, De Marchi et al. (2013) has begun to explore processes of environmental upgrading. As mentioned above, processes of upgrading can contribute to addressing sustainability challenges.
Using GVC Concepts to Understand Buyer-Led Governance for Sustainable Production
While in theory the GVC concept, particularly the ‘driven’ model of governance, first developed by Gereffi (1994), can incorporate activities at all stages of production, much of the research on buyer-led industries, as has been stated, has focused on interactions between lead firms and their upper tier suppliers. For example, in Gereffi and Memedovic’s (2003, pp.3–4) paper looking at the prospects for developing countries to upgrade in GVCs, the value chain for garments is described as comprising “raw material supply, including: natural and synthetic fibres; provision of components, such as the yarns and fabrics manufactured by textile companies; production networks made up of garment factories, including their domestic and overseas subcontractors; export channels established by trade intermediaries; and marketing networks at the retail level.” This groups together all the initial stages of production and yet these initial stages are virtually excluded from the actual analysis undertaken on the garment GVC.
A further limitation of the concept of GVCs is that it puts emphasis on business interactions. Research using this approach has concentrated on vertical commercial relationships. Although the model itself is relatively comprehensive, in practice, studies using this approach have not often explored how businesses interact with their environs. However, while the GVC’s focus on vertical relationships could be seen as a weakness, from another perspective it can also be seen as a strength. The in depth research into vertical relationships that has been carried out through GVC studies provides insight which is useful for exploring the process of lead buyer governance for sustainable production.
47 2.3.2) Production in Global Production Networks
The GPN framework provides a way to understand broader governance issues than those that have often been the focus of studies using a GVC approach. The GPN framework moves beyond a vertical approach to incorporate actors external to production processes more centrally into the analysis of how global production is structured and shaped. This is crucial when considering governance for sustainability. Additionally, the GPN framework places stronger emphasis on embeddedness which has often been underexplored in studies which have used GVC approaches.
The GPN framework has been defined as, “an organisational arrangement, comprising interconnected economic and non-economic actors, coordinated by a global lead firm and producing goods or services across multiple geographical locations for worldwide markets (Coe and Yeung 2015, pp.1–2).” While definitions of the GCC and GVC frameworks have incorporated non-firm actors and territoriality, research framed under these approaches has often focused on governance in inter-firm relationships (Coe and Yeung 2015). Compared to these frameworks, the GPN approach more strongly emphasises considering factors outside of direct buyer-seller relationships.
The GPN framework involves three conceptual categories. These include value (creations, enhancement, capture), power (corporate, collective and institutional), and embeddedness (territorial, network and societal) (Henderson et al. 2002; Coe and Yeung 2015). These categories provide a way to analyse issues of governance for sustainable production throughout ESNs. The framework also involves the conceptual dimensions of: firms (ownership, “architecture”), sectors (technologies and products/markets), networks (“architecture”, power configuration and governance), and institutions (governmental, quasi-governmental, non-governmental). These concepts provide different ways to divide the activities in GPNs.
An important understanding coming out of the GPN approach is the evolutionary nature of networks. Networks are seen to be shaped by processes of path dependency (Henderson et al. 2002). Yeung and Coe (2014) emphasise the importance of considering dynamic competitive drivers in shaping the emergence of network structures.
GPN analysis provides a way to look at global production systems that takes into account the complexity of how the systems function. In proposing the GPN framework
48 Henderson et al. (2002) explicitly say that looking at firms is beneficial for exploring possibilities of economic development. This project expands this potential by using the framework to explore the impact of business activities on social and environmental factors. Research using the GPN and GVC frameworks has focused on upgrading, spatial embeddedness and governance. These concepts can be drawn upon to understand lead buyers’ involvement in governance for sustainable production.
According to Coe et al. (2008), GPNs endeavour to cover all relevant sets of actors and relationships. GPNs are not made up of merely top down relationships but involve dynamically inter-connected and simultaneous processes with asymmetrical power relationships (Coe et al. 2008). They can be considered economic, political, social and cultural phenomena (Levy 2008; Coe et al. 2008). These diverse sets of actors and processes are fundamental to ESN producers’ experience of governance.
Governance within a GPN
While the GVC literature has focused on a narrow concept of inter-firm governance in the upper tiers of value chains, governance for sustainable production includes a broader set of forces. The forms of governance described in GVC literature often focus on how firms affect each other’s decisions related to competitiveness (Gereffi and Fernandez-Stark 2011). However, sustainability, while being affected by this type of governance is also affected by a much wider range of governance forces from the GPN. An exploration of governance for sustainable production must consider the main forces which shape the development of production systems that can vary for producers located at different points in the ESN and working in different LPSs.
By highlighting the role of multiple actors involved in supporting globalised production processes, the GPN framework points to a broader consideration of extra-firm actors than the GVC and GCC approaches. In this study considering how lead buyer governance takes place in conjunction with a broad set of additional governance forces questions the idea of production as being buyer-driven. Coe and Yeung (2015, p.15) highlight examples of GPN actors as “supranational organisations, government agencies, trade unions, employer associations, NGOs, and consumer groups.” This study explores the roles of a wide range of GPN actors as providing governance for ESN producers.
49 Governance actors that are considered in this work are grouped into private, social and public (Gereffi and Lee 2016). These include lead buyers, producers within the ESN, public and private organisations (non-firm actors and private firms within the GPN) and civil society actors. These governance actors can be considered through the GPN’s conceptual breakdown of corporate, collective and institutional power. Additionally, governance is seen as originating from structurally embedded forces, which include market structures, norms and socio-cognitive institutional frameworks.
The set of governance actors and forces considered is shown in Table 2.1. All of these GPN governance forces can originate from local or global sources and affect the sustainability of production within an ESN. This thesis seeks to understand how lead buyers govern producers subject to multiple governance forces.
Table 2.1: Overview of Governance Actors and Forces Governance Actors and Forces Selected Sourc es of Governance Private • Lead Buyers • Trade and Logistics Intermediaries • ESN Producers (buying inputs from other producers) • Business Associations Public • Governments • Intergovernmental Organisations Social • NGOs • Unions • Standard Setting Bodies • Consumers • Workers • Social Movements Structurally Embedded • Social Embeddedness • Network Embeddedness • Territorial Embeddedness Source: Author’s Construction
Private governance involves inter-firm governance. While considering the strong roles of multiple governance forces, the focus of this study is private governance by lead buyers. In proposing the idea of GPNs, Henderson et al. (2002) wrote about the gap in previous literature of looking at firms as development agents. When looking at lead buyers as actors that can promote sustainable production for producers located all over the world, this role is key. As lead buyers have been seen as driving production (Gereffi 1994; Gereffi 1999) and are seen by many as responsible for the sustainability of the products they sell (Jenkins 2001), it is important to understand the role they play in providing governance for producers at all stages of production. Inter-firm governance can also be seen to take place through interactions between producers and intermediaries.
50 Public governance can originate from government and inter-governmental institutions. Public organisations govern production systems through both hard mechanisms, such as legislation and other softer governance mechanisms, such as incentives intended to support the adoption of particular behaviours (Lobel 2012). Activities of these governance actors often have a territorial scope providing horizontal governance. These formal institutional actors can be based inside or outside of the local region and play an important role in negotiating with private actors to shape local development (Coe et al. 2004).
Organised and unorganised societal actors seeking to support sustainability can also act as governance actors by providing social governance. Organised social governance can include issue-focused NGOs and worker unions. These organisations can carry out a number of activities to promote sustainable production, such as running campaigns to promote public awareness of sustainability related challenges (DeWinter 2001), pushing private companies to provide governance for their suppliers (Bartley 2003; Vogel 2008) and participating in multi-stakeholder dialogues (O’Rourke 2006). When looking at how social organisations govern the ESN, a diverse group must be considered. Diverse organisations may be concerned with wide-ranging aspects of sustainable production.
Social governance from unorganised sources can be seen to originate from civil society. The term ‘civil society’ has had changing meanings since its initial development. Cox (1999, p.10) defines its current use as a “comprehensive term for various ways in which people express collective wills independently of (and often in opposition to) established power, both economic and political.” While civil society actors can come together to form organisations, the type of pressure they would then create would belong to the category above. Unorganised social governance is generated from individuals’ attitudes and actions. Major sources of this type of governance for ESNs are consumers and unorganised labour. A growing role for this source of governance can be seen as a reaction to a growing ‘governance deficit’ created by the spread of neo-liberal policies which have removed regulations in favour of liberalising trade (Gereffi and Mayer 2006; Mayer and Gereffi 2010).
Structurally embedded governance forces are experienced by producers in addition to those being driven by organisations and individual actors and are shaped by
51 where a producer is located. Using Hess’ (2004) concept of embeddedness, “where” can be seen as a social, network or territorial location. Societal embeddedness is seen as the influence of an actor’s background including cultural and political aspects. Network embeddedness is derived from involvement in networks of individuals and organisations that may cross national borders. Territorial embeddedness considers how anchored an actor is in a geographic location, which can involve being constrained by the economic activities and social dynamics of that place. The GPN approach emphasises that producers experience these forms of governance (Coe and Yeung 2015).
One element of structurally embedded governance is market structure. The structure of markets in which ESNs work is varied globally and by industry. Each context provides different pressures related to the sustainability of production practices. Lane and Probert (2009) conducted an in depth study which shows how different national capitalisms in the home countries of lead firms in the garment industry can shape how their ESNs are structured.
Another element of structurally embedded governance involves embedded norms. A variety of literature has discussed how actions are shaped by embedded norms (Ponte and Gibbon 2005; Scott 2014). Norms have been seen as a major factor influencing how businesses behave (Scott 2014). Businesses working within the same organisational fields are often found to have similar behaviours. While it can be argued these are the best suited activities to the environment in which they are working (Nelson and Winter 1982), these can also be seen as institutionalised practices (Scott 2014).
All of these governance forces contribute to creating the institutional framework experienced by businesses within a GPN. A definition of institutions is provided by Scott (2014, p.56), “Institutions comprise regulative, normative, and cultural-cognitive elements that, together with associated activities and resources, provide stability and meaning in social life.” Scott sees possibility for exploring institutions at multiple levels including global, organisational population, organisational field and intra-organisational. In this study institutional pressures can be seen to exist across network connections and within LPSs. Scott (2014)’s framework divides how theorists have looked at institutional governance by dividing institutional structures into three pillars described as regulative, normative and cultural-cognitive.
52 The regulative pillar is seen as being composed of formal rules. In the framework used in this study, this form of institutionalisation would be considered as driven by public and private organisations. For businesses in ESNs, regulations can be part of vertical sourcing relationships or be felt due to territorial location. Governance from government agencies is often confined to defined territorial regions. LPSs are often subject to multiple tiers of institutional regulations from different sources that cover different territorial scales.
The normative pillar involves values and norms. Values are defined as “conceptions of the preferred or the desirable together with the construction of standards to which existing structures or behaviours can be compared and assessed (Scott 2014, p.64).” Norms are defined as specifying “how things should be done; they define legitimate means to pursue valued ends (Scott 2014, p.64).” Norms and values can be applicable to all members of a society or at times apply to a select group. For example, always hiring a certain type of person for a particular job role, such employment by gender or ethnicity, can be part of a normative system.
An important consideration when looking at norms is how they develop. Scott (2014, p.162) writes that, Normative standards may arise slowly and incrementally over time but they may also be explicitly established by self-appointed arbiters employing more or less representative bodies and deliberative procedures. Professional and trade associations present clear modern instances of such groups and processes. Institutionalisation can involve the change from actions being based on rational logic to the development of routines that are carried out without a consideration of whether the activities involved are the best option available. Looking inside organisations, Selznick (1992) describes thick institutionalism as moving beyond developing explicit goals and rules, coordination mechanisms and communication channels. Examples of this process are seen as including hardening rules and procedures, establishing strongly differentiated organisational units that develop their own vested interests and power structures through administrative rituals, symbols and ideology (Scott 2014). This process takes time. Knudsen (1995) describes the effect that a firm’s organisation structure stops being determined by transaction costs and instead is shaped by accumulated competences or capabilities. Through this process behaviours may no longer need incentives as they become norms.
53 Norms can become deeply ingrained and become cultural-cognitive institutions, which Scott considers as the third institutional pillar. The relationship between constitutive culture to social norms was described by Schneider (1976 as cited in Scott 2014, pp.76–77), Culture contrasts with norms in that norms are oriented to patterns for action, whereas culture constitutes a body of definitions, premises, statements, postulates, presumptions, propositions, and perceptions about the nature of the universe and man’s place in it. Where norms tell the actor how the scene is set and what it all means. Where norms tell the actor how to behave in the presence of ghosts, gods, and human beings, culture tells the actor what the ghosts, gods, and human beings are and what they are all about. (pp. 202-203). Cultural-cognitive institutions shape how people perceive their environments. 10
For production taking place in an ESN, the forms of governance discussed in this section so far can be seen as working through horizontal and vertical governance pathways. Horizontal pathways are experienced based on territorial location and vertical pathways involve connections between buyers and sellers. The rest of this section considers these two governance pathways.
GPN and Territoriality: Considering Horizontal Governance in Local Productive Systems
While the GVC approach has emphasised governance as taking place through vertical buyer-seller relationships, the GPN framework stresses the importance of space. While this study focuses on products that involve global connections, production processes take place within territorial spaces. Henderson et al. (2002) emphasised the importance of considering how places affect and are affected by flows of capital, labour, knowledge and power. Coe and Yeung (2015) write that GCC research has an underdeveloped conceptualisation of territoriality as it focuses on the national scale with little attention played to the local or regional contexts. However, the broader territorial scope of consideration of the GPN framework has been incorporated into some studies
10 While the cultural-cognitive pillar has relevance, as this level of institutionalisation can shape the actions of people working in ESNs, due to the limits of the data collection processes employed in this study, the major types of institutionalisation considered as structurally embedded governance forces are the regulative and normative pillars.
54 which use GVC framework. Notable examples are found in Neilson and Pritchard’s (2009) institutionally enhanced GVC analysis as well as Gereffi and Lee’s (2016) explicit consideration of vertical and horizontal governance in a GVC.
Coe and Yeung (2015) emphasise the importance of looking at multiple scales depending on the type of questions being considered. A benefit of the GPN concept is that it allows for different levels of focus. Henderson et al. (2002) point out the importance of considering how diverse actors are bounded at different scales. All GPNs can be seen to be embedded in multi-scalar regulatory systems, which involve governance from different sources (Coe et al. 2008).
As the challenges related to sustainable production being considered in this study are the result of actions within production sites, local context is a key factor. Understanding sustainability challenges related to production practices requires understanding processes that take place within a local space. Within a GPN framework, Coe et al. (2004, p.469) highlight the importance of looking at how development in local spaces is, “a dynamic outcome of the complex interaction between territorialised relational networks and global production networks within the context of changing regional governance structures.”
In this study, production is considered as taking place within a LPS. This scale is considered as a territorial region in which common production practices are used by multiple businesses engaged in similar activities. This could include a territorially based organisational field, a cluster or broader region housing similar producers.
Wilkinson’s (2003; 1983) productive system theory provides a way to consider how production takes place. Productive systems involve coordination between multiple factors. These include labour, the means of production, ownership structure, control over productive activity as well as the social, political and economic framework (Wilkinson 2003). The organisation of these systems shapes the sustainability of the production process, but can also vary across diverse territorial and societal locations.
Focusing on the scale of a LPS has several benefits. One is that focusing on a definable group of producers allows for a targeted exploration of the roles that lead buyers play in governance for sustainable production. A second is that businesses in the same LPS have similar experiences of governance pressures. These common experiences
55 can be seen as being tied to a third benefit, which is that within LPSs business forms are often similar. This can involve common practices being connected to the same sustainability challenges.
Considering definable groups of similar actors facing identifiable challenges related to sustainable production allows this study to explore processes of governance for sustainable production at a scale that enables meaningful analysis. This exploration involves considering the standpoint of producers experiencing common horizontal and vertical governance pressures from their location within the same territorially defined institutional environment.
The following discussion considers the third benefit in more depth. Notably, Dimaggio and Powell (1991) emphasise the tendency for homogeneity of organisational forms within organisational fields. They define an organisational field as a set of organisations that “in aggregate constitute a recognised area of institutional life: key suppliers, resource and product consumers, regulatory agencies, and other organisations that produce similar services or products (pp. 64-65).” This homogeneity can help with understanding the dynamics of businesses perpetuating a sustainability challenge within a LPS.
DiMaggio and Powell (1991) use the concept of isomorphism to understand the process of homogenisation. Isomorphism is seen as a constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions. At the population level, such an approach suggests that organisational characteristics are modified in the direction of increasing compatibility with environmental characteristics; the number of organisations in a population is a function of environmental carrying capacity; and the diversity of organisational forms is isomorphic to environmental diversity (DiMaggio and Powell 1991, p.66).
DiMaggio and Powell (1991) consider two types of isomorphism as competitive and institutional. They identify three mechanisms of isomorphic change as coercive, mimetic and normative, which are seen as analytical distinctions that are not always clear cut in empirical cases. Coercive isomorphism is a result of both formal and informal pressures. These pressures lead firms to develop similar structures which can effectively interact with their institutional environment. Mimetic isomorphism involves organisations modelling themselves on other organisations, intentionally or
56 unintentionally. Normative isomorphism’s main source is professionalization with two main aspects being seen as education and membership in professional or trade associations.
The process of isomorphism is not seen as necessarily resulting in the most efficient organisational forms becoming most prevalent (DiMaggio and Powell 1991). This understanding is useful when considering sustainability challenges that predominate in an LPS as it indicates there are possibly more efficient structural forms that may not involve existing sustainability challenges.
Local history is very important in the development of LPSs. One model which explains why particular practices can predominate is positive feedback (David 1985; David 2001; Arthur 1994). This process explains how systems that may not be the best choice can persist over time. This is an important understanding when considering sustainability challenges. Necessary conditions for positive feedback are described by Arthur (1994) to include the following four factors. First, changing to a new approach can involve high set up costs. Second, after spending time and effort learning about one approach individuals may be reluctant to switch. Third, advantages can be felt because others are using the same option. Fourth, new businesses may be more likely to adopt widely accepted approaches. Important consequences of this process are seen as indeterminacy, involving possibilities for multiple equilibria; inefficiencies, when inferior technology becomes widely adopted; lock-in, the difficulty in changing to a new approach; and, primacy of early events, with small differences having large effects.
The theory of isomorphism in organisational fields is useful for understanding challenges related to sustainable production as common practices adopted across an organisational field can be associated with sustainability challenges. With this understanding, the approach in this study looks at LPSs with the boundaries defined as the scale at which businesses have similar forms and are involved in similar sustainability challenges.
A feature of LPSs is the institutionalisation of practices. When processes become institutionalised they may move from being done by rational choice based on the specific features of a situation being faced to becoming routines. Characteristics of productive systems that can be considered unsustainable may be by-products of processes which have other benefits or they may be related to activities which have developed based on
57 path dependent historical trajectories that may not have current benefits. This understanding opens up possibilities for introducing a stimulus that may be able to promote change that addresses a sustainability challenge. This possibility is considered further in this study related to the role of lead buyers promoting governance for sustainability.
GPN and Network Embeddedness
While experiencing pressures from horizontal governance, producers in an ESN can also be considered as being embedded within a network. Network embeddedness can be seen as describing, the network of actors a person or organisation is involved in, i.e., the structure of relationships among a set of individuals and organisations regardless of their country of origin or local anchoring in particular places. It is most notably the 'architecture', durability and stability of these relations, both formal and informal, which determines the actors' individual network embeddedness (the relational aspect of network embeddedness) as well as the structure and evolution of the network as a whole (the structural aspect of network embeddedness) (Hess 2004, p.177). This thesis explores network embeddedness across inter-firm relationships that connect businesses through an ESN to consider vertical governance processes.
As discussed above, the GVC literature has provided much insight into governance occurring through buyer-seller relationships. In addition to the concept of buyer-driven governance, vertical relationships can also be seen to be shaped by conventions. Ponte and Gibbon (2005) wrote about the existence of conventions which are normative expectations of how business will be conducted. They consider the interactions between the explicit criteria of buyers’ definitions of quality and conventions. The nature of connections at different points in the network are crucial to facilitating flows of vertical governance.
This study focuses on exploring how lead buyers’ attempts at governance for sustainable production flow through an ESN. However, a producer’s position in the network can also be the driver for creating some sustainability challenges. Particularly, some sustainability challenges can be seen as the result of adverse incorporation. This is a term which takes into account that “inclusion in global economic activity through employment does not always, everywhere and for everyone result in an alleviation of chronic poverty and vulnerability; rather, it is for vast swathes of the global labour force
58 associated with their perpetuation (Phillips et al. 2011, pp.5–6).” Such challenges indicate that it is important to consider broader aspects of network embeddedness outside of pressures created by buyers seeking to promote sustainable production practices. Accordingly, the research in this study attempts to consider buyer-driven governance as being part of a wide governance experience felt by producers.
2.3.3) Drawing from the GVC and GPN Frameworks
While the approach in this study is based on considering production as taking place within a GPN, research using both the GVC and GPN approaches provides insight into understanding lead buyers’ roles in providing governance for sustainable production. Both approaches provide ways to understand the experiences of businesses considered in this study. Key differences between these approaches can be seen in Table 2.2.
Table 2.2: Understanding Governance for Sustainable Production GVC Approach GPN Approach Producers, brands and Wide set of actors including Key Actors retailers commercial and non-commercial Key Multiple actors interacting across Buyer-Seller Relationships a complex network Largely ignored (with key expceptions, such as Neilson Social, network and territorial Embeddedness and Pritchard 2009; Gereffi embeddedness are key and Lee 2016; Ponte and components Sturgeon 2014) Source: Author’s Construction, drawing from (Gereffi et al. 2005; Henderson et al. 2002; Coe et al. 2008; Gereffi and Fernandez-Stark 2011; Coe and Yeung 2015 )
The approach used in this study brings together strengths from both frameworks. The GVC approach provides in depth exploration of vertical relationships between buyers and sellers. Insights about vertical relationships developed through studies using the GVC approach are used in this study to explore the vertical relationships that exist between the diverse set of businesses and vertical pathways that are involved in the ESN. The GPN approach draws attention to the importance of considering multiple governance actors and the role of embeddedness. The GPN’s incorporation of a broad set of actors and the importance of territorial location are used in this study to better understand how producers in an ESN experience governance.
59 2.4) Production across an ESN
In this study, within a GPN framework, producers contributing to the production of a lead buyer’s garments are seen as being connected through an ESN that involves a broad set of businesses connected through commercial relationships. The set of businesses considered includes all that are responsible for turning raw cotton into final garments. This section provides more detail on how production is seen to be organised in this study.
2.4.1) Considering Producers as Connected through an ESN
Before moving on with the argument, a major term used in this study is explored further. As already discussed, in this study production is considered as being carried out by a set of producers considered as an ESN. A justification for the choice of the three words “extended”, “supplier” and “network” is provided below.
The word “extended” is used to draw attention to a wider group than is generally included within studies looking at governance of production in GVCs and GPNs. The extended group includes those involved with the initial raw material production to those responsible for the final stages of product assembly. This includes diverse groups of producers involved in all activities related to the production stage of a product’s life- cycle. The multiple producers creating intermediary products can be visualised as forming multiple branches moving down from the producer responsible for the final stage of manufacturing. While all stages of producers are included in definitions of GVCs and GPNs, research on the garment industry has often focused on top tier producers (Ruwanpura and Wrigley 2011; Raworth and Kidder 2009).
Addressing questions related to sustainability requires a change of focus. While theories of governance in GVCs and GPNs have concentrated on the role of lead buyers and their connections to first tier producers, businesses in lower tiers of production for manufactured products, particularly those involved in raw material production, often have less direct connections to these lead buyers. Yet all of the businesses involved in production are part of a product’s life-cycle, with all of their actions directly affecting the sustainability of the final product. A focus on sustainability requires viewing products as items with histories. This is in contrast to literature looking at economic systems, which generally looks at separate industries and their interactions. Using GPN and GVC
60 frameworks for understanding challenges related to sustainable production requires an explicit consideration of the multiple connections between the set of businesses involved in all stages of production.
The term “supplier” is used instead of “supply” to invoke the active nature of members of these networks. Additionally, the word ‘supplier’ indicates that in this context the producers are looked at as creating inputs for other businesses. Specifically, businesses are included in the ESN if they contribute to the production of products for an identified lead buyer. Furthermore, in contrast to the term “production” in GPN, this term solely refers to producers and not the wider set of actors considered in a GPN.
Finally, the word “network” is used as it is seen to more adequately represent the structure of relationships between suppliers than a “chain” which implies linearity. The businesses that are seen to be members of a GVC are the same as those that are included in the description of an ESN. However, considering this set of businesses as an ESN allows for an exploration of the how producers are connected through multiple and interconnected vertical pathways leading to a lead buyer. The way that retailers connect to lower tier production processes cannot be accurately represented as a one dimensional linear process when looking at sustainability challenges. A network conception allows for a more nuanced understanding of the diversity of production processes used within one ESN. Each vertical pathway that a product can flow through may involve different production technologies and related sustainability challenges based on where each stage of production takes place.
An ESN is a subset of a GPN. It can be seen as the core of a GPN as it only includes the businesses directly responsible for production. Focusing on the suppliers allows for an exploration of production from the perspective of producers. These producers’ experiences of vertical inter-firm governance are considered as well as their horizontal experiences of governance from a diverse set of GPN actors.
While metaphors of chains and networks can both be useful heuristics for looking at processes involved in global production to answer different research questions, this study’s exploration of the complex set of relationships connecting diverse producers responsible for different stages of production from raw material generation to the final stage of manufacturing is better suited to a network approach. The term “network” more
61 accurately represents the structure of the commercial relationships that are involved in modern globalised production. These relationships are key to considerations of governance for sustainability. Coe and Yeung (2015, p.15) describe the GPN approach as, an avowedly network approach that seeks to move beyond the analytical limitations of the chain notion. Production systems are seen as networked and recursive meshes of intersecting vertical and horizontal connections in order to avoid deterministic linear interpretations of how production systems operate and how value is generated and distributed. . . the term ‘network’ in GPN analysis is not mere semantics, therefore, but reflects a particular ontological understanding of how socio-economic systems are organised and function. Understanding the set of connections involved in production as a network allows for an exploration of governance for sustainable production for multiple producers involved in multiple vertical pathways contributing to making one product.
2.4.2) Governance Flows across the ESN
As discussed above in the section on the GPN approach, across an ESN producers experience governance from multiple sources. Governance from these sources can flow through both vertical and horizontal pathways. Following Humphrey and Schmitz’ (2000) work considering the intersection of industrial clusters and global value chains, Gereffi and Lee (2016) elaborated a model for considering this type of intersection, which is reproduced in Figure 2.1. This figure highlights the role of vertical governance from a global lead firm as well as the role of local horizontal governance originating from multiple sources.
62 Figure 2.1: Gereffi and Lee’s Confluence of Actors in GVC and Cluster Governance
Source: (Gereffi and Lee 2016, p.31 )
Exploring the intersection of vertical and horizontal governance forms a base for the approach taken in this study. Considering how governance flows across all stages of production, the models of Humphrey and Schmitz (2000) and Gereffi and Lee (2016) are built upon to understand governance flows connecting producers across multiple tiers of production. This study explicitly considers how vertical and horizontal governance interact at different locations in an ESN. These interactions can involve vertical governance originating from buyers of intermediary products, who are not lead buyers, and different forms of horizontal governance occurring across multiple territories housing producers.
Figure 2.2 depicts how governance flows around ESN producers at multiple stages of production. The figure highlights how producers within the same ESN are embedded within different LPSs. The figure also shows diversity in vertical pathways. Production of one product moving from producers at the bottom of the diagram up to the lead buyer at the top can take place in distinct productive systems. Additionally, producers in the same LPS can sell to different types of buyers in different locations but their products may be contributing to items bought by the same lead buyer.
63
Figure 2.2: ESN with Vertical and Horizontal Governance
Source: Author’s Construction
64
Vertical Governance Pathways
In this study, vertical governance is a form of governance that firms experience and create through buyer-seller relationships within the ESN. Vertical governance involves buyers creating pressures that shape their suppliers’ practices. Experiences of vertical governance depend on the point in the ESN in which a producer is operating. Vertical governance is depicted by the dashed lines in the Figure 2.1.
Across the ESN processes of vertical governance can be considered using Ponte and Sturgeon’s (2014) micro and meso scales of governance. Looking at the micro level involves, “seeking to explain the determinants and dynamics of bilateral exchange as embodied in individual value chain links (p. 2).” The meso level involves, “examining how and to what extent micro-level aspects ‘travel’ up and down the value chain (pp. 2- 3).” Processes of micro and meso governance are explored in this study in order to better understand lead buyers’ roles in governance for sustainable production across an entire ESN (macro governance). In addition, to better understand macro governance, the lessons learned through looking at vertical processes of micro and meso governance are supplemented by looking at the role of horizontal governance that firms face based on their territorial location within a LPS.
Horizontal Governance Pathways
Horizontal governance is felt by businesses because of their embedded location within a particular territory, which involves businesses in the same ESN experiencing distinctly different sets of horizontal pressures. Horizontal governance can originate from local or non-local sources. The approach considered in this study concentrates on how groups of producers in the ESN are located across diverse LPSs. Horizontal governance is depicted in Figure 2.1 by the small blue ‘>’ and ‘<’ symbols.
When looking at the governance experience of an individual LPS within the ESN, vertical and horizontal governance forces can be explicitly considered. Employing concepts as proposed by the frameworks mentioned above which consider the intersection of vertical and horizontal governance (Humphrey and Schmitz 2000; Gereffi and Lee 2016), a number of studies have focused on looking at the intersection of GVCs with governance in LPSs. These studies have often focused on production taking place in clusters that have direct connections to global buyers (Giuliani et al. 2005; Nadvi and
65
Halder 2005; Lund-Thomsen and Nadvi 2010; Lund-Thomsen and Pillay 2012; Mezzadri 2014a; Knorringa and Nadvi 2016). These studies have highlighted the importance of cluster level institutions and collective action of cluster based businesses.
When the focus of analysis is moved onto an entire ESN, LPSs must be considered that do not have any direct connections to global buyers. The governance experiences of producers responsible for early stages of production in ESNs and not directly connected to lead buyers are not well understood. Following the framework in this study, businesses’ location within an LPS, as well as their vertical connections to buyers, shape their governance experiences. Figure 2.3 shows how producers’ governance experiences within LPSs are considered within this study. This figure emphasises the roles of both vertical and horizontal governance.
The fact that producers across the ESN have different vertical and horizontal positions draws attention to the potentially different governance experiences felt by producers within the same ESN. Comparing this to the perspective provided by Gereffi and Lee (2016) as depicted in Figure 2.1, a major difference is that producers experience different forms of vertical governance within one ESN. Also, across different LPSs within the same ESN horizontal governance experiences differ.
Figure 2.3: Local Productive Systems’ Experiences of Vertical and Horizontal Governance
Source: Author’s Construction
The actions of firms can be seen as the result of balancing pressures created by different governance forces. Understanding this negotiation process involves considering the power relations that exist between relevant governance forces and the priorities of businesses. According to Wilkinson (2003, p.13), The evolution of a productive system is . . . a dialectical process in which economic and institutional elements dynamically interact. Change is generated by developments in products and processes, and with changes in productive and power relationships both within and between productive
66 systems. These interact with the broader economic, social and political framework and both are modified in the process. Such forces can lead to the destruction or radical modification of productive systems and to the growth of new forms. Considering how productive systems develop involves questioning how firms interact with pressures from different governance forces. An ESN member business’ governance experience is based on its network and territorial location. Understanding how lead buyers link into this process is the focus of the empirical research in this study.
2.5) Lead Buyer Governance for Sustainable Production
With the broad understanding of production being organised across an ESN, this thesis focuses on exploring the role that lead buyers play in providing governance for sustainable production across their ESNs. Understanding how lead buyers govern producers working at different points in an ESN requires an exploration of governance processes taking place vertically and horizontally within a broad set of GPN connections. This section considers how past studies have looked at the role of lead buyers and shows how these conceptions do not adequately capture the role that retailers play when considering governance for sustainable production.
Producers are seen to experience different forms of governance based on their network and territorial locations. Lead buyers are seen as connecting to the producers through vertical pathways defined by the sourcing connections that make up the network structure and horizontal pathways, involving non-sourcing connections. As described above, the dominant approach which has been explored in past research has been vertical connections with upper tier suppliers. As will be discussed below, this has also been a dominant approach in lead buyers’ attempts to address challenges with sustainable production. In order to understand processes of governance for sustainable production across all stages of production, this study provides a broader exploration of how lead buyers connect vertically to all producers in their ESNs and also explores horizontal connections that take place outside of sourcing relationships.
2.5.1) Vertical Approach to Buyer-Driven Governance
While this thesis considers lead firms as potentially playing multiple roles in governance for sustainable production, the dominant approach to buyer-driven governance that has been taken by major brands and retailers and been explored by
67 researchers has been the introduction of standards. The following discussion considers how research looking at retailers’ vertical approaches at addressing challenges related to sustainable production can contribute to understanding the broader role that lead buyers play in governance for sustainable production across all stages of production.
Vertical governance is carried out by three groups of actors. The first is lead buyers. The second is intermediaries. The third is ESN producers who act as buyers for businesses producing the inputs that they use. Vertical governance can be seen to be shaped by public and social governance actors which often target lead buyers’ in attempts to promote sustainable production among suppliers.
The focus of this study is the governance role played by lead buyers. However, when looking at vertical pathways, it is important to consider the role of trade intermediaries and ESN producers as buyers involved in vertical micro governance relationships and the process of meso governance flowing through vertical pathways connecting raw materials to lead buyers. Bitran et al. (2006) highlight that in addition to their role providing coordination services, trade intermediaries are involved in controlling and governing portions of supply chains. While ESN producers are seen as the recipients of governance pressures created by lead buyers and trade intermediaries, these firms are the buyers for businesses that produce the inputs they use. The approach taken in this study incorporates these three types of firms as vertical governance actors and provides an empirical exploration of the types of roles they play in governance for sustainability.
Earlier work looking at inter-firm governance has often focused on factors specifically linked with businesses’ competitive positions (Gereffi and Memedovic 2003; Schmitz 2006). When considering governance for sustainable production, the factors being governed may fall outside elements directly related to a firm’s commercial position in the network. Outside of what may be considered as traditional product requirements of buyers, these forms of governance include official policies specifically aimed at controlling internal processes among suppliers, such as labour standards, in addition to other behaviours of buyers which may influence social and environmental outcomes of production practices.
Buyer governance for sustainable production in ESNs includes two aspects. One is a selective function which can involve making decisions that shape which producers become members of the network. This can be an outcome of design decisions. For
68 example, if a garment is made out of cotton, then cotton farmers will be in the ESN. A similar garment could be made with viscose, which would involve an entirely different set of raw material producers.
The second function involves governance through relationships in the ESN. This type of governance can involve setting standards or other techniques for influencing producers’ behaviour. This study focuses on the second governance function considering interactions between businesses that have existing connections within a particular ESN.
Garment sector lead buyers’ dominant approach to addressing labour issues has involved vertical pathways through the introduction of codes of conduct. This approach, often involving the introduction of private social standards, has been considered as part of a compliance based paradigm (Lund-Thomsen and Lindgreen 2014). In the garment industry, these codes have involved standards which are expected to be followed by factories responsible for garment production.
Governance Relationships and Mechanisms
Understanding how the relevant governance forces function in ESN relationships requires an interrogation of the structure of these relationships. At the end of the 20 th century, the acceptance of state–based (hierarchical) regulation declined in favour of market-based systems. Looking outside this dichotomy, Messner and Meyer-Stamer (2000) wrote that real world actors found an alternative to this solution by developing governance networks.
Messner and Meyer-Stamer (2000) described a typology of three governance mechanisms, including hierarchies, networks and markets. Hierarchy is seen politically as the rule of the state and also a way to look at the internal structure of companies. Messner and Meyer-Stamer (2000, p.2) described network governance as involving “negotiation between autonomous actors which are to a certain extent interacting on a permanent basis.” The third type of governance is seen as being market based. It is characterised by decision making based purely on prices, which are determined by supply and demand. These mechanisms of governance can be seen in the Gereffi et al. (2005) governance framework described above.
Hierarchical and network governance can involve diverse governance mechanisms in relationships where governance actors have some level of power over
69 producers. Mechanisms used can involve mandatory pressures and voluntary pressures. Both can involve incentives and sanctions. Furthermore, the mechanisms can be used to create pressure through vertical or horizontal pathways. Many forms of governance are moving from governmental, hierarchical structures to softer governance structures. These new structures, relying more on networks than hierarchical forms, often substitute normative structures over regulatory structures (Mörth 2004; Scott 2014). Mechanisms for spreading soft laws include reporting and coordinating procedures, monitoring and agenda setting (Jacobsson and Sahlin-Andersson 2006). These mechanisms can be used by diverse groups or coalitions of governance actors. Lobel (2012) discusses the idea of regulatory governance as a system that blends public and private governance. This thesis considers these theories to explore the ways that lead buyers provide governance to producers at different points in their ESNs.
Formal Governance Processes
Producers in ESNs are subject to multiple forms of formal governance. Formal governance processes can be mandatory or voluntary. The following discussion outlines some of the dynamics of how formal governance is implemented.
While markets have become global, most legislative power remains at the national or sub-national level. This creates challenges in terms of taking legal action to improve sustainability in ESNs. Nations often have laws covering domestic economic, social and environmental issues. However, national governments have varying abilities to enforce these laws.
While many issues related to sustainable production are not regulated by governments of countries that import products, many brands and retailers have developed and signed onto initiatives that involve standards for the production of the products they sell. Nadvi (2008, p.3) writes that global standards are at the core of various conceptions of governance, describing standards as “commonly accepted benchmarks that transmit information to customers and end-users about a product’s technical specifications, its compliance with health and safety criteria or the processes by which it has been produced and sourced.” Standards have been seen as a way that private actors have compensated for ‘government deficits’ developed in the 1980s (Gereffi and Mayer 2006; Mayer and Gereffi 2010). Standards can provide information to reduce transaction costs, as well as providing credence, or value, to customers related to qualities that may not be immediately visible (Nadvi 2008). Standards can be mandatory or voluntary.
70 Nadvi and Wältring (2004) provided a useful way to explore trends in global standards, dividing standards according to their scope, geographical reach, function, key drivers, forms, coverage and regulatory implications. Their typology is included in Appendix A. They also identified different ‘generations’ of environmental and social standards. The first generation involved companies developing their own codes of conduct. The second generation involved cooperation between businesses to develop sector wide codes of conduct. The third generation involves business developing international standards which began to be monitored by specialised third parties. The fourth generation involved standards led by NGOs. Finally the fifth generation involves tripartite collaboration between businesses, NGOs and the public sector. An overview of features of each generation can also be found in Appendix A. While these generations can be seen as chronological developments, past generations continue to exist in conjunction with more recent developments. These are all forms of standards which lead firms can use to promote sustainable production among members of their ESNs.
In the context of GPN analysis, Coe et al. (2008) outlined four important aspects of standards. These include their application to different sustainability criteria; their varying levels of enforcement structures; their varying sectoral, geographic and institutional contexts; and, the actors involved in production. They see these processes as innately geographical, which they explain at three levels. The first is that the actors involved in negotiating standards are often distinct at the local, regional, national and international levels. The second is that schemes can specifically cover products sold in certain territories or networks. The third is that the standards may apply to processes occurring at locations that are geographically distant from their development.
Nadvi (2008) questioned whether global standards are converging or diverging and found that quality related standards seem to be converging but the issue is not very clear when it comes to social and environmental standards. There is a growing significance of regional actors in standards formation. Nadvi (2008) also questioned the viability of long-term compliance with the imposition of externally created standards that are not socially embedded in the local context. He proposed that if outcomes from the standards can be shown to provide benefits then they may be more easily accepted. On the other hand, he wrote that if the outcomes are ambiguous or seen to be negative, then the standards may be “seen as a necessary but external ‘evil’ that has to be responded to, but that does not necessarily change local social perceptions on the values implicit in the
71 standard (p. 17).” Research by Barrientos and Smith (2007) has shown that while corporate codes have a role to play in improving labour standards, in their current form, they are not challenging existing commercial practices or embedded social relations that support poor labour standards in ESNs.
Nadvi (2008) wrote that while standards can be seen as a way to codify information and reduce transaction costs, some standards may not have this effect. Ensuring process standards are followed may require additional monitoring, especially for those that face high levels of risk for non-compliance. One element of enforcing sustainability standards are auditors. A significant problem with the auditing system is that companies often conceal their normal practices from auditors who visit infrequently, may not understand local conditions and may not be able to adequately measure enabling rights (Barrientos and Smith 2007; Barrientos 2008). Furthermore, companies that are subjected to frequent audits measuring different standards systems may experience monitoring fatigue (Mayer and Gereffi 2010). While most emerging research looking at the role of lead buyers in standards for manufactured products has focused on first tier suppliers (Ruwanpura and Wrigley 2011; Hoang and Jones 2012), Nadvi and Raj- Reichert (2015) have started to explore the impact of private standards for lower tier suppliers. Their study found that private standards were not reaching second tier suppliers in electronics GVCs.
Treating standards as rules that need to be enforced keeps them as external demands. An important factor to consider in implementing a standard is whether it includes training or sensitisation. Another factor is whose criteria it is based upon. While standards have the potential to improve the sustainability of businesses’ practices, they also have the potential to make conditions worse for the people they are intending to help or to exclude people, businesses and countries from participating in ESNs.
The use of standards as a governance tool by lead buyers can be seen as a vertical approach that involves trying to shape suppliers’ behaviours through sourcing requirements. This study involves questioning how the structure of the ESN’s vertical relationships shapes lead buyers’ ability to use standards to promote sustainable production for businesses in their ESNs.
72 2.5.2) Alternate Approaches to Buyer-Driven Governance
As retailers face pressures to address a broader set of sustainability issues, understanding the limitations of vertical compliance approaches, such as using codes of conduct, is important. A major limitation can be seen in the fact that those receiving vertical pressures are located in different institutional environments. In addition, alternate and potentially complementary approaches can be considered. One approach includes creating new forms of vertical governance relationships. Another approach involves developing horizontal, non-sourcing connections to LPSs that face sustainability challenges. These could involve lead buyers making connections to LPSs that are contributors to their ESNs and are involved in production practices the retailers’ consider as unsustainable.
Local Impacting Vertical
Bartley (2010) points out that compliance models often do not take into account the local context. He proposes that standards need to be adapted to the context in which they will be applied, It appears that it is not that universal standards cannot be applied in diverse settings. It is that doing so requires a great deal of work by actors in the chain of demands and assurances. . . Scholars of private regulation should abandon the image of global standards bypassing the state and transcending old configurations of power and instead attend to the fascinating ways in which standards are filtered, renegotiated, or compromised as they enter particular political economies (p. 27). This study considers how these dynamics play out within a case study.
Locally embedded norms within LPSs may influence producers’ reactions to all governance forces. The existence of embedded practices that can vary significantly across different LPSs is a major challenge for improving sustainability in ESNs. Even if lead firms or other external actors develop standards that could improve sustainability in ESNs, local norms and even cultural-cognitive institutions can affect workers’ willingness to adopt new practices which may be seen as more sustainable by outside groups. On the other hand, the opposite problem may occur. Local practices may be more sustainable and businesses may be facing pressures from global governance mechanisms to adopt less sustainable practices. For producers working in countries where other types of governance are weaker, embedded norms may be one of the strongest governance mechanisms.
73 Understanding the balances of power between different governance forces is crucial for understanding how they influence the development of productive systems. Focusing on the importance of horizontal governance dynamics within LPSs allows these dynamics to be explored when considering how lead firms’ can be involved in governance for sustainability.
Cooperation
Lund-Thomsen and Lindgreen (2014) discuss the emergence of a cooperation paradigm for addressing CSR challenges faced by companies trying to ensure their suppliers use sustainable production practices. This paradigm is considered as involving the development of closer alignment between the objectives of lead buyers and first tier suppliers. In contrast to the compliance based paradigm, which involves cutting off ties with non-complying producers, governance in the cooperative paradigm involves building longer term relationships with less pressure that can involve external actors such as NGOs and unions. Lund-Thomsen and Lindgreen (2014) see the cooperation paradigm as better aligned with the GPN framework, compared to the compliance based paradigm, which is seen to be more aligned with the GVC framework. This is due to the cooperative paradigm’s involvement of multiple governance actors, particularly those based in production locations.
The drivers of a cooperation paradigm included problems with the compliance model being identified by academic studies, activities of MSIs and recommendations by private sector consultants (Lund-Thomsen and Lindgreen 2014). Cases have been found where this type of model brought improvements to working conditions when lead buyers worked closely with garment manufacturers (Locke 2013). However, Lund-Thomsen and Lindgreen (2014) are sceptical of the potential for this approach to make a large change in how lead buyers engage with their suppliers. Addressing all sustainability challenges may not be possible through approaches which rely on agreement across different stakeholder groups.
Informal Governance Processes
While a wide variety of different formal governance mechanisms are used by governance actors, all of these are putting pressures on productive systems that are affected by numerous informal forces. These informal forces can be generated through
74 organisations that are involved in formal governance, such as informal pressure put on manufacturers by retailers’ expectations. Additionally informal pressures are created by structurally embedded forces. Examples of these pressures range from local norms about what it means to have a good job to different values people place on the natural environment to having to deal with fluctuations in the natural environment. These forces are felt by all producers and form the context in which they deal with formal governance pressures. When looking at how producers experience governance from their network positions in ESNs and their territorial positions in LPSs, it is important to consider how they experience both formal and informal governance through vertical and horizontal pathways.
Interaction between Multiple Governance Forces
The framework of considering production as taking place in ESNs where producers experience both vertical and horizontal governance pressures draws attention to the importance of considering interactions between multiple governance forces. The interactions can involve diverse governance forces coming together within a local context. Producers’ experiences are the outcome of these interactions. Understanding these interactions is crucial for understanding processes of governance for sustainable production. Ignoring these interactions and focusing solely on the actions of lead buyers cannot provide a full understanding of governance for sustainable production.
When considering the interaction of formal and informal governance, pressures from informal forces can impact the effectiveness of formal mechanisms. Problematic practices associated with sustainability challenges may be encouraged through formal or informal governance and the introduction of formal measures attempting to change existing production practices can be counteracted by potentially stronger forces creating pressure for stability. This process is explored in the empirical part of this study.
Another particularly important dynamic to consider for producers in ESNs is the complexity of relationships between governance forces with different origins. Governance pressures from different actors can be based on different conceptions of how a sustainable industry should function. By mixing diverse normative frameworks related to sustainability, the interaction of pressures created by diverse governance actors in the GPN surrounding an ESN may have unintended results, such as job loss. Lund-Thomsen
75 and Nadvi (2010) have argued for the need to explore the relationship between locally developed and externally imposed sustainably programmes.
Informal governance processes can also develop out of interactions between multiple governance forces. Amengual (2010) describes how public and private governance can address each other’s’ gaps. Samford (2015) explores how government policies can promote innovation for producers seeking to meet international standards. Considering these types of interactions can contribute to understanding the role that lead buyers play in governance for sustainable production.
Lead Buyers’ Connections to Lower Tier Producers
The compliance approach is based on vertical relationships that involve buyers having high levels of power over suppliers. When considering how lead buyers connect to the suppliers across an entire ESN, the relationships do not necessarily have the same power dynamics as those that exist between lead buyers and first tier suppliers, which has been the context of implementing many supplier standards. The relationship between lead buyers and lower tier suppliers is not well understood. The empirical investigation in this study explores the nature of relationships between lead buyers and all levels of suppliers in a case study ESN.
While a lot of research has focused on how lead firms govern first tier suppliers, research considering governance mechanisms for lower tier suppliers is limited. Nadvi and Raj-Reichert’s (2015) work on second tier suppliers begins to address this agenda. This study carries forward the exploration of how private governance impacts suppliers responsible for different stages of production. This thesis explores the role of buyer- driven governance connecting to lower tier producers from two perspectives. First, governance processes within the ESN are explored through vertical buyer-seller relationships. Second, ways that lead buyers can connect to members of their ESNs through alternate non-sourcing relationships are considered.
2.5.3) Lead Buyers and Governance for Sustainability across ESNs
The concept of buyer-driven GVCs has often been based on looking at vertical pathways. However, drivers related to sustainable production may work through multiple pathways. The conceptual framework presented in this chapter provides a way to explore the role of lead buyers in governance for sustainable production. This framework has two
76 main parts. First, diverse businesses are connected through multiple vertical relationships in an ESN. Second, producers can experience governance through vertical and horizontal pathways based on their embedded network and territorial location within an ESN and a LPS.
This framework allows for a consideration of the role of lead buyers from two perspectives. The first is considering the role played by lead buyers in providing governance through vertical pathways. These pathways involve governance moving down from lead buyers through multiple buyer-seller relationships to connect to raw material producers. The second involves considering any horizontal non-sourcing connections that lead buyers make directly with actors territorially grouped within LPSs. Considering lead buyers’ governance roles through both scales provides a multi-faceted understanding of governance processes within the ESN, which can allow for an exploration of how lead buyers connect to businesses at all points in the ESN.
The main relationship considered in past studies has been that between lead buyers and upper tier suppliers. This relationship has also been the focus of the dominant approach used by lead buyers’ early attempts to address challenges related to sustainable production. However, when considering sustainable production it is important to consider all stages of production. Lead buyers are now starting to consider a broader set of sustainability challenges that involve activities taking place at multiple stages of production. Seeking to explore the role of buyer-driven governance in sustainable production, this study considers lead firm governance as a process involving a larger set of producers than previous research which has looked at the role of buyer governance in garment production.
To understand this complex process, this research draws on the various theories which have been discussed in this chapter. While these theories might differ, it can be beneficial to consider them as complementary as opposed to conflicting. As described above, in order to bring together the multiple perspectives which have been brought out in past literature, Ponte and Sturgeon (2014) propose a modular theory of governance, which allows for the existence of diverse governance mechanisms shaping production. Explicitly considering a modular theory, they emphasise the role of multi-causality through combining multiple governance models to develop a broader understanding than can be achieved by focusing on a singular explanation. While providing an entry point
77 into a modular theory building process, Ponte and Sturgeon identify the need for future research to create an expanded modular theory of governance. The governance model in this study brings together multiple conceptions of governance to create such a modular framework, which has the breadth to consider questions surrounding governance for sustainable production across an ESN. Particularly this is accomplished by focusing on the intersection of vertical and horizontal governance pressures experienced by producers within diverse LPSs.
2.6) Conclusion
This chapter has presented the theoretical basis for the research. As has been discussed above, there is a lack of understanding regarding how decisions affecting sustainability are shaped across production processes for manufactured products that involve producers situated in diverse locations and responsible for different sets of production activities. The bodies of literature considering globalised production as taking place within GPNs and GVCs have potential to provide insight into processes of governance for sustainability. However, past research has concentrated on governance between lead buyers and upper tier suppliers and placed insufficient focus on exploring how lead firms interact with producers at all stages of production, which is a critical question when seeking to understand processes of governance for sustainable production.
This thesis addresses this gap by looking at how all stages of production are governed, guided by insights related to governance provided by research using the GPN and GVC frameworks. Exploring governance for production carried out by producers connected through an ESN involves considering how these businesses are placed within the network. Businesses’ experiences of governance are seen as being shaped by their vertical (network) locations and horizontal (territorial) locations within LPSs.
Governance is seen as flowing vertically through buyer-seller links from raw material to final assembly. Multiple vertical pathways exist in the same network and firms can simultaneously be part of multiple vertical pathways. These pathways are the framework through which private governance, in the form of sourcing requirements, flows.
As highlighted by the GPN framework, producers are embedded in territories. Considering businesses in ESNs as working within distinct LPSs allows for an
78 exploration of horizontal governance for producers that work within the same institutional context and often use similar practices that can be connected to sustainability challenges. Horizontal pressures experienced within a LPS can be seen to interact with any vertical governance pressures producers experience from their customers. These territorial groupings can also provide a focus for lead buyers’ attempts to provide governance for sustainable production.
As powerful lead buyers are experiencing pressure to address sustainability issues in their ESNs, this chapter has provided a framework through which the way that lead buyers connect to producers across their ESNs can be understood. This framework is used through the rest of this thesis to explore the role of lead buyers in governance for sustainable production in the empirical case of UK retailers sourcing cotton garments from India. Specifically, this framework is used to explore the process of buyer-driven governance when considering production processes taking place across a fragmented set of producers linking cotton production to final garment assembly. Lead buyers’ vertical and horizontal connections to different stages of production are considered across this empirical case. The following chapter provides an overview of the research design and methodology.
79 3: Research Design and Methodology
3.1) Introduction
This chapter provides an overview of the design of this study and the research methods that were used. In order to address the lack of understanding about lead buyer governance for sustainability, particularly when considering the early stages of manufacturing and production of raw materials, this study considers governance experiences within a case study ESN. The research focuses on a case which involves UK retailers’ ability to govern producers involved in all stages of making cotton clothing in India.
Empirically, this case is considered from two perspectives. The first involves looking at how governance flows vertically, moving from lead buyers across multiple buyer-seller relationships to raw material production. The second perspective considers horizontal governance by focusing on territorial grouping of producers within LPSs. While the case study ESN involves numerous LPSs responsible for production within India, this thesis considers five of these LPSs in more depth to provide a comparative case study of different horizontal governance experiences within the larger case. These two perspectives, which provide insight into how governance flows across the ESN, are then brought together to explore the roles that lead buyers play in governance for sustainability for all stages of production from their place at the top of the ESN.
While details about the findings of this study are provided in subsequent chapters, an overview of how the research was carried out is provided below. Section two describes the research design. Section three covers the approach that was used. Section four provides an overview of the data collection process. Section five explains how the analysis was conducted. Section six describes challenges and limitations related to this study. Finally, section seven provides a conclusion.
3.2) Research Design
This study explores the process of buyer-driven governance when considering sustainability challenges involved throughout fragmented production across an ESN. The research design involves (a) analytical framing of the research and (b) exploring an empirical case study to provide insight into how vertical and horizontal governance are
80 experienced by producers. This section outlines the philosophical approach taken in this study, the questions asked to carry out this research, the conceptual framework adopted, how the case was chosen and an overview of the structure of the case study network.
3.2.1) Research Philosophy
This research takes a critical realist approach to understanding sustainable production and the governance processes involved in shaping how production takes place across an ESN. This philosophy was developed by Bhaskar (1975) and interpreted and developed by subsequent writers (Archer et al. 1998). The approach used in this study draws mainly from Sayer’s (1992; 2000) conception of critical realism.
Realism sees the world as being made up of real objects and structures that when perceived by humans can only be discussed based on human interpretation (Sayer 1992). Sayer (1992) emphasises the importance of researchers taking a critical approach. This includes identifying the existence of false beliefs, which involve humans misconstruing reality, and carrying out “critical evaluation of their associated practices and the material structures which they produce and which in turn help to sustain those practices (Sayer 1992, p.40).” He provides an overview of his critical realist philosophy through the eight points in Figure 3.1.
81 Figure 3.1: Sayer’s Signposts Regarding the Nature of Realism 1. The world exists independently of our knowledge of it. 2. Our knowledge of that world is fallible and theory-laden. Concepts of truth and falsity fail to provide a coherent view of the relationship between knowledge and its object. Nevertheless knowledge is not immune to empirical check, and its effectiveness in informing and explaining successful material practice is not mere accident. 3. Knowledge develops neither wholly continuously, as the steady accumulation of facts within a stable conceptual framework, nor wholly discontinuously, through simultaneous and universal changes in concepts. 4. There is necessity in the world; objects -whether natural or social- necessarily have particular causal powers or ways of acting and particular susceptibilities. 5. The world is differentiated and stratified, consisting not only of events, but objects, including structures, which have powers and liabilities capable of generating events. These structures may be present even where, as in the social world and much of the natural world, they do not generate regular patterns of events. 6. Social phenomena such as actions, texts and institutions are concept- dependent. We therefore have not only to explain their production and material effects but to understand, read or interpret what they mean. Although they have to be interpreted by starting from the researcher’s own frames of meaning, by and large they exist regardless of researchers’ interpretations of them. A qualified version of 1 therefore still applies to the social world. In view of 4-6, the methods of social science and natural science have both differences and similarities. 3 7. Science or the production of any other kind of knowledge is a social practice. For better or worse (not just worse) the conditions and social relations of the production of knowledge influence its content. Knowledge is also largely – though not exclusively- linguistic, and the nature of language and the way we communicate are not incidental to what is known and communicated. Awareness of these relationships is vital in evaluating knowledge. 8. Social science must be critical of its object. In order to be able to explain and understand social phenomena we have to evaluate them critically. Source: (Sayer 1992, pp.5–6)
Conceptualising Reality
Bhaskar (1975) distinguishes between transitive and intransitive dimensions of knowledge. The world has objects, which can be physical processes or other social phenomena, which form the intransitive dimension and exist independently of the discourse surrounding them (Sayer 2000). The transitive dimension is formed by theories and discourse (Sayer 2000).
Critical realism distinguishes between the real, the actual and the empirical (Sayer 2000). Real connotes items that exist, which can be natural or social. Real involves objects, their structures and their powers. Powers involve “capacities to behave in particular ways, and causal liabilities or passive powers, that is, specific susceptibilities to certain kinds of change (Sayer 2000, p.11).” While the real involves understanding
82 capacity, the actual involves what happens when powers are activated. Finally, the empirical involves the world of experience.
The real world creates impacts that are independent of how people perceive them. For example, while perceptions of the impacts of production can differ (as was discussed in Section 2.2), production has actual impacts. How these effects are understood depends on how humans perceive them. Some of these impacts can be measured and others involve more complex outcomes that are not easy to measure or identify.
Humans are seen to construe their experiences of reality. Individuals experience life through “using cognitive and conceptual resources of particular communities (Sayer 1992, p.24).” Shared meanings and understandings can be developed through inter- subjectivity. Sayer (1992) explains how systems of meaning are negotiated through processes of social interaction. These systems become conventions which can be a reference point for understanding actions of individuals. Powerful actors can have some influence over monitoring these meanings. However, this is bounded by the realm of the possible as human perception is based on experiences of real intransitive objects and structures.
Understanding the importance of considering social constructs when researching social issues is key for conceptualizing sustainability issues. As discussed in Chapters 1 and 2, what constitutes a sustainability challenges can depend on perception. Sayer (1992) sees the job of the social scientist as exploring both structures and how actors interpret these structures. Understanding social phenomena is by no means just a question of understanding concepts in society and the meanings of practices . . . we also need to know under what conditions, to what extent and with what effects they have been used. Social phenomena have a crucial material dimension and are closely associated everywhere to relationships with nature, both in its virgin and its artificially transformed states (Sayer 1992, p.28). In this process, researchers must be critical when considering the dynamics of the social phenomena they are exploring.
Making sense of systems requires considering the item of interest at the right level. Sayer (1992) provides the example of considering how water can put out a fire. In contrast, if the water were thought of as its component parts of hydrogen and oxygen,
83 these are flammable substances. Considering water as a whole provides a unit of analysis that is more than the sum of its parts. The social world can be seen in the same way.
Complex objects that cannot be understood by being broken down into their component parts are said to have emergent powers (Sayer 1992; 2000). Objects can be considered as structures or parts of structures. Structures are defined as “sets of internally related objects or practices (Sayer 1992, p.92).” The causal power of structures emerges from internal relations of their constituent parts. A consequence is that the world can be considered as being composed of different strata which involve considering events at different scales. This provides the benefit of being able to focus on the stratum of interest without having to understand all the lower level strata. To explore the actions of a human, a researcher does not need to explore the individual’s inner biological processes. However, Sayer (1992, p.120) warns that, “The fact that individuals and institutions operate in many different structures also creates difficulties for deciding by virtue of what structure a particular power exists.”
This study focuses on production as taking place within an ESN which allows for a consideration of a wide set of governance forces which may not be considered if one were to focus on production decisions made by an individual business. The analysis in this study considers experiences within an ESN at two levels. One level focuses on the experiences of individual businesses involved in production, specifically considering their network and territorial locations. The other level considers groupings of producers in LPSs, which are seen as integrated systems containing interrelated actors that respond collectively to pressures.
Causal Explanations
Easton (2010, p.121) writes that “the most fundamental aim of critical realism is explanation.” Sayer (1992) highlights the importance of exploring causal mechanisms in critical realist analysis. In justifying the importance of explanations, Sayer (1992) distinguishes between social science focusing on being able to develop predictions versus explanations. Predictions are used to establish an expectation for something to happen. Causal explanations “tell us what makes things happen (Sayer 1992, p.134).” This study draws from critical realism in its focus on identifying causal mechanisms. The focus is on understanding the role of multiple governance factors in shaping current production practices.
84 A critical realist causal explanation implicitly or explicitly includes multiple parts and does not simply cite a cause and an effect. In addition to identifying the immediate causes of events, explanations must involve the necessary conditions for the existence of a mechanism (Sayer 1992). Causation can be described not only by physical triggers but also by reasons that prompt people to act in certain ways (Sayer 1992; 2000).
Sayer (1992) depicts the complexity involved in understanding causal mechanisms. When seeking to understand causal mechanisms, the nature of the objects involved must be considered, including their structure, composition and properties. Additionally, the operation of the mechanisms’ powers or liabilities must also be considered. To understand what gives a mechanism power, mechanisms possessed by an object can be investigated by observing both the way the mechanisms work and the structure of the object. Sayer (1992, p.114) describes the interdependencies involved in this process as follows. In examining such accounts, it is found that the search for relevant causal power and liabilities requires a clarification of the kinds of abstraction that are used, in order to improve the qualitative understanding of the processes, so that condition and mechanisms can be identified. So causal analysis is usually closely tied to abstraction and structural analysis and hence explanation to description. There is also an interdependence between all of these and the interpretation of meaning. Actions are not only meaningful; they have causes and effects. As reasons can be causes and structures can be concept-dependent, causal, structural and interpretive analysis are interdependent. In different contexts, the same mechanism may product different outcomes and conversely the same type of outcome may have different causes.
One factor to consider when conducting causal analysis is that the form of a structure can enable certain outcomes. Sayer (2000) provides the example that a hierarchical structure can enable delegation. Whether that power is activated depends on the conditions. Also the outcome of the use of that power can depend on other conditions. Sayer (2000) also points out that social processes usually depend on actors’ interpretations and outcomes can occur that are unacknowledged or unintended.
In a realist approach, causation is not seen as a regular predictable series of events or generally able to be explained by social laws. Finding commonality between occurrences of observations may not imply a connection. Finding an explanation requires
85 identifying causal mechanisms, determining how they work and if they have been activated, as well as considering the conditions of activation.
When seeking to understand causal mechanisms, critical realism sees a divide between closed and open systems (Sayer 1992). Closed systems can be seen to have predictable results as all conditions can be regulated. Open systems, which are those that are usually the topic of social science can involve a multitude of changing factors that may not be perceived, yet can change the outcomes of causal mechanisms.
Sayer (1992) refers to identified regularities between events, such as what is often produced by quantitative analysis as instrumentalist laws. He sees them as providing a way to calculate the dimensions of a system and working best in a closed system. These serve a different function than causal laws.
To identify causal responsibility in complex open systems, a contrasting case can be considered or a series of questions can be asked. Sayer (2000) provides a set of characteristic realist questions which involve considering historical developments, the mutual necessity of different structures and understanding how an object’s properties allow it to have certain impacts. These questions are about necessity rather than regularity and help to distinguish between what can be and what must be under certain preconditions. The questions can involve considering alternate outcomes. The questions in this thesis involve considering how to understand the structures involved in organising production processes and how producers’ positions within these structures influence the way they experience governance pressures.
Sayer (2000) describes that the answers to critical realist questions are dependent on how objects are conceptualised. Asking the right questions facilitates sharper conceptualisations. As described in Chapter 2, this thesis seeks to understand governance processes by conceptualising production as taking place in an ESN.
Sayer (1992) sees the development of existential hypotheses as an important component of theories. These are seen as involving the identification of objects and only need a single instance to be confirmed. In Chapter 6, the analysis involves developing existential hypotheses related to mechanisms that are involved in shaping buyer governance in buyer-seller relations.
86 Realist approaches seek to identify generative mechanisms and conditions that produce events. This type of understanding can help create change. By providing information on the necessary conditions both for the existence and the activation of the mechanism, and in some cases on the way conditions mediate its effects we increase the chances of either removing or changing the mechanism, preventing its activation or suppressing the damaging effects of its exercise (Sayer 1992, p.135). When considering how change happens, it is important to understand both the material and non-material aspects. When considering how productive systems are organised in this study, change in these systems is considered as potentially being constrained or facilitated by both material and non-material structures.
Critical Realist Research Methods
Critical realist methodology distinguishes between intensive and extensive research (Sayer 1992). Intensive approaches explore relationships in depth and are useful for developing causal explanations. These approaches are seen as suited to critical realist research. Alternately, extensive approaches involve looking at larger groups and are suited to identifying patterns but less suited to developing causal explanations.
This thesis’ use of a case study approach is an example of a critical realist intensive approach. Wynn and Williams (2012) describe how through exploring causal mechanisms critical realist approaches must focus on understanding existing outcomes. Applying this principle, this research looks at the organisation of production practices fragmented across an ESN and explores why these practices are being used.
Sayer (1992, p.244) describes how conducting research that is open to establish the focus of who and what will be studied in an ongoing process allows the researcher to learn from each object and contact to develop new links and “build up a picture of the structure and causal groups of which they are part.” This research remained open to this idea of learning throughout the data collection process in order to develop an understanding based on structures that were not apparent before the research began. To enable this process, as described below, this study used institutional ethnography as its method of inquiry which involves the research attempting to learn about the processes being explored from the perspectives of interviewees along with material artefacts which give insight into the systems being studied.
87 This study is focused on exploring causal mechanisms behind the actions carried out by industrial producers. The purpose of the exploration is to understand the pressures faced by businesses involved in production processes. This includes how governance pressures are created for these businesses based on the actions of governance actors and structurally embedded forces which constrain the options available.
The approach in this study considers both structure and agency by looking at producer organisations as having freedom to make choices while working within the constraints of GPN governance forces. The options producers consider for organising production practices within their facilities is shaped by their perceived range of options. These perceived options are based on the real intransitive elements of productive systems and inter-subjective understandings of the structures that make up these productive systems.
Understanding challenges surrounding sustainable production requires more than just considering the physical possibilities for how production can take place. It requires understanding the systems which shape how technology is organised. This study focuses on exploring the structure of productive systems and the causal mechanisms involved in leading to different outcomes.
3.2.2) Research Questions
To explore the main research question of, “to what extent is buyer-driven governance sufficient for promoting sustainable production across fragmented production processes in an ESN?”, four sub-questions have been considered. The first sub-question is conceptual and the other three are empirical. These sub-questions are:
1. How can the organisation of production be conceptualised to explore how lead buyers are involved in governance for sustainable production across fragmented production processes?
2. What is the structure of the ESN linking UK retailers to all stages of Indian garment production?
a. Who are the lead buyers and how do they attempt to promote sustainable production?
b. Who is involved in production, how are fragmented producers linked together and where are they located?
88 3. To what extent do vertical governance pathways allow lead buyers to control production processes in their ESNs?
4. How can experiences of horizontal governance within LPSs provide insight into buyer-driven governance for sustainable production in an ESN?
The first question was explored in the previous chapter which outlined the conceptual framework used in this study. This framework outlines how producers can be seen to be connected through an ESN, with businesses working within distinct LPSs. This framework is briefly reviewed below (in Section 3.2.3) as it shapes how the study is designed.
The second question explores the structure of the ESN. The main characteristics of four features of the case study ESN are explored. These features are the characteristics of the lead buyers, the characteristics of the suppliers, the way that the businesses are connected to each other and where the businesses are located. The characteristics of these four features shape the structure of the network, which is seen as creating the framework through which inter-firm governance can flow. These features are described below in Section 3.2.5 and Chapters 4 and 5 focus on answering sub-question two.
The third and fourth sub-questions provide two complimentary perspectives for considering how governance operates across the ESN. Looking at these sub-questions provides a way to explore vertical and horizontal governance.
The third question considers how governance flows vertically down through the network. This is based upon the understanding of the structure of the network developed through the first and second sub-questions. This question aims at understanding how governance through sourcing practices creates pressures for producers at all points in the ESN. Chapter 6 explores this question.
The fourth question considers how producers’ experiences of key governance dynamics within their territorially embedded locations in LPSs can help with understanding how lead buyers can play a role in governance for sustainable production. As this case involves a large number of production activities shaped by an even larger group of governance actors and forces, this question is addressed by considering governance processes surrounding a selection of five LPSs. These five LPSs are responsible for different stages of production and have each faced a different key sustainability challenge. The fourth sub-question is addressed in Chapter 7.
89 Considering these four sub-questions together provides a way to understand the main question in this study. Bringing together insights from exploring vertical and horizontal governance processes found in the case study facilitates an examination of the extent to which lead buyers can play a role in governance for sustainable production across different points in their ESNs. This is discussed in Chapter 8.
3.2.3) Conceptualising the Network
As discussed in Chapter 2, in this study, all businesses contributing to production for an item are seen as connected through an ESN embedded in a broader GPN. The GPN includes a diverse set of governance actors and the framework highlights that producers experience network, territorial and societally embedded pressures (Hess 2004; Coe and Yeung 2015). Understanding sustainable production across an ESN involves considering the interrelationships that take place between diverse producers across fragmented production processes involved in the production of a final product from raw material to final assembly, which often occur in different territorial and network locations.
In this study, lead buyers are seen to sit at the top of an ESN which involves numerous vertical pathways through which products can be involved in during the production stage of their life-cycles. Producers in these vertical pathways are considered as being situated in LPSs that involve distinct configurations of horizontal governance. The roles of lead buyers in providing governance for sustainable production are seen to be shaped by how producers experience the interaction of vertical and horizontal governance from their places within the ESN and within an LPS.
3.2.4) Choosing the Case
The case considered in this study is the Indian branch of the ESN responsible for producing cotton clothing for major UK retailers. The ESN includes all stages of production taking place within India. Additionally, to explore horizontal governance, five LPSs were selected from within the case study network. These decisions were made through theoretical sampling, which is an approach suited for focusing on cases that are useful for expanding an understanding of relationships and logic within theoretical constructs (Eisenhardt and Graebner 2014). The following paragraphs explain the choices of focusing on the cotton garment industry, sourcing activities of major UK retailers, production in India and the selected five LPSs.
90 Choosing cotton garments
Making cotton clothing involves cotton production, textile manufacturing and garment manufacturing. These industries are all important to the world economy. Specifically, textiles and clothing accounted for 4.3% of merchandise trade in 2013 (WTO 2014). While cotton does not represent a large value of world exports, making up only 0.11% in 2013, (UNCTAD 2015), cotton farming has a major impact globally with the production of 120 million 480 lb bales in the 2013/14 season providing employment for millions worldwide. All three of these industries have been associated with diverse sustainability challenges, which involve social, environmental and economic implications. These range from small scale farmers incurring high debt levels to pollution generated as a by-product of dyeing processes to exploitative working conditions in garment manufacturing.
Cotton garments are also very important to the UK’s economy. Consumption of clothing and footwear has been rising and in 2012, weekly household spending on clothing and footwear in the UK increased to £23.40 from £15.30 a decade earlier (ONS 2013).11 At these levels clothing represented 4.8% of UK weekly household spending in 2012 (ONS 2013).
The proportion of clothing imported into the UK has grown progressively. While UK spending on clothing and footwear had an average annual increase of 3.3% from 1999 to 2009, a report put out by Oxford Economics (2009) commissioned by the British Fashion Council estimates that nominal gross value added of UK fashion manufacturing decreased by about two thirds from 1995 to 2009. In 2011, UK total clothing imports were £19 billion with 41% of this figure (£7.8 billion) being made up by items identified as being cotton (UN Statistics Division 2015).12
A benefit of looking at cotton clothing is that this case represents an example of a manufactured product with a relatively simple set of production processes. The governance challenges that are found to occur during cotton garment production would
11 These figures are adjusted for inflation. 12 The importance of cotton for imported garments changes with fashion trends. Also, increased cotton prices may encourage substitution by other fibres.
91 likely be stronger for products relying on more complex processes involving multiple component parts, such as electronics or even clothing made from synthetic fibres. Nevertheless, the complexity in this case shows numerous challenges for retailers attempting to provide governance for sustainable production for members of their ESNs.
Choosing the Top 20 UK Clothing Retailers
As discussed in Chapter 2, retailers have been seen as lead firms governing activities of businesses involved in producing their wares. While retailers are a diverse group which includes both small and large businesses, the bulk of UK garment sales are carried out by large retailers. The top 20 clothing retailers’ share of consumer spending on clothing and footwear in the UK accounted for 58% of the market share in 2012 (Mintel 2013).
All twenty retailers have references to promoting sustainability in their communications material (see Chapters 4 and 8). Businesses within the top twenty retailers are likely to have more resources involved in addressing sustainability of their production than many of the smaller businesses in the UK’s garment industry. These larger businesses often have staff specifically focused on sustainability concerns and have the resources to have in-depth involvement with internationally located producer businesses. In their purchasing practices, the leading retailers are all making at least some efforts towards promoting adherence to ensuring a specified level of working condition standards are upheld by garment factories. Also many of them have started to make efforts at promoting sustainability throughout multiple stages of production, with the efforts of some reaching down to the level of cotton production. Considering these businesses that are making an effort at addressing these issues and identifying challenges they face, provides a way to understand governance processes connecting retailers to their ESNs.
Choosing India
The cotton garment industry’s ESNs involve supplier firms working in multiple countries with complex governance dynamics that could be explored to draw out a better understanding of governance for sustainable production. Looking at suppliers based in India provides a case study location that houses major industrial sectors which specialise
92 in all stages of creating cotton garments, from cotton production through multiple stages of manufacturing leading to final garments. This, therefore, provides a manageable case study given the limitations of time and resources available to a PhD student.
The Indian apparel manufacturing industry relies heavily on domestically manufactured cotton. Most units mainly use 100% cotton fabric with between 60-65% of the total fabric used by Indian garment manufacturers being cotton (AEPC 2009). Since the extensive deregulation that took place in India during the mid-1980s, the country’s garment export industry has grown rapidly. India is the 4th biggest supplier of clothing imports to the UK (UN Statistics Division 2015). In 2011, India produced 11% of the UK’s cotton clothing imports (UN Statistics Division 2015). Overall, apparel contributed 4.7% of the value of India’s exports in 2013 (UN Statistics Division 2015).
All stages of cotton garment production are part of industries that are important for India. India is the world’s second largest exporter of cotton yarn and textiles and the fourth largest exporter of clothing (Malik 2011; WTO 2011). Textiles contributed 5.10% of the value of total output in India in 2011-12 (Central statistics Office 2014). Two thirds of India’s textile product exports go to the US and EU (Ministry of Textiles 2011). While at the time of the design of this study (2012), India was the second largest global producer of cotton, in the 2014-15 growing season, India surpassed China to become the world’s top producer (USDA 2015c).
Choosing Example LPSs within the Broader Case
This study takes a novel approach to GPN focused research on the garment industry by examining all the businesses within an ESN, rather than focusing on the upper tiers alone. As information on the specific set of businesses involved in this ESN is not entirely clear (which is representative of the lack of transparency throughout the network that is discussed in Chapter 6), the study focused on looking at producers within LPSs that were identified as contributing to the chosen ESN.
In order to identify the actors in the case, a process of mapping members of the ESN was carried out. The first step to mapping the ESN involved identifying the production processes involved in making cotton garments. The process can be split into
93 six main stages. These are cotton farming, cotton ginning, yarn spinning, textile manufacturing, garment manufacturing and wet processing (see Figure 3.2).
94
Figure 3.2: Production of Cotton Garments
Source: Author’s Construction
95
Cotton is grown on shrubs. Fluffy white fibres are harvested from bolls (seed bearing pods), which open at the end of a growing season. Ginning removes seeds and waste matter from the fibres. Both the seeds and the fibres have uses. Cotton fibres are used for spinning yarn. Cotton seeds can be used to make cottonseed oil for human consumption and the cottonseed meal which is left can be used to feed livestock.
To make yarn, cotton fibres are aligned and twisted. These yarns can be used to knit or weave textiles. Then textiles are cut into pieces which are sewn into garments, which may have additional accessories attached, such as zippers or buttons and may have embellishments, such as beadwork or embroidery. During the production processes, wet processing involves various chemical treatments, being applied at different stages to facilitate manufacturing processes and provide different fashion finishes. Wet processing includes bleaching, dyeing and other chemical processes, which can be done to the yarns, textiles or garments.
After identifying the main stages of manufacturing, the next step in mapping the ESN was identifying the businesses that are involved in carrying out each stage in India. Tracking individual relationships is difficult because companies may want to keep their suppliers confidential. Additionally, buyers or suppliers of respondents may not wish to participate in the study. As mapping connections between individual businesses was outside the resources of this study and the approach to this research involves considering governance experiences in LPSs, the mapping process focused on identifying connections between LPSs which are linked through multiple buyer-seller relationships. The mapping process was used to identify LPSs from which respondents were selected.
Two main techniques were relied upon for the mapping exercise that was carried out. One was looking at industry statistics related to production and trade within India. The second approach which supported findings from the available industry level data was to ask participants about identities and locations of businesses involved in carrying out the various stages of production for cotton garments produced in India and sold to UK retailers. This included asking identified ESN producers about their buying and selling relationships as well as asking knowledgeable respondents about patterns they have observed.
While the field work conducted for this study focused on major areas contributing to the case study ESN. To better understand issues related to horizontal governance, during 96 the analysis stage, five LPSs within the broader case were selected for a more in depth consideration. These LPSs were chosen to represent different stages of cotton garment production. The selected cases are garment production in Delhi, wet processing in Tirupur, spinning yarn in Tamil Nadu, cotton ginning in Gujarat and cotton farming in Gujarat.
These LPSs involve sets of producers which face common sustainability challenges and the exploration of each LPS is focused on looking at governance surrounding a key sustainability challenge. The challenges are as follows: the use of child labour in Delhi garment manufacturing, emissions of untreated waste water from Tirupur wet processing units, poor working conditions at Tamil Nadu spinning mills, poor working conditions at Gujarat ginning units and low yields for cotton farmers in Gujarat which limited farmers’ abilities to generate income.
These LPSs were chosen because they are all important producers involved in specific stages of inputs into cotton garment production. Figures 3.3 to 3.5 show major production centres related to the production of cotton clothing in India. Figure 3.3 shows the major garment production clusters in India. Figure 3.4 shows levels of production of textiles products across India’s states. This figure compiles the production of yarn, textiles and wet processing.13 Figure 3.5 shows cotton production across India. In these figures, it can be seen that the regions selected house large numbers of producers.
13 As will be discussed in more detail in Chapter 5, these activities are sometimes carried out within integrated firms and sometimes carried out by fragmented firms. However, industry data available groups these activities together.
97 Figure 3.3: Major Garment Production Clusters in India
Source: Author’s Construction, data from (AEPC 2009 )
98 Figure 3.4: Spinning, Weaving, Finishing and Other Textile Factories in India
Source: Author’s Construction, data from (Central Statistics Office 2015a )
99 Figure 3.5: State-Wise Cotton Production 2013-2014
Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
100 As can be seen in Figure 3.3, Delhi garment production is made up of three smaller clusters in the National Capital Region (NCR), which include Noida, Gurgaon and Okhla. Combined, the number of units found in the NCR would make it the sixth largest cluster in terms of units. The three clusters’ export levels range from 78%-85% of production and together the NCR is responsible for approximately 29% 14 of India’s garment export turnover (AEPC 2009).
Tirupur houses a garment cluster with 2500 units that is responsible for almost 80 per cent of India’s knitwear exports (AEPC 2009; Jayanth et al. 2011). Some of the garment manufacturers have in house wet processing facilities and others rely on independent businesses to carry out wet processing activities, which include dyeing and bleaching. Interviews with industry associations in Tirupur revealed there were approximately 500 members in a local dyers’ association and 150 in a local bleachers’ association (I61-R70-W; I65-R74-W). The size of this industry can be seen by looking at Figure 3.3 which shows the size of the garment cluster in Tirupur and Figure 3.4 which includes independent wet processing units as among the activities contributing to the level of textile production.
Approximately 46% India’s yarn spinning capacity is in Tamil Nadu (Tamil Nadu State Planning Commission 2013). The scale of yarn spinning in Tamil Nadu is shown in Figure 3.4 which includes yarn spinning together with other textile manufacturing activities.
Finally, the last two LPSs considered are connected to each other as they are related to cotton production in Gujarat. The scale of this industry can be seen in Figure 3.5. Gujarat is responsible for approximately 32% of India’s ginned cotton output and 26% of cotton production (Central Statistics Office 2015b; Directorate of Economics and Statistics 2013).
The existence of sourcing connections between these LPSs was indicated through interviews carried out during the field work conducted for this study as respondents were
14 This percentage is from the total export turnover generated by a set of units representing 95% of India’s garment production. The producers not considered in this figure are generally focused on the domestic market (AEPC 2009).
101 asked about locations of buyers and suppliers. The choice of sustainability challenges was made based on reviewing available literature in conjunction with considering sustainability related issues that were identified as local challenges by interviewees. A more detailed discussion of how production is distributed across India is provided in Chapter 5.
3.2.5) Exploring the Structure of the Case Study ESN
As already discussed, in order to understand challenges related to sustainable production, the analysis in this study considers production as being carried out by a set of businesses connected through an ESN involving buyer-seller links and working within identifiable LPSs. Looking specifically at the selected case study ESN provided the focus of the exploration of governance processes in this research. In the analysis, four features involved in shaping the structure of the ESN were considered as shaping flows of governance. These include the identity of the lead buyers, the types of businesses involved in the network as suppliers, the types of links that connect businesses in the network and how all businesses are located within a LPS. General characteristics of each of these features are provided below, while Chapters 4 and 5 provide a more in depth exploration of the case.
The first feature considered is the identity of the lead buyer. Lead buyers can be different types of businesses with different priorities related to engaging with members of their ESNs. For the case study ESN, UK retailers are lead buyers. These retailers experience high levels of pressure to ensure the products sold in their name are made sustainably. Under this pressure, these retailers attempt to shape production practices using multiple strategies. Retailers’ place at the top of the ESN is depicted in Figure 3.6. A discussion of the case study retailers is provided in Chapter 4.
The second feature of the ESN considered is the types of suppliers. A major part of the identity of supplier businesses in the network is the type of production practices each business is responsible for. Within this ESN, businesses can have different levels of vertical integration. For some suppliers, multiple stages of production are found within one facility and others are responsible for one stage of production. This results in different types of businesses being responsible for the same production activities in different parts of the ESN. This variety can be seen in the different heights of producers depicted in Figure 3.6, which represent individual firms with different levels of vertical
102 integration. Other features of businesses that can be important include but are not limited to the sizes of producers and the way that businesses are internally organised. The types of suppliers found in the case study network are discussed in Section 5.2 in Chapter 5.
The third feature considered is the type of links that connect businesses across the network. These links can be seen to involve multiple vertical pathways which represent different arrangements for production taking place within one ESN. Levels of integration and fragmentation shape the number of producers that make up the vertical paths. When looking at the producers outlined in red in Figure 3.6, it can be seen that fewer individual businesses are involved in production when vertically integrated manufacturers are involved compared to the number of producers involved in highly fragmented production as depicted by the producers outlined in green. The number of links involved in a vertical pathway can be seen as characterising different lengths for different paths.
Another key aspect of the links in this network is the types of relationships they represent. The nature of these buyer-seller relationships is the framework through which buyer-driven governance operates. These links can exhibit multiple features which are discussed in more depth in Chapters 5 and 6 based on the findings of the empirical case.
The fourth, and final, feature that is considered when looking at governance for sustainability in this case is the businesses’ territorial locations. Considering businesses as working within a specific LPS can be critical for understanding sustainability challenges in production. Knowledge of the territorial distribution of producers allows for an exploration of the role of horizontal governance that producers experience. The way that producers within the ESN are grouped within different territories is depicted by being located within distinct LPSs in Figure 3.6. These LPSs have different features in different parts of the country. Section 5.4 of Chapter 5 highlights some key differences which can be seen when looking at features of businesses responsible for the same stage of production yet located in different LPSs. Considering the different dynamics found within LPSs is key to the exploration of horizontal governance which is discussed in Chapter 7.
103 Figure 3.6: Depiction of Four ESN Features
Source: Author’s Construction
104 3.3) Approach
This section explains the approach taken in this study. This research considers a case study ESN in order to learn more about how retailers govern producers responsible for all stages of production of cotton clothing. The method of inquiry in this study follows the techniques of institutional ethnography (Devault 2006; Campbell and Gregor 2002). This section provides a justification for the use of a case study and methods derived from institutional ethnography and concludes by providing an overview of the main research activities.
3.3.1) Using a Case Study with Five Embedded Comparative Cases
This study uses a case study approach to explore an ESN. Yin (2009, p.18) defines a case study as an empirical inquiry that investigates a contemporary phenomenon in depth and within its real life context, especially when the boundaries between phenomenon and context are not clearly evident. . . The case study inquiry copes with the technically distinctive situation in which there will be many more variables of interest than data points, and as one result relies on multiple sources of evidence, with data needing to converge in a triangulating fashion, and as another result benefits from the prior development of theoretical propositions to guide data collection and analysis. Case study research has been seen as focusing on one person, situation or event from the perspective of multiple stakeholders using multiple sources of information (Hakim 2000).
A benefit of focusing on a case study is that it permits a deep exploration that can allow a researcher to explore problems through multiple lenses. Particularly, Blatter and Haverland (2012, p.8) highlight how this makes it possible to consider both, the (re-) constitution of agents (their interests, identities, and institutional features) through social structures and the (re-)constitution of social structures through the cognitive processes and social interactions of the agents. By taking into account structure and agency as well as material factors . . . case study researchers can overcome the supposedly incommensurable differences between ‘constitutive’ and ‘causal’ approaches in explaining social realities (Blatter and Haverland 2012, p.8). Drawing from this strength, this study brings together information provided by actors involved in the case study ESN with information available about the structures which shape the ESN.
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Within the main case study, this research considers five embedded smaller cases at the level of LPSs and treats them as comparative case studies. Yin (2009) highlights the benefits of conducting in depth analysis into embedded units within a broader case study design. Each LPS considered houses businesses that are members of the main case study ESN. Comparing the experiences within these LPSs allows for an exploration of vertical and horizontal governance dynamics at different points in the ESN.
While using a case study approach does not allow for statistical generalisation, this approach facilitates the development of results that can provide analytical generalisation (Yin 2009). This can involve taking what is learned within one case to help to build theory that can be used to understand broader social processes. The critical realist approach used in this study involves seeing case study exploration as enabling the development of causal explanations and mechanisms leading to the outcomes that are observed, which in this case involve the way production is organised within an ESN.
As described by Wynn and Williams (2012, p.805), considering the processes involved in causal mechanisms identified within one case can help with better understanding causal mechanisms in other contexts. The intent under [critical realism] is to utilise the detailed causal explanations of the mechanisms at work in a given setting to obtain insights as to how and why a similar mechanism could lead to different, or perhaps similar, outcomes in a different setting (Becker 1990). We seek to explain any such differences not as exceptions to theory or as occasions to invalidate the original causal analysis, but rather as an integral element of any proposed explanation or theory. Thus, generalisability provides a means to leverage existing statements of causal mechanisms to explain events observed within the specific context of the new setting as opposed to predicting outcomes based on the generalisation of theory to a new population or context. This serves to validate the explications of causal tendencies and the interplay of mechanisms and context, and refine our theories.
Additionally, within this study, there are ways in which comparative techniques help to provide more nuanced findings. This includes the consideration of causal mechanisms taking place in the five embedded cases as well as across multiple vertical buyer-seller governance pathways within this study. Ackroyd and Karlsson (2014, p.31) describe that, Comparative research helps to clarify both the nature of a mechanism and the range of variation in both process and outcome that can occur. . .
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comparative case design . . . helps to clarify the extent to which outcomes are attributable to a mechanism or its context or their interaction.
Overall, this research uses a case study with consideration of embedded units to uncover causal mechanisms. The results can provide insight for ways of conceptualising governance that can facilitate better understanding of the dynamics of governance processes and the organisation of productive systems. Thus the findings produced by this case study can be generalised to build a better understanding of the processes involved in lead buyer governance for sustainable production across ESNs.
3.3.2) Using Institutional Ethnography
When conducting this research, the focus was to understand processes that take place in the GPN in which the case study ESN sits. The approach used techniques drawn from institutional ethnography, which takes ruling relations as the subject of study (Devault 2006). Slade (2010, p.462) writes, the end goal of an institutional ethnography research project is to expose how larger power relations shape local experience. In this way, institutional ethnography projects can be framed as extended case studies into the mechanics of power. The research process used in this study sought to understand how producers in the ESN are connected to vertical and horizontal governance forces.
Smith (2005), the initiator of this approach, explains that institutional ethnography can be used to explore power relations outside of what is immediately visible from a local context. She describes how it aims to “[make] visible how we are connected into the extended social relations of ruling and economy and their intersections (p. 29).” The approach involves exploring how institutional systems operate from the standpoint of the subjects of study. Ng and Mirchandani (2008) describe the ability of institutional ethnography to understand how local experiences are shaped through how local actors are connected to global systems.
In this study, this approach was taken to understand governance processes experienced within LPSs that involve relationships within one ESN crossing through multiple locations. While institutional ethnography usually takes the perspective of an individual interacting with an institutional system (Devault 2006), interviews in this study attempted to explore the perspective of ESN businesses within a GPN. Governance dynamics within the GPN were identified through using two established data collection 107 methods within the institutional ethnography approach, which were conducting interviews and reviewing texts (Slade 2010).
Through interviews data was collected based on respondents’ personal experiences of working within the GPN. The focus of the interviews was not to gain details about personal characteristics but rather to learn about experiences of governance from respondents’ places working at businesses within the case study ESN. While the case encompasses thousands of businesses and individuals, this approach allowed broad- based information to be garnered through relatively few interviews with knowledgeable informants with lived experiences of network processes.
Interview data was supplemented by reviewing texts. Institutional ethnography sees texts as providing insight into how institutional processes can be coordinated and managed (Devault 2006). Insight into lead buyers’ roles in formal vertical governance was seen through their creation of policies which shape their interactions with suppliers. Additionally, texts created by key actors involved in the GPN provided insight into how governance processes are experienced by producers at different points of the ESN. These texts were considered together with information obtained in interviews to uncover aspects of vertical and horizontal governance relations.
3.3.3) Overview of Activities
Activities for the research were split into three stages. The first involved conducting background research and designing the study. The second focused on collecting data about the case study. The third involved reviewing and analysing the available information and writing the thesis. An overview of the main activities and outputs of each stage is provided in Table 3.1.
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Table 3.1: Overview of Research Activities Research Stage Dates Main Activities Main Outputs
Stage 1: Research September 2011 - • Reviewing Literature • Continuation Review Design October 2012 • Auditing relevant classes at Report the University of • Research Plan Manchester
Stage 2: Data November 2012 - • Field Work in the UK(3 • 98 Interviews Collection September 2013 months) • Field Work in India (7 months)
Stage 3: Data October 2013 - • Transcribing Interviews • PhD Thesis Analysis and December 2015 • Getting Interviews Writing Translated and Transcribed • Coding Interviews in Nvivo • Analysis • Writing • Editing and Revising
Source: Author’s Construction
The field work involved spending 3 months in the United Kingdom and 7 months in India. The research was conducted in the following locations.
Table 3.2: Field Research Sites Location Date London, UK November 12, 2012 – January 25, 2013 Delhi, India February 5, - March 4, 2013 Ahmedabad, India March 5, 2013 – April 4, 2013 Delhi, India April 5, 2013 – May 5, 2013 Mumbai, India May 6, 2013 – June 14, 2013 Delhi, India July 15, 2013 – August 2, 2013 Tirupur, India August 5, 2013 – August 11, 2013 Coimbatore, India August 12, 2013 – August 20, 2013 Mumbai, India August 21, 2013 – August 26, 2013
Ahmedabad, India August 27, 2013 – September 12, 2013 Source: Author’s Construction
The research in the UK was based out of London with some interviews conducted through Skype to other locations. During the research in India, the principle researcher was housed at two research institutions: the Institute for Human Development in Delhi, India under the supervision of Professor Dev Nathan and the Gujarat Institute for Development Research in Ahmedabad, Gujarat under the supervision of Professor Keshab Das. Field work was conducted in Delhi, Ahmedabad, rural Gujarat, Mumbai, Tirupur and Coimbatore.
During the third stage of the research there was an overlap in data collection and data analysis processes. After the preliminary analysis of the field work data, the importance of focusing on dynamics within individual LPSs became apparent. At this stage in the research, the decision was made to conduct more in depth analysis of
109 selected LPSs. 15 This involved collecting and reviewing additional documentary evidence focused on the selected sites, which had all been visited during the fieldwork portion of the study.
3.4) Data Collection
As described above, this study is based on multiple sources of data. Data sources included interviews; texts produced by members of the ESN, a broad set of GPN governance actors and third parties; databases; attending industry events and observations of production facilities. This section provides an overview of these sources of data, describes how a research journal was used for this study and explains how validity of the findings was ensured.
3.4.1) Interviews
Interviews were conducted with selected people working in and/or knowledgeable about cotton garments’ ESNs. Informants were selected from relevant organisations related to all stages of cotton garment production, including, management of producer businesses, business association representatives, NGO staff, key informants, trade unionists, academics, government officials and farmers. As the purpose of the interviews was not to study the people interviewed but to learn about how cotton garments’ ESNs function, relatively few interviews with knowledgeable informants connected to each stage of production provided information about broad GPN processes.
The interviews involved a total of 122 respondents in 98 separate interviews. While the bulk of the interviews involved one respondent, several group interviews were conducted involving 2 to 11 respondents. The respondents worked for 3 of the retailers in this case study and 57 supplier firms. The types of supplier businesses included trade intermediaries; manufacturers of garments, textiles and yarns; wet processing firms; ginning and pressing units; and, cotton farmers. The other respondents were from the wider GPNs in which this ESN sits, including industry experts (academics and representatives of businesses involved in the industry, who do not meet the case study
15 The selection process was described above (in Section 3.2.4).
110 criteria) and representatives from NGOs, government agencies, business associations and businesses providing support services to firms in the case study. The set of tables included in Appendix B provide an overview of the interviews conducted for this thesis. These tables show 16 that 18 interviews involved respondents connected to the retail industry (indicated by interview codes ending in ‘R’), 18 focused on garment manufacturing (codes ending in ‘G’), 9 focused on wet processing (codes ending in ‘W’), 20 focused on textile manufacturing (codes ending in ‘T’), 26 focused on cotton production (codes ending in ‘C’) and 7 were with general industry experts (codes ending in ‘E’).
Selecting Respondents
Respondents were purposively selected related to their knowledge about the case study ESN and governance pressures experienced by ESN businesses. Interviewees were found through online searches, attending industry events and talking to people in the research sites who could provide tips on places to go where businesses in the ESN are located. A snowball technique was also used by asking respondents for introductions to people they knew who may be of interest to interview.
Specifically, identifying members of the ESN in India involved asking sourcing firms and manufacturers if they sold to any of the 20 case study retailers. For lower tier producers, textile producers located in areas identified by the AEPCs’s (2009) sourcing data on garment exporters were approached and asked about their customers. For yarn spinning and earlier stages of production, businesses were generally not aware of the end users of their products but interviews were sought in regions with large levels of production of the inputs used in cotton clothing, which are identified in the maps above (see Figures 3.4 and 3.5) as well as through some connections provided by interviewees with their direct buyers or suppliers.
16 Interviews are classified according the highest level of production to which the organisation represented by the respondent was connected. For example, a firm that manufacturers garments and textiles would be classified under garment manufacturing.
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Conducting Interviews
Interviews with representatives of ESN firms were focused on their firms’ experiences with vertical and horizontal governance. Interviews with representatives of organisations creating governance pressures and other key informants were focused on learning about the GPN and how different actors interact. Talking to people in the ESN and those more broadly involved in its governance processes provided different perspectives on how the GPN functions. This was helpful for confirming the findings and triangulating information. Additionally, talking to both parties in buyer-seller relationships provided a set of different perspectives on the same processes.
Interviews that were conducted were semi-structured. Seventy-two of the interviews were conducted by the primary researcher in English and 26 of the interviews were conducted in regional languages (Hindi, Gujarati and Tamil) by interpreters in the presence of the primary researcher. While most of the interviews were conducted in person, 11 of the interviews were conducted over the phone or through Skype.
Working with Interview Data
Interviews were audio-recorded with consent of the participants. 17 To enable analysis, translators were engaged to create English language transcriptions for interviews conducted in languages other than English through the use of an interpreter. To try to ensure accuracy, all translations were checked and corrected by a second translator. For interviews recorded in English transcriptions were created by the primary researcher along with the assistance of a company specialising in transcription services.
Ethics
To protect the rights of the informants who were involved in this project, informed consent was obtained before conducting any interviews. For this process, a document outlining the scope and purpose of the research was provided. For participants who could not read English, the project overview and interview expectations were explained orally. All participants were asked to sign a consent form outlining their
17 Three interviews were not audio recorded due to unforeseen circumstances. For these interviews, detailed notes were taken.
112 involvement in the research. The consent form was created in English and translated into Hindi, Gujarati, Tamil and Marathi.
All interviewees participated in the research of their own free will, and were clearly informed of the option to withdraw at any time. The respondents were assured that any information they shared would be kept confidential and appropriate measures were taken to protect their confidentiality. All of the research information was stored in an encrypted partition on a computer that is protected by a password. Additionally, respondents’ names and any organisational affiliations were not associated with the files, unless they specifically requested to be named.
As many of the interviewees spoke languages other than English, six interpreters were involved with the fieldwork. These interpreters were found through their affiliation with academic institutions in India. Each interpreter was given an overview of the project and signed a confidentiality waiver. Additionally, all people involved in creating transcriptions were asked to sign confidentiality waivers.
Finally, to protect the principle researcher’s safety, most interviews were conducted in formal business locations. Additionally, while conducting the field research, a responsible 3 rd party was informed by telephone about interview locations. Furthermore, many of the interviews, including some that were conducted in English, were carried out in the presence of a local interpreter.
3.4.2) Documentary Analysis
Documents created by ESN companies that were reviewed include companies’ websites, reports and policies. These types of documents were sought out for all of the 20 top UK garment retailers. These documents provided insight into the activities carried out by these businesses related to promoting sustainable production. This information was a valuable complement to information obtained through interviews.
In order to develop more detailed understanding of how different governance forces place pressures on firms in the ESN, documents created by a broad set of GPN actors were also reviewed. These documents include those produced by governments, intergovernmental organisations, NGOs, unions and business associations.
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For the five selected LPSs, while supplemented by interviews conducted in these locations, the profiles are largely based on data obtained from existing research and documentary evidence which provided information on governance experiences surrounding the sustainability challenges considered. To understand the processes of how the LPSs experienced governance pressures and the reactions that took place in light of these governance pressures, multiple documentary sources were consulted including newspaper articles, publically available legal documents and minutes from industry association meetings.
3.4.3) Additional Data Sources
To understand the landscape of production processes taking place in India, additional information was obtained from multiple large data sets. These included government run censuses and surveys providing information on all stages of producing cotton garments in India. Additionally international trade data was consulted related to where the UK sources cotton clothing and India’s involvement in exporting products involved in intermediary stages of production.
Another source of data was found through attending industry events. An overview of these events is found in Section B.9 of Appendix B. This was useful for seeing how intermediary products were promoted to buyers at trade fairs. Also, seeing presentations by industry members and relevant government representatives provided insight into the ways multiple parts of the GPN function.
Finally, particularly related to the sustainability challenges of five LPSs profiled, observation was used during site visits to producers. Tours were provided by many respondents which provided insight into some practices related to sustainability challenges and the governance firms experienced.
3.4.4) Research Journal
An important part of the data collection process involved keeping a research journal. Throughout the field work and during the analysis, preliminary findings, questions and observations were recorded. During the field work, this document was used to record observations from site visits, notes about the interviews and record experiences related to attending industry meetings.
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3.4.5) Ensuring Validity
Following the institutional ethnography approach, multiple forms of data were brought together to provide an understanding of the network relationships being explored. These multiple sources of data were brought together to provide a well-rounded picture of the case being studied. Qualitative information from interviews was validated through a process of triangulation. Information in interviews was corroborated and supplemented through interviewing people working at different points in the case study ESN and involved in wider GPN governance forces that connect to the ESN.
To understand sourcing practices of the top 20 UK retailers, interviews were conducted with direct representatives of three retailers, sourcing firms which cover sourcing activities for at least 8 of these 20 firms and garment manufacturers which sell to at least 6 of the retailers. Additionally, documents were reviewed that cover sourcing policies for all 20 firms. These included documents produced by the retailers as well as organisations that have studied the involvement of retailers in sustainable sourcing practices. Furthermore, information was collected related to the growth of retailers’ non- sourcing connections through interviews and documentary analysis.
In order to develop a well-rounded understanding of the experiences of producers, interviews were conducted with businesses on the buyer and supplier sides of buyer- seller relationships. Additionally, interviews were conducted with actors knowledgeable about the LPSs in which the producers operate. Respondents from diverse locations within the case study ESN provided starkly different points of view. Particularly, being able to look at two sides of dyadic relationships between buyers and sellers allowed for a multi-faceted exploration of how the network functions and how relationships are experienced.
For the five LPS cases, the sustainability challenges being explored took place over many years. The experiences of businesses in these LPSs were explored through talking to businesses currently working in these locations as well as reviewing available documentary evidence which provided diverse perspectives on the situations being explored. Looking at the cases from multiple perspectives enabled an understanding of the tensions that existed between different pressures in these LPSs.
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3.5) Data Analysis
At the end of the field work, the research journal, which was used to record findings and ideas, was reviewed and preliminary conclusions were developed. Transcripts of interviews were entered into Nvivo and categorised by classifications based on the interview number, the respondent and features of the organisation represented by the respondent. Coding themes were created based on the research questions, the interview questions, preliminary conclusions and issues which emerged during the coding process. Additionally interviews were coded to classify data’s relevance to each of the five selected LPSs. The processes used for generating answers to each of the empirical sub-questions are outlined below, followed by a discussion of the analysis process carried out to answer the main research question.
3.5.1) Understanding the Structure of the ESN
Chapters 4 and 5 explore the first empirical sub-question which considers the structure of the case study ESN. To explore the characteristics of retailers considered in Chapter 4, background information was compiled on each retailer. Additionally, factors shaping the governance pressures that all of these retailers experience were drawn out from the data reviewed.
The different forms of producers and traders found in the case study ESN and the types of connections they have were identified by compiling information from interviews supplemented by available industry data. Using Netdraw software, this information was used to produce a diagram of the case study network, which is provided as Figure 5.3 (on page 176) in Chapter 5. Exploring this visual representation of the network helped to identify the key characteristics of how production is organised which are discussed in Chapters 5.
3.5.2) Vertical Governance through Sourcing Relationships across the Case Study ESN
The second empirical sub-question, related to how governance flows vertically through sourcing relationships, is considered in Chapter 6. In order to explore vertical governance, the analysis considered the micro and meso scales of governance across the ESN, as defined by Ponte and Sturgeon (2014). Micro level governance involves how
116 governance takes place in direct inter-firm links. Meso level governance involves considering how governance pressures flow beyond direct links across vertical pathways.
To learn about inter-firm governance, information about specific buying and selling relationships obtained through the interviews was reviewed. Initially an attempt was made to classify these relationships according to the categories presented in Gereffi et al.’s (2005) governance framework as market, hierarchical, captive, modular and relational. However, this framework was found not be applicable to the relationships in this case. Consequently, incorporating insights from the Gereffi et al. model, the determinants for buyer power were classified into a new set of categories which are described in Chapter 6.
To understand how governance pressures can flow beyond direct links in meso governance processes, the structure of the network was considered. This included considering how links have different characteristics when moving down vertical paths in the ESN. The analysis involved considering how governance pressures move across multiple links.
3.5.3) Horizontal Governance in Local Productive Systems
The third empirical sub-question is considered in Chapter 7. This question seeks to understand how governance is felt within LPSs. In order to understand the dynamics experienced in LPSs, the analysis focused on the way that producers in selected LPSs have responded to governance pressures related to a key sustainability challenge.
The analysis employed causal process tracing (CPT) (Blatter and Haverland 2012). This type of analysis focuses on exploring the factors which lead to the existence of a particular situation – in this case the productive systems that are currently being used in the case study ESN. By conducting in-depth investigations into multiple causal processes, CPT research involves creating ‘comprehensive story lines.’ From these ‘causal chains’ and ‘causal conjunctions’ can be extracted to identify critical situations that connect cause and effect. Through developing a deep understanding of how multiple factors lead to the situation being explored, CPT can provide knowledge about the causal configurations (combinations of causal conditions or social mechanisms) that make specific outcomes possible. The configurations of conditions and/or mechanisms that the researcher identifies as necessary and sufficient for an outcome within the cases under 117
investigation are used to elucidate the set of potential configurations (all possible combinations of the identified conditions and mechanisms) and/or the set of proven causal configurations. The first set is helpful for developing ‘typological theories’ inductively; the second set includes all those configuration that have been shown to lead to the outcome of interest (Blatter and Haverland 2012, pp.31–32). This type of analysis was used to understand differences in the horizontal governance processes experienced in each case. Particularly, this was helpful for explaining why some cases responded to pressures by making radical changes to productive systems while others have continued to use practices associated with sustainability challenges.
3.5.4) Retailer Governance over ESN Producers
To address the thesis’ main question related to retailers’ ability to promote sustainable production across an ESN, Chapter 8 brings together insights from Chapters 2, 4, 5, 6 and 7. The analysis expands on the consideration of retailers’ vertical governance through their sourcing connections that was considered in Chapter 6 and considers retailers’ role as a governance actor more broadly. Taking into account, the features of the network structure discussed in Chapters 4 and 5, the way that retailers can connect to producers through both vertical, sourcing and horizontal, non-sourcing connections is considered. The way that retailers can govern producers through these connections draws from the lessons found in Chapter 7 about how diverse governance mechanisms can effectively promote changes to production practices. This analysis was used to identify different forms that buyer-driven governance takes across the ESN.
3.6) Challenges and Limitations of Study
While this research has been designed to answer the main research question with the available resources, the process involved a number of challenges. This section provides a description of some challenges that were faced. Additionally an overview of some of the limitations to the research is provided.
Finding Respondents
Finding participants that were part of the case study ESN was a major challenge. Difficulties were faced in getting contact information for people in the network and with getting them to agree to participate in interviews. To overcome this challenge, many interviewees were asked if they could provide introductions to additional people working
118 in the network, hence employing a snowballing method. The primary researcher also attended several industry events where companies had sent representatives specifically to interact with the public.
Another challenge faced was that some businesses in the ESN have received negative publicity surrounding sustainability challenges related to their production practices. Businesses who had specifically been targeted by publicity campaigns were not interested in speaking to a foreign researcher. Additionally, in Tamil Nadu, a participant from a multi-stakeholder initiative warned that no one from the spinning industry would talk to a foreign researcher because all businesses would be aware that two Dutch citizens had been publicising Tamil Nadu as a place with poor working conditions. This proved to be true and it was not possible to conduct any interviews with representatives of Tamil Nadu spinning units. However, businesses that work with Tamil Nadu spinners were interviewed and documentary evidence related to the industry was obtained, including publically available transcripts of industry association meeting minutes.
Working with Interpreters
Interviews for this study were conducted in English, Hindi, Gujarati and Tamil. These were done with the assistance of 6 interpreters. The interpreters were found through contacts at research institutes and universities in Gujarat and Maharashtra and through an English as a second language school in Tamil Nadu. These interpreters had varying levels of research experience. A few were knowledgeable about research processes and seemed to be asking questions and interpreting clearly. The interpreter found through a language school did not have experience in conducting academic research. This interpreter often changed the questions being asked and changed answers to those that he felt would please the primary researcher as opposed to clearly interpreting statements provided by respondents. All of the interpreted interviews were recorded and translated into English by independent translators, which revealed what was actually being said by both the interpreters and the respondents.
Phone versus In-Person Interviews
Several interviews were conducted through electronic forms of communication, including Skype and telephones. Most of the interviews that were not conducted face-to- face resulted in far less detailed responses and less periods of unstructured discussion.
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These interviews provided less rich information than was provided in the face-to-face interviews. Attempts were made, when possible, to meet all respondents in person.
Data Gaps
While participants were selected purposively to provide information about the ESN being studied, due to irregularity in access to people of interest there are likely gaps in and variation on the amount of information collected about each topic of interest. To address this problem, the case study combines interview data with other sources of information in order get a well-rounded picture.
Obtaining enough information about the selected LPS cases was particularly a challenge as the focus on these localities was determined after the fieldwork. Documentary evidence was drawn upon in order to understand local experiences with the sustainability challenges being considered. Available documentary evidence as well as published and unpublished reports on these cases were brought together to understand the key aspects of local experiences of governance for sustainability.
Limitations
As this study is the outcome of research conducted by an individual researcher, a major consideration is the positionality of the researcher. This can be seen from two perspectives. One is how the researcher is perceived by participants and another is how the researcher perceives the situation being studied.
When considering how a researcher is perceived by a (potential) respondent, there is an aspect of consciously shaped self-representation (Mullings 1999; Herod 1999). During this study, in seeking to conduct interviews with people involved in international garment production and those specifically specialising in the promotion of sustainable procurement, the principle researcher may at times have been perceived to be trying to uncover hidden aspects of production process. Particularly in India, the researcher as a representative of a foreign institution may have been perceived as an outsider that was looking for problems. When seeking to make contacts with interviewees, personal references were sought and when no personal connections were available, the researcher attempted to describe the project through written and oral communication in a manner that made potential interviewees feel that they could contribute to an academic study as opposed to being the potential targets of an exposé. Within interviews, to overcome this 120 challenge, the researcher attempted to maintain a positive tone and to focus on allowing respondents to share their personal experiences with different governance pressures as opposed asking questions which may make them feel defensive about the production practices carried out by their companies. However, Herod (1999) points out that researchers cannot completely control how they are perceived by respondents. Attempting to promote interviewees to provide transparent information, across all interviews the questions asked were often focused on encouraging the respondents to share their lived experiences with working in the industry.
Another concern related to positionality is that many of the interviews conducted for this study were with management level representatives of companies. Schoenberger (1991) identifies a challenge that can occur during corporate interviews is that the respondent may be used to being in control of a situation and may take over guiding the discussion in an open-ended interview format. The interviews conducted for this study followed Schoenberger’s guidance for alleviating this challenge by seeking to engage in interactive dialogue. Additionally, the interviewer referenced a prepared list of discussion themes throughout the interviews in order to ensure the planned topics were discussed during the course of each interview.
In terms of how positionality shapes researchers’ interpretations of situations, Mullings (1999) describes a researcher’s knowledge as being shaped by positionality and location in time and space. She considers positionality as involving “perspective shaped by his/her unique mix of race, class, gender, nationality, sexuality and other identifiers (1999, p.337).” The interviewer’s perspective can shape how information provided during an interview is interpreted. Additionally, Schoenberger (1991) discusses how specific terms can have different meanings to different individuals.
For this study, while all interpretations are filtered through the perspective of the lead researcher, the information considered was drawn together from multiple sources including statements by interviewees with different types of connections to the ESN being studied as well as documents and observation. This use of multiple sources of data was intended to inform an analysis that attempts to uncover real structures that are involved in the coordination and governance of the case study ESN. As Sayer (2000) notes that researchers’ judgements are fallible in all social science, throughout this thesis the findings are supported by the presentation of empirical evidence. This enables the 121 reader to consider their own interpretations along with reading those created by the researcher.
Further limitations were experienced based on the design of the study. One such limitation is that processes taking place in the ESNs for top UK firms may not be relevant for producers in other ESNs. The research focused on the role of large retailers, yet 42% of cotton clothing sold in the UK is sold by smaller retailers which may have different types of relationships with their suppliers. Particularly, smaller businesses may have less formalised processes and less resources devoted to promoting sustainable production.
Another limitation is that the existence of the relationships being examined may be based on governance processes which may not be apparent within the relationships themselves. For example, strict environment or social regulations in an alternate location may have led production to be conducted in a location with weaker regulations. Furthermore, connections in the Indian portion of the case study ESN are domestic according to the definition of the case. However businesses interviewed often sell to firms outside of the case study ESN. Governance by these firms outside of the case study may play a large role that may not have been sufficiently explored as the focus of this study was on governance from firms within the case.
An additional limitation is that using a case study may generate findings with narrow scope, potentially specifically relevant to the case but less relevant for other cases. This may be an issue as the set of connections considered within this study all take place within India and relationships may differ when sourcing connections cross multiple borders. Further research could be conducted to explore the applicability of the results in other cases. However, the analytic generalisations coming out of this study can provide a way to better understand how production is organised in other cases, even when those cases exhibit different outcomes.
3.7) Conclusion
This chapter has laid out the design of this study and the processes involved in carrying out the research. An empirical study was carried out to explore how vertical and horizontal governance processes take place across the ESN. Evidence related to governance dynamics within the ESN was used to better understand the role of lead 122 buyers in providing governance for sustainable production for producers located at different points in their ESNs.
The rest of this thesis presents the results of this study. The following chapters consider the structure of the ESN, how governance flows vertically through the ESN and a closer examination of sustainability challenges in five LPSs in order to understand how retailers can play a role in governance for sustainability across all stages of production in an ESN.
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4: UK Retailers’ Position at the top of the Case Study Cotton Garment Extended Supplier Network
4.1) Introduction
To provide a context for this study’s exploration of the role of UK retailers in providing governance for sustainable production across their ESNs, this chapter discusses features of the retailers considered. As Chapter 3 explained, four main features of the ESN are considered as shaping the way governance actors can engage with producers. These include the characteristics of the lead buyer(s), the characteristics of suppliers, the characteristics of links between businesses and how businesses in the ESN are territorially embedded. This chapter focuses of the first feature. The retailers considered are seen as sitting atop a large network of producers responsible for carrying out all stages of production of cotton garments. In order to explore the role that UK retailers play in governance for sustainable production in their ESNs, this chapter addresses part ‘a’ of the study’s second sub-question, “ What is the structure of the ESN linking UK retailers to all stages of Indian garment production?” This involves considering the identity of the lead buyers and how they attempt to promote sustainable production.
The chapter is laid out as follows. Section 2 provides a general overview of the retailers included in this study. Section 3 considers the types of pressures these firms face which can influence how they engage with members of their ESNs. Section 4 considers these retailers’ vertical sourcing connections with their suppliers. Section 5 considers how the retailers work with multiple stakeholders and can make horizontal connections in their efforts to promote sustainable production. Finally, Section 6 provides a conclusion.
4.2) Retailers as Lead Buyers
This thesis focuses on how top UK retailers as lead buyers can play a role in shaping the production processes used by businesses responsible for each stage of production of cotton clothing. Clothing retail in the UK is diverse and includes small independent shops and large corporate retailers. This case study focuses on the 2012 top 20 clothing retailers in the UK. This section provides an overview of characteristics of these retailers. 124
The case study retailers are large businesses with thousands of employees. Some specialise in clothing retail and others also sell a variety of products. In 2012, sales of these top 20 firms represented 58% of clothing sales in the UK. Figure 4.1 shows how this market share is distributed. 18
Figure 4.1: The Top 20 UK Retailers’ Shares of Spending on Clothing & Footwear 2012
Source: Author’s Construction, data from (Mintel 2013 )
These retailers are large and sophisticated organisations. They have high levels of resources and have management structures that are used to coordinate complex international business transactions. These companies have the potential to play a large governance role in their ESNs. This role will be discussed in the following chapters.
These firms generally import finished garments that are manufactured abroad. However, some production continues to take place with domestic manufacturers.
18 Next Group Includes: • Next Retail 4.56% • Next Directory 2.48% • Lipsy 0.12% Arcadia Group Includes: • Arcadia – fashion 4.12% • Arcadia – BHS 1.46% The Edinburgh Woollen Mill Group Includes: • The Edinburgh Woollen Mill Ltd contributing 0.34% of spending • Jane Norman Ltd (acquired 2011) contributing 0.18% of spending • Peacocks (acquired 2012) contributing 0.96% of spending
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Retailers import clothing using a variety of sourcing processes, often working with sourcing firms to coordinate manufacturing processes. These retailers can sell clothing from independent brands or from their own brands, which can be referred to as private label. This study particularly focuses on sourcing processes for retailers’ private label items.
While some retailers in this case specialise in clothing, others derive a large level of sales from general merchandise or groceries. In 2012, clothing and footwear sales ranged from £384 million at House of Fraser to £3.7 billion at Marks and Spencer (Mintel 2013). Most of these retailers were founded in the UK with the exceptions of Primark from Ireland, TK Maxx from the USA and Hennes and Mauritz (H&M) from Sweden. From the available data it can be seen that these firms have between 3,200 and 518,000 employees with operations ranging from solely focusing on the UK to operating in 59 countries. An overview of the characteristics of these retailers can be found in Table 4.1.
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Table 4.1: Overview of Case Study Retailers
Retailer Type Employees* Countries of Operation
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Retailer Type Employees* Countries of Operation
*Reported numbers from 2013-2015 **Estimate of clothing and footwear sales (Mintel 2013) ***Figure for Marks and Spencer Clothing **** George, Asda’ clothing line, was founded in 1989 Source: Author’s Construction, data from (Mintel 2013; Arcadia Group 2014; Arcadia Group 2015c; ASDA 2015a; Debenhams 2014; H & M 2014; House of Fraser 2015b; JD Sports Fashion 2015; John Lewis Partnership 2015a; Marks and Spencer 2015a; Missouri Topco Limited 2014; N Brown Group Plc 2015; New Look 2015a; Associated British Foods plc 2015; Sports Direct 2105; Tesco 2015c; The TJX Companies 2015 )
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Retailers attempting to promote sustainable production have largely relied on vertical sourcing relationships. Through these vertical relationships, retailers have well developed systems for connecting with members of their ESNs. Additionally, retailers have been involved in a number of projects that have created non-sourcing, horizontal connections with members of their ESNs in order to promote sustainable production. The nature of these horizontal connections is more ad hoc than those involved in vertical connections. Both forms of connections are outlined below (in Sections 4.4 and 4.5).
4.3) Governance of Retailers Selling in the UK
Retailers face multiple pressures which shape how they operate. These include pressures that lead retailers to work with offshore producers and pressures which shape the nature of the relationships with the producers involved. Research looking at how clothing retailers engage with their suppliers has posited that retailers are lead actors (Gereffi 1994). This view is often shared by social and public governance actors creating pressures for retailers selling in the UK. Following this presumption, retailers are often expected to control the activities involved in producing their products.
The case study retailers face numerous governance pressures based on their territorially embedded location in the UK. While some of these governance pressures are related to being responsible for ensuring products being sold are made using sustainable processes, some governance pressures also encourage retailers to take actions which may exacerbate or even create sustainability challenges. This section explores processes that have led to retailers to working with outsourced production and some of the key pressures the case study retailers face which shape how they interact with producers.
Governance Surrounding Retailers’ Use of Outsourced Production
Multiple factors can be seen as supporting the model of retailers relying on outsourced production to make products sold under private labels. These include a desire to focus on core activities, providing increased pay-outs to shareholders, reducing commitments related to maintaining a manufacturing labour force, being able to better serve market demand for quality and variety, improvements in communication technology, former communist and other largely closed economies opening up increasing global productive capacity, developing countries expanded focus on export based growth strategies in the 1980s, reducing risk (economic, product, regulatory, labour and environmental), lowing production costs and increasing flexibility (Milberg and Winkler
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2013; Coe and Yeung 2015). Benefits of offshoring include allowing firms to raise profits while keeping low prices by reducing costs, increasing flexibility, offloading risks and avoiding sometimes strict labour and environmental regulations, while earning rents from design, marketing and financial activity (Milberg and Winkler 2013).
A major dynamic involved in retailers working with outsourced production is financialisation. Coe and Yeung (2015) assert that the causal role of financing in shaping the organisation of production must be part of a theory of GPNs. Financialisation can be seen as “the general set of processes by which financial markets come to exercise a greater pull on economic organisation of economies and societies (Martin 2002; Epstein 2005) (Neilson and Pritchard 2009, p.13).”
Milberg and Winkler (2013) cite two major explanations for an increased importance of finance in the global economy over a 25 year period. One is the shareholder value revolution, which involves increased shareholders rights in the late 1970s and 1980s along with a related shifting of power from managers to shareholders. This created an emphasis on shareholder value and short-run returns on investment which was achieved through downsizing and distributing a greater amount of profits back to shareholders through higher dividends and share buybacks. The second and compatible explanation for financialisation has been a change in the rate of return on manufacturing investment compared to the rate of return in on investments in financial assets. From the late 1980s through the 1990s, US companies experienced a growth in emphasis on maximising shareholder value along with the growth of institutional investors and the opening of financial markets to foreign investors (Palpacuer 2008).
Pressures related to financialisation led companies to shift risk to employees and suppliers through various forms of work externalisation. With the goal of increasing value for shareholders, businesses began to focus on their core competencies (Milberg and Winkler 2013; Palpacuer 2008; Ponte and Gibbon 2005). This has been a driving force towards the increase of global sourcing and the development of fragmented ESNs. Milberg and Winkler (2013, p.213) see financialisation and the expansion of outsourced production as mutually supporting processes.
Pressures for short-run increases in stock prices have encouraged the shift to core competence and offshoring . . . And offshoring has raised profits and permitted a shift of resources from long-term investment in firm growth to financial assets.
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Together these processes have led to the existence of ESNs in which retailers heavily rely on outsourced production.
Milberg and Winkler (2013) highlight a component of financialisation as being that non-financial firms use finance rather than production as both a source of profit and a use of their funds. Involvement in finance includes using income to purchase financial assets, often through share buybacks (Milberg and Winkler 2013). Using offshore production has led to increased profits through gaining access to lower cost production as well as limiting the need for investing in production. Companies have put increasing amounts into purchasing financial assets and paying dividends (Milberg and Winkler 2013).
Retailers buying manufactured products as opposed to manufacturing in self- owned facilities creates a situation where retailers do not have direct control over production processes. The process of outsourcing creates the relationships between retailers and production that are the focus of this study.
Governance Surrounding Retailers’ Relationships with Suppliers
Major governance actors creating pressures for the case study retailers related to their relationships with producers include governments, inter-governmental institutions, NGOs, shareholders, board members and customers. Diverse pressures from these actors shape how retailers govern their ESNs. Pressures experienced by retailers can be formal and mandatory, formal and voluntary or informal.
In terms of formal and mandatory pressures, retailers must comply with various regulations which impact imports of clothing. These include policies created by the EU and UK governments which shape the sourcing practices of all case study retailers. Additionally board members may make decisions impacting retailers’ internal operations.
In addition to mandatory regulations shaping retailers’ importing activities, there are numerous formal and voluntary standards that retailers may choose to follow. These include those developed by intergovernmental organisations as well as private organisations. Examples of these standards which cover clothing retail include the Ethical Trade Initiative (ETI), WRAP, the Clean Clothes Campaign, standards developed by the International Standards Organization, SA8000, Business Social Compliance
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Initiative (BSCI), the Supplier Ethical Data Exchange (SEDEX), OEKI-TEX and international unions’ framework agreements.
Numerous informal pressures also encourage retailers to promote sustainable production in their ESNs. These include risks to public image if practices considered unethical by potential customers are publicised, pressure from NGOs and unions, motivation of employees, a desire to have on-going availability of inputs and societal expectations for a business. Another reason that has been proposed for retailers to address issues related to sustainability is to fill a void created through a lack of public regulation (Mayer and Gereffi 2010; Mayer and Pickles 2010).
Retailers also face commercial pressures which may lead them to promote practices associated with sustainability challenges in their ESNs. These can be related to pressure from competition with other retailers and include pressures related to cost and timelines, such as focusing on competitive pricing or just-in-time policies. Additionally, fashion trends may involve the use of production methods which can create sustainability challenges, such as sand-blasted denim. Another commercial pressure on retailers which may affect their interaction with suppliers is a desire to minimise risk, which can move the risk onto suppliers or create other challenges for suppliers.
Through these diverse governance forces, retailers experience conflicting pressures. The remainder of this discussion focuses on identifying major pressures created by the governance actors shaping retailers’ practices.
The EU and UK governments have a series of regulations to which clothing sold in the UK must adhere. These regulate qualities such as allowed levels of chemical residue and flammability of children’s clothing and sleepwear. Governmental organisations also work with retailers to run projects that are focused on supporting issues related to sustainability of production of clothing sold in the UK. For example, the Benefits for Businesses and Workers project was supported by the UK Department for International Development’s (DfID’s) RAGS challenge fund along with UK retailers to improve management systems of garment manufacturers to promote ethical production of clothing being sold in the UK. This project was supported by 8 major retailers. Five of which are part of this study (Arcadia, Marks and Spencer, New Look, Sainsbury’s and Tesco). Additionally, the Registration, Evaluation, Authorisation (and Restriction) of Chemical substances (REACH) policy regulates the import of chemical compounds into
132 the EU and affects the use of chemical treatments that can be used on clothing that UK retailers import.
Governmental organisations also create policies which regulate tariffs retailers have to pay to import clothing from different countries. EU trade policies can be used to promote more sustainable production practices through the General Scheme of Preference Plus system which removes tariffs for select developing countries which ratify and implement international conventions related to human and labour rights, environment and good governance. Additionally, the WTO and regional trade frameworks also shape how trade policies influence international trade of products involved in making cotton garments.
Various additional intergovernmental organisations take actions which shape how retailers interact with their ESNs. In terms of sustainable production, the ILO has created a series of international labour standards, which nation states can ratify. These have played a large role in shaping how many retailers have defined standards for internal policies.
NGOs also place numerous pressures on retailers related to their connections with their ESNs. These organisations have two main methods for interacting with retailers. One is creating campaigns which use the retailers’ public images to promote action to address sustainability challenges. The second is working cooperatively with retailers on projects aimed at addressing sustainability challenges in ESNs.
Two other groups of private actors play a role in shaping how retailers engage with their ESNs. Shareholders traditionally have had the single objective of earning profit from their shares. More recently some movement has been happening towards the development of responsible investment initiatives, as can be seen by the creation of FTSE4Good, which is a rating system for investors that rates companies based on criteria intended to measure the businesses’ level of responsibility. Another group that creates pressures on retailers is their boards of directors. These boards have objectives which include ensuring retailers reduce their risks in their business activities and also increasingly may place pressures related to encouraging responsible practices.
Customers are also a group that creates pressure for retailers. Their priorities can influence retailers’ interaction with producers. These priorities include cost, product
133 qualities, style and a desire for buying products whose production meets their ethical concerns.
Historically, consumers have had a large role in elevating the importance of sustainability in ESNs. Consumer-led campaigns in the 1990s contributed to the widespread creation of sourcing policies and standards. Notably in the anti-sweatshop movement 19 in which consumers were able to collectively express their concerns in a way “that has promoted a broad acceptance of expanded corporate duties based on notions of corporate social responsibility (DeWinter 2001, p.102).” Consumers’ growing concern with raw material production is also adding pressure for retailers to address issues of sustainability in the lower tiers of their ESNs. As end-buyers with the ability to express their concerns through their purchasing choices or choosing to become involved in pressure campaigns, consumers play a role in governing lead buyers in ESNs.
While the development of globally distributed production has limited the ability of workers to organise and bargain there are still many active workers’ groups trying to support workers’ rights (De Neve 2008; Mayer and Pickles 2010). Mayer and Pickles (2010) highlight the growth of International Framework Agreements, which seek to support ILO labour standards throughout production networks, being negotiated between international union federations and multinational enterprises. While such agreements may be improving the conditions for some workers, Barrientos et al. (2011) discuss the growth of hiring structures that limit the rights of certain workers. Workers who are not full-time and permanent may not be included in programmes aimed at improving workplace standards and these groups may face more challenges in having their concerns impact ESNs.
An overview of the main actors, their objectives and methods of influencing retailers is provided in Table 4.2. This table divides the governance actors described above into public versus private and social governance actors.
19 DeWinter (2001, p.102) describes this movement as “a loosely connected array of groups and individuals in the global North and South, ranging from established unions, human and labour rights groups, environmental groups, religious groups, consumer groups, investors, and trade associations, to students, universities, and mobilized citizenry.”
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Table 4.2: Governance of Retailers Key Institutional and Collective Main Objective Related to Method of Influence on Retailers Governance Products Being Sold Actors Public Governance Actors UK and EU • Health and safety of consumers • Defining standards which imports Governments must adhere to • Addressing global sustainability • Involving retailers in projects to issues support better production practices • Creating polices to regulate trade • Restrictions on imports • Government incentives ILO • Global Labour Issues • Creating international conventions on labour rights WTO • Promoting free trade • Reducing barriers to trade Private and Social Governance Actors NGOs • Addressing labour issues • Working with retailers on projects • Addressing environmental issues aimed at addressing sustainability related issues • Running campaigns to encourage Retailers to improve practices in their ESNs Shareholders • Investing in profitable businesses • Buying and selling shares • (Promoting responsible practices) Board Members • Products being sold should make • Encouraging risk management profit • Encouraging management • (Promoting responsible practices) practices that promote sustainability Customers • Product qualities • Purchasing decisions • Cost • Style (quickly changing styles of fast fashion create time pressures for production) • Sustainability of production Source: Author's Construction, drawing from Jenkins 2001
Overall, retailers’ experiences of governance pressures can be divided into two forms. One is pressure to make short-term profit. The other is the growing pressure to ensure sustainable sourcing. Reactions to both are actualised through retailers’ attempts to minimise risk. While certain actions which are unsustainable may be profitable in the short term, there is increasing awareness of the negative impacts of many common business practices. Although pressure from shareholders or others who stand to profit exist, which may push for the status quo or the development of new unsustainable but profitable activities, there are multiple pressures on retailers which are making these businesses attempt to promote sustainable practices in their ESNs.
For many retailers, risk management is key to their decision making processes. Lund-Thomsen and Nadvi (2009) describe a dominant trend in the CSR agenda as being risk management. The benefits of risk management as the purpose of addressing
135 sustainability challenges, depends on the focus of the risk being assessed. In some situations this can lead to retailers taking strong actions to promote sustainable production in order to prevent damage to public image or to maintain a stable supplier base. A major concern is that when the focus is risk to retailers’ profits, then decisions may not promote sustainability from the perspective of producers. Another concern with risk-based sustainability decisions is that there can be fundamental contradiction between considering sustainability at a local scale with balancing risk globally.
In some cases multiple priorities can be aligned into cohesive strategies. Alternately, reacting to multiple governance pressures, different parts of retail organisations may have conflicting strategies. In the face of multiple and conflicting governance pressures, retailers have complicated relationships with members of their ESNs which integrate pressure for short-term profit along with attempts to promote sustainable production. Before considering how retailers’ pressures are felt by suppliers in Chapter 6, 7 and 8, the types of pressures retailers create for their suppliers are considered below.
All of the retailers considered describe their own businesses as being concerned with sustainable production. This study considers how these businesses, with high levels of resources, are able to govern production processes in order to be able to sell products that are made taking sustainability into consideration. First vertical sourcing approaches taken by retailers are discussed. This is followed by a discussion of how retailers engage in cooperative actions that can involve creating horizontal connections with the LPSs that house producers contributing to their ESNs.
4.4) Retailers’ Vertical Sourcing Connections
Retailers’ connections to first tier suppliers are diverse with retailers using multiple sourcing strategies to connect to large pools of factories across the globe. These relationships are all covered by formal sourcing policies. While sourcing policies are expected to be followed for all orders, specific requirements can be different for each order. This diversity results in producers experiencing different types of pressures, often experiencing pressures which create sustainability challenges.
The case study retailers’ commercial connections are mainly with the final stages of production or sometimes only with sourcing firms that interact with garment
136 manufacturers. In this system, retailers’ influence through sourcing practices can be through direct commercial relationships or through shaping the way that first tier suppliers create pressures on lower tier producers. While Chapter 6 will examine challenges and differences in the types of pressures created across links at different tiers of the ESN, this section considers the demands created by retailers from their place at the top of the ESN.
As mentioned above, a large part of retailer decision making is based on risk reduction. When retailers make the decision to outsource production, they gain some benefits in terms of risk reduction. These benefits include not having to maintain production facilities and a manufacturing workforce. This allows flexibility in production levels and product types. However they do encounter some increased risks. A major risk is the loss of control over how production takes place. This creates potential for the use of unsustainable production practices.
Vertical governance can be considered at two levels. The first is the way that retailers set out formal objectives for their sourcing activities. The second is the way that practices actually used by retailers can create conflicting pressures on producers, some of which can counteract the objectives of the retailers’ formal policies. Both levels are considered below.
Retailers’ Sourcing Objectives
Working within the constraints of the governance pressures described above, retailers have a set of objectives in sourcing relationships. Sitting at the apex of their ESNs, retailers create both pressures for sustainable production and pressures which can contribute to sustainability challenges. For the top UK retailers considered in this study, sustainable production is an expressed concern (see codes of conduct listed in Table 4.4 on page 141 and membership in sustainability focused coalitions in Table 4.6 on page 156). These retailers’ main sourcing objectives can be seen as cost, quality, time, health and safety of consumers and sustainable production.
Retailers attempt to meet these objectives in different ways, which are outlined in Table 4.3. These objectives are generally common across the case study retailers. However, retailers generally employ complex sourcing strategies based on the needs of
137 different product lines and the companies’ overall strategies, which may involve placing different levels of emphasis between these objectives. 20
Table 4.3: Retailers Objectives and Methods of Influence Main Objectives Related to ESN Method of Influencing ESN Producers Production Price • Negotiation with sourcing firms and producers Quality • Designing, co-designing, approving design • Monitoring production processes • Requiring management standards for producers Timelines • Negotiation with sourcing firms and producers Health and Safety of Consumers • Following government policies • Developing own policies (more stringent than government policies) Sustainability of Production Practices • Codes of conduct • Chemical policies • Involvement with programmes intended to address sustainability challenges through horizontal connections • Creating incentives for producers to internally address sustainability challenges • Developing product lines which use practices considered to be more sustainable than conventional production practices Source: Author’s Construction, drawing from interviews with ESN participants and reviewing case study retailers’ policies and reports As mentioned above, retailers, as buyers of garments, have two sets of potentially conflicting requirements they can have for their suppliers. First, there is the desire to source products that meet their immediate business needs with the goal of maximising short-term profit. Second, there is the desire to ensure that their sourcing practices will not cause problems by promoting unsustainable practices. These pressures are integrated through sourcing requirements expressed within formal policies intended to govern all sourcing practices and also within the less coordinated sourcing practices carried out by staff involved in various aspects of sourcing.
Retailers can promote sustainable production through their sourcing practices in a number of ways. In terms of seeking products that are associated with sustainable production, retailers can choose to create designs which do not involve features that are
20 While differences can be observed in how these retailers engage with their suppliers, for the purposes of this study, the case study retailers are considered as one group. Insight into differences in how UK retailers engage in ethical trade can be seen in Hughes (2005).
138 associated with sustainability challenges, such as avoiding sand-blasted denim. Additionally, they can seek to source from suppliers using sustainable practices through relying on third party certification or through direct monitoring. This could include company-wide policies, such a codes of conduct or be related to incorporating specialised sustainable inputs, such as organic cotton. Methods retailers have used to try to influence production practices carried out by the independent businesses in their ESNs through sourcing practices include looking for suppliers that meet pre-defined sustainability related standards and promoting the use of sustainable practices in an attempt to stimulate producers to internally address sustainability challenges.
While retailers take some actions to address sustainability challenges, their practices can also exacerbate sustainability challenges. Actions which retailers take which may cause challenges related to sustainable production include putting extreme cost and time pressures on producers, ordering designs which require unsustainable materials or processes and regularly changing suppliers.
A way that the retail level purposively influences production is through the creation of sourcing policies, which are intended to cover all transactions. Sourcing policies can include process standards. Process requirements may include factors such as using formal quality assurance systems, adhering to codes of conduct regulating working conditions and using processes which minimise harmful environmental impacts. Sourcing policies can cover many issues. Three major types of policies considered here are management standards, chemical policies and codes of conduct.
Some firms have specific requirements for management systems of suppliers. These often involve complex quality control procedures. Some firms use statistical Acceptable Quality Level (AQL) standards to determine whether to accept an order. Retailers can have their own staff monitoring production processes or hire independent agencies to monitor factories’ quality procedures. They may also look for formal managements standards such as ISO 9000 series quality management standards.
Many retailers have created chemical policies. These policies originally focused on the objective of consumer health and safety but some retailers have more recently begun to include components related to environmental impact at production sites. Next (2013) describes their chemical policy as being based on legal standards, recommendations by industry experts, influence by pressure groups and customer
139 feedback. Sometimes retailers look for third party standards related to chemicals, such as OEKO-TEX, which certifies textile products in relation to levels of harmful substances.
Since a series of NGO campaigns in the 1990s, most major retailers have implemented codes of conduct intended to set minimum labour standards for people working in first tier suppliers. The widespread use of codes of conduct can be seen in Table 4.4. Since the creation of these policies, there has been on-going debate surrounding what to include. However, more recently there has been a greater level of consensus across the industry with the wide-spread acceptance of the ETI base code (Sustainable Apparel Coalition 2014). However, some of the case study retailers continue to follow their own standards or those created by alternate third parties. When different standards are expected by different retailers, producers can have conflicting pressures and have multiple audits. Codes of conduct have traditionally been applied to retailers’ first tier suppliers and are enforced through retailers’ internal auditing processes or through inspection by third party inspection services.
As mentioned above retailers have begun to expand their chemical policies to address the environmental impact of chemical use. An early company to do this was Levi’s with their introduction of effluent guidelines for wet processing in the mid-2000s. More recently, in November 2014, Marks and Spencer released a set of process standards for textile processing. Under this policy, which adds to an existing chemical policy, chemicals used within wet-processing facilities must fulfil a new set of regulations. In this system, companies have to self-declare their compliance but they are expected to get their facilities audited by a recognised testing institution. Also in some cases, retailers are now specifically looking for third party environmental certifications. For example, ASDA George sourcing now includes ISO 14001Environmental Managements Systems in their code of conduct.
As traditional chemical policies focused on product standards, retailers were able to test their final products to ensure that they were not contaminated with unacceptable levels of chemical residue. Controlling activities that take place during chemical treatments creates a new challenge as firms responsible for chemical treatments are often not involved in direct sourcing relationships with retailers. Creating new policies to regulate activities of lower tier supplier can be problematic. Challenges involved are discussed throughout this thesis.
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Table 4.4: Retailers’ Codes of Conduct Retailer Code of Conduct for Suppliers Auditing Number of Audits Arcadia Group • Arcadia Group Code of Conduct • 3rd Party Audits • 3,212 audits (2014) ASDA • General Merchandise Code of Practice • George: 3rd Party Audits and • George: 500 audits/year • ASDA’s Ethical Standards and Factory Walmart Ethical Team Audits Capability and Capacity Audit (FCCA) Debenhams • Supplier Code of Conduct • 3rd Party Audits and own • ~575 (2014), 50% of compliance teams in Hong Kong factories and Bangladesh H&M • Code of Conduct • H&M Staff Audits • 3,168 (2014), 84% of factories House of • Ethical Sourcing Policy • Supplier Self-Audits, 3rd Party • -- Fraser Audits or Other Retailer Audits • Random 3rd Party Audits JD Sports • ETI Base Code • Supplier Self-Audits • 60% of supplier base • Group’s Conditions of Supply include • Some 3rd Party Audits (2015) Employment Standards for Suppliers John Lewis • Own Brand Products: John Lewis • Own Brand Products: 3rd Party • -- Partnership Responsible Sourcing Code of Audits and Own Staff Audits Practice Marks & • Global Sourcing Principles • 3rd Party Audits • 1405 (2014) Spencer Matalan • Ethical Sourcing Policy • 3rd Party and Internal Audits • -- N. Brown • JD Williams & Company Limited Code of • 3rd Party and Internal Audits • 749 (2013) Conduct for Suppliers of Goods New Look • New Look Group Code of Busine ss Ethics • 3rd Party and Internal Audits • -- Next Group • Code of Practice • 3rd Party and Internal Audit s • 1,673 (2014) Primark (ABF) • Supplier Code of Conduct • Internal Audit Team or 3rd Party • 2412 21 (2014) Auditors
21 100% of factories are inspected before being used.
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Retailer Code of Conduct for Suppliers Auditing Number of Audits Sainsbury’s • Terms and Conditions include Code of • 3rd Party Audit • Over 1,700 audits and Conduct for Ethical Trade supplier visits Shop Direct • Shop Direct Ethical and Environmental • Own staff or 3rd Party Audit • 400 (projected for 2014) Group Code of Conduct* Sports Direct • Code of Ethics/Supply Policy* • 3rd Party Audits -- UK Tesco • Code of Business Ethics • Audits by Internal Ethical Trading • Averages: Bangladesh - Team and 3rd Party Auditors once every other week; China & India - once a month to once a year; Sri Lanka and Turkey - once a year The Edinburgh • Peacocks Code of Conduct 22 • Peacocks Uses 3rd Party Auditors -- Woollen Mill • Group TK Maxx (The • TJX Europe Code of Conduct • Internal or 3rd Party Auditor -- TJX Companies, US) * Document not publically available Source: Author’s Construction, data from (Arcadia Group 2015a; Arcadia Group 2014; ASDA 2014; Debenhams 2015; Debenhams 2014; H & M 2010; H & M 2014; House of Fraser 2015a; ASDA 2015b; John Lewis Partnership 2015a; John Lewis Partnership 2009; John Lewis Partnership 2015b; Marks and Spencer 2014b; Marks and Spencer 2015c; Matalan 2015; JD Williams n.d.; N Brown Group Plc 2014; N Brown Group Plc 2013; New Look 2013; New Look 2015b; Next 2011; Next 2015; Primark Abf 2015; Primark 2015b; River Island 2015; Sainsbury’s Supermarkets LTD 2013; J Sainsbury plc 2015; Shop Direct Group 2014; Shop Direct Group 2015; Sports Direct 2105; Tesco 2015b; Tesco 2014a; Tesco 2015a; Peacocks 2015; TK Maxx n.d. )
22 General Edinburgh Woollen Mill Group policy could not be found. However, the group is a member of SEDEX.
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Outside of official policies, retailers have numerous requirements that are established on an order-by-order basis. Order specific requirements can include cost, product qualities, time-lines and process requirements for specialty lines.
One order-specific pressure created by retailers is cost. This is a major consideration when sourcing. Desire for lower prices creates pressure on producers to look for ways to reduce cost. These pressures can have positive effects, such as producers finding innovative ways to minimise the creation of waste. However, sometimes these pressures have negative consequences, such as high pressure for workers (Raworth and Kidder 2009) or improper treatment of waste.
For the major retailers considered in this study, clothing designs sold in their stores are diverse and involve different production practices. Decisions related to product quality can directly affect sustainability. Specific issues include the different types of processes involved in producing different designs. Sustainability challenges can develop based on the processes involved in creating textiles and the way that the textiles are manipulated during manufacturing, such as requirements for hand stitched embroidery or chemical treatments on fabrics. Designs can be provided by retailers, independent design houses, sourcing firms or garment manufacturers (I39-R48-R; I44-R54-R; I46-R56-G; I50-R59-G; I51-R60-G). However, final decisions are made by the retailers.
Another type of quality requirement which directly shapes retailers’ sourcing is selling product lines that have specifically targeted sustainability criteria. Many of the retailers in this case do offer or have offered product ranges which are particularly designed to involve targeted sustainability characteristics. These can range from using sustainable fabric, such as organic or recycled materials, to products that have been given a fair trade certification to products made in eco-certified factories. Sometimes these are based on the retailer’s own standards and sometimes third party standards. Marks and Spencer has developed an innovative programme that encourages suppliers to produce more sustainable products through a system that encourages the adoption of any item from among a list of sustainability related attributes (Marks and Spencer 2010).
A third major determining factor for sourcing an order is timing. Retailers have plans for when new lines are expected to hit store shelves. Buying practices include arranging for the producer to meet the retailer’s schedule. Often problems arise with
143 factories being able to meet the production schedules of retailers. Reasons why timelines are sometimes not met include sub-contractors failing to deliver a product or service on schedule (I4-R4-R) and the retailer making last-minute changes to orders (Locke 2013). Retailers’ control over timelines can cause problems for workers in factories because of requirements for excessive overtime and irregular patterns of orders sometimes leaving factories without enough work at certain times of the year (I19-R20-G; I46-R56-G; Raworth and Kidder 2009). Additionally, retailers can apply financial penalties for orders that are shipped late (I4-R4-R; I44-R54-R).
The UK houses offices for leading global apparel retailers that have increasingly focused on lean and agile sourcing (Bruce and Daly 2011). The decisions of these retailers have been seen to affect local practices around the world (Gereffi 1999; Raworth and Kidder 2009). While these changes have facilitated the development of fast fashion bringing cheaper fashionable clothes to customers, associated pressures to reduce production costs have been questioned as causing a “race to the bottom (Nadvi and Wältring 2004, p.54).”
Another way that order specific decisions can influence sustainability challenges is the choice of producers. When retailers frequently change their sourcing locations it causes instability for manufacturers. Additionally, it limits the potential for relationships, which could address sustainability challenges, to develop between retailers and manufacturers.
Considering the diversity of retailers’ formal sourcing policies and order specific requirements provides a portrait of retailers as governance actors that create very diverse pressures for producers in their ESNs. The ways that retailers connect to their ESNs to implement these pressures are considered below. Understanding how these pressures are transmitted through sourcing relationships allows for an understanding of how retailers can promote more sustainable production through these relationships.
Retailers’ Sourcing in Action: Diversity of Pressures
As described above, retailers have numerous and potentially conflicting requirements for firms involved in their ESNs. The ways that these priorities are transmitted to producers is now considered. Major retailers source in very different ways that involve varying levels of connections with producers. At one end, some retailers 144 have internal staff on the ground in production countries dealing with garment factories, choosing fabrics and monitoring production on a regular basis. At the other end, some retailers buy from UK based sourcing firms that have weak, distance-based relationships with overseas garment production factories. Diversity in retailers’ sourcing practices exists between different retailers and within each retailer as retailers use a variety of sourcing practices simultaneously. For example, Next sources more than 40% of their products through a subsidiary with offices in production countries that specialise in sourcing while also using a variety of independent sourcing firms and direct sourcing (Next 2014).
One aspect of diversity in sourcing practices can be seen in the fact that retailers engage with first tier producers from a large and diverse group located across the globe. A second expression of diversity can be seen through the variable balances of power between potentially conflicting sourcing priorities. Within retailers, job roles are associated with targeted objectives which can be in tension with each other, such as buyers wanting to reduce costs, merchandisers wanting products quickly and sustainability focused staff trying to address challenges with enforcing codes of conduct. A third factor creating diversity is found in the way that sourcing firms connect retailers to garment manufacturers. Some of these sourcing firms provide direct links to top tiers suppliers as they have strong relationships with top tier suppliers. For example Sourcing Firm D, based in Delhi, has a set base of factories in India with which they have long term relationships. While in other cases, sourcing firms with weak connections to producers are the first stage creating distance between retailers and production processes. For example, Sourcing Firm C, based in the UK, works with different garment factories across multiple countries, with orders placed based on factories being able to provide adequate samples for each design. The remainder of this section considers how retailers implement pressure from their place at the top of the ESN. The diversity of relationships forms and types of pressures created for first tier suppliers is emphasised. This diversity results in situations where retailers have different abilities to connect to lower tier production processes.
A major thing to consider when looking at diversity within each retailer’s sourcing practices is that all of the case study retailers rely on large supplier bases spread across multiple countries. AT Kearney, a global management consulting firm, points to
145 the importance of using diversified portfolio approaches for managing retail supply chains (Srikanth et al. 2011). They highlight the benefits of this approach for reducing risk and recommend its use across countries and the supplier base. This creates a situation where retailers must deal with diverse sustainability challenges, not only based on the variety of products they sell but also based on different local challenges in the production sites of first tier suppliers along with the diverse locations of the lower tiers of their ESNs.
An overview of each retailer’s sourcing base can be seen in Table 4.5. This table shows that retailers source across many countries using a large group of directly contracted suppliers (often sourcing firms) that work with an even larger number of first tier garment manufacturers. The retailers in this case all source their clothing from multiple countries. From the information available the range of sourcing countries is from 22 to over 70, with numbers of suppliers ranging from 226 to over 1000 and the number of factories ranging from 544 to thousands. Some of these retailers have sourcing offices in India, which creates the potential for closer connections to production, while others do not.
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Table 4.5: Overview of Retailers’ Sourcing Bases Number of Suppliers and Sourcing Retailer Number of Sourcing Countries Number of Factories Office in India Arcadia Group • Arcadia: 46 countries; • Arcadia: 757 suppliers, -- top 5: China, Turkey, ~983 factories Romania, Mauritius and • BHS: 632 suppliers India • BHS: ~46 countries; top 5: China, UK, Bangladesh, India and Vietnam Asda • George 23 : Asia and Europe • George: 226 suppliers, -- with biggest manufacturing 544 factories countries China and Bangladesh Debenhams • China/Hong Kong 46%, India • Over 500 own brand • No 13%, Bangladesh 12%, suppliers, 1,150 Vietnam 6 %, Romania 5%, factories Cambodia 4%, Turkey 4%, UK 3%, Other 7% H&M • 27 • 850 suppliers, 1,926 • Yes factories House of Fraser • Countries with delivery -- • No logistics listed in supplier manual: China, India, Indonesia, Pakistan, Sri Lanka, Taiwan, Thailand and Vietnam JD Sports • Own brand suppliers located -- -- principally in the Far East and Indian Sub-Continent John Lewis • 50 24 • Thousands of suppliers, • Yes more than 1/3 supply own brand products (includes multiple products outside of garments) Marks & Spencer • Over 70 • 3000 suppliers (includes • Yes (UK) multiple products outside of garments) Matalan • Predominantly Far East and -- -- Turkey
23 George is ASDA’s clothing brand. 24 For John Lewis Partnership.
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Sourcing Number of Sourcing Number of Suppliers and Retailer Office in Countries Number of Factories India N. Brown • Main countries China, • 1,564 suppliers, 3,400 -- India, United Kingdom, factories Pakistan and Bangladesh New Look • 28 • 270 Suppliers, 860 • Yes Factories (New Look Ethical Trading Website Nov 2015) Next Group • 39 • 510 suppliers, 1,851 • Yes factories Primark (ABF) • 27 • 700 suppliers -- River Island Co -- -- • No Ltd. Sainsbury’s • Over 55 • 1,000 non-food • Yes suppliers Shop Direct • At least 16, which include -- • Yes Group Bangladesh, Bulgaria, Cambodia, China, India, Latvia, Lithuania, Malaysia, Pakistan, Poland, Romania, Sri Lanka, Taiwan, Thailand, Turkey and UK Sports Direct UK ------Tesco • 22 Countries, main -- • Yes sources: China, Bangladesh, India, Sri Lanka and Turkey The Edinburgh ------Woollen Mill Group TK Maxx (The • Over 100 -- -- TJX Companies, US) Source: Author’s Construction, data from (I38-R47-R; Arcadia Group 2015b; ASDA 2015b; Debenhams 2014; H & M 2015; H & M 2014; House of Fraser 2015c; JD Sports Fashion 2015; John Lewis Partnership 2015b; John Lewis Partnership 2015a; Marks and Spencer 2015d; Missouri Topco Limited 2014; N Brown Group Plc 2014; New Look 2015b; Next 2015; Primark 2015b; J Sainsbury Plc 2013; J Sainsbury Plc 2015; Shop Direct Group 2014; Sports Direct 2105; Tesco 2014b; The TJX Companies 2015 )
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Retailers have different professional positions which are generally attached to different responsibilities and objectives. Main roles involved with sourcing include buyers, merchandisers, designers, technologists and sustainability focused personnel. Each position has varying degrees of control over how a product will be designed and manufactured. Varying goals are also attached to each of these roles. Some of these staff members engage directly with manufacturers or with sourcing agents who often are responsible for coordinating production.
Designers are responsible for creating designs and approving designs created by potential suppliers. The designer can play a large role in choosing a factory. This role is shared with buyers and the balance between the two in decision making processes can vary. For buyers price is a major deciding factor, while timelines are also a major consideration (I7-R7-R). Retailers measure schedules according to a critical path, which involves setting dates for different stages of production (I7-R7-R; I41-R50-R). Merchandisers are involved in product development and price (I44-R54-R). Finally, technologists are responsible for coordinating the technical aspects of making a garment (I41-R50-R). This can include ensuring health and safety requirements are met.
In the context of the commercial requirements of the roles discussed above, retailers have developed requirements specifically targeted at addressing sustainability challenges. Most major retailers now have staff whose job responsibilities include managing code of conduct requirements and some have wider objectives related to sustainability of production. However, these teams are generally much smaller than those involved in the traditional sourcing related roles. Even in companies with large sustainability departments compared to industry standards, the number of people working on supporting the code of conduct is dwarfed by those managing other aspects of production, such as product quality.
In some cases, attempts are being made to make concerns about sustainability a part of business as usual within sourcing strategies. A representative from a department focused on sustainable sourcing at one of the case study retailers described how sustainable production was being promoted internally. We’ve got very good communication right to the top . . . product directors, in their meetings, the code of practice is a fixed agenda item. So it’s not like we come in every six months. . . .so they will talk about what the factory ratings are etc. It’s taken time, but we’ve embedded it within the 149
business and the business knows we provide not only added value but a very important kind of risk management (I3-R3-R). These comments show how concerns related to sustainable production have become a concern for how some retailers run their businesses. However, this perspective comes from a staff member who seeks to promote sustainable sourcing and may not represent how staff with other responsibilities related to sourcing see their roles.
Leading retailers’ specialised sustainability focused staff are developing internal programmes to increase awareness of sustainability challenges among other staff members. As well as making working conditions an agenda topic in regularly scheduled sourcing meetings, these efforts involve activities such as running workshops and training sessions. We’re providing training for suppliers, for our regional sourcing teams, for our internal colleagues here, so buyers, technologists, merchandisers, so to get [our sustainability policy] to work and what [our sustainability policy] is all about is making sure that we are building sustainability into how we operate, how we do business. The only way you can do that is through engagement with the full business. So we will spend time training and educating many parts of our supply chain and many parts of our operation here as well (I9-R9-R).
Some retailers have stronger enforcement of their codes of conduct than others. Some retailers ask for audits to be carried out for each potential supplier and run new supplier inductions (I3-R3-R; I9-R9-R). Other retailers accept third party audits and work with sourcing firms in relationships in which they do not know which factory is actually producing their order (I44-R54-R). Investment in carrying out audits for each supplier are more feasible for companies that make larger orders (I44-R54-R) and order size is often a feature of a company’s market strategy.
A trend which is affecting retailers’ sourcing practices is the growth of fast fashion. This is impacting sourcing practices even for higher and mid-market retailers such as Next, which moved from 4 to 9 seasons in 2013 (Mintel 2014). This pressure to have faster turnaround can be in conflict with pressure to have better working conditions. Also rapidly changing fashions may require sourcing from different factories, which have the desired skills and equipment for each order. However, it can also be supportive of longer term relationships because in some cases retailers would rather work with known suppliers to support agility and efficiency (Doyle et al. 2006).
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A third aspect of sourcing which brings variety into how retailers connect with manufacturers is the variable role of sourcing firms. In addition to working directly with factories, retailers’ sourcing can be done with the assistance of independent sourcing firms. While working behind the scenes, sourcing firms are major players in the ESNs of major UK retailers. These firms can be responsible for numerous processes including design, finding and interacting with factories and shaping production processes. They also are often responsible for ensuring that production takes place according to processes stipulated in retailers’ sourcing policies. Additionally, large sourcing firms can have their own sustainability related policies and take actions to promote these policies as well. Sourcing firms can work closely with factories following time and action plans that outline each stage of production.
Retailers in this case can conduct all of their sourcing through one sourcing firm or may buy from multiple sourcing firms. Retailers and sourcing firms sit at the top of the ESN. Either of them can form the global connection to India. Sourcing firms used by retailers sourcing from India can be located in the UK, India or a third country. Smaller UK sourcing firms or Indian sourcing firms may have narrower offerings than large multi-national sourcing firms. However, the smaller firms may have specific specialties. When using a sourcing firm, retailers may get an invoice from the sourcing firm or from the manufacturer.
When retailers buy from sourcing firms, they may not know which factory their product will be produced in. For example, a merchandiser from a small UK based sourcing firm said, We used to go to the buyer office . . . Sit with them, show our collections, say these are all the samples which we received from many factories in Asia. We don’t say like that’s from Asia or any country. We, in front of customers - buyers, for them we are the supplier. So they would not ask about any details about the factories in Asia. They say they are just inquiring about that one [design]. For them, [our sourcing firm] is their supplier (I44-R54-R). In cases such as these, retailers expect the sourcing firm to ensure that the manufacturer has third party certification showing that the production meets the required code of conduct standards.
However, in some cases retailers may tell the sourcing firm their desired factory. A representative from the Indian office of an international sourcing firm stated, 151
There are clients with various requirements. Some give the details, that they have this programme and want to place it with this particular [factory], or in some cases they ask that this is the product that they would like to have and we would research the right [factory] for that. (I41-R50-R). Even when a sourcing firm is used the retailer may have some direct connections with the factory.
Retailers’ relationships with sourcing firms tend to be longer term. Relationships between retailers and sourcing firms can be stable while the factories that they source from can change rapidly. For example, a representative from an India-based sourcing firm that specialises in European exports stated, We are an agency that when we start work, our stress is issues that are relationship based. Most of our customers – we started in 82 as an agency – and we still have the same customers working with us (I53-R62-R). These long term relationships can lead to high levels of trust. For example, one Indian sourcing firm interviewed, Sourcing Firm D, is very dependent on one retailer. The firm will be very flexible to meet this retailer’s needs (I51-R60-R). This can include producing runs that are smaller than minimums required for other buyers. An assistant merchandiser from this firm said, So for [one of the case study retailers], because we do so much, we go down for them, even if they ask us to do 100 pieces. We don’t even think about it, even if it doesn’t make us any profit, nothing, because that’s a company that also gives us a 20,000 piece order (I51-R60-R).
The sourcing firms involved in this ESN have some key differences. William E Connor writes on their website that, “There is only one way to manage the business. To have dedicated people on the ground, in all places, all the time (2015, p.1).” This is in contrast to sourcing practices from smaller sourcing firms. A merchandiser from a small UK sourcing firm said, They would do a quick look at the factory. They would see the facilities. Do they have the stitching machines? Do they really have a factory? [laughs ] . . . They will go and look around. Is there any factory? Sometime the person sitting in Bombay, the person sitting in Delhi or the person sitting in Dhaka or the person sitting in Shanghai, they will be sitting in this office and they will say, ok, I can do this, I can do this, 80,000 pieces, I can do this 10,000 pieces. But if you go and visit them, it’s like a small office. There are no machines. There is no nothing. . . how will they be able to do it? In that case it is important that [a representative from UK sourcing firm] should go and visit once and they should visit once and they should go to the factory and say this is the factory where it going to be made. That is important to make the order in a successful manner (I44-R54-R). 152
Larger sourcing firms use routinized procedures and formal decision making processes for selecting manufacturers. These companies keep detailed records to inform decision making. A merchandiser who worked for a large China-based sourcing firm described procedures used as, Performance on shipping or the quality that they are producing, the inspection pass rates, things like that which can be monitored statistically, they were there on the central database and everybody in the organisation, whether he is sitting in India or abroad or whatever, they can monitor that (I41-R50-R). These larger sourcing firms also spend a lot of effort evaluating suppliers through thorough inspection processes.
Smaller sourcing firms do not have the resources that are available to larger firms. Consequently, smaller sourcing firms use less formal criteria for making decisions. Without such elaborate decision making tools and resources, decisions are based more on personal discretion. A merchandiser from Sourcing Firm C described how the company does not have, any online systems or any measuring systems because it’s not that much systematic like [Sourcing Firm B]. At [Sourcing Firm C], only the boss knows about all the factories because he might have visited the factory. . . [Decisions are made] based on your experience and their past performances. There was no written analysis. . . Sometimes the factory could be disastrous. So that time you would blacklist the factory and not work with it again (I44-R54-R). Smaller sourcing firms may source from factories which they have not visited in person. Also, smaller sourcing firms compared to larger sourcing firms do not have the capacity to put as many resources into monitoring factories. The same retailers can use both large and small sourcing firms for different items.
Numerous sourcing firms advertise that they can ensure ethical production and large sourcing firms have their own socially-focused supplier standards. Sourcing firms can use internal people or hire specialised firms to carry out technical and social audits of potential factories. Additionally, some sourcing firms have ISO management standards.
Sourcing firms can also have internal diversity. This can be a reflection of the requirements of their different customers. According to a company representative of a large sourcing firm, different departments,
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have different sets of requirements. Some actually [consider the] ability [of factories] to change and things like that as a major criteria and others just need the pricing as a major criteria. So that was done based on various divisions’ requirements (I41-R50-R). This comment shows that vertical pressures can differ across relationships, even considering the pressures that are created by the same buyer, in this case the sourcing firm. Chapter 6 will explore diversity in buyer pressures in more depth across all stages of production.
While some sourcing firms may experience similar pressures to retailers, one major difference is that sourcing firms do not have brand name recognition with the general public. When news stories break about poor working conditions it is the names of the retailers that are broadcast across the world. However, sourcing firms working for top UK retailers have pressure from their customers – the retailers - to attempt to ensure that the retailers’ codes of conduct are followed by producers.
4.5) Retailers’ Horizontal Non-Sourcing Connections
The discussion above focused on how retailers connect to suppliers through vertical sourcing relationships. As was discussed in Chapter 2, these have been the relationships that have been most heavily focused on by researchers. However, retailers’ role in governance for sustainable production can also involve retailers’ involvement in non-sourcing connections. These non-sourcing connections can involve membership in coalitions and creating direct connections with producers responsible for any stage of production. As described in Chapter 2, connections retailers make directly with governance systems in LPSs or with producers outside of their sourcing relationships are considered as horizontal connections and can facilitate horizontal governance flows.
While retailers’ sourcing connections are fundamental to their ability to sell products, non-sourcing connections are often seen as an add-on. However, as will be discussed in further detail in Chapter 8, non-sourcing connections are becoming more important in the face of the complex challenges that are involved with promoting sustainable production. A general overview of non-sourcing connections is provided in this section. However, this is much less comprehensive than the information on vertical connections. Non-sourcing connections tend to be built through numerous projects, often developed on a case by case basis and consequently are more difficult to encapsulate as a
154 clear set of practices than the more uniformly applied vertical approaches. The discussion in Chapter 8 provides further insight into how these approaches are developing based on the exploration of how governance of production takes places within the ESN that is provided through Chapters 5, 6 and 7.
Direct Connections
Many retailers are involved with initiatives that take place within particular LPSs. Retailers’ involvement can include contributing to the administration of projects or supporting them financially. Sustainability focused projects can be a focus for bringing together retailers’ employees to support a good cause, such as running fundraisers in which staff raise money directed at supporting a target project. An example of the scope of these types of direct connections is that in 2014-15, New Look implemented 65 projects across China, Bangladesh, India, Cambodia, Vietnam, UK and Turkey (New Look 2015b).
Connections through Coalitions
A major way through which retailers make non-sourcing connections is through participation in coalitions. An example of some of the coalitions in which retailers participate can be seen in Table 4.6. This table shows that the case study retailers are involved in multiple coalitions. For example, ASDA, H&M, Marks and Spencer, Primark and Tesco are all involved in at least 5 coalitions. Of the 20 retailers in the case, only JD Sport, Sports Direct and TK Maxx were not members of any of the 12 coalitions considered. These coalitions can facilitate broad connections between retailers and LPSs responsible for multiple stages of production.
These coalitions involve their own administrative bodies. The involvement that retailers have within these organisations can vary from purely financial to on-going inputs in decision making processes. The coalitions are bodies which can run projects based in LPSs. These coalitions can also be part of organising policies which shape vertical governance through member retailers’ sourcing connections. A brief description of each coalition is provided in Appendix C.
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Table 4.6: Selected Retailer Membership in Coalitions
Sources: Author’s Construction, data from (Coninck et al. 2011; BCI 2015b; ETI 2014; The Sustainability Consortium 2014; BSR 2014; GSCP 2014; Sedex 2014; Greenpeace International 2015; ZDHC 2015; WRAP 2015; TISP 2015; Sustainable Apparel Coalition 2014 )
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4.6) Conclusion
This chapter has focused on understanding the characteristics of the lead buyers considered in this study. By selling in the UK, these lead buyers experience governance pressures related to promoting sustainable production in addition to pressures which may promote interactions that exacerbate or cause challenges related to sustainable production. Retailers’ interactions with suppliers are seen to be based on how these governance pressures influence their behaviour.
Retailers connect with producers through two paths which can facilitate buyer-led governance. The first is through vertical, sourcing connections, which are relationships that involve bringing together diverse sourcing objectives. The second is through horizontal connections. These connections are often created with the main purpose of promoting sustainable production.25 The ways that vertical and horizontal connections create governance pressures for producers at different points in the ESN are considered in Chapters 6, 7 and 8.
This chapter has focused on the identity of the lead buyers, which was considered as the first of the four features of the ESN that are explored as shaping its structure in the framework laid out in Chapter 3. Now that the features of the UK retailers in this study have been considered, the following chapter considers characteristics of the other three features which are related to how production is organised. This involves looking at first, the types of suppliers involved in the case; second, the types of links that connect buyers and sellers; and third, the way that production is territorially embedded within LPSs.
25 However, they can be created with alternative motivations such as creating a project to focus on for internal staff team building.
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5: Mapping the Production Network Connecting Indian Cotton to Indian Cotton Clothing
5.1) Introduction
To provide a basis for how governance experiences will be considered in Chapters 6, 7 and 8, this chapter provides the context in which the transformation of cotton to cotton clothing takes place within India. While the previous chapter considered the role that UK retailers play at the top of the ESN, this chapter looks at how production within the ESN in India is structured. This chapter considers part ‘b’ of the question: “What is the structure of the ESN linking UK retailers to all stages of Indian garment production?” This involves identifying the types of businesses involved in production, how these fragmented businesses are linked together and where they are located.
The structure of the ESN provides the context which determines the flow of governance and the potential for retailers to shape the practices of producers. As described in Chapter 3, four features are considered in this study as shaping how governance takes places across the group of businesses involved in an ESN. Chapter 4 considered one feature of the ESN structure, which was the identity of the lead buyers. The remaining three features are considered in this chapter.
The second feature is the types of businesses involved in supplying the final product. In this case production occurs in businesses characterised by varying levels of integration and fragmentation. However, most production in India occurs through fragmented production processes which connect independent businesses responsible for separate activities. Additionally, a number of forms of intermediaries are involved in connecting producers across different stages of production. The third feature of the ESN is how businesses are linked. In this case inter-firm connections are diverse with businesses simultaneously using multiple sourcing strategies and different relationship types existing in different parts of the network. The fourth feature of the network, which can aid in understanding processes of governance for sustainability, is how producers are distributed territorially. In this case, producers are quite distinctly grouped in LPSs. Producers in these LPSs often have similar characteristics and face similar sustainability challenges.
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This chapter focuses on discussing the characteristics of the features of the case study ESN’s structure that are related to production. Sections two, three and four explain the dynamics of how the case exhibits the three ESN features considered in this chapter. Section five provides a discussion of how the characteristics of these three features, along with the characteristics of the retailers that were discussed in Chapter 4, inform the discussion of governance for sustainable production in the subsequent chapters. Section six provides a conclusion.
5.2) Characteristics of Suppliers
When looking at the characteristics of the producers that make up this network, multiple forms of integration and fragmentation can be found in the case study ESN. This section considers who is responsible for carrying out the processes involved in producing cotton clothing in the Indian branch of top UK retailers’ ESNs. Looking at the variety of actors that are involved, it can be seen that this set of businesses involves diverse patterns of integration and fragmentation. However, the most common processes involve high levels of fragmentation with different businesses responsible for carrying out each stage of production.
Different levels of integration and fragmentation result in diverse arrangements for how production is distributed between facilities. This results in situations where, at one extreme, a first tier supplier could be responsible for all stages of manufacturing. Or, alternately at the other extreme, a first tier supplier could be responsible for a single stage of manufacturing and rely on multiple tiers of producers each carrying out one stage of production. These example pathways can be seen in Figure 3.6 (on page 104), where they are shown through the red and green lines.
Across this case multiple forms of integration and fragmentation are found which results in a limited applicability of focusing on considerations of divisions between businesses based on categories defined by production of specific components of garments. For example, fabric production can take place within a small informal sector producer or at a large firm responsible for multiple stages of production from yarn spinning to garment manufacturing. These differences indicate that firms producing the same products can have very different features. This can be seen in the differences between the large composite mills that generally carry out spinning and weaving with an average of
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1,416 employees and non-small scale industry weaving mills with an average of 279 workers (Office of the Textile Commissioner 2015).
The discussion in this section provides descriptions of the main forms of producer businesses found in this case study ESN. Firm types vary across the ESN from small to large, formal to informal and high levels of vertical integration to high levels of fragmentation. Fragmentation, particularly for businesses involved in the garment manufacturing stage is widespread. Individual components within the broader stage of garment production can be carried out by separate businesses, such as buttons being applied by one facility with beadwork taking place at a different location.
Figure 5.1 provides an overview of the different forms of businesses that are found in the case study ESN. This figure shows the different forms of vertical integration that are found in the case study ESN. The vertical spread of the blue boxes indicates level of vertical integration. Horizontal placement is not significant. The business forms represented are based on the types of producers that were directly interviewed for this study as well as information provided by industry experts, such representatives of industry associations. While the applications of considering business structures for understanding governance for sustainable production are considered in detail in Chapter 6, the characteristics of major types of businesses found in this case are now discussed. The forms of businesses discussed are: • garment manufacturers with varying levels of vertical integration (E-P in Figure 5.1), • general garment sub-contractors (Q in Figure 5.1), • embellishers (R in Figure 5.1), • processors (S in Figure 5.1), • composite mills with varying levels of integration (E-L, T and U in Figure 5.1), • power looms (V in Figure 5.1), • knitters (V in Figure 5.1), • yarn spinners (W-Z in Figure 5.1), • cotton gins (W, X, AC in Figure 5.1), • and, cotton farmers (AF in Figure 5.1). The way businesses responsible for different stages of production are linked is discussed in the section below which focuses on connections between businesses in the ESN (Section 5.3). Sourcing connections between the businesses shown in Figure 5.1 are visually depicted in Figure 5.3 (on page 176).
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Figure 5.1: Forms of Vertical Integration
Source: Author’s Construction
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With the diversity of business forms found in the case study ESN, sectoral breakdowns, which are common in GVC and GPN mapping and analysis, cannot capture the structure of this case. In this case sectoral categories, such as textile producers, are not easy to define because businesses carrying out each task take multiple forms with varying levels of vertical integration. This can be seen by looking horizontally across the rows of Figure 5.1. When considering governance for sustainable production this distinction is important as the way that producers experience pressures from buyers related to production practices is shaped by the structure of the businesses. This includes multiple factors such as a producer’s size and organisational structure.
5.2.1) Garment Manufacturing
Production for garment export for the case study retailers is contracted to formal sector garment manufacturers. These firms have a wide variation in their level of vertical integration. Their manufacturing activities range from doing a small amount of tasks in- house, such as cutting and packaging, while buying ready-made textiles and outsourcing the bulk of garment manufacturing stages (P in Figure 4.3) to being highly vertically integrated and carrying out every stage after ginning (E in Figure 4.3). While Indian garment production can take multiple forms, most production takes place in garment manufacturers that do not involve high levels of vertical integration.
Sub-contracting components within the garment manufacturing stage is very common (I38-R47-R: I51-R60-R; AEPC 2009). Subcontractors often engage in “job- work,” which involves being given the materials and specifications for a design and being paid for their manufacturing services. Sub-contractors hired by garment manufacturers can carry out processes that include stitching, dyeing, printing, bleaching and embroidery. These sub-contractors can be formal or informal businesses. Below, different types of businesses that are involved in garment manufacturing in India are discussed.
Garment Manufacturers
The case study retailers generally have orders placed at formal sector garment manufacturers. India’s Annual Survey of Industries 2012-2013 (Central Statistics Office 2015a), which considers formal businesses registered under the Factories Act, found that there were 9,265 facilities manufacturing apparel, split between 6,143 units for wearing 162 apparel and 3,122 units for knitted or crocheted apparel, employing 922,060 (7.1% of persons in the factory sector). Total output of these manufacturers was 903 billion rupees (£9 billion) in 2013 (Central Statistics Office 2015a). The businesses employed an average of 142 people with 122 directly involved in production of which 49% 26 were women (Central Statistics Office 2015a).
While most garment manufacturers are smaller businesses, there are few large manufacturers in India, these includes Orient Craft, Shahi Exports, Arvind, Eastman Exports and Brandix. An overview of examples of large manufacturers is provided in Table 5.1. These businesses all employee over 100 times more employees than average. These businesses own multiple factories and have high production capacities, meaning they can produce larger orders than other Indian producers or sell many small orders. These firms have different structures and possess greater abilities to negotiate with large retailers than smaller firms. Interviews for this study included one garment manufacturer in this size range (Composite Mill A).
Table 5.1: Examples of Large Indian Garment Manufacturers Year Firm Employees Factories Capacity Revenue Founded Orient Craft 1972 26,000 21 in NCR 200,000 £160 million pieces/day Arvind 1931 25,620 -- 46,000 £478 pieces/day million 27 (reported production of bottoms, formal tops and knit tops) Shahi 1974 100,000 51 across six 370,000 £187 million Exports states pieces/day Sources: Author’s Construction, data from (Arvind Limited 2015; Ghosal 2013; Shahi Exports Private Limited 2015; Arvind 2015; Orient Craft Limited 2015 )
Garment manufacturers are often family owned units (AEPC 2009). Manufacturers’ roles include buying raw material (mainly fabric or yarn), design, cutting, folding and ironing, packaging and marketing. Integrated manufacturers, which are few,
26 This figure is the percent of women out of workers directly hired by the factory and does not include workers of either gender hired through contractors. 27 Only 13.72% of turnover was from garments.
163 can include knitting operations, embellishment and dyeing. The larger businesses are generally more vertically integrated than their smaller counterparts and sometimes are responsible from all stages of production starting from spinning. However, smaller garment manufacturers can also be integrated with knitting being more commonly integrated with garment manufacturing as opposed to weaving due to different equipment requirements (I4-R4-R; AEPC 2009). Indian garment manufacturers have varying contributions to design, with some employing full-time design teams, such as Garment Manufacturer C (I54-R64-G). Manufacturers can make their own designs, collaborate on designs or use those provided by their buyers (I19-R20-G; I54-R64-G). Garment manufacturers selling to markets which require compliance with codes of conduct have personnel or specialised departments dedicated to applying for required certificates and ensuring the factory can pass the required inspections (I55-R65-G) or work with consultants to help with these processes (I54-R64-G).
Subcontractors
Garment manufacturers fulfilling orders for the case study retailers are often supported by general subcontractors, also known as jobbers. Embellishments in India are often done by hand. These activities are often sub-contracted to homeworkers. In a survey of unincorporated businesses (National Sample Survey Office 2012), it was estimated that in 2011 there were 3.8 million ‘own account enterprises’ (OAEs), defined as those “normally run by members of the household without hiring any worker on a fairly regular basis (Ministry of Statistics and Programme Implementation 2015, p.1)” involved in the manufacture of wearing apparel with an average of 1.2 non-hired employees. In addition, the same survey estimated that there are approximately 0.5 million establishments in this industry, defined as enterprises “run by employing at least one hired worker on a fairly regular basis (Ministry of Statistics and Programme Implementation 2015, p.1).” These businesses had an average of 4 workers. Both forms of garment manufacturers may be responsible for subcontracting activities for garments to be exported to the UK. Together both types of businesses employ an estimated 88,000 formal workers and 1.3 million informal workers. However, it must be noted that these figures represent businesses specialising in both domestic and export production and these activities are often carried out by separate businesses.
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Jobbers carry out manufacturing processes but have the materials and design provided by their customer. Jobbers can be responsible for knitting, stitching, embroidery, accessory fixing, ironing, processing and other tasks (AEPC 2009). Some jobbers will perform all tasks from cutting to packing when given orders on piece rate from manufacturers. Table 5.2 below shows a break-down of how activities are split between manufacturers and jobbers. Many businesses in India are dedicated jobbers. These can be found within the 916,000 non-factory units carrying out embroidery (Bedi 2009). Most (71%) of these units run without power and almost all (93%) are OAMEs.28
Table 5.2: Activity-wise Classification of India’s Garment Industry Units
Source: Author’s Construction, data from (AEPC 2009 )
5.2.2) Wet Processing
While wet processing may be integrated in larger garment manufacturers, this activity is often conducted as job-work. More than 80,000 wet processes businesses work in the informal sector (Bedi 2009). In 2006, 23% of the value of output of processing was created by informal businesses and 73% from the formal sector (Bedi 2009). Formal sector fabric finishing provided employment for 241,028 people in 2013, which was 1.9% of formal sector industrial employment (Central Statistics Office 2015a). Each formal sector unit employed an average of 81 people, of which 66 worked directly on production related tasks. Only 5% 29 of textile finishing production workers were women.
Processing units can be dived into three types, classified as being part of composite mills, standalone large processing units and small scale industry processing units (Working Group for the Textiles and Jute Industry 2011). Ninety per cent of units
28 A manufacturing enterprise run without any hired workers employed on a fairly regular basis is an Own Account Manufacturing Enterprise (OAME) (Bedi and Cororaton 2008). 29 This figure is the percent of women out of workers directly hired by the factory and does not include workers of either gender hired through contractors.
165 are SMEs (Working Group for the Textiles and Jute Industry 2011). In 2005, there were 2,510 power units with 59 of them being part of composite mills, 167 semi-composite and 2,284 independent (Chatterjee 2015).
5.2.3) Textile Manufacturing and Yarn Spinning
In India knitting and weaving are usually carried out by different businesses. Businesses in this sector include both large scale and small scale facilities. Both processes use cotton yarns as an input. Yarn production can be done independently or it can be integrated with weaving and often wet processes in units referred to as composite mills.
It is estimated that the Indian textile industry is made up of 1,129,000 handloom and hand-knitted units and 502,000 powerloom/mill and knitting units (Bedi and Verma 2011). In 2005/6 the power-loom sector was responsible for 72.6% of fabric production, the mill sector for 3.4%, the hand-loom sector for 7.3% and the hosiery sector for 16.2% (Bedi and Cororaton 2008). Both the power-loom and hosiery sectors have been expanding while the mill and handloom sectors have been declining (Bedi and Cororaton 2008).
Formal Sector Textile Producers
Formal sector textile production was carried out by 2,329 weaving units and 630 knitting and crocheting units in 2013 (Central Statistics Office 2015a). These businesses provided employment for 276,156 people in 2013, which accounted for 2.1% of formal sector industrial jobs (Central Statistics Office 2015a). An average of 93 people were engaged per unit, with 78 involved directly in production, of which 16% 30 were women (Central Statistics Office 2015a). In 2008, there were 179 large, formal sector weaving mills, which can be considered large powerlooms (Bedi 2009).
In the early stages of industrial production in India, large composite mills which included spinning, weaving and processing, dominated. However, only a small proportion of production takes place in composite mills currently. In 2015 there were 200
30 This figure is the per cent of women out of workers directly hired by the factory and does not include workers of either gender hired through contractors.
166 composite mills across the country (Office of the Textile Commissioner 2015). Composite mills are generally large employers. A representative from a textile industry association described these businesses as having a minimum of 1,600 workers with some having over 10,000 (I23-R25-T). In recent years, some composite mills have expanded to include clothing. These businesses sell textiles and clothing domestically and abroad.
While these firms have high capacities they sometimes need to outsource activities or buy yarns from other producers. A representative from one of India ’s large composite mills interviewed for this study described having to sometimes outsource parts of the weaving process to a power loom. Because requirements of production . . . is good. . . we are getting our work done on job work. . . weaving capacity is less and we are outsourcing and then bringing back for finishing and we are selling. So some part of the production is sourced outside (I32-R41-T).
Powerlooms
Weaving cotton fabrics in India is mostly carried out by the decentralised sector. The same types of looms are used in both but the organised sector has more advanced technology (I12-R12-T). Starting a powerloom in the decentralised sector takes much less investment than establishing an organised textile mill (I12-R12-T). In the Key Results Survey on Unincorporated Non-Agricultural Enterprise (Excluding Construction) in India, it was estimated that there are 2.2 million OAEs involved in the manufacture of textiles with an average of 1.6 non-hired employees (National Sample Survey Office 2012). In addition, the same survey estimated that there are approximately 0.4 million establishments with an average 5.7 workers. Together both types of businesses employ an estimated 59,000 formal workers and 1.5 million informal workers.
In 2006, 509,000 units were running with the use of power, including powerlooms, hosiery and knitting units with 54% in the informal sector (Bedi 2009). Of these units, 74% were OAMEs with an average of 1.5 people employed, 12% were NDME with an average of 3.3 employees, 8% were DME with an average of 8 employees, 5% were small to medium unorganised with an average of 13 employees and less than 1% was split between small to medium organised enterprises (174 units) with
167 an average of 13 employees, medium enterprises (1,474 units) with an average of 25 employees and large enterprises (2,315 units) with an average of 63 employees. 31 Units running without power numbered 1,129,000, with 98.6% belonging to the informal sector. Most handloom units (93.3%) were OAMEs with an average of 1.5 people engaged but at the top end large handloom units averaged 94 employees (Bedi 2009). Knitting Mills
Knitting mills provide textiles for the hosiery sector, which includes all types of knitted fabrics, including T-shirts and undergarments. Few knitting units are integrated (Bedi 2009). Many producers are informal. The knitting and crocheting industry is made up of an estimated 23,362 units, with 59% of them being OAMEs and 41% running without power (Bedi 2009). In 2005, 460,000 people worked in the manufacture of knitted and crocheted fabrics and articles (Bedi 2009).
Yarn Spinning Mills
In contrast to the large involvement of the ‘unorganised’ sector in textile production, India’s spinning industry is dominated by the ‘organised’ sector (Osakwe 2009). The bulk of Indian cotton yarn (95%) is spun at large scale spinning mills and composite mills (Osakwe 2009). India is a global leader in cotton yarn production.
In 2013, India’s 4,408 formal sector spinning mills provided 679,224 jobs, which accounted for 5.2% of formal sector industrial jobs (Central Statistics Office 2015a). Each unit employed an average of 154 people with 135 involved directly in production. Twenty per cent 32 of production workers were women.
In 2015, 60% of spinning units were large businesses, including standalone units and composite mills (Office of the Textile Commissioner 2015). Employing about 66%
31 “NDME is a manufacturing establishment employing less than six workers (household and hired workers taken together). DME is manufacturing establishment employing six or more workers (household and hired workers taken together). The maximum number of workers employed in DME units is 9 with power and 19 without use of power (Bedi 2009, pp.6–7).” 32 This figure is the percent of women out of workers directly hired by the factory and does not include workers of either gender hired through contractors.
168 of people in the spinning sector, overall the share of medium and large units of the industry’s total value added was 98.2% and their share of the value of output was only 90.2% (Bedi 2009).
Distinctions between these business types can change over time. A representative from a textile association discussed a growing trend of spinning mills expanding to include knitting activities. What is happening is there is a lot of forward integration with spinning mills into knitting. Spinning mills are organised businesses. They started knitting, so that becomes organised knitting also. Otherwise, traditionally knitting has been in the unorganised sector but a lot of spinning mills are now getting into knitting (I12-R12-T).
5.2.4) Cotton Production
Cotton production is generally fragmented with farmers responsible for growing and harvesting raw cotton and gins responsible for removing seeds and waste matter from multiple farmers’ crops. However, in some cases gins are owned by collective groups of farmers. The following discussion provides an overview of the main types of businesses involved in cotton farming and ginning.
Cotton Ginning Mills
Cotton ginning in India is done in mills generally located relatively near to cotton farming. Gins are often standalone private businesses. However, ginning can also be done by farmer-run ginning cooperative and government run facilities.
Gins can range in size. In 2013, 3,405 formal sector gins 33 employed 104,729 (Central Statistics Office 2015b). Each factory employed an average of 31 people with 24 engaged directly in production. Generally at a small scale, there are an estimated 5,879 informal ginning enterprises with an average of 2.3 workers (National Sample Survey Office 2012). These include 4685 OAEs with an average of 1.5 non-hired workers and 1,193 establishments with an average of 5.3 hired and non-hired workers.
33 The figures also include businesses engaged in seed processing for propagation as information on these activities was combined in available statistics.
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Cotton Farmers
Over 10 million people farm cotton in India (Ramamurthy 2014). According to the agricultural census 2010-11 (2015), cotton was found in 2,677,175 marginal holdings of less than 1 hectare, 2,505,225 small holdings with between 1 and 2 hectares, 1,659,075 semi-medium holdings of 2 to 4 hectares, 759,870 medium holdings of 4 to 10 hectares and 114,855 large holdings of over 10 hectares. Figure 5.2 illustrates the large proportion of marginal and small holdings. Almost all Indian cotton farmers also rely on other sources of income (Bedi and Cororaton 2008).
Figure 5.2: Sizes of Cotton Holdings
Source: (Author’s Construction, data from Agricultural Census 2015 )
5.2.5) Intermediaries
Across the connections in the ESN, intermediaries can be involved in connecting buyers and sellers. Additionally, these intermediaries can play various other roles in facilitating production processes. A representative from Retailer A described the crucial role that intermediaries play as managing risk for both parties in a transaction (I9-R9-R). At some points in the ESN intermediaries can be large multi-national firms and at other points they can be micro enterprises, which involve individuals bridging connections between buyers and sellers.
The sourcing firms which help retailers connect with garment manufacturing processes range from small to large and have much more diverse structures than the case study retailers. Sourcing firms are crucial in international trade. Companies buying products produced from overseas markets, often outsource the activities involved in 170 interacting with overseas manufacturers. These activities can be complicated when firms are looking to buy custom made products, which may require high levels of communication with producers. Sourcing firms play a large role in supporting UK garment retailers in coordinating production. These firms range from small to large and have varying levels of contact with the producer firms from which they source. Almost 600 companies attended the Tex Trend 2011 conference for buying agents in India (Wool & Woollenes Export Promotion Council 2011). Some of these are representatives of brands and retailers but many are independent sourcing firms and buying houses.
There are three main types of sourcing firms which are used by retailers in the case study. One type of sourcing firms includes small UK-based firms that sell designs to the case study retailers and are responsible for importing garments made in other countries. A second type of sourcing firm includes those firms located in third countries. These firms specialise in coordinating sourcing activities globally. The most prominent of these companies is Li and Fung. A third type of sourcing firm includes those working within India. These can be independent buying houses and buying houses run as subsidiaries of retailers. These businesses carry out many of the functions that could be and are sometimes done by retailers’ in-house buying teams. Additionally, in India there are firms that specialise in exporting.
An overview of five large sourcing firms can be found in Table 5.3. These firms are almost as big as the case study retailers and in some cases, such as with Li and Fung, are bigger than some of the case study retailers. These are large firms that operate across multiple countries. Notably, some of these firms also have their own codes of conduct.
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Table 5.3: Examples of Larger Sourcing Firms involved in the Case Study ESN
Source: Author’s Construction, data from (Li & Fung Limited 2014; Li & Fung Limited 2015; William E Connor & Associates 2015; Impulse 2015 )
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A representative from a large sourcing firm, that provides services for some of the case study retailers, described the firm’s role as being involved right from [factory] selection, which is the right [factory] for whatever product is required. Then cost negotiations with them, then placing the orders, then tracking the orders, whether they are going on time then we are basically doing the final inspections until the dispatch. So this is what our responsibility was (I41-R50-R). Sourcing firms play a crucial role in shaping the ESN by often being the ones to choose the facility in which an order will be placed.
Both yarns and textiles are also often sold with the involvement of intermediaries. These intermediaries are generally smaller businesses that work within India to connect buyers and sellers located in different regions or to connect businesses of different sizes. For example, Composite Mill A relied on selling their textiles in India through a network of agents who interact with small garment manufacturers.
Cotton traders buy and sell bales of cotton. They can facilitate sales within India and abroad. Many of these firms have long histories and can be large, established businesses. One major way that cotton is sold is through the National Commodity and Derivatives Exchange (NCDEX) in Mumbai. Through this platform cotton is physically distributed through delivery centres located in Abohar in Punjab, Sirsa in Haryana as well as Hanumangarh and Sriganganagar in Rajasthan. According to the International Trade Centre, most contracts are closed by physical delivery of commodities. They describe that, participants use this market mostly as a trading platform, price discovery tool and physical trade forward contracting (International Trade Centre 2007, p.192). An additional trading platform, the Multi-Commodity Exchange (MCX) also functions with most deals resulting in the physical delivery of commodities.
While traders involved in cotton bales are generally larger formal businesses, cotton farmers sometimes sell their raw cotton to smaller traders who may sell it to other traders or to gins. Raw cotton or kapas traders can be individuals working on their own. However, kapas trading often happens through formalised markets, which include those run by state government agencies called Agricultural Produce Market Committees (APMCs) and smaller local market yards.
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5.3) Connections between Businesses
The section above focused on identifying the diverse forms of businesses which are responsible for contributing the production of cotton clothing that is bought by UK retailers. This section focuses on identifying characteristics of the links which tie these businesses together. This is the third feature of the ESN as discussed in the framework provided in Chapter 3. When looking at vertical pathways in the ESN connecting raw material production to garment manufacturing, products can be made at any of the forms of businesses described above and pass through the diverse forms of links discussed in this section.
When looking at the entire case study ESN, one can see multiple forms of businesses. The nature of integration and fragmentation determines the way that businesses are connected to each other. Figure 5.3 shows how the different forms of businesses found in this network are connected through sourcing relationships. While this section provides some discussion on how businesses are connected to each other, further qualitative aspects of the relationships involved in these connections will be considered in Chapter 6 which focuses on governance processes that take place within sourcing connections.
In Figure 5.3, the same forms of vertically integrated and fragmented businesses are shown as depicted in Figure 5.1. These represent the types of firms that are involved in producing cotton garments in India. The sizes of the squares indicate the level of vertical integration of a business. The businesses with higher levels of vertical integration are displayed on the left and more fragmented firms are displayed on the right. The colours of the squares indicate the highest level of production for which the producer is responsible. This diagram shows how these businesses are connected through multiple different vertical pathways. Additionally, the colours of the lines linking firms indicate different types of links. The pink lines show connections that involve direct buying links. The blue lines indicate links that involve job work, in which the buyer provides material inputs to a producer that is paid to do a service. The variety of sourcing connections within the case study ESN is discussed in this section.
A major feature of the case study network is that it involves multiple forms of connections. Businesses across the network act as buyers and sellers in different
174 relationships they have with network members. In this section three key aspects of these connections are considered. The first is what the network shows about buying connections. The second is how the businesses involved relate to the network as sellers.
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Figure 5.3: Network Connections across Different Forms of Vertical Integration within Case Study ESN
Source: Author’s Construction
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While forms of connections are quite diverse, there are some notable features which can be seen by looking at the range of connections observed. An important understanding derived from looking at the set of commercial connections that were identified in this study is that retailers do not have direct commercial connections below yarn spinning. Additionally, the number of sourcing connections involved in making a cotton garment can vary within the ESN. More integrated units which are on the left hand side of the diagram are involved in less sourcing connections. Also, moving up from farmers, inputs can pass through a variety of forms of businesses before reaching retailers, including formal and informal sector businesses. Finally, sourcing is done through multiple forms of links for each type of input, including obtaining inputs from within individual companies
5.3.1) Sourcing Connections
By definition, businesses are included in this network by being suppliers to member businesses. Businesses can be linked into this network through multiple arrangements of sourcing connections. Retailers’ commercial connections are concentrated at the top of the network with few connections to fabric manufacturers and even fewer connections to yarn manufacturers. They generally do not have any direct commercial links to cotton production. Many retailers source through sourcing firms and a small number of retailers have sourcing offices in India. Some retailers have connections with fabric or yarn manufacturers through directly buying fabric or sourcing through nomination. Nomination involves identifying a fabric manufacturer and asking the chosen garment manufacturer to buy fabric from the nominated source.
Buyers’ sourcing practices determine the nature of how businesses are connected to this network. Important decisions shaping this are how suppliers are chosen and the type of transaction being carried out. Some major variations involved in the case study ESN are discussed below.
Sourcing choices determine the stability of the network. The membership is not fixed. In some cases long-term relationships exist but there is generally no obligation to maintain these connections if buying needs change. Across the ESN buyers usually simultaneously work with multiple suppliers that may be different types of businesses. A
177 representative from a retailer described the diversity of their supplier base as, “a mix of small manufacturers, big manufacturers, medium manufacturers (I38-R47-R).”
One major distinction between sourcing connections in this network is between buying an input from a supplier versus hiring a supplier for job work. These connections are shown as different coloured lines in Figure 5.3. Most garment manufacturers outsource a large portion of production to jobbers, which have lower labour costs (AEPC 2009). These relationships include providing the material and design for the sub- contractor. A common way for production to happen based on a retailers’ order is for the garment manufacturers to acquire the fabric from an independent fabric producer and to have the fabric dyed by a separate firm and sometimes embellished by additional specialised subcontractors before being put together in house or through the assistance of general subcontractors.
Non-vertically integrated garment manufacturers buy grey (untreated) fabric from mills, powerlooms or knitting units. Buying undyed fabrics allows them to meet specific design needs of their buyers through custom ordered dyeing and other treatments. In some cases, garment manufacturers can also buy yarns and get fabrics custom made for their orders. Knitted garment exporters often buy yarns from spinning mills, which they can get knitted on job-work. Additionally, one of the composite mills interviewed for this study relies on sending portions of weaving out as job-work when orders are higher than the company’s internal capacity (I32-R41-T). Processing is commonly outsourced. This may be because of a lack of capacity within the garment manufacturers or can be driven by legal requirements. An example can be seen in the following description provided by the owner of Garment Manufacturer A. Processing is all outsourced because in Delhi, dyeing is not allowed. So there are different mills in different areas. . . dyeing of fabric is not allowed in Delhi. So we have to get from different states where this is approved. . . Generally what we do is we have the grey fabric in store, in our stock, so as per requirements, we send it to them, they process it and give it back to us (I19-20-G). With the exception of outright bans, across the ESN wet processing can take place as an integrated or fragmented process.
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Embellishments in India are often done by hand and these are often carried out by independent contractors hiring homeworkers for job-work (I38-R47-R; I51-R60-R). A representative from a Delhi based sourcing firm described, “the beading is hand work. And it goes outside of the factory to be done (I51-R60-R).” The ability to offer small runs of intricately beaded and embroidered pieces is a speciality of garment manufacturing in India. The fact that this is often contracted out to home-based workers has been associated with the use of child labour. Challenges surrounding these issues are discussed in detail in Chapter 7.
Ginning is also an activity than can be carried out as job-work. However, this process is less common, often being used for specialty cottons (such as organics) where a higher tier buyer wants to track cotton from the farm (I75-R84-G). In these cases cotton is bought directly from a farmer and the buyer pays a gin for their services. This could involve an NGO or composite mill buying cotton directly from farmers and getting it ginned before carrying out further production processes. This allows for monitoring traceability, which is a process further discussed in Chapter 6.
Sometimes a buyer will tell the garment manufacturer where they should buy their inputs. As mentioned above, this process is referred to as nomination. In India, it is common for accessories and labels but less common for fabrics (AEPC 2009). Table 5.4 provides an overview of the use of nominated suppliers by India garment manufacturers. Nomination of fabrics is declining. This means that retailers or sourcing firms are increasingly less likely to be responsible for choosing a fabric manufacturer. Nomination is rarely used for yarn, sewing thread, dyes or chemicals.
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Table 5.4: Garment Manufacturers’ Sourcing through Nomination
Source: (AEPC 2009, p.19 )
While the discussion above described differences between integration and fragmentation based on main manufacturing activities, the borders between which businesses do additional activities can be fuzzy. While retailers can design their own items, buy the materials and hire a garment manufacturer to carry out cut-make-trim (CMT) services, there has been a trend for supplier upgrading (Fernandez-Stark et al. 2011). Depending on the capabilities of the garment manufacturer, design can be done by retailers or garment manufacturers or cooperatively. Upgrading of garment manufacturers may be contributing to the decline of the use of fabric sourcing through nomination. In the current situation the breakdown of who has control over sourcing can differ order by order, while for the most part, Indian garment manufacturers in the case study choose their own fabrics.
5.3.2) Selling Connections
While Figure 5.3 shows different ways that firms are supplying to the case study retailers, an important point to note is that while membership is defined by selling into the network, businesses may have many other buyers outside of this network. Producers may only have a small proportion of their outputs ending up in garments sold by the case study UK retailers. Buyers outside the case study may have different types of connections with producers that create additional vertical governance that is not considered in this study.
Looking across all garment production, 70% of production is consumed domestically and 30% is exported (Joshi and Singh 2010). However, some garment manufacturers specialise in creating garments for Western markets, while others concentrate on the domestic market. Textiles sold in domestic markets were valued at $10 billion US and exports at $12 billion US in 2009 (AEPC 2009). This case only considers textiles used domestically by Indian garment manufacturers producing clothing 180 for UK retailers. However, the same producers, who produce fabric of a quality acceptable for use in garments sold by top UK retailers can sell to both markets.
Considering spinning, less than 30% of the yarn from spinning mills in Tamil Nadu is used directly in the supply chains of products produced in India for global brands and retailers (Solidaridad 2012). About 23% of yarn production is exported and some of this may be used in the production of clothing for top UK retailers via production processes in other countries (Solidaridad 2012). Of the total production of cotton yarn in India, which was 2,948 million kgs in 2008, 5% was consumed by mills, 27% was consumed by powerlooms, 17% was consumed by handlooms, 27% by hosiery, and 3% by other forms (Bedi 2009).
Globally, India is a major cotton producer. Much of this cotton is fed into domestic supply chains, with 72% of cotton consumed domestically in the 2013-2014 season (The Cotton Corporation of India 2014).
5.4) Productive Systems within India
Chapter 4 along with the above two sections have discussed the first three features of the case study ESN. These were the characteristics of the lead buyers, the characteristics of the suppliers and the types of links connecting buyers and sellers. At this point, the discussion in this section focuses on how producers are territorially distributed, which is the fourth, and final, feature considered for this ESN. This section shows that producers are located within few territorial groupings and that these groupings, considered as forming LPSs, exhibit diversity within India.34
5.4.1) Production in Local Productive Systems
For all stages of production of cotton garments in India, producers can be found to be generally grouped within LPSs. However, the scale of LPSs housing producers
34 While differences in LPS in regions outside of India are not explored in this study, an indication of global diversity of productive systems contributing to the case study retailers’ cotton garment production can be found in Appendix D. Considering these differences amplifies the importance of considering horizontal governance for retailers considering sustainability challenge that cross their global ESNs.
181 responsible for different stages of cotton garment production is diverse. Across India, industrial stages of production often occur in clusters (Das 2005). Clusters involve “sectoral and spatial concentrations of firms (Schmitz and Nadvi 1999, p.1503),” which have the potential for economies of scale, scope, agglomeration gains and joint action (Lund-Thomsen and Nadvi 2010). Agricultural producers are often less concentrated as they are spread across larger rural areas but cotton production can be identified as occurring within distinct territorial regions.
Figures 5.4 through 5.11 show how different stages of production are distributed in LPSs across the country. These maps show that for each stage of production, producers are concentrated within definable territorial regions. Figure 5.4 shows garment production; Figure 5.5 shows spinning, weaving and finishing factories; Figure 5.6 shows other textile manufacturing factories, which is category that includes knitting textiles; Figure 5.7 shows composite mills; Figure 5.8 shows weaving; Figure 5.9 shows spinning; Figure 5.10 shows ginning; and finally, Figure 5.11 shows cotton farming. Appendix E provides the data that was used to generate all of these maps.
Looking at these maps shows that at each stage of production, producers can be found to be concentrated in relatively few areas. Garment manufacturing can be seen to be concentrated in Kolkata, southern India, Mumbai, Ludhiana and the Delhi area. Maharashtra houses 35% of formal sector weaving mills. Tamil Nadu houses 62% of spinning mills. In 2013, over 85% of ginning output was from the six states depicted. Considering these territorial groupings allows for an exploration of differences between LPSs. The discussion below provides insight into how the LPSs depicted can be seen as housing producers that use distinctive production practices.
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Figure 5.4: Garment Clusters in India
Source: Author’s Construction, data from (AEPC 2009 )
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Figure 5.5: State-Wise Distribution of Spinning, Weaving and Finishing Factories
Source: Author’s Construction, data from (Central Statistics Office 2015a )
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Figure 5.6: State-Wise Distribution of Other Textile Manufacturing Factories
Source: Author’s Construction, data from (Central Statistics Office 2015a )
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Figure 5.7: State-Wise Numbers of Composite Mills
Source: Author’s Construction, data from (Office of the Textile Commissioner 2015 )
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Figure 5.8: Locations of Non-Small Scale Industry Weaving Mills
Source: Author’s Construction, data from (Office of the Textile Commissioner 2015 )
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Figure 5.9: Locations of Spinning Mills 2015
Source: Author’s Construction, data from (Office of the Textile Commissioner 2015 )
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Figure 5.10: Ginning Output in Top 6 States in 2013
Source: Author’s Construction, data from (Central Statistics Office 2015b )
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Figure 5.11: Cotton Production 2013-2014
Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
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5.4.2) Difference between Local Productive Systems within the ESN
Across each LPS, businesses can be found to have a variety of characteristics and use different production practices. This section highlights differences between LPSs in this case. Noticeable differences shown in the maps provided include that businesses in different LPSs vary greatly in size. Other differences can be seen in the data presented in Appendix E. This data shows that LPSs have different levels of reliance on women workers as well as different employment structures, with some LPSs relying heavily on contract labour while others hire workers directly. Some highlights of key differences between LPSs responsible for different stages of production are now considered.
Considering garment production, some clusters are more export oriented than others (see Figure 33 in Appendix E). Additionally, garment producers can take different forms in different LPSs. Businesses in the Delhi area, which mostly specialise in making woven garments, tend to be smaller and rely on more subcontracting (Mezzadri 2012). Businesses in Tamil Nadu which make knit garments are often vertically integrated to include knitting and garment manufacturing (I38-R47; I4-R4). Numerous sustainability challenges have been identified in Indian garment manufacturing. These are often connected to working conditions (Rossi and Staritz 2011; Raworth and Kidder 2009; Mayer and Pickles 2014). However, the characteristics of each LPS can shape the nature of such challenges.
When considering textile production, as depicted in Figures 5.5 to 5.9, it can be seen that businesses also have variations across LPSs. For example, across regions, businesses have different average sizes. Another difference can be seen when considering formal sector spinning, weaving, finishing and other textiles manufacturing. In the southern states (Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana), these firms have an average of 43% women workers directly employed versus an average of 5% among the remaining states (Central Statistics Office 2015a).
LPSs for cotton also have diverse features. There are many differences in how cotton is farmed in different parts of the country. Some of the key differences can be seen
191 in the varying yields and use of irrigation.35 These differences between productive systems can shape the sustainability challenges that are faced for farming businesses. Farming has been associated with numerous sustainability challenges. Major concerns in India have included farmers accumulating unmanageable debt (Sahai 2007; Behere and Behere 2008; Afonso 2015) and high levels of pesticide use (Mancini et al. 2005; Mancini et al. 2008). Additionally, the use of genetically modified cotton has been debated as being the solution or cause of sustainability challenges (Freeman 2012). However, experiences for farmers working in diverse LPS have been found to be dramatically different, particularly related to the use of genetically modified cotton (I17-R18-E; Gruère et al. 2008). The transition to genetically modified cotton in Gujarat is explored in Chapter 7.
The sustainability challenges faced at different stages of production of cotton garments are diverse. Challenges can be caused by the technology used and how production is organised. Some stages of production can be prone to particular sustainability challenges due to the nature of production processes. For example, environmental problems arising from the use of chemicals in wet processing or labour issues arising based on the need for high levels of labour for garment manufacturing. However, the production practices which lead to sustainability challenges are specific to how production is organised within LPSs.
This section has highlighted the diversity of business forms that are specific to each LPS. These different forms can be seen as a result of these businesses operating in distinct institutional environments with unique histories. The ways that differences between LPSs shape responses to sustainability challenges are considered through exploring experiences of five LPSs in Chapter 7.
5.5) Features of the Case Study ESN
In this thesis, the ESN structure is considered through an exploration of the four features described in Chapter 3. These include the type of lead buyers, the type of suppliers, the ways in which businesses are connected and the locations of businesses in the network. The discussion in this chapter has provided information on the last three
35 Section E.3 of Appendix E provides an overview of these differences.
192 features which has rounded up the structure discussion that began with the first feature being discussed in Chapter 4.
Considering characteristics of these ESN features as shaping the structure of the ESN provides a base for the exploration of how governance flows through this network in Chapters 6 and 7 and 8. A brief overview of some of the implications of the features found in this is provided below.
5.5.1) ESN Feature 1: UK Retailers as Lead Buyers
The first feature of the network, which was discussed in Chapter 4, is that UK retailers are at the apex of this network. All businesses are directly contributing to a product that is sold by these retailers. The demands of these retailers shape the membership of the network. Based on their territorial locations, UK lead buyers are subject to a number of governance pressures that lead them to play a growing role in governance for sustainable production for members of their ESNs. These retailers are seeking to play this role through both vertical and horizontal governance pathways.
5.5.2) ESN Feature 2: Varying Levels of Integration and Fragmentation, Many Intermediaries and Diverse Business Structures
The second feature considered for this network is the characteristics of suppliers. Businesses were found to have varying levels of integration and fragmentation. Although some production takes place in integrated factories, the most common production processes involve products passing through multiple firms. Additionally, fragmentation is enhanced by the use of intermediaries in connecting different businesses.
One aspect of fragmentation is that subcontracting is a common process in the case study ESN. When activities are subcontracted, it is often done as “job-work”. In these processes a firm may provide the materials to another firm that they hire to carry out a service. As discussed in Section 5.2.1, activities done through job-work include parts of garment manufacturing, wet processing and embellishments. Additionally, ginning services can also be conducted on a job-work basis. Another form of subcontracting involves non-manufacturing services, such as quality or labour inspections. When a producer uses subcontractors, they may or may not inform the company they are selling to.
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Levels of fragmentation and integration are often shaped by past government policies. Some of these policies which explicitly sought to regulate the sizes of businesses have been repealed. However, the legacy of the policies in the form of the productive systems developed continues to shape the industry.
As has been illustrated, producers in this ESN have a wide range of sizes and forms. Within the network, business characteristics vary dramatically with a range from micro farmers to large composite mills to medium sized auditing firms to multinational retailers. These differences are seen to shape inter-firm governance in the discussion in Chapter 6.
An example of the complex arrangements of fragmentation and integration can be found with Textile Manufacturer A (I32-R41-T). This business specialises in making denim. They own their own weaving equipment but at times their orders are higher than what they can produce so they have to contract out part of their weaving through job- work. This involves providing the sub-contractor with yarn. Textile Manufacturer A owns their own yarn spinning unit that is run as a separate business 40 km away from their textile unit. However, they do not produce enough yarn to meet their production requirements so also buy yarn from independent yarn spinners. As a denim company, Textile Manufacturer A has specialised dyeing processes. These are carried out by an integrated dyeing facility for all of the fabric, including the orders that have been woven through job work. Additionally, Textile Manufacturer A has recently set up a garment manufacturing facility where they use a small portion of their own fabrics, while the rest of their fabric is sold through agents to garment manufacturer in India and abroad.
The existence of varied production arrangements leads to a challenge with dividing businesses based on a uniformly fragmented definition of production. As this study focuses on governance pressures which businesses face related to the production processes they use, the unit of analysis considered is the firm or groups of firms within an LPS as opposed to broadly considering groups of producers responsible for different stages of production. Across Chapters 6, 7 and 8, vertical governance that businesses experience from their buyers is explored along with the horizontal governance they experience in the LPSs in which they are located.
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5.5.3) ESN Feature 3: Links Represent Multiple Forms of Sourcing Connections
The third feature is that most businesses are connected through multiple types of sourcing relationships. This multiplicity is expressed in two ways. Connections between businesses can differ qualitatively and the same businesses can have different types of connections among different buyers and suppliers.
In this study the determinants which are seen as shaping buyer-governance in buyer-seller connections include the characteristics of the buyer and seller and how the businesses in the relationship are embedded in social, territorial and network locations. These determinants are discussed and explored in Chapter 6.
A notable feature of this network is that businesses involved in the network may have very weak connections to it. The majority of their buyers may not be part of this network. They may be selling only a small fraction of their outputs into this network or may move in and out of the network depending on their sales in each season. Many firms sell to businesses that are part of multiple supplier networks, feeding into alternate end uses. Outside of inputs feeding into garments that are destined for the UK export market, India is a global leader in most of the intermediary products involved in creating garments. Much of its production of intermediary components of cotton garments is for export and India also has a large domestic market, which is rapidly expanding.
5.5.4) ESN Feature 4: Businesses are Concentrated in Local Productive Systems with Distinct Characteristics
The fourth feature considered is how producers are embedded in different locations. This chapter has focused on territorial location, while network location will be explored in more depth in Chapters 6 and 7. This chapter has emphasised that at each stage of production most producers can be found to be grouped within a small number of LPSs. These LPSs were shown to have distinct characteristics that distinguish them from each other.
Differences between LPSs result in diverse sustainability challenges being prominent in different regions. A representative from a national garment association commented, Of course heterogeneity is always there between north and south. There are very different issues on the kind of labour they engage and the kind of
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payment. In fact, minimum wage across India is different, there are different minimum wages because the cost of living in India is different in various cases. In the north you have a lot of migratory work force which is why you have a lot of contractual labours. In south that is less, there are more people who are residential workers, so, that issue is different (I13- R14-G). The analysis in this thesis shows the importance of considering embeddedness for understanding governance for sustainable production for producers in diverse network and territorial locations.
5.6) Conclusion
Understanding diversity among the supplier base for the retailers discussed in Chapter 4 problematizes the idea that these retailers can be lead firms driving producers at all points in their ESNs. Exploring the characteristics of three features related to how production takes place in the ESN responsible for making cotton garments in India indicates that there is variation in vertical paths which can be involved in the production stage of a product’s life-cycle. This understanding of the ESN structure provides a base for the rest of this thesis’ exploration of governance processes.
Specifically, considering the three features of characteristics of suppliers, characteristics of links, and territorial embeddedness, the following insights were found. Different forms of businesses with varying levels of integration and fragmentation are responsible for production. These businesses are connected through diverse type of commercial links. Finally, producers in India are grouped in relatively concentrated LPSs which house businesses with common characteristics that differ between LPSs.
As mentioned earlier, lead buyer governance in the ESN is explored by first, focusing in how vertical governance flows down through buyer-seller relationships and, second, focusing on how businesses experience horizontal governance within their LPSs. The features of the four ESN features that are identified in Chapter 4 (characteristics of lead buyers) and this chapter (characteristics of suppliers, characteristics of links and territorial locations) start to show that vertical links in an ESN are complex and businesses are located in territorial groupings that can be considered as having common horizontal governance experiences. An individual product can be made through the inputs from multiple vertical paths converging as production moves forward, with
196 multiple farmers contributing to one gin, multiple gins contributing to one spinning mill and so on. These vertical pathways can also be seen to connect diverse LPSs.
Vertical and horizontal perspectives are considered successively in the next two chapters. Chapter 6 considers how vertical governance can flow down from retailers through all stages of production down to raw material producers. Chapter 7 moves on to look at how producers experience governance pressures from their location in the network and in a particular LPS. These two perspectives of governance are brought together in Chapter 8 which considers how retailers provide governance for sustainability through both vertical sourcing and horizontal non-sourcing relationships.
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6: Governance in Vertical Pathways across the Extended Supplier Network
6.1) Introduction
In order to better understand the role that buyers play in governance for sustainable production across fragmented ESNs, this chapter considers how governance through sourcing flows down vertical pathways for the ESN considered in this thesis. While inter-firm governance has often been theorised by looking at relationships between lead firms and top tier suppliers (Gereffi et al. 2005), this chapter’s exploration of inter- firm governance at all stages of production identifies a more complex set of governance relationships across the ESN. Considering the potential for varying governance structures across multiple sourcing relationships in the same ESN, this chapter examines retailers’ governance role by asking: To what extent do vertical governance pathways allow lead buyers to control production processes in their ESNs? The answers to this question contribute to this study’s broader exploration of the role of lead buyers in governance for sustainable production in ESNs.
The discussion in this chapter emphasises the limited ability of retailers to promote sustainable production through sourcing practices from their position as buyers at the top of the case study ESN. The information in this chapter is primarily based on interview data collected through field work for this study.
The chapter progresses as follows. The next section considers micro governance in direct sourcing relationships, which involves buyers in individual transactions (eg. yarn spinners buying cotton or textile manufacturers buying yarn) playing a governance role for their direct suppliers. It identifies variation in buyers’ abilities to control suppliers in distinct buyer-seller relationships across the network. This variation shows diversity in forms of vertical buyer governance within one ESN. Section three considers meso governance, which involves governance travelling from retailers down vertical pathways connecting multiple buyer-seller relationships. This section emphasises how diversity among buyer-seller governance relationships along individual pathways prevents retailers’ governance through sourcing from traveling down to lower tiers of the network. Finally, section four provides a conclusion.
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6.2) Buyer-Driven Governance in Dyadic Connections across the ESN
While retailers have been seen as lead firms and governance actors at the top of ESNs, this section considers how businesses at different points in the ESN can be governance actors for their direct suppliers in dyadic buyer-seller relationships. The level of governance considered is described as micro governance by Ponte and Sturgeon (2014). Through exploring diverse buyer-seller relationships found across the case study ESN, this section shows varying forms of governance potential when considering buying as a way to control production processes of direct suppliers.
The section begins by considering what buyer-driven governance means in the dyadic connections found in this case. The role of buyer governance is shown to be based on a wider set of criteria than that proposed in the Gereffi et al. (2005) framework. Buyer governance is seen to be shaped by differences in the characteristics of the buyer and seller and how these actors are embedded in a network, territorial and societal location. Following this discussion, the variety of forms of buyer power found across this case are considered, which include buyer-seller links with high and low levels of potential for buyer governance.
The section concludes by discussing a major limitation of buyer governance in dyadic relationships will be considered. Even in cases where buyers have power to demand process requirements, the way that producers take up these requirements does not always result in processes being used that address sustainability concerns. This limit is based on producers’ ability to adapt to process requirements in unexpected ways.
6.2.1) Understanding the Role of Buyer Governance in Sourcing Relationships
While the Gereffi et al. (2005) framework introduced a way to classify power dynamics in transactions in a GVC, these classifications were not found to properly capture dynamics of inter-firm governance found in this case. While this theory was described as “chain governance,” in reality it only considered relationships between lead buyers and first tier suppliers. This case shows that when buyers in direct buyer-seller relationships have different characteristics than those that were exhibited by the lead buyers considered in the Gereffi et al. analytical framework, the logic behind the five relationship forms does not hold. This section proposes considering a broader set of factors that were found to shape the micro governance dynamics within this case. Two
199 key determinants of potential for buyer governance were found to be: differences between buyer and seller characteristics and constraints and opportunities available from the embedded locations of the buyer and seller. Table 6.1 provides an overview of these factors.
The first determinant of buyer governance potential is the characteristics of the businesses involved in a transaction. The characteristics of both the buyer and supplier play a big role in understanding power dynamics in micro governance relationships across the ESN. Examples of characteristics which can be important are business size, formality and the capabilities of suppliers.
The second determinant of governance potential in micro relationships is seen as embeddedness. As discussed in Chapter 2, embeddedness can be shaped through network, territorial and social locations. This chapter focuses on looking at network embeddedness. Elements considered include market structure, types of buyer requirements, relationship norms and relationship structures. Territorial and societal embeddedness of buyers and sellers in different LPSs within the case are considered in more depth in Chapter 7.
Identifying these two determinants was carried out inductively by considering features found across the wide number of buyer-seller relationships that were observed in this case. Specific relationships that were discussed by interviewees were reviewed and key features perceived to shape the inter-firm governance processes they experiences were listed. While initially many features were considered, these were successively grouped into common themes until these final two categories remained.
The identification of these determinants is based on considering the actors as being situated within a GPN. The structure of the network shapes the experiences of the businesses working within it. Additionally, the characteristics of the structure of the businesses shape how they act and how they are perceived. These determinants can be seen as causal mechanisms which shape buyer power.
These broader categories can be seen as encompassing Gereffi et al.’s (2005) criteria of codifiability, capability in the supplier base and complexity of transactions, as shown in the table below. “Capabilities in the supplier base” is seen as a characteristic of the supplier business. Both the “complexity of information” and the “ability to codify transactions” can be seen as part of the requirements that a buyer has for their supplier. 200
Table 6.1: Determinants of Governance Potential Determinants of Governance Example Components Potential Business Characteristics • Size • Formality • Capabilities in supplier base Embeddedness • Network embeddedness • Structure of relationships (direct buying vs. job- work, dependency of buyer and seller on each other, duration of relationship, involvement of intermediaries) • Market structure (externally fixed prices vs. negotiation) • Type of buyer requirements (qualities considered by buyer, complexity of information, ability to codify transactions) • Relationship norms, such as formality of transactions • Territorial embeddedness • Societal embeddedness Source: Author’s Construction
Looking at these two dimensions which shape buyer governance at the micro scale provides a way to classify individual links in the ESN. Within the case study ESN, relationships can be found with different characteristics in both dimensions. This results in some producers which could be seen to have higher potential for buyer-driven governance as well producers with limited potential. Examples of different relationships found in the ESN explored for this study that show the relevance of these categories are now discussed.
6.2.2) Variation in Buyer Governance Structures in Direct Sourcing Relationships
Features of the two determinants considered to shape buyer governance in dyadic relationships were found to vary at different links within the case study ESN. This creates a situation in which some buyer-seller links have greater potential for buyer-led governance than others. Certain combinations such as small buyers sourcing standard products from wholesalers representing large suppliers are not conducive to buyer-led governance while others, such as large buyers ordering custom-made products from small producers are more conducive to buyer-led governance. Some of the ways in which these differences were expressed in this case study are discussed below.
While the discussion in this section refers to sourcing connections between different stages of production, it is important to consider that, within India, businesses in the ESN which are responsible for the same stages of production are located within
201 distinct LPSs and exhibit diverse characteristics. This discussion is intended to show that the relationships involve different combinations of the two determinants of buyer governance discussed above. The relationships discussed represent the diversity of direct buyer-seller vertical governance experiences found in this case. The examples presented should not be seen to typify relationships at any stage of production.
Differences in Business Characteristics
As Chapter 5 showed, there are multiple types of producers which act as buyers across the ESN. The characteristics of these businesses shape the potential for inter-firm governance at different links. Some characteristics of businesses which can shape their potential to govern or be governed are size, level of formality and capabilities.
When looking across the ESN it is apparent that there are some businesses that are bigger and more formal. Two notable business types which often display these characteristics are composite mills and yarn spinners. Composite mills were historically major players in the Indian textile industry (I47-R57-T; Monte 2009). Despite a decline in their presence in recent years, the firms that continue to operate can be very large and can have a great deal of influence over lower tier producers. The average number of workers at composite mills in India is 1,362 (Office of the Textile Commissioner 2015). Yarn spinning involves both large and small businesses with 58% being large (Office of the Textile Commissioner 2015).36
Notable small and often informal businesses in this ESN include farmers, gins, informal sector weaving units and wet processors. Most garment manufactures in India are small businesses with the exception of a few larger firms (see discussion in Chapter 5). Those selling directly to UK retailers are in the formal sector. However, their subcontractors can be in the informal sector.
The wide range of businesses within the ESN leads to the existence of relationships that have very different businesses engaging in direct buyer-seller relationships. When larger businesses are buyers they may be able to create strong
36 Additionally, yarn spinners have strong industry associations and lobby to have policies instated which support the Indian spinning industry (ATEXCON 2013).
202 pressures on smaller suppliers. Larger businesses as suppliers may be less easily influenced by buyers’ demands. When smaller businesses act as buyers at different points in the ESN, they often would have limited ability to demand changes to their suppliers’ production processes. Finally, when smaller businesses are suppliers they may be more susceptible to governance pressures from large buyers.
Past research which has considered the effects of organisational size has found that larger organisations have a number of common characteristics (Scott 2014). These include being more prone to early adoption of innovation; more resource-rich; more internally differentiated; more visible to external publics; and, when incorporating a differentiated personnel office, more receptive to innovations related to employment matters. These size effects can be seen to influence how a business behaves in their role as buyer or seller. Along with the fact that businesses interacting with large differentials in size may be likely to have multiple functional differences, buyers that are much smaller or larger than the supplier they are sourcing from may be seen differently by the supplier.
Finally, specifically considering the role of ESN businesses as suppliers allows for an exploration of the Gereffi et al. (2005) framework’s feature of the capabilities in the supplier base. In this case, some producers are responsible for relatively technical manufacturing processes, such as yarn spinning, and others are simpler, such as weaving at powerlooms. However, all stages of garment manufacturing are relatively simple compared to the manufacturing processes used by some other industries.
Embeddedness
In addition to the difference in businesses’ characteristics described above, buyer governance in dyadic relationships is shaped by embeddedness. While businesses in the case study ESN are in the same network, they experience different embedded pressures depending on their network, territorial and societal positions. This discussion focuses on the role of network embeddedness. Specifically, four components are considered: the structure of relationships, the market structure through which a product is traded, the types of requirements that buyers consider and the formality of transactions. Each of these is discussed below.
When considering relationship structures, examples of components that make up these structures include the dependency a buyer or seller has on a particular group of 203 buyers or suppliers, the duration of the relationship and whether intermediaries are involved. Different relationships structures are found across the ESN.
The power any individual buyer may have over their suppliers is partially related to how dependent the producer is on business from that buyer. If a supplier sells most of their output to one buyer or a group of buyers with similar requirements, the supplier will experience greater pressure to meet demands of that buyer. However, if the supplier has many options of buyers they will have less incentive to follow stringent demands given by a specific buyer or group of buyers.
For example, a representative from Sourcing Firm D, a small sourcing firm, described how they would alter normal policies to meet the needs of a key buyer, which is responsible for a large proportion of their sales. The interviewee described that for their most important buyer, which is one of the retailers in this case, they reduce their mark-up. He said, “we get a bit lenient, we cut down maybe 2% (I51-R60-R).”
The effect of dependency can also involve demands coming from a group of buyers, which can be seen in the wide spread use of codes of conduct by UK buyers. While garment manufacturers in this case typically try to spread their sales between multiple retailers (I39-R48-G; I56-R66-R-), they often focus on a particular market or markets and will follow the demands of buyers in their target market. Many retailers seeking to impose codes of conduct request adherence to common codes. In this situation, garment manufacturers adhere to codes that they think will appeal to the buyer pool on which they depend (I19-R20-G).
Looking across the ESN, different levels of dependence can be found for relationships involving different stages of production. Some relationships involve producers highly dependent on a small group of buyers. For others, many buyers are easily accessible. Table 6.2 provides an overview of ESN sellers’ dependence on direct buyers within the case study ESN for each stage of production. The connections considered in this table are for fragmented production processes and do not include vertically integrated production.
The first row of Table 6.2 considers sourcing firms and shows that different sourcing firms have different levels of dependency on UK retailers depending on where the sourcing firms are based. As discussed in Chapter 5, sourcing firms in the case study 204
ESN can be based in the UK, India or a third country. Each type of sourcing firm has different levels of dependency on UK retailers. UK-based sourcing firms are highly dependent on UK retailers as customers as their specialty is connecting UK retailers to garment manufacturers. India-based sourcing firms can have a broad customer base of international retailers and brands. However, they can specialise in the UK market and work with a small group of regular customers. Third country-based sourcing firms are least dependent on UK retailers. These sourcing firms may have customers all over the world and specialise in making global linkages.
The second row of Table 6.2 shows that garment manufacturers in this case study have medium dependency on UK retailers. Indian garment manufacturers in this case specialise in producing for international buyers. While they may focus on the UK they generally sell to multiple countries, often those with similar demands to the UK, such as those in Europe, North America and Australia.
Wet processors providing services for garment manufacturers creating clothing for exports are highly dependent on this group of buyers. The processes and substances that are used are specialised to meet demands of this market, including stringent chemical policies which cover clothing imported into the EU.
Textile manufacturers and composite mills in this case have medium dependency on garment manufacturers selling to the UK. They specialise in making fabrics of a quality acceptable for exports but their products can also be used for garments sold in the domestic market. A representative from Textile Manufacturer B described, “We sell it to Indian garment manufacturers who are exporting them and we also sell to Indian garment manufacturers for use in the domestic market but mainly it goes into exports (I43-R53- T).” Additionally, they also have the option of directly exporting fabrics.
Yarn spinners in this case have many options regarding buyers for their outputs. They have low dependency on textile manufacturers selling fabrics to be made into garments that will be exported to the UK. They may sell to a range of domestic textile manufacturers that may or may not be making export quality fabrics or they can export to textile manufacturers in other countries (Theuws and Overeem 2014).
Table 6.2 also shows that businesses providing sub-contracting services to any of these manufacturers are highly dependent on the businesses which hire them for sub- 205 contracting, often a relatively local process. 37 Also, agents responsible for connecting producers of any of these manufactured products are highly dependent on the case study businesses buying the products in which they specialise.
Finally, Table 6.2 shows that traders of ginned cotton are not very dependent on Indian yarn manufacturers. These traders can easily sell cotton bales in global markets. Indian cotton ginners, however, are more dependent on Indian buyers. They often sell their cotton to domestic spinning mills or local traders but also can sell the cotton to international buyers. Raw cotton traders are highly dependent on Indian gins. Raw cotton is generally not sold internationally. For the same reason, cotton farmers are also highly dependent on Indian buyers.
Table 6.2: Importance of ESN Buyers to Producers
Medium/High
Source: Author’s construction
Conversely, if a producer is dependent on one or a small group of suppliers they may have less leverage in making demands. Buyers who are highly dependent on particular ESN suppliers may find it difficult to switch to new suppliers. For example, textile and garment manufacturers in Tirupur are dependent on local wet processing service providers. After environmental regulations caused prices to rise, which is a case discussed in depth in Chapter 7, garment and textile manufacturers continued to use local
37 Some sub-contracting in India involves sending items across state borders (I89- R116-W; AEPC 2009).
206 wet processors. The dependency in this relationship can be seen in the following comments provided by a representative of a sourcing firm located in Tirupur. Speaking about the option of using wet processors in other regions to save costs, he said, If you go to another area of India, you would have to go to the north. Mainly, Mumbai, Ludhiana and these guys are more used to work for the domestic market and not well savvy about the export requirements so their fabrics you can say 50-50 is your chance that the fabric will not be well dyed (I4-R4-R).
Table 6.3 shows the dependence of case study buyers’ at different points in the ESN on suppliers within India (that are included in this case study). The level of dependency indicates how much choice the buyer has when looking for inputs. The classifications are based on evaluating the options available to buyers of each input for case study firms considering their sourcing options inside and outside of India.
Starting from the top of Table 6.3, UK retailers have low dependency on Indian garment producers. They source from multiple countries and are generally flexible about changing suppliers. UK and third country based sourcing firms are not very dependent on Indian producers as they can connect with producers in any country. Indian sourcing firms are highly dependent on Indian garment producers as that is their main set of suppliers. This is the same situation for the rest of the businesses in the ESN. Supplies at all levels of production for cotton garments for Indian producers are generally procured domestically.
If buyers have low dependence on suppliers they have more opportunities to make demands over their suppliers. For the majority of lower tier buyers in this case, high dependence on a limited set of suppliers reduces the potential for these buyers to make demands on their suppliers compared to the lead buyers which have many global sourcing options.
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Table 6.3: Importance of ESN Suppliers to Producers
Business Type
Source: Author’s construction
Another element of relationship structure is duration which also varies across the ESN. In some cases long-term relationships can be built up between buyers and suppliers. In others, short-term relationships or the use of intermediaries prevents the development of more stable connections. Longer term relationships create more potential for buyers to shape practices of their suppliers.
At different points in the ESN considered in this study, businesses were found to have both short-term (one transaction) and long-term relationships. However, across most interviews with producers in India, businesses did seem to rely on some level of continuity in their buying and selling relationships, even in cases where items being bought and sold were standard products. While the research for this study did not involve a data collection method which enables broad generalisations to be made about relationship lengths, a number of patterns were indicated across the ESN.
While relationships tend to be relatively stable among fragmented Indian producers, the situation is different at the top of the ESN. Retailers tend to have long term relationships with sourcing firms. A representative from sourcing firm D described, “Our strength is issues that are relationship based . . . we started in 82 as an agency and we still have the same customers working with us (I53-R62).” These relationships involve retailers trusting the sourcing firm to monitor many aspects of production.
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However, connections between retailers and garment manufacturers often change from season to season. For example, Arcadia has published that only 54% of their suppliers have been used for three or more years (Arcadia Group 2015b). The short term nature of the connections between retailers and garment manufacturers creates problems for developing relationships which may be beneficial for promoting sustainable production practices.
Garment manufacturers sourcing directly from textile manufacturers can have long term relationships. For example, the manager of Garment Manufacturer A described having a long term trusting relationship with a small group of textile manufacturers (I19- R20-G). Additionally these firms can have long term relationships with wet processing units and other subcontractors involved in garment manufacturing (I19-R20-G; I55-R65- G). Also, sourcing firms can be responsible for arranging subcontracting and they can have long term connections with subcontractors (I51-R60-R).
Textile manufacturers can have long term direct relationships with yarn producers. A representative from Textile Manufacturer A described buying directly from yarn mills without using agents. In terms of relationship length, he said, “We have fixed almost 40% to 50% of suppliers. We prefer to have consistence in a source (I32-R41-T).”
Despite the fact that yarn manufacturers are buying a product based on what could be considered a pure market transaction, some yarn manufacturers continue to source from some of the same gins over time. A representative from a large spinning mill described, “Every year I visit all the gins to understand their difficulties and make them understand what was our last year overall report on their supplies (I88-R115-T).” As gins generally buy cotton from local farmers, long term relationships exist but these relationships do not generally involve the development of trust as gins buy from many suppliers. When asked about how many farmers supplied his gin, a co-owner of Spinning and Ginning Mill B said more than 50 come each day during the season (I76-R85-T).
When relationships between businesses develop, these ties can shape decisions made by both parties. Granovetter (1985) discusses how businesses can prefer to work with other businesses with which they have personal connections even when it might not be best choice for price. The way that decision making logic can change in long term relationships was described by Powell (1990, p.303), “As networks evolve, it becomes
209 more economically sensible to exercise voice rather than exit. Benefits and burdens come to be shared.” This type of effect was seen in the field work as representatives from businesses described giving and receiving advice from their clients. For example, a buyer from Spinning Mill C described giving technical advice to gins which he sourced from every year (I88-R115-T). While this transaction could be considered one that should be market based, the length of the relationship allows for greater levels of contact.
The process of building trust between actors in the GPN is important for understanding how trust shapes the outcomes of interactions between ESN producers and their buyers and suppliers. Murphy (2006) highlights the importance of considering how trust building is a sociospatial process with trusting relationships being conceived of as temporalrelational fields emerging from particular social, material and political setting maintained and transformed by the cognitions, symbolic exchanges and performances of agents involved. He sees trust-building as a communicatively driven process shaped by influences at the micro scale, involving subjective interpretation of expected behaviour; the meso scale, involving intersubjective experiences of the physical setting and the impressions given by actors in the relationship; and, the macro scale, involving the role of wider institutions, structural conditions, circumstances and hierarchies as well as the positionality of the firm or individual.
The factors Murphy (2006) describes can differ greatly for the buyer-seller relationships found across this network. Viewed through Murphy’s framework of trust- building in economic space, the diverse circumstances surrounding the set of relationships involved in this network can be seen to be likely to lead to a wide variety of relationship forms. This matches the empirical observations of relationships observed.
The relationships that develop over time and involve trust-building can create possibilities for buyers to influence suppliers - or vice versa. When relationships exist over time, they can become a base condition through which decisions are made.
Another component which shapes the structure of buyer-seller relationships is the involvement of intermediaries in a transaction. Intermediaries are common across the ESN considered in this study and can be found between all levels of production in this case. In relationships that involve intermediaries all aspects of the power dynamics of buyer-seller governance would incorporate these triadic relationships.
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The role intermediaries play can modify the dynamics that would otherwise be involved in connecting the two businesses involved as buyer and seller. For example, it is common for small sourcing firms to connect garment manufacturers to retailers (I44- R54-R; I51-R60-R). When this occurs, the manufacturers’ main contact can be a small sourcing firm as opposed to a large multi-national retailer. One point in which small- scale intermediaries play a key role is for gins buying cotton. Often individuals are hired as agents working on behalf of the gin or act as intermediary buyers between farmers and gins (I28-R35-C).
Intermediaries in this ESN can be large actors which play a strong governance role in a transaction. As discussed in Chapter 5, there are several large global sourcing firms that connect retailers to garment manufacturers. These sourcing firms can rival the size of retailers and often are important buyers for the factories they work with.
Subcontractors can also be contacted through agents. The use of agents limits the development of relationships with the people actually involved in carrying out the subcontracting. This is particularly prevalent with beadwork and embellishment (I58- R119-G). Also, textile manufacturers often buy yarns through agents (I27-R31-T; I50- R59-T).
In research looking at the roles of intermediaries, they have been identified as playing a number of roles, including transportation, warehousing, sourcing and quality control. They have been described as ‘maestros’ (Bitran et al. 2006) and ‘orchestrators’ (Zacharia et al. 2011). Taking up this role, trade intermediaries have begun to perform more complex roles such as strategic coordination, design and supplier development (Zacharia et al. 2011; Bitran et al. 2006; Fung et al. 2007). A major role that intermediaries play in connecting businesses and facilitating governance for sustainable production processes is through monitoring. In this role, intermediaries can be responsible for creating trust in transactions in relationships where the buyer may not otherwise trust the seller.
For intermediaries, developing longer term relationships with both parties can be helpful. Indian sourcing firms interviewed for this study about their role in garment sourcing had long term relationships with a select group of customers (I51-R60-R; I53- R62-R).
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A representative from a sourcing firm located in India described the type of relationships they create with their buyers and suppliers. “Communication is for a buying house . . . I think it’s the most important thing . . . It’s how well you can communicate with the buyer or with the factory (I51-R60-R).” He went on to describe an on-going trust building process with customers, “The rest of everything is a process once you’ve learned it . . . but it’s the communication, they call it the handwriting, you should get used to the handwriting of Top Shop and you will be fine (I51-R60-R).” For sourcing firms working at a distance from their customers, developing trust in their relationships can be very important.
However, some intermediaries can have short term relationships. A representative from Sourcing Firm C, a small UK based sourcing firm described having very weak connections to a changing group of garment suppliers across several countries (I44-R54- R). Nevertheless, this sourcing firm maintained long-term relationships with their buyers, UK brands and retailers.
Another major way that embeddedness shapes the potential for buyer governance is the market structure within which a transaction takes place. Market structure can constrain how a product is sold and the requirements producers must meet to sell their product. For example, within India, cotton and yarn are traded based on published market prices (I95-R44-C; I60-R69-G). A representative of a business that carries out spinning and ginning described, “For pens, a company can put his own price but for yarn and cotton we cannot put our own price, so we have to go according to the market as market makes the price (I76-R85-T).”
Market structure can also shape businesses’ buying and selling options. In some cases producers are required to sell to public marketing boards, such as cotton produced in Maharashtra before 2002 38 or to any licensed buyer, such as in Maharashtra from 2003. Or, in other cases, products can be sold in an open market. These formal regulations
38 From 1971 to 2002, cotton grown in Maharashtra had to be sold to the government through the Monopoly Cotton Procurement Scheme (MCPS) (Mishra et al. 2006).
212 shape the options available for buyers to engage in governance processes for their suppliers.
Another component of embeddedness is the types of requirements that are expected within buyer-seller relationships. Purchasing decisions can be made based on a variety of criteria. The types of requirements of buyers can be seen to be shaped by accepted norms governed by institutions classified under Scott’s (2014) normative pillar. These norms define the type of behaviour that is seen as acceptable.
Requirements considered within transactions can be seen to be shaped by conventions (Ponte and Gibbon 2005; Ponte and Sturgeon 2014). Multiple types of sourcing requirements can be found across the case study ESN. Five major ones are considered below. These are product quality, price, time, codes of conduct and chemical policies. The balance between each of these differs significantly in different ESN transactions. An overview of the main pressures businesses face at each stage of production is provided in Table 6.4.
This table indicates that when looking at sourcing requirements for each stage of production in the ESN certain patterns can be identified. The requirements for inputs being used for each stage of production are chosen based on differing requirements. A notable pattern is that transactions at lower tiers tend to be based purely on measurable product qualities.
As can be seen in Table 6.4, garment manufacturers have pressure to meet retailers’ requirements for cost, quality, time, codes of conduct and chemical policies. The ways in which retailers express these requirements were outlined in Chapter 4. These pressures are strong as Indian garment manufacturers selling to UK retailers are quite dependent on retailers with similar requirements.
Textile manufacturers selling directly to retailers or nominated by retailers have pressure to meet the same requirements as garment manufacturers (cost, quality, time, codes of conduct and chemical policies) as they are dealing with the same set of buyers. Textile manufacturers selling directly to garment manufacturers have pressure to meet garment manufacturers’ requirements for quality, time and cost and chemical policies but not codes of conduct (I19-R20-G; I50-R59-G). For both sales avenues, time is only a
213 factor when a fabric is being custom made. Otherwise buyers of fabric can keep amounts of standard fabric in stock and ready for production (I19-R20-G; I7-R7-R).
Wet processing, that is integrated with garment manufacturing or textile manufacturing, can be subject to the requirements of customers for garments or textiles as the buyer is a retailer. When wet processing takes place in independent facilities, these businesses must meet their buyers’ (usually garment manufacturers) requirements for cost, quality, time and chemical policies (I65-R74-W). Chemical polices from retailers generally involve regulations on chemical residue that can be tested in final products. A representative of an independent wet processor interviewed for this study indicated that his facility had not been inspected by private inspectors for retailers’ codes of conduct (I65-R74-W). This respondent indicated the only specific change they had to make for export markets was using certified dyes, “The buyers check for certificates for all the chemicals (I65-R74-W).”
When yarns are sold directly to retailers or sourcing firms, yarn manufacturers must meet requirements for quality and codes of conduct as they are covered by codes of conduct that specify requirements for all suppliers. However, when yarns are sold to garment manufacturers or textile manufacturers, yarn manufacturers must only meet their buyers requirements related to quality (I50-R59-T). Time requirements apply if a yarn is being custom made but this is relatively rare (I50-R59-T). Yarns are usually bought by the garment manufacturer or textile manufacturer (I50-R59-T). Yarn producers in India use set rates for selling their yarn (I50-R59-T). Consequently, they do not feel pressure from buyers to lower prices.
Ginned cotton is sold purely based on quality aspects with prices set by markets (I26-R28-C). Raw cotton is also sold purely on quality aspects with prices set by markets (I28-R33-C). For both of these sales channels producers do not feel pressure from their buyers to lower their prices. This is different than relationships at the top of the network in which negotiation between the buyer and seller determines prices.
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Table 6.4: Main Vertical Pressures at Each Stage of Production
Type of Type of Buyers Producer (based on business form)
Source: Author’s Construction
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When producers are integrated and are responsible for carrying out multiple stages of production, retailers requirements can be directly applied to multiple stages of production. This is clearly a benefit if retailers want their production to follow their codes of conduct. However, in the Indian context, vertical integration is rare.
Looking across all stages of cotton garment production, several patterns can be identified regarding how commercial pressures influence producers. Some of these are discussed below.
Quality is the only requirement that is strong at every connection. In this area retailers define physical product parameters that travel down through all sourcing connections. Quality requirements can involve buyers monitoring suppliers’ processes at different stages of production.
Sourcing related time and cost pressures exist for the stages of the ESN that involve custom production. The pressures can originate from retailers and may promote sustainability challenges. This is an issue concentrated at the final stages of manufacturing.
Retailers have established process requirements for first tier suppliers and recently attempts have been made to introduce environmental protection related process requirements for wet processing firms, which are often hired by garment manufacturers. Lower tier processes can be certified by a third party or be monitored by the buyer.
A notable pattern is the differing requirements for inputs at the upper and lower tiers of the ESN. These create different potential for buyer-led governance. Products that are custom made based on retailers’ orders may be more compatible with the introduction of process standards. These products also face additional pressures related to price and cost which may involve situations in which retailers direct requirements are promoting sustainability challenges. Lower tier producers face less pressure from retailers both
216 related to causing sustainability challenges and related to the promotion of sustainable production.39
While other factors considered above are related to the power a buyer may have over a supplier, another limitation can be whether a request is acceptable. For example, this determines whether it is acceptable for a buyer to ask a seller to change their processes. In the case of retailers buying from garment manufacturers, the idea of codes of conduct has become accepted and expected. However, for producers at lower tiers process requirements are generally not expected and may not be accepted. For example, a member of Retailer A’s compliance team mentioned wet processors being resistant to allowing retailers to conduct code of conduct inspections (I38-R47-R), while this is now an expected practice by garment manufacturers. Accepted norms in transaction processes shape the behaviour of both buyers and sellers. Commons’ idea of ‘working rules’ in transactions can shape what businesses ask each other. Commons (1931, p.650) describes, the operation of working rules on individual action . . . are expressed by the auxiliary verbs of what the individual can, cannot, must, must not, may or may not do. He "can" or "cannot," because collective action will or will not come to his aid. He "must" or "must not," because collective action will compel him. He "may," because collective action will permit him and protect him. He "may not," because collective action will prevent him [sic ]. However, these rules are not fixed and Commons describes them as continuously changing.
The introduction of codes of conduct can be seen as a process of institutional creation. While the discussion in this chapter focuses on considering whether buyers have power to make demands on suppliers, when certain types of requirements become institutionalised they may be expected by suppliers even when they have relationships with buyers that may not be seen as characterised as ones in which buyers have power over suppliers.
The third component of network embeddedness considered in this chapter is related to the level of formality involved in a transaction. Some firms rely on formal
39 The lack of governance pressures related to process requirements flowing down from retailers along vertical pathways is discussed further below (in Section 6.3).
217 guidelines for how purchasing decisions are made, often involving specific procedures for making decisions. Other firms make purchasing decisions based more on individuals’ perceptions. Buying practices can involve formal tracking of buyers over time which shape future decisions or can involve informal processes based on the personal discretion of the buyer. This difference is highlighted by the contrast between systems described as being used by the two sourcing firms where Respondent 54 has worked. Sourcing Firm B uses a complex data base system to track factories’ performance, which is used to shape future decisions (I44-R54-R). Sourcing Firm C does not keep detailed records and relies on the opinions of the owner as to whether to work with a particular factory (I44-R54-R).
Levels of formality involved in transactions can shape the flexibility of the buyers and sellers. Some transactions require formal contracts, such as those by retailers ordering garments. Other transactions are carried out verbally, such as some forms of subcontracting for elements of garment production and farmers selling their cotton to kapas (raw cotton) traders. Also, some transactions in the ESN involve physical testing of products and others are based on potential buyers’ observations. For example, farmers selling to kapas traders rely on a visual and tactile judgement. A staff member from a state run cotton market, where farmers or small scale traders bring raw cotton to be bought by traders who sell to gins, described how traders do not need any special equipment to assess the quality of cotton they are bidding on. He just looks at the cotton and he can say the length and all. . .No need to go to any laboratory, they will take cotton seed in their mouth and bite like this. . .If it sounds then its right and if it doesn’t sound then it will be full of moisture. . . Then they will not give more money to the farmer, if it is dry then they will give more money (I28-R33-C). This is contrasted to how yarn spinners buy cotton from gins based on the results of assessing the cotton fibres based on a set of formal, quantifiable standards.
Pressures from buyers for their suppliers can take place through both formal and informal mechanisms. Both quality and cost requirements can be promoted through formal and informal pressures. Informal pressures can involve information shared between businesses directly or general market preferences of buyers. Formal sourcing pressures are expressed through standards.
While formal process standards have been frequently used by UK retailers, buyers at lower tiers of production do not generally require their suppliers to follow
218 formal standard systems. However, there has been a growth of the use of standards and formal testing procedures for lower tier producers, particularly related to yarn spinning. Yarn spinners in India can now use high volume instrument (HVI) machines to assess fibre quality when they are making purchasing decisions (I26-R28-C). Additionally, quality of spun yarn can be tested in a laboratory (I27-R31-T). This introduction of more formal transactions may be conducive to the introduction of further standards related to the use of sustainable processes in the future. However, at the time of this study, the only formal process standards focused on sustainability concerns described by interview respondents (outside of niche products, such as organic cotton) were for garment manufacturing.
6.2.3) Producer Agency & Limitations of Buyer Defined Production Practices
Across the ESN’s multiple buyer-seller relationships, even in cases where buyers have power to make strong demands on direct suppliers, some sustainability challenges are not amenable to being addressed through sourcing requirements. While the discussion above focused on identifying instances where buyers are in a position to have strong governance relationships to their suppliers, it is important to keep in mind that suppliers do not blindly follow requirements created by their buyers, even in cases where buyers have a lot of power. Studies which have looked at the effectiveness of codes of conduct in improving working conditions have shown that producers can modify their practices in ways that are not anticipated by buyers (or other actors) imposing codes of conduct (Raworth and Kidder 2009; Barrientos and Smith 2007).
When businesses are faced with external requirements they can be seen as active decision makers which may modify their practices according to their own strategies. Oliver (1991) identifies five general strategies available to organisations confronting institutional pressures. These are: acquiescence/conformity, compromise, avoidance, defiance and manipulation. Acquiescence involves succumbing to the pressure. Compromise involves making strategic changes. Avoidance involves ignoring the pressure. Defiance involves not only resistance but resistance done in a highly public way. Manipulation involves finding a way around the pressure.
In this study as well as others which have looked at the effects of buyer-driven governance pressures (Raworth and Kidder 2009; Soundararajan and Brown 2016;
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Mezzadri 2012; Barrientos and Smith 2007), producers have been found to take actions which may not involve processes being modified in the ways intended by those introducing sourcing requirements. In cases where producers have been certified as following process standards, two particular problematic situations have been found. The first is that producers may restructure production practices to meet requirements while pushing unsustainable practices into forms that are not included in standards (such as hiring temporary employees) (Mezzadri 2012). This can be seen as an approach which involves compromise. The second problematic response is that producers may continue to use the same practices while finding ways to pass inspections (such as creating a second set of books, bribing inspectors, etc) (Raworth and Kidder 2009). This can be seen as a response that involves manipulation.
A challenge that can affect the efficacy of codes of conduct is unauthorised sub- contracting. While the case study retailers generally require their manufacturers to disclose all sub-contracting activities, the practice is not always followed. A representative from one of the case study retailers describes the existence of unauthorised subcontracting among their suppliers, “We have always identified . . . factories outsourcing without letting us know about it. That’s a challenge (I38-R47).” In cases where garment manufacturers use undisclosed subcontractors, production practices may not adhere to agreed-upon codes of conduct. Alternately, producers can choose to move to less demanding buyers.
Intermediaries can also play active roles that involve reacting to buyers’ sustainability related requirements in ways that perpetuate challenging practices. A representative from Sourcing Firm D described how they relied on a base of 8 or 9 garment factories and that orders from the UK would be sent to one of the four factories that has certificates related to codes of conduct (I51-R60-R). Orders from other countries that did not have such requirements would be sent to factories that did not have certificates related to codes of conduct (I51-R60-R).
How suppliers perceive buyers making demands can impact how demands are received. Buyers seen as more important or that a supplier is more dependent on may have more weight placed on their demands. In this study garment manufacturers are often required to obtain certification related to buyer’s codes of conduct to be able to sell to
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UK retailers. Garment manufacturers place great weight on the demands of their buyers. Consequently, garment manufacturers accept this requirement.
One way that retailers have been able to impact first tier suppliers is by driving the creation of jobs focused on ensuring compliance. A representative from a case study retailer’s code of conduct team spoke about retailers managing codes of conduct through compliance departments in Indian garment factories (I38-R47-R). For garment manufacturers targeting markets which have code of conduct requirements, this investment has been justified. However, investing in such intra-organisational change may not be seen as worthwhile for lower tier producers who are less dependent on buyers with code of conduct requirements.
While considering producer agency is important, in many instances businesses adhere to practices without questioning them. Scott (2014) points out that while looking at agency of organisations is important, one must also take into account that adhering to many institutional pressures may not be a conscious choice particularly if following them is seen as a matter of appropriateness. For producers in this case, different institutional pressures may have more or less weight. This is explored in more depth in Chapter 7, which considers how producers in selected LPSs react to multiple and sometimes conflicting pressures they face related to sustainable production.
6.3) Lead Buyer-Driven Governance Flowing Down Vertical Pathways
Moving from looking at buyer governance within the ESN’s micro relationships involving individual buyer-seller relationships, this section considers how governance pressure can flow vertically from retailers down to lower tier suppliers. This process is seen as meso governance. It involves buyer governance flowing down through vertical pathways that link multiple dyadic buyer-seller relationships connecting different stages of production.
When considering fragmented vertical pathways, retailers seeking to create pressures for lower tier suppliers with which they do not have direct commercial connections can use two different strategies to attempt to change behaviour. One is that retailers can put pressure on first tier suppliers to monitor their suppliers. Another strategy is requiring early stage inputs to have third party certification of required standards. These strategies can be complementary and are not mutually exclusive. Both 221 have limitations that are discussed separately in this section after the differences between retailers’ ability to control product versus process qualities are first considered.
Both of these vertical meso governance strategies require some form of communication related to lower tier production processes for retailers to know if the products they are buying have been made using desired processes. This has been a topic that has received much attention in the call for traceability (Norton et al. 2014). The fragmentation of the ESN makes even this seemingly simpler task, of identifying the businesses that have carried out production processes, very difficult. This section ends with discussing the example of a major retailer’s attempt to trace the flow of cotton through their ESN which had to be terminated after the consulting firm hired to carry out this task determined that it was not possible.
6.3.1) Understanding the Role of Buyer Governance Flowing Down Vertical Pathways
In order to understand meso governance, the characteristics of the vertical pathways in which it flows must be considered. Vertical pathways in the case study ESN involve different numbers of links depending on the level of vertical integration of producers. Paths with more links (highly fragmented production) can be considered as longer compared to pathways with fewer links (more integrated production), which can be considered as short pathways. Production for the case study retailers’ ESNs involves multiple and intersecting long and short paths as most ESN producers have multiple suppliers.
There are two main ways that retailers shape production practices through their sourcing decisions. First, they make choices about design and which first tier businesses to source from. Second, their sourcing interactions can influence the practices of the firms with which they have sourcing relationships.
To a large extent, retailers can control product qualities. Retailers choose the physical parameters of the products they buy. However, processes used to make these inputs are much more difficult to control. Process requirements require forms of trust or monitoring that are generally not necessary to evaluate product qualities. The differences between controlling product versus process characteristics is now considered.
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Retailers control product qualities by making the final decision on product design and whether an order is accepted. The physical parameters of each input are apparent in the final product and accepted at the retailer’s discretion. Retailers conduct numerous tests to the products they buy before accepting an order (I7-R7-R). Bhaskaran et al. (2014) report that rejection rates based on product quality requirements can vary from between 15% to 30% for garments. With this system in place, retailers’ product requirements shape all physical product qualities, down to the length of cotton fibres woven into yarns. A big picture example of how easily information about product qualities passes vertically through multiple buyer-seller links can be seen by the fact price changes in raw material production travel through the whole network. While the cotton garment value chain is long, cotton prices can affect retail prices as was shown when cotton prices spiked in 2010 (Mintel 2012).
Considering processes of meso governance, it is apparent that product requirements flow across the network. This is not the case for process requirements which face a number of barriers. For fragmented production, buyers’ ability to control processes used in production would involve having a way to influence or at least be aware of production processes carried out by multiple businesses along numerous and intersecting vertical pathways. The rest of this section shows that retailers cannot easily control production processes through meso governance taking place across these vertical pathways.
6.3.2) Limitations to Retailers Creating Governance Pressure through Sourcing from the Top of Multiple Vertical Pathways
This section considers limitations to retailers being able to control processes through their sourcing connections at the top of an ESN’s multiple vertical pathways. The first part considers limitations to governance power flowing down through multiple connected sourcing relationships. The second part considers the potential for relying on third party certification systems of lower tier inputs. The final part of the section considers how challenges with traceability provide a serious impediment to any form of governance through sourcing for cotton garments.
Governance Flowing across Multiple Vertical Dyadic Relationships
Two key issues are considered as preventing flows of vertical governance down to raw material production. The first is a slow dilution of buyer power moving through
223 vertical pathways. The second is the existence of key cut-off points that can be considered as preventing vertical flows of buyer governance for processes.
When looking at how buyer-driven governance passes through any vertical pathway, a process of dilution of power moving across connections can be seen. This is caused by the limits to buyer governance in each dyadic connection being compounded as requirements are passed to lower tier producers. In this case, this results in retailers having very limited ability to promote processes they believe to be connected to sustainable production through vertical pathways leading to lower tier suppliers. Particularly, with greater difficulty occurring in long vertical pathways.
The strategy of getting upper tier suppliers to monitor lower tier suppliers’ processes is highly susceptible to experiencing challenges with a slow dilution of buyer power. As sourcing pressures move across links in the ESN, the level of power buyers have over their suppliers is influenced by the relationships involved at each link which has to be crossed. Any challenges in governance at a specific link would limit the ability of upper tier buyers from influencing lower tier buyers.
To understand this dynamic, it must be considered that buyers wishing to control processes of lower tier suppliers through this arrangement would have to encourage their first tier suppliers to put desired pressures on lower tier suppliers and possibly also to develop internal governance structures to carry out this process. This could require the first tier supplier to have some sort of monitoring arrangement for the second tier supplier. This process would face challenges related to the level of influence buyers would need to have as well as the resources that may be necessary for developing such programmes. For many first tier suppliers in India which are small garment manufacturers, developing monitoring programmes for their fabric suppliers would not be feasible.
In addition to a slow dilution of buyer power that takes place when moving down any of the vertical pathway in this case study ESN, a second challenge is the existence of key cut-off points in the network that prevent governance from flowing vertically. As mentioned above in the section on variation in buyer governance structures in the ESN (Section 6.2.2) there are some points in the network where buyers have very
224 little power. These can be seen as key cut-off points which would prevent vertical governance flows.
Particular key cut-off points where buyer-led governance breaks down include cases when small garment manufacturers buy ready-made products from large textile manufacturers and when informal sector textile manufacturers buy yarn. For example, when small, informal fabric manufacturers source from large spinning mills, any governance pressure flowing down through the network would be cut off at that point. Another point where this can happen is when small garment producers source textiles through agents that buy them from large composite mills. This type of connection with weak governance potential often occurs in the Indian context.
Limited dependency can also create key cut-off points where vertical governance cannot flow beyond certain suppliers as all producers supplying to a buyer with low dependency are selling into a branch of the network that has low dependency. This relationship factor was discussed above in Section 6.2. The result of this process is that many lower tier suppliers are not very dependent on UK retailers as end buyers.
Within producers at different points in the ESN, production related to clothing for UK retailers may not be a large proportion of sales. Retailers’ lack of leverage when trying to make demands on businesses that do not have direct contracts is expressed in the following quote from the India-based code of conduct manager for Retailer A. Some of our manufacturers are vertically integrated and they have dye houses owned by them so it becomes a bit easier for us to go out and actually make sure that their standards are reasonable. However . . . there are some of the factories that outsource and maybe use some other dye houses or mills for procuring the raw materials. In that case, our approach is slightly different because we don’t have that leverage actually. Because of the fact that a garment manufacturer who is working for [Retailer A] for example, let’s say sources out of a particular mill and that business would be very miniscule for that mill and they will say we’re not interested to have someone from [Retailer A] code of practice to come in and audit us . . . it’s a challenge for all the retailers actually (I38-R47-R). A driver of challenges in this regard is that many buyers look to India particularly when they want small runs. Buyers with smaller orders for woven products may not have the minimums needed for composite mills to carry out production. For small orders, retailers are often working with small garment manufacturers who may not have leverage over their suppliers.
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At certain points along vertical pathways producers do not know who will use their products. Whether connections involves large composites mills making textiles that will be bought by small garment manufacturers through agents (I32-R41-T) or farmers are selling cotton to traders (I22-R23-C), these relationships are not conducive to flows of vertical governance related to process requirements. All suppliers below a key cut-off point would not have any requirements coming from lead buyers.
Third Party Standards
An alternate and potentially complimentary approach is the use of third party process standards for lower tier suppliers. This approach is currently expanding. In November 2014, Marks and Spencer introduced a policy requiring wet processes to provide proof of third party certification for environmental issues.
This approach has advantages and disadvantages. One advantage is that it requires far less investment from either retailers or their first tier suppliers. However, it does require lower tier suppliers to make investments in paying for third party certification and relies on developing trust in third party certifiers.
A major challenge with this approach is that it creates opportunities for falsification. Certificates would be required for multiple inputs, which could be difficult to independently identify when brought together in one product. This type of certification across all stages of production currently exists for speciality products, such as organic cotton.
Retailers have begun to include requirements for product features that promote sustainability. When items are labelled as having sustainability features, their inclusion could be considered a product quality choice. For example, if a retailer wants to have a product line with a sustainability feature such as organic cotton, this can be put in the purchase order and the businesses involved in manufacturing the product would find organic cotton in the same way that a different purchase order specifying a certain type of denim would result in that type of denim being acquired. In this case, a challenge could be that cotton was sold with an organic certification that was not actually grown with organic methods. In cases with third party monitoring the retailers must trust the organisations involved.
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Monitoring involved in the creation of these specialty products is very high. This is associated with higher costs. When the case study retailers sell products with such attributes, third parties are heavily involved in coordinating all stages of production (I77- R86-G). The high costs are connected to problems with traceability.
Traceability
At its base, processes of meso governance involving governance from lead buyers traveling down vertical pathways to raw material production would require some form of traceability to ensure that processes being used by lower tier producers adhered to the requirements of the lead buyers. In the case study ESN, traceability has proved to be a difficult process. While speciality products with sustainability characteristics, particularly cotton, have been monitored through different stages of production through specially set up monitoring processes, conventional pathways across the ESN often do not involve buyers at each link knowing much about the origin of the input they are buying (I44-R54- R; I45-R55-R).
Along with growing concerns about sustainable production, there has been a growing demand for traceability. While retailers and brands have traditionally been the face of products, there is a growing pressure for retailers to have traceability of the production stages of their products’ life-cycles. Traceability involves being able to identify all stages of production. Pressures related to traceability are directly tied to retailers being seen as lead actors in governance for sustainability. The UN Global Compact (Norton et al. 2014) suggests four drivers for why retailers may want to have programmes which focus on traceability of their supply chains. These are defined as values and efficiencies, stakeholder pressure, regulation and global alignment. These drivers are seen as promoting 10 benefits, which are outlined in Table 6.5.
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Table 6.5: Drivers and Benefits of Traceability Programmes Driver Benefits Values and Efficiencies • Reducing risk • Operational efficiencies and process consistency • Securing supply • Supplier selection and supplier relationships • Reputational benefits Stakeholder Pressure • Meeting stakeholder demands for more product information • Ensuring claims are true Regulation • Meeting legal requirements Global Alignment • Standardisation of expectations, processes and systems • Ensuring security of natural resources Source: Author’s Construction, data from (Norton et al. 2014 )
Despite the strong drivers for retailers to develop traceability programmes, they have proven to be a difficult undertaking. An empirical example showing this difficulty is the way that a traceability scheme for Marks and Spencer’s cotton production was cancelled due to challenges with feasibility, even with a significant investment put towards realising this objective. This case is described below.
In August of 2011 Marks and Spencer produced a press release outlining the commitment they had made to develop a traceability programme for their clothing and home products. They hired a consultancy firm to help with this process. After about 18 months this programme was cancelled as they could not reach the required scale (Barrie 2014). In an interview with a trade magazine, Tim Wilson, the CEO of Historic Futures, the consultancy firm hired, described a challenge with understanding sourcing relationships in the global cotton industry by giving the example of cotton from Uzbekistan, a country widely condemned for using forced labour for harvesting. He said, Uzbek cotton “still gets sold every year but is not turning up on the market anywhere; nobody’s got any and yet it’s all being sold. Well the reason is nobody’s actually collecting the data to say where it went (as quoted in Barrie 2014).” Wilson also describes the challenges in building new sets of relationships that would be needed to develop traceability as, “technically difficult, commercially difficult and culturally difficult (as quoted in Barrie 2014).” In this case, a retailer which has the self-proclaimed goal “to become the world’s most sustainable major retailer by 2015 (Marks and Spencer 2010, p.3),” was not able to establish a traceability programme.
The difficulties seen in the experiences of this retailer are also expressed in a report by the UN Global Compact (Norton et al. 2014, p.18), which states, A few companies interviewed during the development of this guide 228
disclosed that their attempts to establish company-specific traceability schemes were unsuccessful. The roadblocks were due to two key factors: the reluctance of suppliers to share information, and the fact that there was a particularly opaque section of the supply chain, such as when there are agents or distributors not prepared to share sources, or a large number of small producers that are difficult to track. Attempts by the organisations in question to pursue traceability alone did not offer a solution. The experiences of these retailers show the challenges that are created through the existence of key cut-off points which can prevent vertical governance from flowing down through fragmented production processes.
Another indicator of challenges related to traceability is the lack of awareness of lower tier producers of how their products will be used. Throughout the interviews for this study respondents at lower tiers indicated variously that they had a rough idea through informal channels where their products would end up or that they did not know. An example of a response is when the production manager at Dyeing Unit A was asked about the brands that his company dyes for, he responded, “No. We just do the job work. They don't tell us all those details (I65-R74-W).” Informal knowledge was expressed by the response of the Founder and Manager of Textile Manufacturer C. When asked about the UK brands his textiles would be used for, he said, “No, they don’t tell us but we know that from our sources that who they are selling to. . . they are this brand Marks and Spencer (I50-R59-T).”
A particular challenge related to not being able to ensure traceability is that it opens up possibilities for products using any sort of processes and the final buyers not knowing about them. Even if lower tier products are certified by third party standards, the product being bought may not be the one that was actually certified. If this happens at one point in the network, producers involved in subsequent stages of production would not be aware of the problem. For example, if workers are not paid properly and buyers at one link were not aware of this or decide to buy the product anyway, their buyers would not know about this problem as there is no physical evidence in the product they bought.
Several major brands and retailers have now published lists of their first tier suppliers. Within this case study, H & M has taken this step. However, even keeping track of which businesses have been involved in garment manufacturing has been difficult as brands and retailers connected to high profile challenges in garment
229 manufacturing reveal their products were made through unreported subcontracting practices (Greenhouse 2013; Cobos and Quadir 2013).
6.4) Conclusion
This chapter has shown that vertical governance in the ESN takes different forms along the multiple vertical pathways that exist for the production of cotton garments in India. Looking at the role of retailers as buyers at the top of the network, this research finds that retailers’ product requirements are met for each intermediary input. However process related requirements face multiple challenges.
At the micro level, two main problems were identified with sourcing practices governing production processes. The first is the variability of potential for a strong role of buyer governance across distinct buyer-seller relationships across the ESN. The second is that, even in cases where buyers are able to stimulate change, the changes may not be in line with the buyers’ intentions.
At the meso level, considering how governance can flow from retailers down vertical pathways to raw material producers, it is apparent that vertical governance through sourcing is severely limited in this case. Buyer governance is seen as having limited ability to flow down vertical pathways. This is due to the compounding of challenges experienced in diverse buyer-seller relationships and the existence of key cut- off points, which prevent governance from flowing down. The impact of these challenges with meso governance was shown by the high profile failure of a major UK retailer in establishing a programme which sought to provide traceability for cotton clothing. In the face of these challenges retailers seeking to use vertical governance mechanisms may be better off working through vertical pathways that involve fewer actors, in other words sourcing from producers that have high levels of vertical integration.
The limitations to vertical flows of governance for garment production found in this case expands previous theories of governance which have emphasised the role of buyer-led governance to bring in an understanding that buyers at the top of an ESN may not be lead firms for all producers. Considering production as involving multiple buyer- seller relationships, with variable governance structures, shows a system where some segments of vertical pathways could be considered buyer-led and others have
230 arrangements with limited buyer power. All of this diversity can take place within the ESN of one lead buyer ordering one cotton garment from India.
While some approaches have considered bi-polar and multi-polar GVCs (Fold 2002; Ponte and Sturgeon 2014), the approach used in this study draws out the importance of understanding governance dynamics that significantly differ in each connection in a fragmented production process. The diverse sets of relationships found question the possibility of any one actor being able to use vertical connections to “drive” the network in terms of sustainable production.
At this point in the thesis, this chapter has shown the limitations of buyer-led governance in promoting sustainable production through vertical governance expressed as sourcing requirements across a fragmented ESN characterised by multiple vertical pathways involving diverse buyer-seller relationships. Chapter 7 proposes benefits related to considering producers in an ESN as being grouped in LPSs and experiencing common horizontal governance. This represents an alternate perspective to the focus on vertical pathways considered in this chapter. In Chapter 8, the perspective taken in Chapter 7 is combined with the perspective provided in this chapter to undertake a broad analysis of the role that retailers can play in providing governance for sustainable production for producers at all points in their ESNs.
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7: Horizontal Governance across the Extended Supplier Network
7.1) Introduction
Producers experience a combination of vertical pressures due to their locations in the ESN along with horizontal pressures due to their territorially embedded location within a LPS. Chapter 6 showed that buyer-seller links have limited ability to facilitate flows of vertical governance, particularly through pathways involving multiple buyer- seller links. The chapter also highlighted the diversity of intersecting vertical pathways that are found within the case study ESN. In the context of buyers’ sourcing policies having limited power through vertical governance pathways across the ESN, this chapter asks: “ How can experiences of horizontal governance within LPSs provide insight into buyer-driven governance for sustainable production in an ESN?”
This question is explored in two ways. First, it is explored analytically by considering how focusing on horizontal governance can address the challenges identified with vertical governance in Chapter 6. Second, the chapter draws lessons about horizontal governance by exploring the experiences within five examples of LPSs that house businesses responsible for different stages of production in the ESN.
While Chapter 6 emphasised the diversity of vertical governance experienced based on differences between business forms and pressures created by being embedded in different locations, Chapter 5 showed distinct characteristics of businesses working within the same LPSs across India. Concentrating on a relatively homogeneous set of producers within a LPS provides a cohesive unit of analysis, compared to the diversity found in vertical pathways. Additionally, in a LPS, businesses experience similar horizontal governance pressures. Understanding production as taking place within territorial groupings with common features provides a way to understand patterns in vertical connections. Furthermore, focusing on territories allows for an exploration of the horizontal governance pressures experienced by producers that are felt in conjunction with any vertical pressures.
Empirically this chapter considers five LPSs that house businesses responsible for different stages of production. Each LPS has also experienced a key challenge related to sustainable production. Exploring these cases provides insight from two perspectives. 232
First, these cases show different ways that territorial groupings of producers are embedded within the ESN’s vertical pathways. Second, exploring experiences of governance related to sustainable production within the LPSs provides insight into the intersection of vertical and horizontal governance.
The cases discussed in this chapter illustrate the limitations of vertical governance pathways for lower tier producers. However, this chapter demonstrates that retailers can also play a governance role for producers in LPSs through horizontal pathways. Considering both types of governance pathways expands previous conceptions of buyer- led governance which have focused on vertical sourcing relationships.
When exploring how governance is experienced within these LPSs, three key horizontal governance dynamics are found to be important. First, each LPS has a unique structure which involves a distinct configuration of key governance actors promoting change and stability. Second, different mechanisms are used to promote change with the cases showing examples where both mandatory and voluntary pressures stimulated change. Third, the nature of sustainability challenges is diverse within one ESN with some challenges ingrained through strong governance forces pushing for stability. Considering these local dynamics is important for understanding how retailers can make horizontal connections and also how horizontal governance pressures are felt alongside any vertical governance pressures.
The rest of the chapter is structured as follows. The following section considers how looking at horizontal governance within LPSs can help to understand buyer-driven governance for sustainable production. The third through seventh sections provide profiles of five LPSs within the case study ESN. The first LPS is a set of garment production clusters in Delhi facing a challenge related to child labour. The second LPS profiled is a garment cluster based in Tirupur with businesses responsible for wet processing creating high levels of pollution. The third LPS profiled is yarn spinning in the state of Tamil Nadu, which has experienced a challenge with employment arrangements. The fourth LPS considered is ginning in Gujarat, which has also faced a challenge related to working conditions. The fifth and final LPS discussed is cotton farming in Gujarat, which faced a challenge related to the ability of cotton farming to support farmers’ livelihoods. The profiles of these cases were created by combining multiple sources of data, including contemporary documentary evidence, such as 233 newspaper articles and legal documents; publications providing empirical information on these cases; as well as interview data and observation from field work conducted for this study. The eighth section brings together what these cases show about how vertical and horizontal governance interact within LPSs across the case study ESN. The final section provides a conclusion.
7.2) Why look at Local Productive Systems?
Chapter 6 emphasised the difficulty for retailer-led governance to filter down through sourcing connections. The variation across vertical pathways creates a severe limitation to promoting governance for sustainable production through vertical flows of governance across an ESN. This chapter proposes an alternate way to understand buyer- driven governance by looking at groups of producers located within the same LPS. Considering these groupings of producers collectively provides several benefits. Three major benefits are: this is an important scale for many of the sustainability challenges experienced in the ESN; this allows for the creation of a simplified understanding of how production is organised compared to the large and diverse set of vertical pathways found when focusing on direct buyer-seller relationships; and, a territorial focus enables an explicit exploration of a broader consideration of GPN actors, which can be considered as providing horizontal governance. Each of these benefits is discussed below before demonstrating how they can be realised through the exploration of five LPSs within the case study ESN.
Important Scale for Challenges Related to Sustainable Production
When questioning governance surrounding challenges with sustainable production, understanding production as happening within a territorial space is crucial. Production processes must be considered as being carried out by actors working within an institutional context. A major factor to consider for sustainability challenges is the scale of the productive systems in which they occur.
Many of the challenges experienced within the case study ESN are based on the way production is carried out within a LPS. Producers embedded in the same territory have similar histories and experiences of contemporary horizontal governance pressures. As discussed in Chapter 2, this can lead to businesses having similar characteristics and Chapter 5 showed that producers in different LPSs in this case have distinct
234 characteristics. Many sustainability challenges are related to common practices having problematic side effects.
Governance pressures related to sustainability challenges within LPSs can come from vertical sources, through buyers, as well as through horizontal sources, which producers feel based on the territory in which they are located. Producers’ experiences involve both sets of pressure coming together. Explicitly considering producers’ vertical network locations and horizontal territorial locations can help with understanding the role that retailers’ governance can play.
Creating a Simplified Map of Vertical Connections in the ESN
One major benefit of considering production as taking place within a LPS is being able to create a simplified map of the ESN. This approach can address some of difficulties posed by the inability for firms to develop traceability for cotton garment production (see Section 6.3.3). Large groups of producers can be captured by considering geographically based LPSs. Instead of considering linear relationships moving down from individual retailers’ purchases, considering LPSs involved in the ESN provides a different way to understand how fragmented production is distributed. LPSs can also be seen as the focus of lead firms’ efforts at playing a role in governance for sustainability as is shown in two of the cases discussed in this chapter (Delhi garments and Tamil Nadu spinning).
Incorporation of a Broad Set of GPN Actors Involved in Horizontal Governance
In addition to benefits related to understanding the structure of the whole network, focusing on individual LPSs allows for an exploration of producers’ experiences. Producers working in territorial spaces face distinct configurations of horizontal governance forces. These forces can be seen as promoting both pressures for stability and pressures for change. Producers’ experiences of vertical policies are felt in conjunction with distinct sets of horizontal governance pressures. Consequently, attempting to establish uniform policies through vertical pathways to promote changes for producers in the same ESN but located in different LPSs results in different local experiences.
When focusing on production taking place in a territorial region, distinct local arrangements for organising production can be found. As discussed in Chapter 2, governance pressures can originate from non-firm actors and embedded governance 235 forces in the broader GPN. Looking at the scale of an LPS allows for an explicit exploration of local, horizontal governance experiences.
The benefits of considering production across an ESN as taking place within LPSs are demonstrated by the insight which is provided by considering the five LPSs profiled below. These profiles consider how producers in these systems have experienced multiple governance pressures related to key sustainability challenges. Exploring the intersection of vertical and horizontal governance processes is crucial for understanding these major sustainability challenges within the case study ESN.
7.3) Child Labour in Delhi Garment Production
The first LPS considered in this chapter is garment manufacturing in Delhi. In the 1980s, India began to participate in the GPNs of foreign brands and retailers (Mezzadri 2008). Initially production for this burgeoning export industry involved adults and children working in factory settings. As this industry developed, pressures against child labour began to emerge from domestic and international sources. By the early 2000s these pressures resulted in a restructuring of the industry into the form it takes today. This involves a relatively strictly enforced ban on workers under 18 years old in factory settings. However, child labour plays a role in the network of subcontractors that supports factory based production.
Exploring this case shows two approaches of how buyer-led governance can take place in an LPS. The first is through vertical connections that facilitate a strong role of buyer-led governance. The second approach which can be seen in this case is a global retailer making a horizontal connection to an LPS to address a sustainability challenge found in its ESN. These approaches to buyer-led governance can be seen to be distinctly different from each other. While the first approach involves a vertically implemented mandatory mechanism, the second approach involves a horizontally implemented voluntary mechanism.
The discussion below first presents an overview of the LPS involved in creating clothing for export in Delhi including a consideration of how this LPS connects to the ESN. The next section provides an overview of the key governance actors and forces promoting change and stability related to the challenge of child labour in the Delhi garment production. This is followed by a discussion on how Delhi garment producers 236 reacted to the intersection of vertical and horizontal governance pressures. This is the same format that is followed in the discussion of the following four cases.
7.3.1) Delhi Garment Production
The LPS for Delhi garment production involves formal sector factories located within the National Capital Region (NCR). As can be seen in Figure 5.4 (on page 183), production is concentrated in three main clusters which all feature different sizes of businesses. These include Noida with 750 units (550 export, 200 domestic), Gurgaon with 675 units (600 export, 75 domestic) and Okhla with 250 units (all export) (AEPC 2009). Often the same garment company owns multiple units across the NCR (I19-R20- G; Mezzadri 2014b). These formal sector firms are supported by layers of formal and informal subcontractors.
This LPS is strongly connected to UK retailers through vertical ESN links. Garment production in Delhi has been seen as involving five types of producers (Phillips et al. 2011).40 Each type has a different set of buyers and pressures. Type 1 and 2 firms have direct contacts to branded international buyers with codes of conduct, with Type 1 selling predominantly to global brands and Type 2 also selling to high end Indian brands. Types 3 and 5 are responsible for subcontracting activities for other producers and Type 4 produces for the domestic market and unbranded export items. Type 5 involves informal subcontractors and these are the businesses that continue to use child labour (Phillips et al. 2011; Bhaskaran et al. 2013).
7.3.2) Key Governance Actors and Forces Promoting Change and Stability in the Delhi Local Productive System
Within the Delhi garment cluster, businesses faced pressures which supported the continuation of a productive system which relied on child labour as well as pressures which promoted a move away from this system. The main governance actors and forces can be seen in Figure 7.1. These include diverse horizontal pressures as well as vertical pressure originating from UK retailers as buyers. Pressures created can be seen to
40 An overview of these types can be found in Appendix F.
237 promote both the continuation and termination of child labour. A discussion of these actors and forces is provided below.
Figure 7.1: Pressures for Change and Stability Related to Child Labour
Source: Author’s Construction
The Indian government has had two main streams for addressing problems with child labour (Gupta 2015). The first involves legislation which has banned certain forms of child labour. The second involves programmes aimed at supporting children transitioning out of the work force. Additionally, numerous civil society organisations have also been involved in pushing to end child labour in Delhi. Activities have included organising protests and demonstrations, running programmes to support children who have been working and participating in multi-stakeholder discussions (ILO 2005).
Alongside horizontal governance creating pressures for ending child labour, there have also been a number of pressures pushing for the continuation of the practice. One factor shaping these pressures for stability is the existence of institutional structures fitting into Scott’s (2014) normative pillar. Social norms were identified as key drivers of child labour by Basu and Tzannatos (2003). In the Delhi case, for some industry actors and key stakeholders, child labour is seen as a part of life. In this context, there were multiple forces pushing towards the continuation of child labour. Additionally, some families are dependent on income from child labour.
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Also creating pressure for the on-going use of child labour are the commercial interests of businesses involved in garment production in Delhi. Commercial drivers for the continuation of child labour can come from businesses which rely on cheap labour from employing children. Additionally, labour contractors which recruit child workers may wish to keep this system active.
Garment manufacturers in Delhi selling to UK retailers also face strong vertical pressures. As discussed in Chapter 4, retailers face numerous pressures to ensure that their products are made sustainably. These pressures have been supported by international NGOs and international governmental organisations whose mandates include addressing issues of child labour, notably the ILO. A respondent from an international NGO focused on labour issues spoke about being involved in seeking to encourage retailers to take actions to address social challenges involved in production by using tactics that include campaigning and lobbying (I2-R2-R). These pressures have been particularly strong related to working conditions in garment manufacturing and have led to the creation of policies which seek to ban child labour in garment production.
Attempting to eliminate child labour, buyers either conduct their own inspections of factories or require proof of third party inspections. Producers selling to global markets felt high levels of pressure from the emergence of global buyers’ demands being formalised into codes of conduct.41 This was a significant pressure for Delhi as between 1989 to 2003, Delhi was consistently responsible for between 35 to 42 percent of the value of India’s garment exports (Mezzadri 2008).
Alongside this strong vertical pressure, a smaller scale form of horizontal pressure was initiated by a global buyer. This involved a collaborative governance approach involving a partnership between an American retailer, a sourcing firm that supplies to retailers in this case study, a garment factory that supplies to case study
41 Additionally, pressure may have been felt similar to Bangladesh’s experience with the Harkin bill. This bill, introduced in 1992 in the US proposed to ban importation of products made with the use of child labour. In Bangladesh, many child workers were dismissed in fear of the new bill leading to losing US contracts (Schapper 2014).
239 retailers, the Indian government and a local NGO. The idea was that embroidery could be carried out by a group of women specially trained who would be cost competitive because fees that were normally charged by middlemen involved in subcontracting would be cut out. In contrast to buyers’ vertical pressures and the government regulations described above, which were based on mandatory bans, this approach focused on promoting voluntary change. Sending sub-contracting to these women was done at the discretion of garment manufacturers, sourcing firms and retailers.
7.3.3) Intersection of Vertical and Horizontal Governance Related to Child Labour in Delhi Garment Production
This section considers two main mechanisms that have been used to promote change related to child labour in the Delhi garment LPS. The first involves public and private efforts to ban child labour in garment factories. The second involves a small scale collaborative project attempting to promote voluntary change toward an alternate form of production.
Banning Child Labour through Vertical Compliance Policies and Local Horizontal Law Enforcement
Global garment buyers and public governance actors have used vertical and horizontal pathways to attempt to end child labour through banning the practice and using inspections to enforce the ban. These pressures to remove child labour were felt alongside strong horizontal pressure for stability related to the continued used of child labour as well as vertical pressure to keep prices down.
When looking at the effects of the governance pressures put on garment producers, it is important to consider how the industry is structured. Within this structure, pressures to ban child labour were felt most strongly by formal sector businesses, particularly Type 1 and 2 firms. These firms felt vertical pressure through buyers’ widespread implementation of codes of conduct accompanied by frequent private inspections. Additionally, they felt horizontal pressure through government regulations.
The structure of the legal framework created pressure for change in the formal sector but not the informal (Deshingkar 2009; Lerche 2012). Government regulations for formal sector manufacturers can be seen to have pushed child labour into sectors that are difficult to regulate (Pala 2014). A further concern is for labour laws which are
240 applicable for home-based workers, it can be difficult for government inspectors to access informal units. Bhaskaran et al. (2013, p.8) found that inspections in the household sector are particularly difficult due to “the inaccessibility of the semi-slum areas in question. Attempts made tend to be immediately obstructed by residents and employers in the area.” Consequently, horizontal pressures also supported change in the formal but not informal sectors.
Facing pressure from buyers and government regulations, formal sector factories began to enforce an age restriction on workers. Following the discussion of buyer power in Chapter 6, manufacturers at this point in the ESN are quite dependent on large UK retailers and were willing to make changes to please these customers. However, the way that Delhi-based firms addressed these vertical governance pressures was based on the dynamics of the LPS. Businesses made changes to their production practices in order to continue to sell to buyers applying codes of conduct. These changes resulted in restructuring processes that allowed for a continuation of child labour in a different segment of production outside the scope of buyers’ codes of conduct and government policies.
Facing conflicting pressures, actors within the cluster took various actions which have resulted in a significant shift in how child labour is incorporated into the Delhi garment cluster. With formal sector factories subject to multiple audits, employment of children became concentrated among informal and home based businesses that support the formal factory sector through sub-contracting services (Phillips et al. 2011; Bhaskaran et al. 2013; Bhullar et al. 2015). This change is explained in the following passage. The forms of adverse incorporation associated with child labour have been reconfigured since the early 2000s. There has been a visible decline in the incidence of child labour in factory settings, in reaction to growing public and political pressure within India and beyond. 2 Yet this decline represents merely a displacement of the problem: child labour has shifted out of factory-based production into the arena of household activity, as the restructuring of garments production to reduce costs and evade regulation has dramatically increased the importance of home-based work and the number of (particularly women) workers in the burgeoning household sector (Phillips et al. 2011, p.6). This shows how pressure for addressing the challenge of child labour resulted in a significant shift in how garments are produced in the Delhi cluster.
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Firms operating in child labour free zones now often post signs indicating this status, see Figure 7.2. A representative from an auditing firm based in Delhi, who was interviewed for this study emphasised the rarity of child labour in formal sector factories, “in India child labour is almost extinct in the organised sectors. There are the one or two odd case that come in some shops but in 99.9% you can’t find child labour (I39-R48-R).”
Figure 7.2: Sign posted outside a Delhi garment manufacturing firm
Source: Author’s Fieldwork 2013
With the introduction of codes of conduct, being required to prove that workers met age requirements became a part of transactions with buyers. When talking about meeting requirements from inspectors, a manager of a garment manufacturer in Delhi spoke about the routine nature of the requirements, saying, “One of the buyers is asking age proof in the file, worker’s file. So you have the age proof there. Now there is another buyer who is asking. We need two age proofs (I19-R20-G).” A manager at another Delhi garment manufacturer described turning away workers who were under age. There’s no child labour. . . We make sure such child labourers are discouraged. They are not just thrown out. It’s not like that. We make sure they have been taught, ‘it’s not the age for you to work’. It is advised to them that you better go and study or develop something else (I52-R61-G). Garment manufacturers selling to the UK now expect their buyers to have standards related to child labour and make efforts to meet these buyers’ requirements. Both of these managers described hiring male migrant workers to work in their production facilities.
However, the change which took place within formal factories can be seen to be supported through the ongoing use of child labour among subcontractors supporting these factories (Phillips et al. 2011; Bhaskaran et al. 2013). Strong horizontal pressures for the continuation of child labour have resulted in the practice continuing in a way that is
242 compatible with the vertical and horizontal pressures which have sought to ban the practice. While the formal sector now employs adult workers, Delhi garment production is still reliant on a large base of child workers (Bhullar et al. 2015).
This outcome can be analysed by exploring three governance dynamics within the LPS. The first dynamic is how the LPS is structured, including the identity of key governance actors. In this case production of garments is supported through a set of sub- contractors, with multiple actors and forces involved in promoting change and stability related to child labour. These include government agencies, NGOs, global buyers and social norms. These governance actors were able to create strong pressures for formal sector firms. However, the structure of the productive system resulted in home-based businesses carrying out subcontracting services for garment manufacturers not feeling pressure from international buyers or domestic laws.
The second dynamic is the nature of the governance mechanisms used. This approach shows mandatory mechanisms to ending child labour created by vertical and horizontal actors have been able to stimulate a change to the productive system. However, vertical pressure to keep costs down along with strong horizontal pressures for the continued provision of jobs for children resulted in a restructuring that involves the continued use of child labour in new forms.
Finally, the third dynamic is the nature of the sustainability challenge being considered. The use of child labour involves strong pressures for stability. Child labour is driven by a set of actors financially dependent on the process and facilitated by social norms. Consequently using a mandatory approach resulted in a restructuring which addressed the pressures for change while maintaining a level of stability in the underlying system of production.
Retailer’s Promotion of Voluntary Change through a Horizontal Connection
While the above approach focused on trying to ban child labour from existing facilities, an alternate approach can be found within the Delhi LPS. This approach involves supporting the development of a new system that does not rely on child labour. This approach has been developed as a collaborative project involving a global retailer making a horizontal connection to actors within the Delhi LPS.
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This project involved setting up a programme in conjunction with a local NGO and a Delhi-based sourcing firm which focused on training women in a local villages to carryout beadwork through a cooperative programme where they could work from locally established production facilities which would pay fair wages to adults and allow women flexible schedules to address any domestic responsibilities (Tewari n.d.). The project attempted to offer an option that was cost competitive to buyers of bead work services as fees to middlemen were cut out.
Initially, this project seemed promising. A large number of orders were placed (I58-R119-G). However, the project was ultimately unsuccessful as it was not compatible with the variability of commercial requirements found in the Delhi cluster. One of the garment manufacturers that had participated in the project described, If handwork and beading is in fashion, the ladies over there get the livelihoods, they get the wages . . . If beading and handwork gets out of fashion, then it is difficult for the industry to support them in terms of work. . . earlier it was in fashion . . .but now it’s just gone (I55-R65– G). As one of the cluster’s commercial strengths is small scale and flexible production, orders for the type of beadwork created by the women were not consistent and the project could not sustain itself.
This outcome can also be explored by considering the three governance dynamics described above. The first dynamic involves the structure and the identity of key governance actors. This approach is connected to the same industry structure as the vertical approach considered above. Additionally, the key governance actors are similar as the approach involves buyers and government actors.
However, in terms of the second dynamic, which is the type of governance mechanism used, in contrast to the mandatory approach, this case involved a voluntary pressure. Retailer buyers, sourcing firm buyers and the garment manufacturer that partnered in the project were given the option to have their beading done by the women trained for this project. This voluntary mechanism initially seemed to be effective. However, as market demand changed, businesses no longer chose to support this project.
For the third dynamic, which involves the nature of the sustainability challenges, the structure of the Delhi industry depends on flexible subcontracting. The solution presented to address the challenge of child labour may not have been appropriate to the
244 challenge being faced. The Delhi garment cluster’s large number of small units which work with varying sub-contractors with access to temporary and casual workers allows flexibility to respond to the variability of orders by international buyers (Mezzadri 2008). The importance of flexibility of production afforded by relying on casual subcontracting was not accommodated by the horizontal approach considered in this section. Women trained to carry out embroidery were specialised in a certain style that did not have consistent market demand.
This discussion of the Delhi case has involved looking at experiences with two approaches for governance for sustainability. This case shows different features of three aspects of local experiences of governance dynamics. Variation between the characteristics of these three dynamics across all five LPSs is explored in Section 7.8.
7.4) Water Pollution in Tirupur Wet Processing
The second case considered is wet processing in Tirupur. This city has faced a severe challenge related to water pollution created by wet processors. After a long legal battle, local civil society groups were eventually able to promote a change in production practices. Previously producers dumped waste freely and now they are responsible for their own waste treatment. A government inspection system is now being implemented to ensure that firms are not emitting any liquid waste.
This LPS involves a set of producers that have much weaker connections to lead buyers than those in the Delhi case. Wet processors’ direct clients are often local garment or textile manufacturers. Vertical governance surrounding this case was minimal. These garment and textile manufacturers’ requirements related to wet processing were limited to the types of dyes being used and did not extend to how producers disposed of waste. However, this case involved strong horizontal pressures for change and stability. While businesses were very resistant to change, strong pressures driven by the community’s experiences of the harmful side effects of unsustainable production practices were able to promote the development of new production practices. Civil society worked with local government to promote a mandatory pressure for change among producers.
7.4.1) Tirupur Wet Processing
Tirupur houses an industrial cluster that specialises in manufacturing knit garments. Garment exporting in the region took off in the 1980s. This cluster has been 245 very successful and is now responsible for almost 80 per cent of India’s knitwear exports (Jayanth et al. 2011). Making knitwear involves yarn spinning and knitting processes as well as wet processing, which includes dyeing and bleaching. Wet processing can be integrated within firms involved in other manufacturing stages or take place through stand-alone firms. When the process is integrated with garment manufacturing it involves direct connections to retailers. Otherwise wet processors’ customers are usually garment or textile manufacturers through job-work contracts. This cluster involved approximately 700 wet processors, which were businesses concentrated on dyeing or bleaching.
7.4.2) Key Governance Actors and Forces Promoting Change and Stability for Tirupur Wet Processing
Compared to the Delhi case, the Tirupur cluster has a different set of governance pressures involved in promoting change and stability. The major governance actors and forces are depicted in Figure 7.3. The types of pressure created by each governance force are discussed below.
Figure 7.3: Pressures for Change and Stability Related to Waste Treatment
Source: Author’s Construction
A major driver in promoting change to the behaviour of Tirupur wet processors was local community members who were experiencing the effects of water pollution. As the Tirupur cluster developed, businesses carrying out wet processing generated growing levels of highly polluted waste water as a by-product of their activities. For decades, 246 much of this waste was being discharged into the Noyyal river. By 2005, the Tamil Nadu Pollution Control Board reported that 88 million litres of contaminated effluent were being released every day (Jayanth et al. 2011). Levels of pollutants found in the Noyyal were growing and polluted water became a serious problem for the local community and particularly for local farmers. These affected community members organised themselves to launch a series of petitions for the government to take action on this issue.
Although official regulations were in place, the government had very little influence on the activities of wet processors in this cluster. Specifically, while the Water Act of 1974 requires adequate treatment of effluent before disposal, this regulation was not being followed in Tirupur (Sankar 2001). However, in the face of pressure from civil society groups, the government took a series of actions to promote the development of private waste treatment facilities, which are described below.
Buyers did not play a role creating pressures surrounding pollution in this case.42 For the wet processors in this cluster that are independent firms, their customers are usually garment manufacturers or textile manufacturers. For firms that are using export quality dyeing processes, the fact that products will eventually be exported is known. However, the retailers and brands that are the end recipients of their production can be unknown (I65-R74-W). Occasionally, buyers that are more quality conscious can inspect the dyeing facility that will be used for their orders (I60-R69-G, I89-R116). The lack of concern by buyers related to pollution can be seen by the response of an owner of a unit that makes knit garments and carries out wet processing at a self-owned facility when asked about buyers inspecting wet processing. “No, nobody comes to the processing facility to check. Even if they come they come to check the workers, welfare of the workers . . . But the environmental processes [are] being taken care of by the government (I60-R69-G).” This business has integrated wet processing so it is closer to lead buyers than wet processing that is conducted by independent subcontractors.
42 Retailer requirements related to pollution of dying conducted by subcontractors have not been common. However, since the field work for this study was conducted, Marks and Spencer has introduced a policy requiring garment manufacturers to check for certification of dying units having pollution control systems (Marks and Spencer 2014a).
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As in the Delhi case, norms existed that involved wet processors dumping waste in the Noyyal river. Businesses benefiting from dumping their waste products had incentives to maintain the system. Addressing the pollution problem would involve increased costs and the on-going situation of lack of regulations helped the industry to be competitive by resulting in cheaper wet processing services.
Businesses in this cluster are organised into several business associations, including the Tirupur Dyeing Factory Owners Association and the Tirupur Bleachers Association. Particularly the Tirupur Dyeing Factory Owners Associations was involved in appealing court rulings enforcing the installation of waste treatment facilities. In this case, collective action by businesses through actions of their industry associations created strong pressure for stability in production processes which counteracted pressures to develop systems that would reduce pollution.
7.4.3) Intersection of Vertical and Horizontal Governance Related to Water Pollution in the Tirupur Wet Processing
The pressures created by community actors were eventually successful in promoting the development of a new productive system. This change took place over the course of a twenty year period with the involvement of community groups in conjunction with legal pressure from the state government. The processes involved in changing the productive system are now considered.
The intersection of conflicting horizontal pressures promoting change and stability involved a series of legal disputes.43 Facing pressure from the local community, the Tamil Nadu government took a series of actions to stop polluting activities.
The first step in this process was that in 1996 a public interest litigation was filed by the president of the Karur Taluk Noyyal Canal Agriculturists Association with the hopes of addressing this pollution problem (Mohan 2013). By the late 1990s, plants began to use rudimentary filtering systems that addressed colour and odour but did not remove salt (Sridhar 2005). In the mid-2000s policies were put in place to try get wet processing units to install water filtration systems that would remove salt, however, these
43 A timeline of key events can be found in Appendix G.
248 pressures were not effective. Firms were required to prove they had made plans to install new systems but many did not follow through with these plans. The government threatened to close down firms without the required filtration systems by 2007 (Mohan 2013). Local businesses protested that the regulations were too strict and that government support was necessary for firms to set up these systems, particularly small firms (Sridhar 2005).
Finally, in 2011 the government took stronger measures to address the water pollution problem after a petition was filed by farmers in 2010 seeking to have the government enforce waste control regulations (Mohan 2013). Following this petition, in January 2011, the Madras High Court shut down all wet processors until they could prove that they had waste treatment systems in place that completely eliminated the discharge of contaminated water. This action affected about 720 units with 40,000- 50,000 workers (ET Bureau 2011).
While the 2011 high court decision initially led to the closure of all wet processors in Tirupur, many were able to reopen after improving their waste treatment systems. The required effluent treatment systems were established through a combination of self-funding, commercial loans and government support (I64-R73-W; Hussain 2014). Some firms built their own effluent treatment plants and other firms worked together to manage common effluent treatment plants that could receive contaminated water from multiple wet processing sites. 44
While early effluent treatment systems in Tirupur were not very effective, new systems have been designed to meet strict government regulations which stipulate zero liquid discharge. These effluent treatment facilities now filter out the waste from contaminated water and produce clean water which can be reused by firms for future wet processing. Additionally, a dry salty substance is created from the filtered waste which has potential industrial uses that have yet to be explored.
44 Kennedy (1999) discusses dynamics shaping how nearby businesses facing similar challenges faced requirements to install effluent treatment facilities.
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While government action took many years, water pollution in the Noyyal river has now been reduced. However, many smaller wet processing firms, which could not afford to invest in waste treatment technology, have been permanently shut down. A representative of a sourcing firm based in Tirupur described, “[about] 90% are working again but, of course, at a higher cost (I4-R4-R).” Despite the higher costs, knitwear manufacturing in the region continues to rely on local wet processing services. Buyers of wet processing services are quite dependent on local wet processors which they trust to carry out work of the quality demanded by international buyers (I4-R4-R).
While broadly successful, there have been some continued challenges. Since 2011 some businesses have continued to violate the laws (Kumar 2014). Additionally, some businesses may have relocated to nearby locations outside of the enforcement zone (Srinivasan et al. 2014).
In this case, the state government, with urging from the local community, successfully promoted the development of new production practices that are less harmful to the environment. Local businesses were able to work together and draw from technology used in other regions to develop solutions customised to the Tirupur context.
The experience in Tirupur shows a very different set of governance dynamics than those found in Delhi. This can be seen in the different set of actors promoting change as well as how governance mechanisms were implemented. A major difference can also be seen in the nature of the sustainability challenges being faced. These three governance dynamics are considered below.
In the Tirupur case, the major drivers for change were farmers and local community members that were feeling the harmful impacts of the sustainability challenge. Community groups promoted change by pressuring government actors into enforcing mandatory pressures to reform production practices. These mandatory regulations were able to successfully promote the creation of a new productive system. However, these pressures were often in opposition to organised resistance from producer groups, which were able to slow the progress of enforcing the pollution prevention laws.
The challenge being faced in Tirupur was more straightforward than that faced in Delhi. A technical solution was identified which could enable businesses to continue to function without continuing to pollute the water. However addressing this challenge also 250 created new sustainability challenges as in the Delhi case. Many businesses were forced to permanently close as they could not afford to install the required equipment. Additionally, there may be longer term consequences in the competitiveness of the Tirupur cluster if these changes result in higher costs of production that detract global buyers free to move to cheaper producers.
7.5) Sumangali System in Tamil Nadu Cotton Spinning
The third case considered is yarn spinning in Tamil Nadu. Yarn spinning is an activity that is prevalent in Tamil Nadu with most firms located in clusters around urban centres (Theuws and Overeem 2014). Yarn can be spun in independent facilities or be part of larger integrated manufacturing businesses. Businesses in Tamil Nadu’s textile and yarn manufacturing industries often hire workers through a system known as Sumangali, which is associated with limited rights of workers. The Sumangali system of employment involves hiring young female workers, usually from rural communities, for multi-year contracts with small regular payments and the promise of a large lump sum payment upon completion of the contract. A challenge exists as these women face extreme pressure to stay in these jobs and often loose the whole final payment if they are unable to complete their contracts. This has been cited as a system of forced labour (Theuws and Overeem 2014; Solidaridad 2012). This employment system also involves workers being highly monitored, often having poor working conditions for the duration of their contracts, and closely watched female workers can be prevented from joining unions (Theuws and Overeem 2014; De Neve 2008).
Local and global NGOs, with some support from retailers, have attempted to improve the conditions for workers involved in this system but with little result in terms of creating new working arrangements. In contrast to the dominant vertical approaches employed by retailers, this case shows how retailers have taken action through horizontal, non-sourcing connections to address a sustainability challenge occurring within an LPS in their ESN. The uniquely local dynamics of this sustainability challenge highlight how retailers must consider the local context when addressing many sustainability challenges.
7.5.1) Cotton Spinning in Tamil Nadu
Cotton spinning firms in Tamil Nadu involve both large and small businesses, with the industry involving 923 large mills and 1014 small-scale mills. As mentioned in
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Chapter 5, spinning, textile and finishing units in southern India have a high proportion of directly employed women workers. In Tamil Nadu, 46% of directly employed workers in textile industries 45 are women (Central Statistics Office 2015a). The Sumangali scheme is common in rural or semi-urban areas where other job opportunities are limited (Solidaridad 2012).
This LPS has much less direct connections to UK retailers than garment production in Delhi or wet processing in Tirupur. As discussed in Chapter 6, yarn spinning is an earlier stage production process and consequently has weaker vertical connections, except for cases where it is integrated with facilities responsible for garment or textile manufacturing.
7.5.2) Governance Promoting Change and Stability for Tamil Nadu Spinning Mills
As with the Delhi and Tirupur cases, there are also different groups of governance actors promoting change and stability for Tamil Nadu spinning mills. These actors are depicted in Figure 7.4. The governance roles played by these actors are discussed below.
45 This figure covers formal sector spinning, weaving, finishing and other textile manufacturing. A specific number for spinning was not available.
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Figure 7.4: Pressures for Change and Stability Related to the Sumangali System
Source: Author’s Construction
In its policies, the Indian government has taken a stance against forced labour. The Indian government has signed the ILO convention(s) on forced labour and has legislation on forced labour (SEEDS 2010). Additionally, a system to rehabilitate people involved in bonded labour has been supported by joint efforts between district, state and national governments (SEEDS 2010).
Various international and local NGOs and workers’ organisations have sought to draw attention to this issue (I59-R68-G). In recent years numerous internationally led NGOs and multi-stakeholder initiatives supported by retailers have begun to develop programmes to address challenges related to working practices in Tamil Nadu’s spinning mills. These programmes have involved activities including awareness raising in recruitment areas and organising a roundtable discussion (Theuws and Overeem 2014; Coninck et al. 2011).
Buyers of yarn generally do not have requirements about the processes involved in producing yarn. For independent yarn producers, buyers are often textile manufacturers in India or abroad. Retailers and their sourcing firms often do not have contact with independent yarn spinners. Even for yarn spinning facilities that are owned 253 by textile and garment manufacturers, codes of conduct are not usually enforced at yarn spinning facilities that are often located at separate sights from textile and garment manufacturing (Theuws & Overeem 2014).
However, retailers at the top the network have become aware and concerned with the way work is organised at Tamil Nadu spinning mills. Realising that the vertical connections with this activity are weak, retailers have sought to build horizontal connections to promote change. This has involved collaborative efforts as can be seen by the following quote by a representative of Retailer A. We have problem in Tirupur called Sumangali, so we work collaboratively with a lot of other brands and the stakeholders on that particular issue. So yeah, we have identified that if we have to sort out issues in the supply chain, in isolation we can’t do it because these are issues that are endemic and [Retailer A] does not have that leverage to sort out all the issues so until you develop a collaboration, we personally feel like it’s not going to sort out (I38-R47-R).
As with the Delhi and Tirupur cases described above, pressures exist promoting the continuation of the Sumangali system. Systems of forced labour have a long history in the Tamil Nadu region (Carswell and De Neve 2013). Businesses hiring workers through the Sumangali system and the contractors involved in recruiting these workers have financial incentives to continue this practice. Additionally, these jobs may initially seem appealing to many young women and their families (Solidaridad 2012). Large lump sum payments can be used for dowries. Also, many young women like the idea of leaving their villages and getting jobs.
7.5.3) Intersection of Vertical and Horizontal Governance Related to Sumangali in Tamil Nadu Spinning Mills
In contrast to the two cases considered above, working conditions in Tamil Nadu spinning mills have not undergone a significant change. While civil society organisations have been joined by retailers to try to address challenges with working conditions in spinning factories, these efforts have yet to produce results. Field research by a Dutch NGO called SOMO (Theuws and Overeem 2014) found that employers continue to use this system and most programmes have failed to show impact. While the Sumangali system has been slightly modified, problematic hiring practices continue to be used.
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Programmes run by NGOs have not been able successfully promote the development of new productive systems which involve more equitable positions for workers. Additionally, government actors have not played a large role in addressing the issue of Sumangali. The following discussion looks at the reactions to the governance pressures described above and how producers have continued to use the Sumangali system. Lack of government involvement in regulating instances of bonded labour has been found nationally. The Supreme Court and the National Human Rights Commission have found state implementation of the Bonded Labour System (Abolition) Act weak (Srivastava 2005). While labour inspectors are supposed to monitor factories to ensure legal working conditions, the implementation of this system has been questionable (Deshingkar 2009). Furthermore, while the government has policies banning forced labour, they have also been responsible for creating pressures which suppress labour organising (Lerche 2012).
However, large spinning mill owners are concerned with the potential that production could develop a reputation for having poor working conditions. Businesses have acted to try to present a positive image of their industry in the media. This desire can be seen in the minutes of an industry association’s meeting which mentions the idea of developing a promotional news story that shows working conditions in a positive light to European customers (SIMA 2012). SOMO (Theuws and Overeem 2014) published a report naming spinning mills that they identified as being connected to particular retailers. This has been a tactic used in the past by NGOs to promote the development of codes of conduct and other forms of retailer involvement in attempting to improve working conditions at first tier suppliers. It remains to be seen how affective this approach will be for stimulating retailer response. So far the response has been mixed from retailers refusing to comment to saying they will work to provide support services to address the problem (Theuws and Overeem 2014).
Responding to a question about approaching brands to deal with social challenges in production, a representative from an NGO interviewed for this study said, We generally speak about brands by organising a roundtable with several European brands and American brands … on Sumangali, they said, no we don’t agree, wherever there is Sumangali or child labour we stop buying garments. But it's only a promise. They never seem to be very serious. They don't listen to civil society or trade unions. They will always promise you but they don't take it seriously with the suppliers (I59-R68-G). 255
This response shows one perspective of a local experience of the limited involvement of buyers in these issues.
Notwithstanding the opinion of the respondent above, retailers appear to be expanding their horizontal connections to this LPS. In light of pressures retailers have begun to feel around this issue, they have begun to build non-sourcing horizontal connections within this LPS. For example, N Brown’s 2015 Annual Report and Accounts (2015, p.28) states that, Together with other retailers and NGO’s we are tackling the wider Sumangali scheme. . .We are working with other retailers and textile suppliers to set up a regulation, inspection and service model in the region that can be up scaled across all mills and factories. The project is currently engaging 2,650 workers across six spinning mills and one factory. Primark’s website (2015a) also explains how they are working with actors within Tamil Nadu to address challenges with the Sumangali scheme. Primark, along with other retailers, is a member of collaborative initiatives that are working to identify sustainable solutions to these practices, and provide safe and legal employment conditions for workers. We are a member of a local stakeholder forum. The Tirupur Stakeholders Forum, which includes retailers, NGOs, trade unions, and an industry association representing manufacturers in the region. . . The Tamil Nadu Multi- Stakeholder Group, convened by the Ethical Trading Initiative, aims to identify how we can collectively support local initiatives and stakeholders such as the forum, and further the work they have begun. Primark is a member of the group and sits upon the Steering Committee. These retailers’ concern with this issue and their attempts to work with local stakeholders to address this issue show a new type of approach that differs from widespread use of sourcing standards in the form of codes of conduct.
While these efforts have not yet been found to be effective, this is an on-going process. This case shows that retailers are attempting to address sustainability challenges for lower tier producers, which are difficult to reach through vertical approaches, as was discussed in the previous chapter. This approach involves building connections in an LPS that are outside of commercial buyer-seller links.
The governance dynamics in this case are very different than the Delhi and Tirupur cases. The structure of the productive system in this case involves producers that do not experience strong vertical pressures related to working conditions. Horizontal pressures exist which have involved civil society actors in conjunction with retailers
256 promoting voluntary change which have not been effective. Also government actors promoting mandatory change has not involved effective enforcement. Problematic aspects of this system of employment have been able to continue due to the strong pressures for stability that characterise this sustainability challenge.
While some minor improvements have been made to employment agreements, the on-going use of the Sumangali system shows that this sustainability challenge is deeply engrained in the productive system in Tamil Nadu. Existing pressures to reform this system have not been able to effectively stimulate change.
7.6) Working Conditions in Gujarat Ginning
The fourth case considered is ginning in Gujarat. Major challenges have been identified with working conditions in gins, which include migrant labourers’ high dependency on employers, child labour and lack of attention to promoting worker health and safety (Prayas 2011; Patel 2011). A local NGO has been working on addressing challenges workers face but their efforts have not resulted in a significant change to employment practices of the gins. The discussion below considers the governance dynamics that have been involved in the continuation of problematic working conditions at gins in Gujarat.
7.6.1) Ginning in Gujarat
Gujarat is responsible for about 32% of India’s cotton production (Central Statistics Office 2015b) and sometimes cotton is brought in from different states to be ginned (Patel 2011). Ginning is concentrated within clusters spread across regions of Gujarat that grow cotton (Prayas 2011). Ginning is often a rural business and factories operate with little oversight. Workers come from local communities and from neighbouring states. Across the state there are thousands of gins, which range in size. The gins interviewed for this study in Gujarat ranged from having 15 to 250 employees (Gin A, Gin and Spinning Mill A and Gin and Spinning Mill B). These gins sell their cotton to traders in India or abroad or sometimes directly to spinning mills.
As in the Tirupur wet processing case and the Sumangali case, this LPS involves producers with weak vertical connections to retailers. Ginners in Gujarat generally do not experience sustainability focused process requirements from their buyers. Retailers do not buy cotton directly. Often multiple stages of buyers separate ginning from retailers. 257
However, in some cases, vertically integrated composite mills can be direct customers of retailers and be direct customers of gins (I75-R84-G).
Some forms of weak horizontal governance pressures exist but these have not made a large impact on producers’ practices. As described in Chapter 5, spinning firms can be seen as a key cut-off point in this case in terms of vertical governance. Consequently, retailers’ vertical connections with ginning are weak. In this context, retailers seeking to address the challenge of working conditions in Gujarati gins would have to develop stronger vertical connections to reach ginning mills or create new horizontal connections with the LPS.
7.6.2) Governance Promoting Change and Stability for Gujarat Ginners
While problematic working conditions are prevalent in the ginning industry in Gujarat, there is very little pressure to improve working conditions in gins. The main governance forces promoting change and stability are depicted in Figure 7.5. These governance forces are discussed below.
Figure 7.5: Pressures for Change and Stability Related to Poor Working Conditions
Source: Author’s Construction
Pressure for change in this case has been limited. The main pressure for change has been horizontal. Notably, a local NGO, the Prayas Center for Labour Research and Action (Prayas), has been working to address challenges in this industry and has received some support from a US based NGO. Organised labour has been limited. However, in 258
2006, the Cotton Ginning and Other Mill Workers Union was created and they have put forward several legal cases since their inception (Prayas 2012). However, similar to the cases above, national laws designed to protect workers are often not enforced at Gujarati gins (Patel 2011; Prayas 2011).
Pressure for stability can be seen through the lack of desire for gins to make changes to established practices. As ginning is often conducted in rural areas, work practices at these businesses are often unseen. Systems have been developed for recruitment and employment practices which are ongoing and also feel little pressure for change. Another driver which can be seen to contribute to this issue is that workers are from marginalised groups (Prayas 2011).
Gins generally do not experience vertical pressures related to working conditions. Buyers of cotton make decisions based on the physical qualities of the cotton. These buyers are generally cotton traders or spinning mills. Considering processes outside of those which support better cotton quality and more consistent bales is not part of standard purchasing agreements (I29-R37-T). For yarn spinners, their only point of contact when buying cotton can be a cotton trader (I81-R90-C).
7.6.3) Intersection of Vertical and Horizontal Governance Related to Working Conditions at Gins in Gujarat
Gins in Gujarat have received relatively little pressure to improve working conditions. From both vertical and horizontal governance pathways, gins do not experience strong pressures for change and consequently continue to use established practices. Poor working conditions continue to function while businesses are integrated into multiple GPNs.
From the beginning of the hiring process, recruitment can lead to problematic hiring practices. Ginning clusters in Gujarat have different patterns for who they hire with specific jobs usually filled by people from identified local or migrant groups who are members of a particular caste or tribal community (Prayas 2011). Migrant workers are often brought by labour contractors and live in accommodation provided by employers. Phillips et al. (2011) explains how the use of labour contractors is a way that obligations of employers to employees are weakened. They outline the consequences as: workers being brought to work on a specific job limiting potential for switching
259 employers, workers being employed by a contractor instead of directly by the firm and recruiters paying advanced wages which are then owed as debts. For the advanced payments, those made for child labour may be given to parents, after which the child has to work off the payment.
Employees at gins often face serious health risks. A number of cases of serious injury and death have been documented (Patel 2011). At visits to gins conducted for this study, many workers were seen to not have any mouth coverings despite the air being thick with cotton dust.
Child labour is also prevalent in this industry (Prayas 2011). At one gin visited during the field work for this study, one of the owners described his workers as, “coming from Madhya Pradesh, because only they can do this work, others are from Rajasthan, the Marwari people also because only they can do this kind work (I26-R29-C).” During the tour of this gin there were clearly children working at various production related tasks.
There is little external attention to the challenges which occur in Gujarati gins. Prayas has run programmes to support workers and tried to bring attention to this issue. Additionally, there has been some local media coverage (oneindia 2007) and an international news story (Hawksley 2012). However this publicity has had little impact on gins’ employment practices.
This LPS lacks strong governance actors seeking to address these issues. The people who work in these facilities are often from marginalised groups, migrants and/or underage workers who may have few other opportunities and are not organised. Additionally, many of the workers are not included in official employee rosters (Prayas 2012). Government agencies are not supporting the developing of better working conditions and Prayas’ efforts have not been enough to promote a significant change.
This productive system is based on networks which connect people who need jobs with gins. This fills a need for both parties. However, the involvement of child labour, limited mobility of employees once hired and the existence of health and safety risks create problems for workers that are not being addressed. Nevertheless, the sustainability challenges in this industry continue without any effective pressure for change.
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7.7) Low Yields for Farmers in Gujarati Cotton Production
The final case considered in this chapter is cotton farming in Gujarat. Farmers growing cotton have faced multiple challenges including having lower productivity than other major global cotton producers. In the 2000-2001 season, India had 8.74 million hectares of land devoted to cotton farming but was receiving relatively low yields at 292 kg/hectare (USDA 2002). This was significantly less than the yields of the most productive countries at that time. Countries such as China and Brazil harvested over 1000 kg/hectare during the same period (USDA 2002).
In 2002, a multi-national company in conjunction with local partners and government actors introduced and promoted a new type of genetically modified seeds, known as BT cotton, which required modifications to farming practices. This technology was voluntarily adopted by cotton farmers. This change involved the widespread adoption of a new productive system, which has dramatically increased yields. In the 2013 season, India’s cotton yield reached 577 kg/hectare (USDA 2015b). The discussion related to this case considers the governance dynamics involved in stimulating this change.
Cotton farming is even further removed from retailers than ginning. Vertical connections between cotton farmers in India and retailers can be complex and involve numerous connections between traders and formal and informal sector businesses. While farmers often work in rural locations with limited formal oversight, in this case organised governance forces were able to trigger a significant change in production processes through promoting a new practice presented as beneficial to the farmers.
7.7.1) Cotton Farming in Gujarat
Cotton production is a major activity in Gujarat. The state is India’s largest producer of cotton with 2.69 million hectares planted in 2013-14 season with an average yield of 692 kg per hectare (Directorate of Economics and Statistics 2015). A 2007-2008 sample survey of cotton farmers in Gujarat found the farmers grew cotton on an average of three to six hectares of land with cotton holdings split on average between two to three plots (Lalitha et al. 2009).
While cotton is a major component of many garments sold by the case study retailers, as this thesis has emphasised, cotton production has very weak vertical links to 261
UK retailers. Buyers for cotton are usually local traders who sell to gins or cotton can be sold directly to gins. As discussed in the case above, gins are also weakly connected to retailers.
7.7.2) Governance Promoting Change and Stability for Gujarat Cotton Farmers
Governance actors and forces surround the issue of low yields for farmers include farmers seeking to find ways to improve their livelihoods, seed companies trying to sell products to farmers and the government seeking to promote higher incomes for farmers. The main governance actors and forces surrounding the challenge of low yields for farmers are depicted in Figure 7.6. These governance forces are discussed below.
Figure 7.6: Pressures for Change and Stability Related to Low Yields for Farmers
Source: Author’s Construction
Horizontal governance promoting change has been strong. Pressures to use BT cotton have involved both public and private actors. While initially genetically modified cotton was banned in India, the national government allowed it in 2002 (Lalitha et al. 2009). Furthermore, private companies in collaboration with the state government in Gujarat have run publicity campaigns to promote the use of BT cotton in Gujarat (Agritech Asia 2013).
In terms of vertical governance, buyers of cotton, with the exception of speciality buyers such as those seeking organic, do not consider the type of cotton seeds that were planted. Conventional cotton buyers are solely concerned with the physical qualities of 262 the cotton being purchased. Farmers’ production processes are not part of purchasing decisions.
In this case there was limited pressure for stability. Farmers themselves wanted to have increased yields. A potential factor promoting stability in the early years of the introduction of BT cotton was risk farmers may have perceived with growing a new type of cotton. However, this risk did not stop most farmers from adopting a practice that became broadly associated with higher yields and better quality cotton.
7.7.3) Intersection of Vertical and Horizontal Governance Related to the Use of BT Cotton for Gujarat Farmers
Following legalisation in 2002, by 2005, the official report of BT cotton cultivation out of total state land under cotton cultivation was 7.19%, however, actual total area was higher due to high levels of unauthorised use (Gandhi and Namboodiri 2009).46 By 2014, 93% of land being used for cotton farming in Gujarat was planted with BT cotton (Choudhary and Gaur 2014; Directorate of Economics and Statistics 2015). Figure 7.7 shows the growth of popularity of BT cotton.47
Figure 7.7: BT Cotton Farming in Gujarat
Sources: Author’s Construction, data from (Choudhary and Gaur 2014; The Cotton Corporation of India 2015 )
46 Farmers in Gujarat adopted BT seeds from these sources as well as unauthorized varieties (I94-R44-C; Gandhi and Namboodiri 2009; Lalitha et al. 2009). 47 2014 area under cotton cultivation is a provisional figure.
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BT cotton was promoted by seed producers in conjunction with government actors. The seeds were sold with the promise of increasing yields and a built-in ability to resist some pests with the consequence of requiring fewer pesticides. BT cotton has reported agronomic, economic and environmental benefits (Gandhi and Namboodiri 2009). Agronomic benefits can be seen as improved pest control and higher yield than conventional varieties. Economic benefits include reduced use of pesticides and a higher yield than non BT cotton. Environmental benefits include reduced application of insecticides, leading to less insecticide in soil and aquifers, less insecticide exposure to humans and animals and an increased population of beneficial insects.
Experiencing the promotion of BT seeds, farmers voluntarily began to use these new types of seeds which required changes to their productive system. When asked about the type of seeds he uses, a farmer interviewed for this study said, “I am using only the seeds that give me good results. I am using BT Bolguard (I22-R23-C).” This shows a positive experience with BT cotton.
While many farmers have benefited from BT, there have also been severe consequences for others. One expert interviewed described regional differences in farmers’ experience with this product (I17-R18-E). In some regions of India, BT has been found to be a risky choice for some farmers and debt associated with higher production costs has led some farmers to commit suicide (Debyani and Neeta 2012). However, farmers in Gujarat have not experienced major problems with BT cotton (Shah 2005).
Without the imposition of formal process requirements, farmers who are growing BT cotton adopted new production practices for this type of crop. While paying more for BT cotton seeds, in the early years, farmers in Gujarat on average sprayed less pesticides received higher yields (Gandhi and Namboodiri 2009).48 Farmers saw changing to BT as a beneficial switch. BT seeds were easily accessible through channels through which farmers were used to buying seeds. Progressive farmers who attended trade fairs were
48 A farmer interviewed for this study indicated these benefits have declined in recent years. He described local farmers planting both BT cotton and non-BT cotton and getting higher yields from non-BT cotton (I85-R96-C).
264 exposed to promotional materials. Additionally, Monsanto, the large US based multinational agrochemical and agricultural biotechnology company that introduced BT cotton to India, working with government partners created model plots around the state (Agritech Asia 2013).
In this situation farmers voluntarily adopted a new productive systems that they felt would be beneficial. BT cotton in Gujarat was promoted by Monsanto, their Indian partner Mahyco and local licensees. These private actors worked in conjunction with programmes run by the Gujarati government which highlighted the benefits of BT cotton (Agritech Asia 2013). Private actors ran booths at agricultural fairs, provided training programs and created demonstration plots. While civil society actors have attempted to prevent the use of Monsanto’s BT cotton, these efforts have not been effective (Herring 2006). Use has continued to grow since its introduction into the market.
Change in this case involved a voluntary mechanism resulting in the widespread adoption of a new practice. This change was promoted by private companies in conjunction with support from the state government. While production increased with the adoption of BT cotton, new sustainability challenges emerged. It is important to consider how this was shaped by the nature of the sustainability challenge that was being experienced and the way that governance pressures shaped how the new productive system was adopted.
Monsanto’s ability to sell BT cotton seeds is based on market research to understand what motivates farmers’ behaviour. Monsanto is currently developing a new type of herbicide resistant cotton which would require less labour for weeding. To set the prices for this product, they have commissioned a comprehensive study to understand how much money farmers could save by paying less for labour (Mehta and Pareek 2015). While the development of this new technology potentially poses many challenges related to sustainability, including a reduced availability of rural jobs and increased use of herbicides, the methods that Monsanto has taken to understand how to best promote a new production process can provide some lessons. Their approach involves taking time to develop plans to promote new technologies presented as beneficial by the potential users. Programmes where producers are presented with options that are seen as helping their businesses may be more likely to stimulate producers to make the effort needed to make broad changes to their productive systems than programmes that involve 265 mandatory pressures for changes, which may lead producers to make minimal efforts to meet the externally imposed requirements.
The challenge experienced in this case was related to producers’ practices and was a challenge that producers themselves had a strong incentive to address. While these conditions resulted in the rapid adoption of a new technology which seemed to address this challenge, supplementary challenges were created based on how this technology has been managed.
7.8) Implications for Horizontal and Vertical Governance Interacting within LPSs
Considering the dynamics within LPSs can help build understanding of the diverse governance processes and connections that take place across the GPN housing the case study ESN. These LPSs involve groups of producers that can be considered to have similar features, face common sustainability challenges and experience the same horizontal governance forces. This section considers how experiences in these cases can provide insight into processes of buyer-led governance across the case study ESN. The first part considers what was found related to governance dynamics within the LPSs. The second part focuses on how this can contribute to understanding retailers’ place at the top of the ESN.
7.8.1) Horizontal Governance Forces Involved in Sustainability Issues within LPSs
Considering the range of outcomes in each LPS considered in this case provides a way to understand processes of governance for sustainability. Particularly, it gives insight into the importance of understanding how pressures for change and stability interact within an LPS and how producers experience the intersection of vertical and horizontal governance pressures. The five cases can be summarised as follows.
In both the Delhi and Tirupur cases governance actors with power to create mandatory changes successfully changed productive systems with the purpose of addressing issues related to sustainable production. However the way that businesses responded to these pressures had mixed impacts in terms of whether more sustainable practices are currently being used. Additionally, in Delhi an approach which involved the horizontal introduction of a voluntary approach was not able to successfully promote change.
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In the Tamil Nadu yarn spinning case and the Gujarat ginning case, pressures towards addressing sustainability challenges have been created by actors who do not have a power to enforce mandatory change for the producers who they are trying to influence. While in Tamil Nadu, large NGOs in collaboration with retailers have encouraged the adoption of new systems and in Gujarat efforts have been mainly driven through one small NGO, both efforts have been unsuccessful. Problematic practices continue to be used with limited changes in both LPSs.
In the fifth case of cotton farming in Gujarat, a complete change in the productive system took place. Private firms in conjunction with a government partner were able to trigger the wide spread adoption of a new farming technology. This was achieved by promoting the new system as a beneficial change for farmers to voluntarily adopt.
The rest of this section considers the three governance factors that have been focused on in this chapter. These are: the structure of the LPS and identity of key governance actors and forces, governance mechanisms, and the nature of sustainability challenges.
Structure of Production and Key Governance Actors and Force in LPSs
Each LPS has different key governance actors. For the Delhi cluster, retailers were a key driver for both governance approaches considered and they played a large role in promoting change through the vertical approach. In Tirupur change was created by the government. In both cases these actors were responding to pressures from civil society groups. In Delhi and Tirupur, the key actors enforcing the change had direct power over the producers involved and the ability to enforce mandatory policies. However the drivers for these changes were civil society organisations, which pushed retailers and state government actors into taking action.
In Tamil Nadu spinning, attention by local and global civil society actors failed to create a significant change in productive systems. 49 In Gujarati ginning, civil society actors have had minimal influence over producers. In these cases, actors which may have
49 However, this is an ongoing situation and retailers’ involvement may result in further change.
267 power over producers, such as local government, have not become involved. Furthermore, in the Tamil Nadu case, industry associations have sought to minimise the public perception of labour violations. In Gujarati farming both the government and private firms have successfully sought to promote the voluntary adoption of a new productive system.
Global governance actors play different roles in these cases. Retailers are connected to Delhi garment producers through both vertical and horizontal ties. Additionally, retailers have started to develop horizontal ties with yarn spinning in Tamil Nadu. In Delhi, Tirupur and Gujarat farming, government actors have played a major role with the first two involving enforcement of laws and the latter involving the promotion of a voluntary new productive system. In all five cases local civil society organisations have worked to address the challenges. Lerche (2012) describes the development of civil society resistance in India as a national response to the lack of state support for labour rights. In these cases, the civil society groups that had the most impact acted through legal channels.
The experiences in these LPSs show the limited involvement of vertical governance by retailers and buyers in addressing these major sustainability challenges involved in producing clothing. Table 7.1 provides an overview of how direct buyers engage with producers in each case. Below garment manufacturing, vertical governance has not played a strong role in the cases considered.
Table 7.1: Role of Buyers in LPS Governance LPS Role of Buyers Delhi Garment Manufacturing • Retailers and sourcing firms often have codes of conduct Tirupur Wet Processing • Retailers and sourcing firms often have codes of conduct for wet processing integrated with garment manufacturing • Product focused chemical policies followed by UK retailers as buyers, recent development of process focused chemical policies for lower tier wet processors • Textile and garment manufacturers as buyers do not have requirements about waste disposal Tamil Nadu Spinning • Retailers have codes of conduct which can apply to parts of businesses involved in spinning • Textile manufacturers or vertically integrated garment manufacturers do not assess working conditions in spinning mills Gujarat Ginning • Cotton traders and spinning mills are concerned with product quality Gujarat Cotton Farming • Buyers not concerned with the type of seeds used, transactions are based on the qualities of the cotton fibre Source: Author’s Construction 268
While in upper tier production, retailers have power to create strong pressures on their suppliers at lower tiers of production, producers have limited connections to UK retailers and are subject to stronger pressures from local governance actors. At lower tiers, firms generally do not have any direct vertical connections to retailers. Firms in LPSs are working in unique institutional contexts which involve sets of key governance actors that have varying levels of ability to promote change. The balance between state, business and civil society actors differs in each case. However, all cases show a role of civil society actors attempting to address the sustainability challenges. Table 7.2 provides an overview of the key governance actors promoting change and stability in each case as well whether the pressures have resulted in the development of a significant change to the productive system.
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Table 7.2: Governance for Sustainability in Profiled Local Productive Systems Sustainability Key Governance Actors and Key Governance Actors and LPS Outcome Issue Forces Promoting Change Forces Promoting Stability Delhi • Child Labour • Retailers • Structure of production within • Processes changed, businesses Garment • Business association LPS have adapted to gain certification, Production • Global civil society • Social norms many practices pushed out of • Indian government • Commercial actors directly remit of inspectors dependent on child labour • Ongoing Use • Retailer • Delhi’s competitive position being • Child labour has continued among of Child • Sourcing Firm based on high levels of flexibility subcontractors Labour by • Garment Manufacturer Subcontractors • NGO Tirupur • Water pollution • Farmers groups (local civil • Wet processors (business • Processes changed, jobs lost for Wet society) associations) factories unable to meet Processing • Pollution control board environmental regulations • Support service providers/ consultants Tamil • Poor working • Local civil society • Structure of production within • Processes remain largely Nadu conditions/ • Global civil society LPS unchanged Spinning forced labour • Retailers • Social Norms Gujarat • Poor working • Local NGO • Structure of production within • Processes remain largely Ginning conditions LPS unchanged • Social norms Gujarat • Low yields for • International seed companies • Farmers adverse to risk • Dramatic shift in production Cotton farmers • Domestic seed companies towards BT cotton Farming • Gujarat government
Source: Author’s Construction
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In this case, Lund-Thomsen and Nadvi’s (2010) distinction between highly visible and less visible producers exists between the LPSs linked to the same ESN as they have varying levels of connections to branded retailers. Retailers have the most direct connections to garment manufacturing. The firms considered in the Delhi garment LPS generally specialise in manufacturing for export markets. These businesses are directly producing branded garments. 50 Many of Tirupur’s wet processor and Tamil Nadu’s spinning mills are not directly connected to retailers. All of the gins and farmers in Gujarat are not directly connected to retailers. These producers are all “less visible” and not covered by retailers’ codes of conduct. As these firms are less visibly connected to the retailers, they may not face reputational challenges that stimulate strong immediate reactions by retailers. Trying to address this difficulty, SOMO investigated the connections and published the names of retailers connected to spinning mills with labour challenges through sometimes indirect relationships (Theuws and Overeem 2014). While some retailers have become involved in efforts to address challenges with the Sumangali system, the impact of this report is yet to be seen.
The businesses in each case differ in how much of their production goes to end global buyers with codes of conduct. Delhi garment manufacturers who specialise in exports and have paid for certification sell to buyers who require it. The wet processors also specialise in export quality finishing. These firms often produce higher quality dyeing, which follows technical requirements for dyes allowed in European markets. Finally, the yarn spinners, cotton gins and farmers sell to multiple export and domestic markets and are not constrained by requirements from one particular buyer group.
As discussed in Chapter 4, global governance actors often seek to influence practices in ESNs by targeting retailers, who are expected to create pressures through network governance. These global actors also create pressures through more direct methods. In three of the cases (Delhi garments, Tamil Nadu spinning and Gujarati cotton farming), global actors have directly played a key role in attempting to promote new productive systems. A concern when global actors try to influence production processes
50 In some cases, when sourcing firms are used, retailers are not aware of the main factories contracted to do their production (I44-R54-R).
271 is that global actors may not understand local norms and priorities, particularly the complex interplay between pressures for change and pressures for stability. Global actors may seek to promote practices that local people may oppose. One way that this problem can be addressed is through working with local partners.
A final major consideration when looking at the role of key governance actors is the key role of cooperation between multiple stakeholders in the cases that have experienced a significant change. In Delhi garments, Tirupur wet processing and Gujarat farming, multiple groups of key governance actors played different roles in stimulating change. This does not imply this is a necessary step but does show that this can be an effective stimulus for change.
Governance Mechanisms
Across these cases, successful pressure for change was found through both mandatory and voluntary mechanisms. Within a LPS some governance actors have power to implement mandatory changes and others may not. The effectiveness of mandatory or voluntary governance pressures at addressing local challenges depends on the nature of the sustainability challenge. More complex sustainability challenges, such as those that require behavioural changes within producers may be better addressed through voluntary as opposed to mandatory pressures. Considering these extremes, there is also a middle ground which was not seen in these cases, which would involve collaboratively developed responses.
Mandatory pressures have been successful at promoting changes that can be easily monitored by observers. However they can be less effective at promoting less observable actions (Barrientos and Smith 2007). Another concern is that mandatory pressure can push unsustainable practices into different forms which are not covered by a policy. The cases considered in this chapter show that mandatory pressure was able eliminate child labour from Delhi garment factories and introduce effluent treatment equipment for Tirupur wet processors. However, in the Delhi case, child labour was pushed into the informal sector.
Even in the case of mandatory pressures, there can be challenges with how they are enforced. Three of the cases considered in this chapter involve persistent use of problematic employment practices. Labour laws are supposed to be supported by 272 inspections. However the inspection system often is not carried out or does not result in penalties when laws are broken. Deshingkar (2009) identifies multiple reasons for these challenges in India. These include corruption and lack of resources in labour departments, employment relationships based on sub-contracting being difficult to monitor, low political commitment and problems with coverage of new forms for work by existing labour laws. While India ratified the ILO convention on labour inspection in the 1940s, problems with the process have led to the involvement of non-government actors, including journalists, researchers and NGOs, in playing the role of inspectors (Deshingkar 2009).
Voluntary pressures have different dynamics than mandatory pressures. Any of the governance actors found in the profiled LPSs have the potential to persuade businesses to adopt new processes. However, in the cases explored, persuasive power has been used in specific ways. This includes civil society putting pressure on actors with the ability to create mandatory requirements (retailers buying from garment manufacturers and state government regulating waste disposal) as well as a private and public coalitions persuading business to voluntarily adopt a new practice (Monsanto and the Government of Gujarat promoting BT cotton).
An important element to consider is the agency of producers (Soundararajan and Brown 2016; De Neve 2008). Lund-Thomsen and Nadvi (2010) consider this aspect in their paper examining how producers engage in collective action to respond to CSR pressures. This perspective indicates a stronger need for understanding what can trigger changes in productive systems. If sustainability challenges exist, they take place in a context of producers using practices that have developed through a historical trajectory that led to the current productive system (Wilkinson 2003). This history is important for figuring out how to promote new systems. Soundararajan and Brown (2016) point to challenges with buyer-led compliance regulations in incorporating values of multiple stakeholders that are affected by sustainability challenges and highlight the importance of finding shared value.
Another consideration is whether there is potential for collaboration between cluster-based businesses. Schmitz and Nadvi (1999) highlight the potential for SMEs in clusters to develop joint responses to shared challenges and Lund-Thomsen and Nadvi (2010) question how this process takes place when challenges are external pressures to 273 comply with CSR requirements. While they highlight positive responses, the yarn spinners association considered in this chapter shows an example where this coordination mechanism may be facilitating the continuation of problematic practices. Additionally, wet processors in Tirupur were drivers for a long legal battle preventing the implementation of environmental laws.
A particular challenge in this ESN is the existence of LPSs which may lack key governance actors with power to implement mandatory pressures. However, the ability of some governance actors to effectively promote voluntary changes indicates that the lack of strong governance actors is not a barrier to addressing sustainability challenges. Understanding local governance systems allows for making better decisions about how to address sustainability challenges. A crucial part of this process is identifying the balance of power between key governance actors and whether they may have the capacity to enforce mandatory change or promote voluntary change. Particularly, retailers seeking to promote sustainable systems can look to key governance actors, where they exist, as potential partners.
As well as considering mandatory and voluntary pressures created by governance actors, these cases also show that informal governance pressures play a big role. Informal governance can include the pressure from norms that exist within the LPSs as well as how power relationships affect the dynamics among people and organisations in the LPS. Informal pressure can be seen to play a large role in the continuation of child labour in Delhi. It can also be seen to play a role in the long delays experienced in promoting change in Tirupur. In this case, official decisions should have led to change many years before it actually happened. In the Tamil Nadu Sumangali system and the working arrangement for Gujarat gins, informal pressures have been key the pressures for stability which have led to the continuing use of problematic practices.
Governance Effectiveness Depends on the Nature of the Sustainability Challenges
A major issue to consider for sustainability challenges is that some practices have stronger pressures for stability than others. This results in some sustainability challenges being easier to address than others. A major consideration is how much change is required to production systems. De Neve (2008) describes the difference in difficulty between dealing with a technical challenge, which may be easier to address, compared to
274 political challenges which may involve addressing more complicated social relations. For example, in some cases there may be a one-time expense to install a new piece of equipment and in others, change may involve long term modifications to people’s behaviour.
With this distinction in mind it can be useful to think about how to understand the drivers of the productive systems being used and the changes a factory would need to make to address the challenge. Locke (2013) finds that training factory managers to run lean production systems can result in better working conditions. This type of logic could be expanded for promoting alternative practices for other sustainability challenges. However, addressing some sustainability challenges may not be aligned with individual businesses’ interests and may need stronger enforcement mechanisms. An example of this type of challenge is one that requires up-front funding. In the case of Tirupur waste treatment, the government was able to provide financial support for some businesses to develop effluent treatment plants.
Solutions must be customised and take into account local governance systems. In this process there are certain key questions which can assist in understanding how retailer engagement could best be targeted. First it is important to understand the nature of the sustainability challenge. Who are the producers whose practices are creating the challenge? How wide spread is the challenge? Why is the current productive system being used? Second, it can be beneficial to identify alternative practices which could alleviate the challenge. What alternatives exist? What are the pros and cons of these alternatives? Would addressing the change be costly for the producer but better for broader societal well-being? Third, and most critical to shaping retailers’ involvement, it is important to consider how a new system could be introduced. Who has binding power to enforce change on producers? How effective are local/public governance actors? Are civil society groups engaged in addressing the challenge? What benefits would different mechanisms have, such as laws, buyer codes of conduct, training programs or other incentives to change practices?
A key issue with addressing sustainability challenges is the pressures that norms may have in fostering the continuation of problematic practices. This is particularly challenging for socially related sustainability challenges. In India challenges with working conditions can be based on complex social structures. Addressing working 275 structures related to these structures can be complicated. Deshingkar (2009) writes about the interaction of social exclusion and adverse incorporation drawing on the European Foundation’s (1995, pp.129–130) definition of social exclusion as “the process through which individuals or groups are wholly or partially excluded from the society in which they live”, while describing adverse incorporation as a process which, “draws attention to the ways in which the poor relate to the market, society and the wider political system (Deshingkar 2009, p.5).” Workers typically belonging to marginalised social groups are often employed as casual workers earning less than legal minimum wages in poor working conditions. While contributing to the economy, these workers are excluded from society with unequal relationships to the often wealthier and more educated people providing employment. These dynamics can be seen in the Delhi, Tamil Nadu and Gujarat cases which consider labour practices. When challenges are based on these complex social structures, promoting change to effectively address them is difficult.
Another way that sustainability challenges can differ is by who is impacted. In the cases considered in this chapter, the impacts were all felt by people within the LPS. For some sustainability challenges, particularly related to environmental impact those who experience the challenge may reside outside of the territory involved in production. Another factor to consider in terms of the identity of who is impacted is the way that the impacted group is connected to producers and to governance actors. In the Delhi garment case, the Tamil Nadu yarn spinning case and the Gujarat ginning case, the people impacted had limited options for changing the productive systems. For adult workers in Tamil Nadu and Gujarat, the potential for organising exists but this avenue has not been well-developed. For the Tirupur wet processing case and the Gujarat farming case, the major groups impacted took actions to address the challenge being faced. In Tirupur, people relying on water from the Noyyal organised themselves to create an ultimately successful legal case to reduce the on-going pollution. In the Gujarat case, farmers changed their own production practices in order to address a challenge which they experienced directly.
Different actors who are connected to the ESN in different ways may have fundamentally different perspectives. Differences and potential conflicts exist between those who define the priorities for improving sustainability of production and those who
276 are impacted by initiatives aimed at improving sustainability (Lund-Thomsen and Nadvi 2009; Humphrey and Schmitz 2001).
Some sustainability challenges may be more driven by local factors than others. When considering pressures for stability, it can also be important to consider the sources of pressure for using a problematic process. These can range from being based on local factors shaping how production is organised to being the result of pressure from global competitors to lower costs.
7.8.2) Retailers’ Connections with LPSs across their ESNs
A key finding when looking at these five LPSs is that retailers have only played a vertical governance role in one of the five key challenges considered. Another key finding is that retailers have developed horizontal connections in two of the LPSs. Understanding the dynamics of governance within all five LPSs can provide insight into the role of lead buyers and how retailers could connect to local partners in lower tier cases which may be difficult to reach with vertical approaches.
The limited involvement of retailers in addressing the sustainability challenges considered in this study is an example of the process of the creation of regulatory enclaves (Posthuma 2010). Through the targeted approaches of retailers’ attempts at providing governance, certain groups of producers are covered while others are completely excluded. The LPSs considered in this chapter involve businesses outside of these regulatory enclaves which did not have any connections to formal private governance driven by retailers. These cases show empirical examples of the limitations of buyer-led private governance.
The fact that retailers only played a vertical role in one case can be seen as based on the limited flow of lead buyer governance traveling through vertical channels that was described in Chapter 6. Chapter 8 will consider ways in which retailers do connect with lower tier producers through developing stronger ties with first tier suppliers. However, these links are not well developed as can be seen by the lack of involvement of retailers in four of the key sustainability challenges discussed in this chapter.
In two of the cases, child labour in Delhi and Sumangali in Tamil Nadu, retailers are involved in horizontal governance. Retailers seeking to address challenges taking
277 place in these LPSs have made connections with horizontal governance actors. Through these horizontal links retailers are able to address a group of producers that would be very difficult to connect to through a vertical approach and to address sustainability challenges that are specific to individual LPSs. Looking at LPSs provides a unit of analysis to consider when looking at the role of local, horizontal governance actors. This is particularly useful for identifying potential partnerships related to sustainability challenges, which retailers may want to develop to connect with LPSs when vertical connections are weak.
7.9) Conclusion
This chapter has further developed an understanding of the role that lead buyers play in providing governance for sustainable production for producers located at different points in an ESN. While Chapter 6 focused on challenges of buyer-led governance flowing through vertical pathways, this chapter demonstrated that looking at producers as being grouped in LPSs provides an alternate way to understand governance processes across an ESN. Considering production as taking place within LPSs provides a way to understand how to address governance challenges which are experienced within LPSs that involve similar businesses experiencing common horizontal governance pressures. Additionally, these businesses within a LPS can have similar vertical positions in an ESN. Consequently, considering vertical pathways as connecting groups of businesses in LPSs can provide insights with broader implications than considering vertical pathways connecting individual businesses.
Considering production as a process which takes place within LPSs that have common governance systems and sustainability challenges can be seen as an alternate approach for retailers seeking to promote sustainable production. This contrasts with an approach which focuses on sourcing policies which are intended to flow down all vertical pathways. Focusing on LPSs can provide a scale for considering sustainability challenges that allows for a different scope of targeting of retailers’ governance efforts. This indicates possibility for both vertical and horizontal approaches.
Additionally, by considering horizontal governance pressures experienced by producers, vertical approaches can be better designed to be more adaptive to local conditions. The cases considered show that distinct local governance systems exist within
278 the same ESN. These must be considered when exploring the role of vertical governance as producers experiencing vertical governance are also experiencing horizontal governance within their LPSs.
Horizontal connections can be created with relationships shaped by the dynamics of the LPSs involved. The cases considered in this chapter show that retailers are not currently the main governance actors related to sustainability challenges for major portions of their ESNs for cotton garment production in India. However, local governance systems have key governance actors that can be potential partners for retailers seeking to address challenges related to sustainable production. Ways in which retailers are beginning to make connections with LPSs to address sustainability challenges in their ESNs are discussed in Chapter 8. Additionally, by considering cases where diverse governance actors have been successfully able to promote change to address sustainability challenges, this chapter shows that governance for sustainable production can be successfully implemented through horizontal governance processes led by actors with and without enforcement power over producers. This provides opportunities for retailers seeking to make horizontal connections to producers with whom they do not have strong vertical relationships.
The understandings of horizontal governance processes provided by this chapter are used to develop the set of models categorising retailers’ roles in governance for sustainable production which is provided in Chapter 8. Particularly, these dynamics illustrate the importance in understating horizontal governance systems for shaping how retailers can provide governance through both vertical and horizontal approaches. Understanding that businesses experience distinct forms of horizontal governance within different LPSs is important for understanding how vertical governance is experienced by producers. Horizontal governance pathways can be seen as an alternative and potentially complementary approach to vertical governance, which has been the dominant form of retailers’ attempts to address sustainability challenges. Horizontal connections provide a way for retailers to directly connect to lower tier producers, which Chapter 6 showed are difficult to connect to through vertical pathways.
Producers’ governance experience is based on the intersection of their vertical location within a set of buyer-seller relationships and their horizontal location within a
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LPS. The following chapter shows how retailers’ governance relationships with producers are based on both of these factors.
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8: Lead Buyer Governance for Sustainability across an Extended Supplier Network
8.1) Introduction
Understanding governance for sustainable production requires developing a broader conception of buyer-driven governance than those which have been used to explore the balance of competitive advantage between brands and retailers and businesses responsible for outsourced production (Gereffi 1994; Gereffi et al. 2005). Sustainability issues permeate across all activities involved in the creation of manufactured goods and are often fundamentally connected to horizontal governance within LPSs. Understanding how to influence these systems is crucial for comprehending the role that lead buyers can and do play in governance for sustainable production across a fragmented ESN. Chapter 6 showed that the ESN is composed of diverse and intersecting vertical pathways which have limited ability to facilitate vertical governance. Chapter 7 showed that considering production as taking place within LPSs can provide valuable insight into how producers in ESNs experience both vertical and horizontal governance pressures. The findings particularly highlight the importance of understanding local experiences of multiple and potentially conflicting governance pressures. Bringing together these insights about vertical and horizontal governance processes taking place within the case study ESN, this chapter focuses on the role of retailers. This chapter addresses the main question asked in this study: To what extent is buyer-driven governance sufficient for promoting sustainable production across an extended supplier network?
This chapter argues that, in the context of sitting at the top of a diverse set of vertical pathways with limited scope to transmit vertical governance pressures, retailers can play multiple governance roles. With conventional commercial relationships, retailers have limited connections to lower tier producers. However, retailers can overcome this challenge by developing stronger connections with LPSs through vertical or horizontal connections.
This chapter classifies different approaches that retailers can use to address challenges with sustainable production across different segments of their ESNs. Five
281 models approaches are included, which represent different ways that retailers can engage with producers in their ESNs depending on the relationship a retailer has to the set of producers and the nature of the sustainability challenge being faced. These model approaches are defined as Hierarchical, Compliance, Support Services, Partnership and Promotion of Voluntary Change. All five approaches may be used simultaneously by a single retailer facing multiple challenges across their ESN. Examples of empirical cases involving these approaches being implemented through vertical and horizontal pathways in the case study ESN are provided in this chapter.
The diversity of roles played by retailers within this case study ESN provides a new understanding of the process of buyer-driven governance. However, while the identified model approaches to buyer-led governance for sustainable production have the potential to be broadly applicable, at the time of the research conducted for this thesis, the case study retailers did not have any clear connections with producers across large sections of their ESNs in India. The lack of connections is particularly prevalent when considering the experiences of producers of early stage inputs. Overall, buyer-led governance across this case study ESN was found to be a limited process. However, facing the pressures discussed in Chapter 4, retailers’ roles are expanding.
The rest of the chapter is structured as follows. The second section provides a discussion of how retailers engage with members of their ESNs through vertical and horizontal pathways. The third section presents five model approaches to buyer-led governance for sustainable production that are found to be used by retailers in this case study. The fourth section considers how these model approaches are beginning to be applied through vertical and horizontal pathways. The fifth section discusses the importance of alliances and collaboration in processes of governance for sustainable production. The sixth section provides a conclusion.
8.2) Understanding Vertical and Horizontal Governance in ESNs
As discussed previously, retailers are expanding their consideration of sustainability challenges to lower tiers. For the case study retailers, selling in the UK means that their actions are constrained by a set of pressures surrounding the products they import. While pressures retailers face were discussed in Chapter 4, this chapter considers how retailers’ reactions to these pressures are beginning to change how they
282 engage with producers in their ESNs. While retailers are found to create a diverse set of governance pressures for members of their ESNs, which can both promote sustainable production and create sustainability challenges, the focus of the discussion here is on retailers’ roles in governance for sustainable production.
To understand how retailers connect to producers experiencing sustainability challenges across an ESN, two conceptions have been considered in this thesis. One is governance travelling down through multiple vertical pathways connecting individual buyers and sellers. The other is by looking at production as taking place within LPSs which are groupings that retailers can create governance connections to through specially created vertical or horizontal pathways that overlay conventional commercial relationships.
Considering Ponte and Sturgeon’s (2014) micro, meso and macro levels of chain governance is helpful for analysing what is happening across a diverse ESN. Looking at governance flows across vertical pathways in Chapter 6 brought out challenges with buyer governance through micro and meso governance processes. These challenges impact retailers’ ability to play a role in macro governance for their ESNs. However, considering alternative forms of connections which retailers can have to producers enables a broader exploration of the dynamics of macro governance.
The vertical approach has been well developed and broadly adopted by the case study retailers. In contrast, the horizontal approach has received less attention and involves a less organised set of projects. However, as will be discussed in this chapter, facing pressure related to challenges surrounding sustainable production, retailers are expanding their use of horizontal approaches. Lead buyers role in macro governance can be seen to involve both their vertical sourcing connections as well as horizontal non- sourcing connections to producers involved at all points in their ESNs.
8.2.1) Retailers and Vertical Governance
As discussed in Chapters 2 and 4, the dominant approach to retailers’ early approaches to addressing sustainability challenges has been though using a compliance model in their sourcing relationships. This has involved setting standards that are expected to be followed by producers. While many standards have focused on garment manufacturers, some are beginning to be applied to earlier stages of production. 283
The limitations of vertical governance through sourcing were emphasised in Chapter 6. Severe limitations were shown for processes of vertical governance related to process standards flowing across multiple links of buyer-seller relationships along vertical pathways.
Retailers’ ability to implement codes of conduct for first tier suppliers can be seen to be based on the types of relationships that retailers have with garment manufacturers. Particularly, the garment manufacturers in this case are dependent on a small group of retailers which have acted jointly in introducing system of private inspection. However, despite the broad spread use of codes of conduct, garment manufacturers have found ways to obtain certification of compliance while continuing to use practices that can be considered to involve problematic working conditions (Soundararajan and Brown 2016; Mezzadri 2012).
The types of relationships between buyers and sellers in the early stages of cotton garment production are much more diverse than those that exist between retailers and garment manufacturers. A major barrier to retailers’ ability to enforce process requirements for lower tiers is the existence of buyer-seller relationships in which lower tier buyers have limited ability to play a governance role in their relationships with their suppliers. Diverse forms of buyer seller links are found across the ESN resulting in a diverse set of intersecting vertical pathways which exhibit varying governance patterns.
Certain links in which vertical governance would be very unlikely to take place create key cut-off points in vertical governance pathways. These key cut off points are related to business forms found along some vertical pathways in the case study ESN. These cannot be considered as sector-wide distinctions. As Chapter 5 highlighted, different forms of businesses can carry out each stages of production in India. So for instance, informal small scale textile manufacturers may create key cut-off points due to their limited ability to play a governance role in their relationships with yarn manufacturers. While large scale formal sector textile manufactures may be in a position to play a governance role and thus would not be considered as creating key cut-off points.
As discussed in Chapter 7, an alternate way to consider vertical flows of governance is by considering connections between LPSs. Focusing on sustainability challenges at this scale can provide a more nuanced understanding of how producers may
284 experience governance pressures. Two benefits of focusing on LPSs are that businesses within the same institutional environment are more likely to have similar forms and these similar businesses may be involved with similarly problematic production practices. Even where apparently similar sustainability challenges are experienced across different LPSs, differing horizontal pressures can lead to different responses to governance interventions. Consequently vertical approaches can be enhanced by understanding that vertical pressures are felt in conjunction with horizontal pressures.
8.2.2) Retailers and Horizontal Governance
Chapters 2 and 4 also discussed the existence of alternate and potentially complementary non-sourcing approaches to buyer governance for sustainable production. These can be seen as involving creating horizontal connections directly to lower tier producers or to governance actors in producers’ LPSs.
Chapter 7 considered how processes of horizontal governance are experienced by producers in five LPSs within the case study ESN. Groups of key governance actors working in LPSs were seen to have the ability promote change through mandatory and voluntary pressures. For cases that involved a change in production practices, the natures of the sustainability challenges being experienced resulted in different outcomes, some of which involved restructuring practices in ways that perpetuated problematic practices.
Retailers were found to play a horizontal role in two of the cases. One involved participating in a project focused on promoting production that does not involve child labour in Delhi. The other involved promoting local programmes to address challenges with the Sumangali system in Tamil Nadu. Additionally exploring horizontal governance experiences across the selected cases provides insight into how governance actors can act to promote changes to production practices. This insight helps with understanding the roles that retailers can play when they make horizontal connections.
As was mentioned in Chapter 4, retailers are developing many new types of non- sourcing connection in efforts to address sustainability challenges at different stages of production. These can include horizontal connections, building partnerships through vertical pathways or working through broad multi-stakeholder initiatives to reach LPSs responsible for early stages of production. These connections are often less formalised than sourcing policies and often are run as individual projects. 285
Connecting to LPSs can involve working with partners to create local connections. Often connections are facilitated by NGOs or multi-stakeholder coalitions. These partners work to address sustainability challenges within communities or regions and can have a better understanding of horizontal governance dynamics than UK retailers. While the projects are often on a small scale, they can involve ongoing support from retailers and collaboration within LPSs.
A benefit of this approach is that it allows for an in depth focus on targeted sustainability challenges which can be supported by an understanding of how producers experience horizontal governance pressures. Projects involving horizontal connections have greater potential to be developed in ways that take into account the local complexity of many sustainability challenges. Considering production at the scale of LPSs allows for an understanding that producers face multiple governance pressures including those felt vertically through connections to multiple buyers along with those felt horizontally within the LPS in which they are located. Local governance systems have a balance between public, private and social governance and often have civil society actors trying to address sustainability challenges that are felt locally. Considering the pressures firms face due to their local territorial embedded position is crucial for understanding governance for sustainability in ESNs.
In addition to the two horizontal approaches found in the LPSs which were focused on in Chapter 7, retailers in this case are developing new horizontal approaches. A key example is that in June 2015, M & S put out a report entitled Global Community Programme (2015b). This highlights their increased focus on connecting with LPSs. Having experienced multiple challenges involved in working through vertical approaches, Marks and Spencer have developed programme specifically targeted at making horizontal, non-sourcing connections.
While the most developed approaches for retailer governance are currently found in vertical approaches, horizontal approaches have potential to be more effective at addressing sustainability challenges. While horizontal approaches show potential to address many of the challenges faced by vertical approaches, they also face distinct challenges. Retailers’ ESNs involve many LPSs which, as has been highlighted in this thesis, can be quite diverse. Making separate connections to all LPSs currently involved in production of cotton clothing for UK retailers would likely not be possible. Horizontal 286 approaches are much more limited in the scope of their impact as they are generally focused on local regions; whereas vertical approaches created by retailers at the top of the ESN can cover a broad set of producers in different locations.
8.3) Multiple Roles involved in Buyer-Led Governance for Sustainability
Considering governance for sustainable production as a process which involves promoting sustainable practices to independent producers, it is apparent that this is a complex process with retailers simultaneously engaging in multiple roles. This section breaks down these roles to identify a set of approaches which are carried out by the case study retailers.
As was discussed in Chapter 7, a useful way to breakdown governance pressures is between those that create incentives for producers to voluntarily change behaviours and those that involve mandatory pressures. At some points in the ESN mandatory enforcement is possible and at other points there may be no effective governance actors able to implement mandatory regulations on productive systems. Another issue is that the nature of some sustainability challenges can be resolved with simple changes and others require more complex adaptation to businesses’ systems. In light of these considerations, two questions then arise when facing a sustainability challenge in an ESN. First, is mandatory enforcement possible? Second, is mandatory enforcement the best way to address the challenge? Understanding that sustainability challenges in LPSs across an ESN may have different answers to these questions, leads to the need to employ different governance approaches. In this context, retailers’ emerging attempts to provide governance for the diverse sustainability challenges at different points in their ESNs have begun to take different forms.
While the dominant approach has involved introducing standards which suppliers are expected to comply with, as discussed in Chapter 2, Lund-Thomsen and Lindgreen (2014) have identified the development of a new cooperation paradigm for lead buyers attempting to address sustainability challenges among their suppliers. Cooperative approaches have the potential to be responsive to the local context. However they require a fundamental shift in the relationships between retailers and producers by requiring a longer term relationship or stronger involvement of local actors which could act as governance intermediaries. Governance in the cooperation paradigm requires
287 taking a new approach in buyer-seller interactions compared to the compliance model under which factory management is often described as a group that does not inherently support requirements and will seek to evade them if possible.
In the compliance based paradigm, private standards are generally applied in commercial relationships. However, considering forms of governance outside of the compliance paradigm also involves the possibility of governance taking place through new relationships. Retailers seeking to promote sustainable production may want to encourage changes to production processes for groups of producers who have no commercial contacts with retailers and may not be receptive to retailers’ demands to adhere to formal standards. In these cases, new types of connections specially created to address sustainability challenges can be built.
In this case, five model approaches can be identified through which retailers are attempting to play a role in governance for sustainable production. The first approach, considered as Hierarchical, involves retailers carrying out production themselves. This involves having complete control over the processes used. The second model approach can be seen as actions fitting within what Lund-Thomsen and Lindgreen (2014) describe as the compliance based paradigm. In this discussion, this is considered as the Compliance approach. This involves retailers playing a “policing” role through developing or enforcing standards. Retailers’ use of the Compliance model can involve supporting government or other actors to play the “policing" role where this may be lacking. The third and fourth model approaches can be seen as two parts of Lund- Thomsen and Lindgreen’s (2014) discussion of the emergence of a cooperation paradigm as they both involve more cooperation than the compliance model. The third model, defined as Support Services, involves retailers encouraging producers to use more sustainable processes through support, such as training programmes. The fourth model approach is Partnership. This involves retailers working with producers to collaboratively address sustainability challenges. A fifth model approach can be seen as the Promotion of Voluntary Change. This approach can take place in situations where buyers have very weak to no connections with producers. It involves retailers using indirect tactics to promote the adoption of sustainable practices, such as running an awareness campaign targeted at a group of producers.
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These strategies can be used in conjunction with each other but have a number of key differences which are discussed below. Major differences are the contrast between the amount of power a retailer needs to use each approach, who defines what is sustainable and who enforces the use of sustainable practices as well as the type of approach which is most suited to each sustainability challenge.
As retailers become increasingly concerned with sustainability across their ESNs, the approaches they take must involve connecting with producers in diverse LPSs which face distinct experiences of the intersection between vertical and horizontal governance. While the Compliance model dominated early attempts to govern for sustainability, the use of Support Services, Partnerships and Promotion of Voluntary Change has been expanding. Hierarchical production for the case study retailers is quite rare. A more detailed discussion of these approaches is provided below.
8.3.1) Five Model Approaches of Buyer-Led Governance for Sustainability
The following discussion provides a more detailed overview of the five model approaches that have been identified as options for retailers to promote sustainable production for ESN members.
Hierarchical Model
If production is carried out by retailers, then they can control all practices being used. This would allow the utmost control for retailers to be able to sell products using sustainable production processes. However this is a strategy that is rarely employed by the case study retailers.
One way that this approach can be considered as being applied in this case is when retailers choose to work with vertically integrated producers. In this type of relationship, retailers’ direct partners would have complete control over early stages of production.
Compliance Model
The Compliance model involves retailers setting standards and checking if suppliers are meeting them. This has been the most common approach for addressing issues related to working conditions in garment factories. This model can be used by retailers with power to define process standards. 289
As this case shows, the Compliance model has been widely adopted by retailers. The use of the Compliance model in this case is discussed in depth in Chapter 4’s discussion on retailer’s vertical governance practices. An option for using a Compliance model with a horizontal approach would involve retailers partnering with key governance actors in a LPS with power to enforce compliance.
Lund-Thomsen and Lindgreen (2014) highlight the ineffectiveness of the Compliance model. As discussed in Chapter 6, there are strong limitations to buyers trying to exert governance power in order to control their suppliers across the multiple vertical pathways found in this case. At main points in these pathways direct buyers are not in a position to act as governance actors. Also, even in cases where buyers can play a strong governance role, mechanisms used for enforcing compliance can create situations where suppliers may actively try to evade inspectors or restructure practices to exclude them from inspections.
The Compliance model can involve incentives or sanctions. Scott (2014, p.159) discusses the effectiveness of coercive models as depending on, relatively clear demands, effective surveillance, and significant sanctions. Beyond this, it also matters whether the mechanisms employed are primarily those of power, involving imposition of authority - where the coercive agent is viewed as a legitimate agent of control - or rely on the use of threats or inducements. These factors can be seen as important for the compliance model.
A common problem with compliance based approaches is that they can fail to take into account differences in LPSs (Bartley 2010). Mezzadri (2014a) emphasises that diversity among India’s garment production centres create different challenges preventing universal compliance programmes from being effective. The diverse local horizontal governance experiences in LPSs at different points in the case study ESN indicate that a compliance model would likely face challenges at addressing production practices used by lower tier producers in this case.
Another challenge that can be seen with the Compliance model is that it can reinforce unequal balances of power between buyers and sellers (De Neve 2009; Mezzadri 2014a). Compliance is a tool that buyers use to exert control over their suppliers. However, in some cases this may be appropriate based on the type of
290 sustainability challenges being faced. For example, this approach was effectively used in the Tirupur wet processing case considered in Chapter 7.
Support Services Model
The Support Services model, which can be considered as a part of Lund-Thomsen and Lindgreen’s (2014) cooperation paradigm, can involve a variety of mechanisms. These can range from forms of capacity building such as training sessions for management or workers to financial support for equipment upgrading. In terms of providing training, some retailers now have inductions for all suppliers (I3-R3-R). In addition, some retailers offer a variety of ad hoc training and support programs to first tier suppliers and their employees (New Look 2015a). Support services can also involve the creation of support materials which guide suppliers on how to fulfil requirements of codes of conduct.
A challenge with training programmes is that they can become tick-boxes for producers. In these cases, staff may attend training sessions but continue to use existing practices without incorporating systems suggested by the training. All big brands, like M&S, Sainsbury, John Lewis, Ralph Lauren, they are all providing . . . and paying for training . . . But the factories are having less interest in this type of training. Because . . . they are thinking that ‘I know everything’. . . [It’s] the same fault with us, we were doing this [training] programme. . . [the] productivity manager will come . . . [the factories] were thinking that if the manager will go for one day there will be a loss of work but they were not able to see the benefit of it in the long run. Because once you are learning about a process, you will make more money. And that’s what the brand is trying to do but the factories what they do is – because the brand is forcing, they are sending their staff for the training. . . They’re coming back [to their factories] and doing nothing but at least some is going. If you take some medicine and you vomit, not all will go out. Definitely some of the tablet will be inside your stomach (I56- R66-R).
In addition to formal training sessions, staff at producers can receive informal advice on how to improve systems. Amengual (2010) describes informal methods through which inspectors inform staff in factories being inspected as to ways that other factories have met compliance requirements. This informal information sharing is seen as an effective way to improve conditions in factories.
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An example of how the Support Services model is being used through vertical connections can be found in John Lewis’ 2015 annual report (John Lewis Partnership 2015a). They state that more than 85% of their buying and merchandise partners completed an online training module. John Lewis is also using a Support Services model through building horizontal connections as can be found in their involvement with a financial literacy training programme in India. we also support projects that address issues faced by our supplier communities overseas. Following a successful pilot with Geosansar in India, we are rolling out financial literacy training and access to a bank savings account scheme to a further 45 Indian factories over a three year period (John Lewis Partnership 2015a, p.74). These two programmes run by John Lewis highlight the uses of Support Services to address challenges related to sustainable production.
Partnership Model
The Partnership model, which can also be seen as part of Lund-Thomsen and Lindgreen’s (2014) cooperation paradigm, can be used directly within a buyer-supplier relationship or involve multiple partners. While the three approaches described above rely on the implementer having direct power to influence producers, this model can be used in relationships where actors are more evenly matched or even with less powerful buyers. In the Partnership model, the priorities of multiple partners can be brought together. Soundararajan and Brown (2016) write about the benefits of finding shared value between buyers and suppliers. Initiatives which are related to motivations of both buyers and sellers may be able to tackle more complicated sustainability challenges. Considering the potential conflict between garment manufacturers’ priorities compared to retailers’, some retailers are starting to develop more cooperative ways of addressing working conditions with their first tier suppliers (I21-R22-R; Lund-Thomsen and Lindgreen 2014; Soundararajan and Brown 2016).
While partnerships, and particularly multi-stakeholder partnerships, seem to be a very promising model for addressing sustainability challenges they face several key challenges. One is that there may be problematic power imbalances between the partners. Another is that they can require a lot of effort to maintain.
Considering the feasibility of developing partnerships with a broad set of first tier suppliers, Lund-Thomsen and Lindgreen (2014, p.17) noted, 292
The rhetoric surrounding cooperation sounds valid, but it is difficult to imagine how vast corporations such as Nike can realistically engage in close cooperation with more than 800 first- tier suppliers. Collaboration might be feasible with a few selected suppliers, engaged in pilot projects; it appears nearly impossible to replicate such close cooperation across hundreds of suppliers, considering just the logistical challenges. Lead buyers seeking to make partnerships with producers involved in multiple stages of production would face an even larger challenge as this would involves significantly more businesses. Additionally, Lund-Thomsen and Lindgreen (2014) highlight difficulty in developing partnerships with highly uneven power relationships between partners.
A study by De Marchi et al. (2013) finds that mentoring approaches may be a good choice when suppliers are smaller and could not afford certification. Their study showed a benefit of this approach being that it can enable the co-development of environmental innovations. This approach could be seen as a combination of Support Services and Partnership. De Marchi et al. (2013) suggest that mentoring-driven governance may be suitable for SMEs. Also, the role of mentor can be played by additional firms such as NGOs or international agencies (De Marchi, Di Maria and Ponte 2013).
An example of a situation where retailers have used a Partnership model can be found in Marks and Spencer’s response to challenges related to supplier factories paying a fair wage. M&S has developed its own buying tool that allows it to take into account a fair living wage when setting the cost price for products made in Bangladesh, India, Sri Lanka and other locations. However, as last year’s Report acknowledged, “this didn’t automatically result in factories paying a fair living wage, so we’re involved in a number of collaborative programmes to address this issue (Marks and Spencer 2015c, p.36). This shows how a Partnership model can be used for addressing complex sustainability challenges.
The Partnership model has many benefits. It is particularly useful for addressing complex sustainability challenges. However not all situations are amenable to this approach.
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Promotion of Voluntary Change Model
Through the Promotion of Voluntary Change model, new or modified production practices can be promoted to producers at any point in the ESN. This model requires the introduction of options which producers can voluntarily adopt. Any actors could potentially present a new productive system as appealing to producers to voluntarily adopt.
Locke (2013) discusses how producers can voluntarily make changes to their production practices that result in improved employment practices through a model which involves combining Promotion of Voluntary Change and Support Services. A key example of the promotion of voluntary change model is BCI.51
One challenge with this model is that addressing some sustainability challenges might not be in the producers’ best interests, such as those related to distributive issues (see Locke 2013) and may require external enforcement. Nevertheless, the promotion of voluntary change model may be particularly useful in LPSs which do not have strong key governance actors, such as the challenges experienced with working conditions in the Tamil Nadu spinning industry and the Gujarat ginning industry discussed in Chapter 7.
8.3.2) Comparing Strategies for Promoting Sustainable Production
An overview of the five model approaches discussed can be found in Table 8.1. Any of these forms of intervention can be successful. The possibility for using each method depends on several factors, which include the level of power that retailers have and the characteristics of the LPS experiencing a challenge. Another concern when looking at these models is identifying who would be involved in developing an intervention and who would be involved in implementing an intervention. Often combinations of these approaches can be effective in promoting change. The following discussion considers differences between the five approaches.
51 BCI involves offering voluntary training to farmers who apply to join the programme. These farmers receive training on how to farm using methods which are more sustainable and involve lower production costs.
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Suitable Structure for Buyer-Seller Relationship
Table 8.1 shows that the Hierarchical model requires vertically integrated production. Both the Compliance and Support Services model are supported through relationships that involve a strong role of buyer governance. However, the Support Services model can also be used in a situation where producers feel that the Support Services are worthwhile. The Partnership and Promotion of Voluntary Change models can be used in any relationship.
Governance actors need different levels of power for each approach. The first two models require some direct control over producers. The latter three models can be used in situations where governance actors do not have any direct control over producers.
Retailers’ involvement in any of these strategies depends on their connections with producers. The Hierarchical model involves complete power over production. The Compliance model requires having direct power over producers. However, the Compliance model can involve retailers aligning with other governance partners that do have power to enforce compliance. Alternatively, Compliance models can be promoted as voluntary with producers deciding to join in order to gain expected benefits. In this case, the approach could be considered a combination of the Compliance and Promotion of Voluntary Change models. Generally the latter three are possible in situations where retailers have limited power over producers. However the Support Service model requires the provider to have credibility to attempt to promote internal changes.
Another consideration is how the businesses involved in the challenge are connected to the ESN. As discussed in Chapter 5, buyer power has different forms at different points in the ESN.
Ability to Address Different Forms of Sustainability Challenges and Potential Obstacles
Table 8.1 also shows that the approaches have different abilities to address sustainability challenges and face different potential obstacles. Hierarchy can address any sustainability challenges and involves complete control. Compliance is seen as better for straightforward challenges and difficult to apply for complex sustainability challenges. Support Services are seen as suitable for any sustainability challenges. However, a challenge is that receivers of support may not change their practices. Partnerships are 295 seen as particularly useful for complex sustainability challenges but a challenge can be power imbalances between partners. The Promotion of Voluntary Change model is seen as beneficial for research producers in hard to connect to parts of the ESN. However, it is seen as being best suited to simple sustainability challenges. This approach has challenges related to limited interactions between providers and users and can result in changes that do not address the sustainability challenge being targeted.
As described in Chapter 4, there are diverse sustainability challenges that can occur in each stage of production. Addressing sustainability challenges requires understanding the local dynamics in which the problematic behaviour is occurring, including the roles played by key governance actors. Additionally, different types of sustainability challenges may be more suited to retailers’ use of different governance for sustainability models. More complex challenges may require interventions able to deal with complex issues, such as the Hierarchical, Support Services or Partnership models.
It is important to consider how alternate production practices can address these challenges. Just creating a blanket policy saying producers need to change “x” behaviour can create unexpected consequences. Identifying forms of governance that are compatible with producers’ experiences of multiple governance pressures can be more useful. This requires understanding local governance dynamics.
As discussed in Chapter 2, the structure of productive systems may be based on historical trajectories and may not be in the on-going best interests of producers and other actors (Wilkinson 2003). In these cases, promoting change can be more acceptable to producers. In some cases, this can be related to the introduction of new technologies. For example, the producers in Tirupur wet processing cases discussed in Chapter 6, who were forced to install effluent treatment systems, now have a source of clean water for their production and collectively benefit from the reduced levels of pollution being emitted into the local river.
A representative from a retailer interviewed for this case discussed the need for using multiple approaches to governance for sustainability. He described challenges with relying on a Compliance model for complex challenges and the potential benefits of using capacity building and partnership models. Unfortunately, we’ve pushed auditing because we needed something to be able to monitor the factories but . . . the key issues that needed to be dealt 296
with: worker-management dialogue, freedom of association, wages, etc, auditing has just never had the capacity to deal with those. Those are the kind of –discrimination – where you’re not able to pick it up on a checklist. Auditing is like a 60 billion dollar business a year . . . Yet, if you look at the impacts in the last 10 years, it’s been very minimal, very! . . . [Retailer A] has been at the forefront of this saying, “go beyond auditing” . . . there’s a lot of issues . . . that will never be properly addressed because they’ve never been able to be picked up and the only way you’re going to be able to resolve those is to ensure that the responsibility goes back into the workplace, for the workers and the management, to be able to negotiate effectively. . . giving workers the skills, the training, awareness and management the skills and training for being able to work with each other to address the issues within the factory but also to have mature industrial relations. . . instead of just getting a third party to go and visit a factory . . . We’re building the relationships more with the unions and the NGOs and the other industry players, saying, “look, you know, you need to have the right management systems, workers need to have a grievance procedure, etc.” but . . . it can’t be that somebody just gives you a management system handbook and says put that in your factory. . . It has to be done properly and there has to be buy-in . . . I would say, we’ve let the workers down quite a lot because in auditing, we promised a lot but delivered very little for those people and for workers it is about wages and freedom of association, those are the enablers that can then ensure that they get their other rights (I3-R3-R). This comment highlights the fact that many sustainability challenges cannot be addressed through the Compliance model, which has been retailers’ main approach.
However, it is not always clear what approaches may be best to address particular challenges. While challenges that are based on physical technology may be less connected to deeper culturally embedded practices and easier to address, Bartley (2010) points out that it is not a clear distinction between social challenges being complex and environmental challenges being simple and ‘technical’.
A further challenge with the Compliance model is the high level of resources required. Retailers’ staff which are focused on enforcing codes for garment manufacturers are currently struggling to successfully carry out this task. Expanding their role to lower tiers may result in spreading already limited resources too thin
A staff member of a case involved in enforcing a Compliance model for a study retailer cites the on-going challenges that exist in the first tier as a reason why retailers should focus their efforts on first tier policies instead of spreading them to look at lower tier suppliers.
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Our priority is to get our first tier sorted out actually. I don’t know if you have heard about the fires in Bangladesh in the manufacturing industry out there so this is big priority. For example, in India there are a lot of issue as the manufacturer’s level in terms of the contract labour and the exploitation that comes with the contract labour, the minimum wages, all that, so that becomes the priority for us. There’s no point in going to the second tier or the third tier when the first tier is actually not compliant. So that’s a challenge (I38-R47-R). This comment highlights a potential difficulty with using the Compliance model for lower tier producers.
A significantly higher number of businesses are involved in the entire ESN, below the first tier suppliers. For retailers to enforce process standards throughout their large ESNs, significantly higher levels of investment would need to be involved. A representative from a garment manufacturer’s business association highlighted the potential expense involved in retailers expanding a compliance programme to lower tiers of their ESNs. There are different levels of maturity that is happening. Of course with most brands it is direct involvement with supplier first but some of them have more of an elaborate compliance programs which require them to go down the value chain. But this level of maturity is a very skewed pyramid today with a tapering bottom. So very few of them are going to the value chain and even that is happening through NGOs. See, India is a very dispersed country, you are going to the value chain requires a lot of resources and effort. Very few brands can afford that (I13-R14-G). The expenses would not only be for the retailers but also for lower tier buyers and producers which may be expected to invest in changing their production processes. This challenge is amplified as the network branches out to include increasing numbers of producers involved in lower tiers.
Development and Implementation of Interventions
Finally, Table 8.1 shows that the approaches can involve different groups of actors. Development of approaches using the Hierarchy, Compliance, Support Services and Promotion of Voluntary Change models can involve the buyers themselves as well as public or social governance actors. Partnership approaches are developed by members of the partnership. Enforcement and implementation of the Compliance and Support Services models can also involve the buyer or public or private service providers. Partnerships are implemented by the partners. Producers are responsible for implementing practices encouraged through the Promotion of Voluntary Change model. 298
Humphrey and Schmitz (2001) draw attention to the contrast between who defines governance interventions and who enforces them. There are multiple possibilities across these five models. For Hierarchical, Compliance, Support Services and the Promotion of Voluntary Change models, there is potential for multiple actors to be involved in developing an intervention. This can range from retailers internally setting priorities to broad stakeholder consultations. The only model that specifically involves producers in developing a strategy is the Partnership model. However, in practice, some partnerships involve relationships, with high power differentials, that do not actually allow all partners to contribute to designing strategies.
Often civil society groups are drivers for addressing sustainability challenges. A representative from a retailer’s India based code of conduct team spoke about the potential for NGOs to shape the retailers’ sustainability agenda, “It does happen that NGOs will come and approach us and they will say, ‘we’re doing’, let’s say ‘child labour eradication from the supply chain, so would you be interested’ and then we would deal with the proposals and if it is interesting (I38-R47-R).” However, as discussed, in the Tamil Nadu spinning case and Gujarat ginning case, in many cases NGOs have been unable to stimulate change. While they have been able to get the issue of Sumangali on retailers’ radar, retailers have not taken effective action at addressing this issue. Despite input from multiple stakeholders, ultimately retailers decide what type of sustainability issues they want to address and what approach they want to use.
Enforcement mechanisms differ greatly across these models. In the hierarchical model, the retailer would design production systems and hire people whose job responsibilities included working within these systems. In the Compliance model, retailers, independent or government monitors can be responsible for ensuring the producers meets the required standards. In the Support Services model, there is often little enforcement over whether the new skills or technology are actually integrated into a producer’s systems. In the Partnership model, each actor could be responsible for themselves or a monitoring system could be developed, depending on the strategy used in the partnership. In the Promotion of Voluntary Change model, changes by producers are not enforced by outside actors.
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Table 8.1: Retailer Governance for Sustainable Production Models Ability to Address Typical Actors Suitable Structure Typical Actors Different Forms of Potential Involved in Model for Buyer-Seller Involved in Sustainability Obstacles Enforcement/ Relationship Development Challenges Implementation Hierarchical • Vertically • Suitable for any • Pressures to • Buyers, public • NA integrated outsource governance actors, social governance actors Compliance • Relationship • Straightforward, • More complex • Buyers, public • Buyers, public and facilitating strong technical sustainability sustainability governance actors, private service role of buyer challenges challenges social governance providers governance actors Support • Relationship • Suitable for any, may • Training or • Buyers, public • Buyers, public and Services facilitating strong involve more complex provision of governance actors, private service role of buyer support for complex equipment may social governance providers governance challenges not result in actors • Support service changed provider seen practices providing useful service Partnership • Any • Complex sustainability • Power or capacity • Members of • Members of challenges imbalance partnership partnership between partners Promotion of • Any • Potential to reach • Lack of • Buyers, public • Producers Voluntary producers in situations interaction governance actors, Change with limited governance • Adoption of new social governance framework systems may actors • Straightforward, result in creation technical sustainability of new challenges sustainability challenges Source: Author’s Construction
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8.3.3) Utility of Different Approaches of Buyer-Led Governance for Sustainable Production
The models discussed in this section represent a spectrum of choices and can be combined in various ways. The choice of model is dependent on the level of retailers’ power over producers. This is shaped by how producers are inserted in the network. Retailers can partner with local actors to play stronger roles when producers are located in LPSs responsible for lower tiers of production that have weak vertical connections. Alternatively, retailers can create partnerships with upper tier suppliers in order to connect to lower tier producers. Processes of collaborative governance are discussed in more detail in below (in Section 8.5). Additionally, the potential to use each model is shaped by producers’ horizontal governance experiences, including the types of governance pressures found within the LPS where production is located and the type of sustainability challenges being experienced.
At the top of the ESN, retailers with high power over their top tier suppliers have been able to enforce straight forward improvements through a Compliance model. However, retailers using this model have had more difficulty promoting changes that require more complex behavioural shifts and some evidence has been found that combining the Compliance model with the Support Services model by running capacity building programmes can address this deficit (Locke 2013). This combined approach involve retailers having power to directly promote change within their suppliers. When looking at governance of lower tiers, retailers have less power to govern and must consider alternate approaches. In this context, persuasive approaches may need to be considered.
For sustainability challenges which involve high levels of pressure to maintain current practices (sticky challenges) higher levels of cooperation and deliberation involving multiple stakeholders may be necessary to develop new systems which actually address these challenges. This is particularly important as externally driven pressures to address these challenges can just push the problematic behaviour out of sight.
This framework builds on the make versus buy logic developed by Coase (1937), refined by Williamson (1979; 1981) and enhanced by the introduction of the option for cooperation (Baker et al. 2002). When considering how retailers can control the sustainability of production practices another level of decision making factors enters the 301 picture outside of measures of profit and risk of supplier failure. Retailers along with their suppliers have varying motivations and considerations surrounding the use of sustainable practices. While many firms have made decisions to outsource which support increasing profits, many of these decisions have led to production taking place using practices with more sustainability challenges, such as production taking place in countries with weak or weakly enforced labour and environmental regulations. As considerations of sustainability begin to play a larger part in retailers’ decision making, it remains to be seen how this will affect the connections that are made with suppliers. Based on how this process is unfolding and actions retailers have begun to take, the framework presented here outlines how concerns related to governance for sustainability can be conceptualised within relationships between retailers and their ESNs.
For any of the model approaches support from intermediaries may be needed. As retailers move forward to adopt any of these forms, new intermediaries may develop. This has already been the case in the approaches of Compliance and Support Services, which have been the most used. Jooste and Scott (2009) describe the creation of an enabling field which involves these intermediaries. They highlight the role that private organisations with existing skills can have in supporting private-public infrastructure projects. Additionally, De Marchi and Grandinetti (2013) find that external knowledge, accessed through universities, research institutions and competitors, can play a large role for environmental innovations.
There can also be synergies between retailers’ sourcing practices and the type of governance for sustainability in which they engage. Retailers which engage in process monitoring to ensure quality can more easily incorporate monitoring related to codes of conduct. These buyers already have a presence in their suppliers’ factories. Quality monitoring tends to be the practice for quality conscious retailers and can involve processes starting from textile manufacturing. This practice can be supportive of initiatives to monitor production for code of conduct compliance.
For retailers that do not carry out quality monitoring and for stages of production that do not involve custom made production, products are sold based on their physical attributes, which do not indicate the sustainability of production processes. In these cases, the retailers or other lower tier buyers could ask for third party certificates to ensure
302 compliance with codes of conduct or other process requirements. This type of sourcing may be less conducive to developing partnerships or even providing support services.
8.3.4) Different Perspective on the Role of Buyer-Driven Governance
The approaches to buyer-driven governance identified in this study provide a different way to think about buyer-led governance than key past approaches. Table 8.2 shows the progression of some major theories which have considered the roles of buyer- driven governance and how this thesis contributes to a new understanding of the process when considering governance for sustainable production. The three past approaches considered are the model of buyer-driven versus producer-driven governance developed by Gerefii (1994), the GVC governance model developed by Gereffi et al (2005) and the modular governance framework developed by Ponte and Sturgeon (2014).
Each approach to exploring buyer-driven governance can be seen to have a different purpose. The first two approaches, the buyer-driven model (Gereffi 1994) and the GVC governance model (Gereffi et al 2005) have often been used to explore supplier firms’ competitive positions within production processes. The third model, the modular theory-building model (Ponte and Sturgeon 2014) considers power broadly and the uses of this framework may be explored by future research. This thesis specifically focuses on governance as it related to the promotion of sustainable production practices.
These conceptions of buyer-driven governance also have considered different conceptions of production. Gereffi’s (1994) proposal of buyer and producer-driven commodity chains highlighted the importance of considering that globalised production processes can be shaped by firms controlling high value activities such as branding and marketing. The GVC governance framework proposed by Gereffi et al. (2005) moved on to looking at the specific role played by buyers which was seen as being determined by three key factors: complexity of transactions, codifiability of information, and capability of suppliers. Ponte and Sturgeon (2014) highlighted the importance of looking at diverse relationship across micro links in commercial relationships across a GVC. They question the role of lead buyers as driving a whole chain, drawing in the idea of bi-polar and multi-polar governance.
Finally, across these three models, the role of lead buyers is seen differently. In the buyer-driven GCC model, lead firms are seen to control access to major resources 303
(Gereffi 1994). In the GVC governance model, lead firms are seen as playing different roles in different contexts. However, these roles are seen to cover the relationships between buyers and their upper tier suppliers. The modular approach developed by Ponte and Sturgeon (2014) allows for less power by lead buyers but still does not question the diversity of roles played by lead buyers. This study considers the roles of lead buyers as simultaneously involving different relationships with different sets of producers. These can involve vertical and horizontal governance pathways. In promoting sustainable production, retailers’ connections with producers are seen to involve five different model approaches to promoting sustainable production. These approaches can be variously combined and retailers’ relationships with producers across their ESNs can simultaneously involve multiple forms of governance.
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Table 8.2: Approaches Considering Buyer-Driven Governance
Source: Author’s Construction, drawn from Gereffi 1994; Gereffi et al. 2005; Ponte and Sturgeon 2014
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8.4) Retailers' Governance for Sustainable Production for Early Stage Inputs
Fragmented production creates challenges for buyer-led governance. Retailers’ leverage for forcibly promoting sustainable production depends on their ties to producers. Retailers seeking to stimulate change have been found to use the five model approaches described above. This section considers how retailers are promoting change to the early stages of production, which are particularly hard to influence from the top of the ESN.
Connecting with the early stages of production can take place through vertical sourcing connections or through the development of direct horizontal non-sourcing connections. Both approaches have pros and cons. Each method is illustrated through examples found in the ESN considered in this study. Both methods are seen to be dependent on developing connections and alliances within the GPN. Following this sections’ discussion of vertical and horizontal approaches, the next section focuses on the development of alliances.
8.4.1) Governance through Vertical Sourcing Relationships
While limits to governance through sourcing have been emphasised in this study, there are two ways that retailers are promoting sustainable processes in the early stages of production through their vertical sourcing relationships. One is through working with vertically integrated suppliers and the other is designing products to include sustainability related processes that can be considered as product qualities through reliance on certification.
Vertically Integrated First Tier Suppliers
Retailers have the option to choose to work with vertically integrated suppliers. Retailers wanting to minimise risk create through the ESN’s fragmentation may choose to use this approach. When retailers outsource production, they face a risk of losing control of production (Gereffi et al. 2005). Connecting to a vertically integrated producer could be seen as a way to limit the loss of control.
If retailers work with vertically integrated first tier suppliers, they can more easily monitor activities at earlier stages of production. While this model is rare in India, it has advantages for addressing sustainability challenges. One benefit is that retailers’ promotion of sustainable production could directly influence all stages of production
306 carried out by the vertically integrated business. Another benefit is that vertically integrated suppliers would be larger businesses that could potentially become partners for addressing sustainability issues amongst lower tier suppliers.
As discussed in Chapter 4, major UK retailers have sustainability policies, such as codes of conduct, which are expected to be enforced for all of their top tier suppliers. When working with vertically integrated suppliers, these businesses in theory would be expected to uphold retailers sustainability policies for all stages of production carried out in-house. However, when multiple stages of production take place within a first tier supplier, producers in India often carry out different stages at different sites and may only have monitoring and certification for their garment manufacturing facilities (Theuws & Overeem 2014).
In addition to the potentially expanded coverage of the compliance model, retailers may use additional approaches to promote sustainable production by working with vertically integrated first tier suppliers. One way that retailers are addressing challenges with compliance to codes of conduct with first tier suppliers is offering training sessions for producers focused on new ways to organise their production. Providing support services can enhance the effectiveness of the compliance model. In an interview a staff member from a European development agency working on addressing challenges in garment production spoke about the recent shift from policing to more supportive models for some retailers (I21-R22-R). When earlier stages of production take place in the same facility, there is potential for expanded impact of these support services in terms of addressing challenges in the earlier stages of production.
Additionally, vertically integrated producers may be larger actors that can address sustainability challenges among their suppliers, potentially working in partnership with retailers. Additionally, vertically integrated first tier suppliers provide retailers with a way to have more direct connection with early stage producers as vertically integrated manufacturers need to buy inputs from these businesses. This contrasts with the non- integrated first tier suppliers whose inputs are limited to fabric and who do not have connections with yarn spinning, ginning or cotton farming. In addition to offering a model with a shorter set of connections between retailers and lower tier producers, vertically integrated producers may be larger actors that can have leverage to promote sustainable production for their suppliers. These suppliers can potentially work in 307 partnership with retailers. This type of model can be seen in the example of Retailer A and Composite Mill A.
Retailer A and Composite Mill A have been partnering to try to promote the use of more sustainable cotton farming processes. Retailer A is a relatively high end UK garment retailer. Composite Mill A is a vertically integrated Indian garment manufacturer that internally carries out spinning, weaving and garment manufacturing activities, known as a composite mill. Retailer A has developed an ongoing partnership with Composite Mill A through which they work together to promote sustainable cotton initiatives. Through this partnership, Composite Mill A supports programmes that train farmers on more sustainable practices and directly buys the cotton and pays for gins to process it. The direct connection between the composite mill and farmers is not a common practice for conventional cotton sales. However this relationship gives Composite Mill A the leverage of buyer power over cotton farmers and hiring ginning as a service helps to ensure traceability as the cotton remains under the ownership of Composite Mill A.
While this project has been relatively successful, the programme involves a high level of commitment and work for Composite Mill A. Within Composite Mill A, the project is run by a department that has been set up specifically to focus on sustainable cotton. This type of programme is possible due to the large size of Composite Mill A with 25,000 employees and their vertically integrated business structure. Additionally, Retailer A is a brand that places large orders and includes sustainable production as a large part of its marketing strategy. They have also been willing to invest a significant amount of work into this project.
Standards for Lower Tier Producers
Whether first tier suppliers are vertically integrated or not, retailers can attempt to address sustainability challenges in lower tiers through relying on third party certification of the processes used to make the inputs. Widespread adoption of this system would involve restructuring how products are sold in the ESN because in the current system,
308 many of early stages of production involve standard products that are purchased based on physically observable attributes. Adding process requirements to the sales of these products would be in effect turning them into credence goods. 52 A challenge with credence goods is the inability for a buyer to directly assess the credence values. Consequently various forms of certification have been used to overcome this challenge including public and private certification systems.
At a small scale, there are forms of early stage input credence goods currently flowing through top retailers’ ESNs. However, these are often niche product lines, such as organic or recycled cotton. Monitoring the production of these products and their movement through the ESN is currently costly as it often involves specific monitoring for traceability and consumers often pay an optional premium which covers these costs. Expansion of certifications for lower tier production for all cotton garment inputs would require dramatic upscaling of third party certification processes. This would be very challenging as can be seen by the failed attempt of Marks and Spencer to carry out a traceability programme that solely involved tracking producers without instigating changes in their productive systems, as discussed in Chapter 6.
Additionally, lower tier producers may have limited interest in being involved in these programmes as early stage producers are not very dependent on UK retailers (see Chapter 5). Another challenge to expanding this system can be seen by the fact that producers who have already switched to organic or other specialty sustainability products often face challenges selling their products for the expected premiums (Cotton Connect 2014).
However, retailers are attempting to expand company-wide policies to include some second tier suppliers. One way that this process has already been starting to happen is through involvement targeted at key areas that have been found to involve practices
52 Across the ESN there are different types of requirements that buyers have for their suppliers. These include those based on a product’s physical attributes, those based on processes used in their creation and additional requirements, such as branding. Items that are considered to have value based on qualities that cannot be directly observed by a buyer have been called credence goods (Feddersen and Gilligan 2001; Darby and Karni 1973).
309 that are seen as problematic and prone to sustainability challenges. Two examples are now discussed, which are pollution created in wet processing and challenging work conditions for homeworkers.
As mentioned earlier, in November 2014, Marks and Spencer introduced a policy to address issues related to pollution in wet processing (Marks and Spencer 2014a). It remains to be seen whether they will be able to enforce these policies. As a representative from a retailer interviewed for this study indicated (I38-R47-R), wet processing firms have historically been resistant to retailers’ inspections. Can these new policies be effective? One factor which may facilitate this policy is that wet processing for UK exports is an activity which is usually done customised for retailers’ orders, as opposed to a standard process. However, making changes to waste treatment facilities can be expensive and firms may not be willing to make these changes to meet the needs of relatively few customers. Additionally, as retailers do not have direct contracts with wet processors that are not integrated into textile or garment production and Marks and Spencer’s policy requires the wet processors to provide proof of their own third party certification, space is created for corruption. Two ways that this type of policy may have more impact is through developing closer relationships with wet processors through using vertically integrated suppliers or through developing direct connections with independent wet processing firms.
In terms of addressing issues related to home workers, one interviewee described the expansion of retailers’ policies as follows. We are working on issues such as homeworkers, where the beads and the sequins get attached on women’s wear dresses and tops which are being outsourced by the manufacturers out to the homes through subcontractors. . . we actually go out to those people also and go out to the homes and ensure that the code of practice is implemented there also (I38- R47-R).
Another example can be found in a report published by ASDA George (George 2013, p.5), which stated, “We have now scaled up these audits to include second tier suppliers such as laundries, embroidery units and packaging suppliers.” While retailers are attempting to promote change in these second tier producers, benefits of these policies are still unclear.
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When considering how retailers may influence the adoption of more sustainable production practices for lower tiers suppliers, the options are very limited. One way that retailers can shape production practices of lower tier suppliers is through processes of nomination. In nominated production, retailers directly choose the inputs that their contracted garment manufacturer will use. In these cases, retailers may have direct contact with a lower tier producer and can require the producer to pass their codes of conduct inspections. However, nominated production is not very common in the Indian context.
In contrast to product requirements that can be observed, process requirements require monitoring. Monitoring processes can be easier when production takes place in integrated sites. Monitoring can be done by the buyer with the process requirement or by a third party. The need for monitoring of lower tiers to enforce process requirements indicates two main options that retailers can employ. First working with vertically integrated first tier suppliers in order to have a direct connection to the early stages of production. Second, relying on third party monitoring.
Based on these options, two major alternative sourcing systems can be found in the case study ESN. Both involve retailers’ sourcing requirements shaping production processes of lower tier suppliers. One is using vertically integrated production in which retailers can attempt to directly influence a set of practices carried out by a single business with which they have direct contracts. Second, production processes of lower tier suppliers can be certified by third parties creating a situation where products with these certifications can be sold through multiple connections in the ESN with buyers being able to choose the production processes by defining required certifications to be provided with the garment.
In the first sourcing system, when retailers work with vertically integrated producers, they have more direct connections to the earlier stages of production. As indicated above, retailers’ codes of conduct are only applied during the early stages of production when they take place within a first tier suppliers or a nominated lower tier supplier. While this form of sourcing provides an easier way for retailers to promote change in early production stages, it is not a common sourcing process in India.
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In the second system, third party monitoring of sustainability standards takes place for lower production for items which are considered speciality items due to their sustainability related characteristics. Currently this is often for items that at the retail level are sold at a premium as their production involves additional costs. However, in some cases retailers have been involved in sourcing inputs made through projects intended to support sustainable production without identifying or marketing these products as specialty higher cost products in their stores. However, these systems with small scale process monitoring involve increased costs for coordination and can face challenges related to third party monitoring.
8.4.2) Governance through Horizontal Connections to LPSs
As retailers’ attempts to promote sustainable production through vertical sourcing connections face serious limitations, particularly in highly fragmented production, another way that retailers are trying to influence ESN producers is by working through horizontal connections. In this approach, retailers can connect directly with lower tier producers or work through organisations which may act as governance intermediaries.
Identifying key governance actors in LPSs is important when using this approach. These actors can operate as partners and are part of the institutional framework which must be considered when implementing a local intervention. Alliances with local actors can be used to promote sustainable production through the compliance, support services, partnership or promotion of voluntary change models.
Retailers Connecting to LPSs
The case study retailers are involved in several projects targeted at addressing local sustainability issues in India. A report by Next (2013, p.8) states, “Our approach is to use our influence to promote good practices and raise awareness, both with our suppliers and their employees as well as others along our supply chain.” Initiatives that retailers are directly involved in include supporting schools or hospitals in communities where factories are located as well as supporting NGO projects that provide different types of training and support services for workers.
The ways that retailers engage in non-sourcing connections differs between retailers much more than sourcing practices differ. Some retailers play leading roles in multiple sustainability focused projects and others have a few small projects they 312 contribute to. They may also provide support in the form of staff or other forms of technical support that involves stronger connections or purely offer a financial contribution. While the scope of these projects can vary from being based in one community to large international projects, the bulk of projects involving connections with lower tier producers in India are small scale.
A challenge for retailers addressing issues at lower stages of production is that they can be diverse and specific to LPSs. As discussed in Chapter 5, production of the same products can involve diverse technologies which may lead to different challenges. Retailers connecting with LPSs can help to address these challenges but the widespread application of this approach would involve a large scale multi-faceted set of programmes able to address these diverse challenges. A way to address this immense challenge can be to work collaboratively.
A major project which retailers have been involved in which explicitly involves a consideration of differences between LPSs is the BCI. A large multi-stakeholder initiative, BCI, works on promoting sustainable cotton world-wide. The project is funded by retailers and is managed by a European central office with branch offices in cotton producing regions. Local affiliates work directly on the ground to train farmers to use more sustainable practices. The purpose of this programme is to create a change in farmers’ productive systems in a way that addresses local sustainability challenges. While this programme is relatively new, they have been able to demonstrate success with attracting farmers to voluntarily participate in the support services they offer. Farmers enrolled in this program are taught methods which are supposed to result in increased profit along with decreased environmental impact and better working conditions. This project involves retailers directly supporting a programme intended to address a sustainability challenge at the bottom of their ESNs.
Online Connections to Suppliers
Retailers have also developed resources which can be seen as a combination of support services and promotion of voluntary change. For example, New Look has
313 developed the Textile Industry Sustainability Platform (TISP), a multi-brand initiative that provides online resources for Chinese textile factories seeking to decrease their environmental impact. This is a free resource supported by seven brands 53 and three consultancy companies. The guide promotes the business case for energy efficiency, introduces energy management and provides examples of how firms have improved energy efficiency.
8.5) Retailer Alliances in Governance for Sustainability
Existing commercial models result in weak or non-existent connections with the early stages of production. Alliances are necessary for connecting to lower tiers. Both vertical and horizontal approaches require working with partners. The feasibility of an approach can be shaped by the potential partners that may be involved. Vertical approaches can be beneficial if the suppliers involved in the alliance have relationships with their suppliers in which they have some sway over the producers. As discussed in Chapter 6, this can be assessed by looking at the characteristics of the buyer and seller, the structure of their relationship and network embeddedness. Alternately, horizontal alliances may be better for retailers in cases where horizontal actors can play a leading role in LPSs.
At this point, the types of actors that retailers partner with when attempting to govern for sustainability will be considered. As addressing the multiple sustainability challenges that arise across an ESN, requires diverse expertise, these partnerships are crucial for designing and implementing well-functioning interventions. Retailers, in various combinations, work with each other as well as additional global and local governance actors, producers and experts. These partnerships can range from bilateral project based collaboration to larger institutionalised multi-stakeholder initiatives.
Working in partnerships to address sustainability issues can help to avoid challenges that can develop with coercive models for complex issues. As the examples discussed in Chapter 7 showed, attempting to address sustainability challenges can lead
53 The brands include New Look, H&M, Gap Inc., Fifth Pacific Companies, J. Crew, Pentland and Columbia Sportwear.
314 new challenges or changes in behaviour that restructure how production is organised in ways that allow for the continuation of the same challenges. Collaboratively developing solutions can minimise this process. Multiple forms of retailer collaboration are discussed below.
Retailers are part of numerous sustainability focused coalitions as can be seen in Table 4.5 (on p. 153) in Chapter 4. A passage in Next’s Corporate Responsibility Report (2013, p.10) highlights the importance of collaboration and the growth of this approach. Next fully understands the importance of working with others to pursue solutions for some of the more complex and systemic problems within global supply chains that we cannot solve alone, and has first-hand experience of delivering benefits by working in partnership with other organisations to understand these issues. Coalitions of retailers are a potential way to mitigate the problems created by the variability of buying practices. Coalitions can develop longer term relationships with producers that may not be possible when retailers change suppliers frequently.
The benefits of working through retailer coalitions were also expressed by a representative from a UK retailer’s code of conduct team. We know that the biggest impact and the biggest change can happen if there is collaboration and that’s not just collaboration with other stakeholders but particularly with companies. You know we’re all in the same countries, we’re all, dealing with the same issues, etc. and if we’ve got a solution and we can roll it out, then if we all rolled it out, obviously, you can imagine the message to suppliers, the message to the industry etc. . . we’re collaborating with different brands because we see it as being really important to ensuring that change happens (I3-R3-R). The same sentiment can also be seen in the following quote from an India based member of a retailers’ code of conduct team. If we have to sort out issues in the supply chain, in isolation we can’t do it because these are issues that are endemic and [Retailer A] does not have that leverage to sort out all the issues so until you develop a collaboration, we personally feel like it’s not going to sort out. Because, let’s say a particular manufacturer doesn’t pay minimum wages, let’s say [Retailer A], Target, M&S and Topshop/Topman goes and tells them that, listen, if you do not pay minimum wages then it’s bad for you, the chances are 9/10 times he will listen, as opposed to [Retailer A] only going to him and saying pay the minimum wages. So the collaboration always helps (I38- R47-R).
In addition to retailers providing support to broad sustainability focused projects, participation in coalitions also contributes to shaping retailers’ internal sustainability 315 policies. For example, many of the top UK retailers use ETI’s Base Code for their own code of conduct.
The activities of these coalitions are diverse. Actions taken by these coalitions often involve running projects that are targeted at making changes within producer businesses. Their focus covers numerous sustainability challenges faced in the ESN from issues related to cotton production to garment manufacturing.
In addition to formal membership based coalitions, retailers can also be involved in informal coalitions at the local level. An India based member of a retailer’s code of conduct team described a community of people working to address sustainability challenges in India. “It is such a small industry. As it is people in the ethical community are very limited, actually, so everybody knows everyone (I38-R47-R).” He went on to describe informal cooperation with other retailers sourcing from India. When we audit the factory we ask the factory, ‘who are their other buyers?’, ‘What percent of their business is with other buyers?’. So that information is always captured in our audit reports. And then if we have a good relationship with the other buyers, retailers, we might call them up, not officially, and say listen guys, we found this factory that you’re also working in and there’s a problem there so how about collaborating on this issue, we might end up collaborating and working together but having said that, we do not, unless we have explicit consent from the factory (I38-R47- R). This example shows how retailers can informally work together for their codes of conduct. These collaborative processes are a way to develop stronger mechanisms for addressing sustainability challenges across an ESN compared to what individual retailers could do on their own.
Retailers can work with NGOs, which can act as governance and information intermediaries when it comes to addressing sustainability challenges. A representative from a retailer’s UK sustainability programme describes an example of this type of relationship. He noted, “We also have some key NGOs that we work with who are there to help us understand what some of the issues are and to help us understand what some of the solutions could be (I9-R9-R).”
Retailers’ relationships with NGOs can be confrontational as well as cooperative. The same UK based retailer representative said,
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We also have NGOs at the other end of the scale that we would call campaigners, rather than collaborators . . . they’ll be challenging you and trying to get you to do things whereas the collaborator will work as a team with you and there’s a lot of tension there because you know they’re trying to get you to go over here and we’re over here and we need to meet in the middle (I9-R9-R).
In addition to learning about sustainability challenges from NGOs, retailers also partner with NGOs to address sustainability challenges. A representative from a retailers’ Indian code of conduct team discussed working with NGO as part of a larger collaborative process by saying, “We do work a lot with external stakeholders in the form of trade unions, in the form of NGOs, in the form of collaborating with other fellow retailers (I38-R47-R).”
Retailers can also collaborate with business associations. Business associations can drive forward programmes that may be more compatible with businesses needs than those developed by retailers. For example, India’s Apparel Export Promotion Council proposed a national auditing system that could meet retailers’ desire to monitor factories and could ease the burden on factories receiving multiple audits by different buyers.
Private governance can be seen as compensating for a deficit in public governance (Mayer and Gereffi 2010; Gereffi and Mayer 2006). Locke (2013, p.24) writes, “given the limited ability (perhaps even willingness) of many developing country governments to enforce their own laws 2, private compliance is currently the principle way both labour rights NGOs and global corporations address poor working conditions in global supply chain factories.” While this is often the case, there are times when public and private governance can complement each other (Amengual 2010). As was shown with Tirupur wet processing and Gujarat farming, government actors in India have played large roles in promoting change to productive systems. Future projects by retailers aimed at addressing sustainability issues may benefit from considering alliances with local government actors.
Additionally, UK retailers have worked with UK government actors to run initiatives. For example, the Benefits for Businesses and Workers project, which was part of DfID’s RAGS Challenge fund, was sponsored by UK retailers to improve management systems of garment manufacturers to promote ethical production of clothing
317 being sold in the UK. This project was supported by eight major retailers (five of which are part of this study: Arcadia, Marks and Spencer, New Look, Sainsbury’s and Tesco).
With outsourced production and complex sustainability challenges embedded in different LPSs, multiple governance strategies are necessary. Both vertical and horizontal approaches are being used with some measures of success. However, both methods have inherent drawbacks.
While working through vertical connections has the added weight of sustainability requirements coming from buyers, these approaches may have limited reach and may not effectively promote change across productive systems which have businesses selling to different buyers all contributing to a common problem. For instance, an issue related to pollution may not be well addressed with only a small portion of companies changing their waste management. The requirement for longer-term partnerships between buyers and supplier for some of the models discussed above presents challenges for broader adoption. Additionally, in the Indian context vertical integration is rare. For relationships that do not have strong buyers, third party standards can be a way to assess producers’ adherence to process requirements. However, if the standards use the compliance model, they may only be able to address straight forward sustainability challenges.
One challenge with making direct non-sourcing horizontal connection with LPSs is being able to connect with key local governance actors. This can be difficult due to the diversity of governance systems and potential lack of strong local governance actors in different LPSs housing ESN businesses. In locations which have strong local governance actors, retailers can work collaboratively to promote mandatory or voluntary changes to productive systems to promote sustainable production. The diversity of LPSs and sustainability challenges they experience would make it very difficult for retailers to scale up efforts that involve creating direct connections.
With both vertical and horizontal approaches, collaborations can be useful for overcoming potential weaknesses. Collaborations can be at the global scale as can be seen by the retailer coalitions discussed above but they can also be between global and local actors.
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Retailers’ coalitions and involvement in multi-stakeholder initiatives can be a way to pool efforts to address sustainability challenges in LPSs that are contributing to the ESNs of member retailers. Working with local actors is both a way to become more informed about local concerns and to connect with local producers. Speaking about addressing challenges in top tier suppliers, a UK based representative for a code of conduct team described the importance of finding strong partners to work with to address local issues. He said, “all the local NGOs need to have the credibility, the local expertise . . . what we’ll do is have a criteria to ensure that the NGO are – how can I put this – not here today, gone tomorrow. They’ve been there long-term (I3-R3-R).” This respondent also emphasised the importance of working with other stakeholders. We try to bring in all the partners into one place, have them all sat round the table, so that we’ll have the industry, we’ll have the contractors and we’ll have the NGOs and trade unions as well. . . You need to have something which is going to be replicable and has all the partners and everybody making sure that it happens and that rolls out . . . We just need to make sure that there’s the collaboration together . . . that government takes its part, the NGOs and trade unions play their role and we play our role, and you know, we’ll be able to move the needle a lot quicker, than having to struggle step by step (I3-R3-R). Alliances between global and local actors are crucial for developing interventions that can address the complex and diverse sustainability challenges that face cotton garment production.
8.6) Conclusion
This chapter has addressed the question of retailers’ ability to promote sustainable production across a fragmented ESN. Retailers’ role in governance for sustainable production is seen to be a multi-faceted process which can be seen as involving five model approaches. These approaches are defined as Hierarchical, Compliance, Support Services, Partnership and the Promotion of Voluntary Change. The approaches are not mutually exclusive and are often combined within one strategy. The approaches available to retailers depend on the relationship a retailer has with producers along with the nature of the sustainability challenge being faced.
The model approaches can involve both vertical and horizontal ties. Each connection type has different benefits. Strengthening vertical connections can be seen as a way to reduce risk created by outsourcing. Strengthening horizontal connections can be
319 seen as a way to reach broad groups of producers that are not easily accessible through vertical pathways.
Overall, this chapter has shown that, while retailers currently do not play a large role in governance for sustainability across this case study, this role is expanding. Working through both vertical and horizontal connections, retailers are connecting to producers in diverse LPSs by developing cooperative relationships with other governance actors and using a variety of models of governance for sustainability. The following chapter provides a conclusion to this thesis.
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9: Conclusion
9.1) Introduction
Challenges with sustainable production are a growing global concern. Brands and retailers are increasingly feeling pressure to promote sustainable practices for the products that they sell. Early approaches to understanding retailers’ relationships to producers responsible for outsourced production found that retailers have a high level of control over producers. However, these studies focused on relationships between retailers and upper tier suppliers. When considering challenges with sustainable production, relationships must be considered between retailers and a diverse set of producers responsible for different stages of fragmented production that go all the way back to raw materials.
While research on the garment industry using the GVC and GPN approaches has focused on governance relationships between lead buyers and upper tier suppliers, these frameworks can provide insight into broader processes of governance for sustainable production. The GVC literature has concentrated on exploring dynamics of the linear relationships that connect businesses involved in outsourcing production. The GPN framework expands this approach and emphasises the importance of embedded location. This includes businesses experiencing horizontal governance considering roles played by a wide set of diverse governance actors. Past research using these frameworks provides a basis for this study’s exploration of the under explored process of the governance role played by lead buyers for all stages of production across a fragmented ESN involving producers working in diverse LPSs.
The findings of this study are based on examining governance processes across the Indian branch of the ESN producing cotton clothing for the top 20 UK clothing retailers.54 The main finding of this research is that retailers’ governance on its own is not sufficient to promote sustainable practices for all stages of fragmented production
54 Ranked based on market share in 2012.
321 processes. Buyer-driven governance for sustainable production was found to take multiple forms when looking across the ESN, with retailers having different types of connections to producers at different points in their ESNs. For addressing many of the diverse challenges with sustainable production found in this ESN, a collaborative effort is required. To play an effective governance role, retailers must create connections to actors in the distinct LPSs in which production takes place. Retailers were found to connect to producers at different points in their ESNs through both vertical and horizontal pathways. However, both sets of connections are relatively weak for lower tier producers.
This thesis makes a contribution by exploring governance processes felt by businesses responsible for all stages of production for cotton clothing. The findings add to a body of literature which has questioned the power of lead buyer governance. Conceptually, by considering an ESN, this research develops a way to understand how producers within a GPN are organised and governed in the production stage of products’ life cycles. This involves emphasizing the importance of considering the diverse experiences of ESN suppliers embedded in distinct network and territorial locations. Empirically, multiple forms of buyer-led governance are identified. The thesis particularly provides insight into the emerging process of retailers making horizontal connections to LPSs in order to address challenges with sustainable production.
9.2) Answering Research Questions
Using a critical realist approach, this study has considered the main research question of, “to what extent is buyer-driven governance sufficient for promoting sustainable production across an extended supplier network? ” This broad question was explored by considering four research sub-questions. The findings from these sub- questions are discussed below followed by a review of the findings related to the main research question.
To address the first sub-question, “How can the organisation of production be conceptualised to explore how lead buyers are involved in governance for sustainable production across fragmented production processes?”, a conceptual framework was developed. This framework draws on GVC and GPN research to understand how production occurs across fragmented globally outsourced processes. Bringing together insights from these bodies of literature, in order to understand challenges involved in
322 sustainable production, the study conceptualises production for lead firms as taking place through a set of producers connected through an ESN.
This ESN is considered as being located within a GPN which encompasses a wide range of governance actors and forces. Producers located in the ESN experience horizontal governance due to their territorial locations within LPSs and experience vertical governance through buyer-seller relationships. Exploring vertical and horizontal governance processes across the ESN provides a way to consider how lead buyers connect to businesses across the network and how lead buyers can be involved in governance for sustainable production.
In order to answer the second sub-question, “ What is the structure of the ESN linking UK retailers to all stages of Indian garment production? ”, characteristics of four features of the ESN were explored. The first feature was the characteristics of UK retailers as lead buyers. These retailers face multiple pressures to be involved in promoting sustainable production and attempt to carry out these pressures through both vertical, sourcing connections and horizontal, non-sourcing connections. However, the retailers also have priorities that can promote sustainability challenges. The second feature is the characteristics of suppliers. Two notable characteristics of suppliers are the existence of multiple forms of producer businesses, involving different organizational structures and different levels of integration and fragmentation, and the existence of a large number of specialised intermediaries connecting all stages of production. The third feature relates to the way businesses are linked together. Multiple forms of sourcing connections are found, including businesses simultaneously using various types of suppliers and the existence of distinctly different transaction types, such as job work or direct sales. The fourth feature considered was how businesses are territorially distributed. Producers for all stages of production in India are concentrated within a relatively small number of LPSs which exhibit distinct features.
This broad overview of the structure of the network begins to show the complexity of looking at how governance can flow through diverse vertical pathways connecting multiple forms of producers. It also shows that looking at production within territorial groupings in LPSs can potentially provide a way to understand common horizontal governance experiences facing a large number of producers contributing to an ESN. With this understanding of the organisation of production, the following two sub- 323 questions considered governance processes by examining governance flows through vertical pathways within the network and by looking at experiences of producers working within LPSs.
Considering the third sub-question, “ To what extent do vertical governance pathways allow lead buyers to control production processes in their ESNs?”, retailers are found to have some leverage for shaping production processes through their vertical sourcing connections, although not as much as some conceptions of buyer-driven governance might suggest. Retailers have high levels of control over product qualities for garments that they choose to buy. However, retailers have limited leverage over process qualities. This limitation is based on the existence of sourcing relationships within the ESN’s vertical pathways in which direct buyers at different stages of production have limited power over their direct suppliers and the ability for producers to react in unexpected ways to buyers’ sourcing requirements. Additionally, some vertical pathways feature key cut-off points in which dyadic relationships involve little to no potential for buyer-driven governance. These key cut-off points prevent vertical governance from traveling down vertical pathways to lower tier producers.
Conceptualising production as taking place within relatively cohesive LPSs provides an alternate way to explore governance in an ESN compared to focusing on vertical pathways. Considering what can be learned from this conception, the fourth sub- question asked, “ How can experiences of horizontal governance within LPSs provide insight into buyer-driven governance for sustainable production in an ESN? ” Answering this question involved two components. The first was considering how focusing on LPSs could overcome the challenges faced through vertical governance pathways. The second involved exploring the empirical experiences of five LPSs within the case study ESN.
Considering producers as being grouped within LPSs provides a unit of analysis that can be used to explore vertical governance experiences which affect broader groups of producers than an approach which focuses on vertical pathways connecting individual producers. Additionally, considering how producers within LPSs experience common horizontal pressures which are felt in conjunction with any vertical pressures provides a better understanding of how governance is experienced by producers. LPSs can also be a unit of analysis considered by retailers seeking to promote sustainable production through vertical or horizontal governance relationships. 324
The exploration of five LPSs within the case study ESN provided insight into processes of horizontal governance. Each LPS considered is responsible for different stages of production and has faced a key sustainability challenge. These diverse examples provide insight into the range of governance experiences within the same ESN. Each LPS was found to have different groups of key governance actors with two of the cases involving some sort of horizontal connections by retailers. Horizontal governance pressures across these LPSs have involved various mechanisms for influencing producers. Amongst these diverse experiences, pressures introduced through mandatory and voluntary mechanisms were both found to effectively promote changes to production practices in different contexts. Additionally the influence of governance pressures was seen to be related to the nature of the sustainability challenges, which were found to differ with some challenges involving stronger pressures for stability than others.
Finally, considering the main research question, which asked, “To what extent is buyer-driven governance sufficient for promoting sustainable production across an extended supplier network? ”, this study found that buyer-driven governance on its own cannot address the diverse sustainability challenges that take place across an ESN. Lead buyer governance was found to take multiple forms across the ESN, with vertical and horizontal connections being used to reach producers responsible for different stages of production. However, currently, most producers in this case, particularly at lower tiers, have limited or no connections to lead buyers and do not follow any sort of process requirements originating from these firms.
Addressing limitations of the dominant vertical approach to promoting sustainable production, retailers are beginning to create new connections. These include building stronger vertical relationships. Particularly, working with vertically integrated producers results in shorter vertical pathways leading to earlier stages of production. The development of horizontal connections is also growing through the work of retailer coalitions, broader multi-stakeholder initiatives as well as the creation of direct relationships between retailers and selected LPSs.
While connections between retailers and producers across this network were found to be weak, five approaches to buyer-led governance for sustainability were identified. These can be used through vertical or horizontal connections. The first type of governance is seen as Hierarchical with retailers integrating production into their 325 businesses. The second is the Compliance model, which involves setting sourcing standards. The third approach is Support Services, which involves providing support for producers to develop more sustainable practices. The fourth approach is the Partnership model, which involves developing partnerships to address challenges with sustainable production. The fifth approach is the Promotion of Voluntary Change, which involves presenting new techniques which producers can voluntarily choose to adopt. The type of lead buyer governance suited to different sustainability challenges is shaped by the relationships that exist between the lead buyer and the producers involved in the production practice experiencing a sustainability challenge and the nature of the sustainability challenge being faced. These five approaches are not mutually exclusive and are often combined to address different sustainability challenges.
As discussed in Chapter 4, retailers are facing high levels of pressure to address challenges related to sustainable production. The use of a wide variety of approaches appears to be growing. Particularly notable is the increasing use of approaches outside of the dominant compliance model. This development is in line with this thesis’ finding that vertical flows of buyer-led governance are very limited when considering fragmented production taking place through multiple vertical pathways.
Nevertheless, between both vertical and horizontal approaches, there are likely many sustainability challenges outside of the scope of retailers’ influence. This limitation highlights the importance of contributions of multiple actors in processes of governance for sustainability. While retailers and other lead buyers can play a role in promoting governance for sustainability, it must be in conjunction with a broad set of stakeholders.
Overall, this thesis found buyer-driven governance across an ESN to be a limited process. Facing pressures to address challenges with sustainable production, retailers are adopting multiple governance approaches to connect to their fragmented ESNs which involve distinct governance challenges across multiple LPSs. However, retailers do not currently play a strong governance role related to processes used by many producers involved in their ESNs, with a lack of governance relationships particularly strong for the early stages of production.
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9.3) Contribution and Implications
This study has attempted to build upon GVC and GPN literature to address an area that is not well understood regarding lead buyers’ roles in governance for sustainable production. Research on sustainability for manufactured products within GVCs and GPNs has focused on governance processes involving lead buyers and upper tier suppliers (De Marchi, Di Maria and Ponte 2013; Ruwanpura and Wrigley 2011; Mezzadri 2012). Expanding on these past studies, this research explores the roles that lead buyers play in providing governance for sustainable production for producers responsible for all stages of production.
This study makes a conceptual contribution by considering suppliers contributing to the production of one product as being involved in an ESN. This group of businesses is seen as the productive core of a manufacturing GPN. Understanding that these businesses are connected through complex networks featuring multiple forms of vertical buyer governance intersecting with diverse horizontal governance systems for producers housed in unique LPSs enables an exploration of the governance challenges which must be considered when trying to promote sustainable production.
The ESN framework’s explicit emphasis on identifying businesses’ horizontal and vertical locations allows for a focused consideration of governance forces as causal mechanisms which are involved in shaping practices used within LPSs. This conception provides a deeper understanding of governance for sustainability than governance models which do not consider multiple forms of vertical governance and the pivotal role that local governance experiences have on shaping local productive practices. This new perspective contributes to being able to better understand how to address sustainability challenges across GPNs responsible for creating manufactured goods.
This thesis, using the framework of an ESN, has shown the limits of vertical governance by lead retailers for lower tier producers. The findings add to literature questioning the role of lead buyer governance (Ponte and Sturgeon 2014). By looking at governance relationships across all stages of production in the case of UK retailers sourcing cotton garments from India, this thesis moves the concept of buyer-driven governance forward. Conceptually, the role of buyer-driven governance for sustainable
327 production is found to be a multifaceted process in which buyers have variable governance relationships with producers at different points in their ESNs.
The diversity of roles played by lead buyers across multiple connection forms is highlighted. The findings of this study question the ability of lead buyers to play a strong governance role for lower tier producers and emphasise the importance of collaboration for effective governance. The importance of collaboration is highlighted by Lund- Thomsen and Lindgreen’s (2014) identification of the cooperation paradigm as a new approach which is emerging in lead buyers’ attempts to address sustainability challenges. Showing the ongoing existence of the compliance based paradigm along with examples of the cooperation paradigm, this thesis identifies five different approaches that lead buyers are taking to provide governance for sustainability for members of their ESNs. These include Hierarchical, Compliance, Support Services, Partnership and the Promotion of Voluntary Change. These approaches are found to be used to address multiple sustainability challenges taking place at different points within ESNs.
Another contribution of this study is an exploration of multiple horizontal governance processes taking place during the production of one product. The study has also explored the growth of retailers’ creation of horizontal connections to address sustainability challenges that are difficult to connect to through vertical governance relationships. Furthermore, it has highlighted the importance of understanding the implications of local experiences of horizontal governance being felt in conjunction with retailers’ vertical and horizontal governance approaches.
Empirically, this thesis provides a detailed understanding of the diversity of governance relationships found in vertical governance pathways along the ESN of Indian cotton garment production for UK retailers. Additionally, this study has explored how vertical and horizontal governance intersect from the perspective of producers located in distinct LPSs across India. The research also shows that many producers in this case do not experience any direct forms of buyer-driven governance pressure related to the use of sustainable production processes.
As a whole, this study shows diverse forms of buyer-driven governance connecting lead buyers to producers in their ESNs through vertical and horizontal connections. It also emphasises that in the garment industry, effective governance for
328 sustainable production cannot be achieved simply through buyer-driven vertical governance. Instead a more nuanced, and more complex, understanding must be developed. Understanding governance for sustainable production requires considering the links and interplay between vertical governance through sourcing and experiences of horizontal governance felt within LPSs, particularly considering the role of alliances.
The findings of this study can provide insight for better understanding the governance dynamics for diverse sectors experiencing challenges with sustainable production. As was discussed in the methodology chapter, the identification of causal mechanisms that are at play in this case study provide insight into understanding causal mechanisms for other similar cases (Becker as cited in Wynn and Williams 2012). The results of this study have significant implications for policy, including public and private governance for sustainability.
Policy implications coming out of this study differ for major stakeholder groups. Considerations that may be relevant for stakeholders are discussed below. In this discussion, the groups considered are split into global and local governance actors.
Global governance actors which are interested in promoting sustainable cotton garment production include private, public and social actors. While brands and retailers are major global private actors, this category also includes sourcing firms. Global public and social organisations take multiple forms.
Considering the role of global private governance, the results of this study show that retailers seeking to play a role in governance for sustainable production need to make connections with actors connected to the diverse LPSs that house businesses in their ESNs. Retailers are beginning to recognise and do this. However, with the size and complexity of the challenges involved in promoting sustainable production, this must be a collaborative process. Increased cooperation drawing together retailers with public and social governance actors in the different LPSs is needed. Governance processes at the global level must consider diverse global-local connections. Global governance discussions must bring together various actors and bring in the perspectives of producers who work within LPSs that have local pressures for change and stability.
Both global public sector actors and international civil society organisations seeking to address sustainability challenges involved in cotton garment production must 329 consider the types of connections that take place across ESNs and the limitations of governance by brands and retailers. They must also consider the strong role of horizontal governance in shaping production practices in different LPSs. When seeking to promote change, these actors can attempt to identify key local actors who have the ability to influence practices associated with sustainability challenges.
For all concerned global stakeholders, addressing challenges involved in sustainable production connected to GPNs is a process which must involve collaboration. Actors working outside a LPS can seek to find local collaborators who can provide insight into the pressures for change and stability surrounding local sustainability challenges.
Local actors attempting to address sustainability challenges in their communities include government actors and other private and social governance actors. Policy recommendations are different for each of these stakeholder groups.
Local private actors, particularly producers involved in ESNs, experience pressures from the diverse governance sources considered in this study. These businesses can seek to work collaboratively with multiple governance actors to address sustainability challenges. However, in some circumstances they may be in a position which involves facing strong vertical or horizontal governance pressures and may have limited options for choosing how to react to these pressures. Incorporating these businesses’ perspectives into any policy interventions can help to promote change that actually alleviates a sustainability challenge instead of carrying out interventions that result in restructuring practices in ways that involve the continuation of the challenge.
Considering local public actors with governance power over production in LPSs involves considering different scales of the Indian government that have jurisdiction over the place of concern. This includes the national, state and local governments. Public organisations across these scales must take into account the way that actors within LPSs experience multiple intersecting governance pressures. Interventions must consider local governance experiences and seek to promote changes that are compatible with existing pressures for change and stability within the local context in which production takes place.
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Finally, local civil society can be seen as an important actor when addressing sustainability challenges. All of the LPSs considered in Chapter 7 have experienced the development of civil society pressures to address key sustainability challenges. Understanding the governance processes used by lead buyers and other forms of governance flowing through the vertical and horizontal pathways affecting producers in LPSs connected to ESNs can provide insight for new ways for civil society groups to attempt to influence producers. Additionally, the different forms of governance that retailers can use to influence lower tier producers can also be adopted by civil society organisations seeking to promote change.
Addressing challenges related to sustainable production across an ESN involves making changes within productive systems that are subject to numerous vertical and horizontal pressures. As discussed in Chapter 2, identifying changes that would result in more sustainable production is not a clear cut process. All governance actors must seek to understand the perspectives of multiple stakeholders that will be impacted by any changes to production processes. Considering production as involving producers connected through an ESN linking multiple LPSs experiencing pressures for change and stability is a way to conceptualise this challenge when seeking to develop governance initiatives targeted at promoting sustainable production.
9.4) Areas for Future Research
Moving forward from this study, there are a number of areas which could be explored further. One would be using a similar approach to study other cases. Another would be conducting further research into governance experiences of LPSs connected to ESNs of major retailers. This could include those that have been part of retailers’ attempts at governance for sustainable production and those that have dealt with historic sustainability challenges. A third area for future research could be exploring the dynamics shaping the structures of vertical pathways linking raw materials to lead buyers of manufactured products. Finally, a fourth area of future research could be exploring the roles and strategies of lead buyers related to promoting sustainable production. Each of these is briefly discussed below.
A clear next step for the research approach used in this study would be to consider how the experiences seen in this case study could be compared to other
331 branches of the same retailers’ ESNs located in different countries. Another extension could be to look at the same set of relationships in other industries. Particularly, this case represents a relatively simple set of production processes for a manufactured product. The challenges identified in this research would be amplified even when considering the diversity of governance systems involved when looking at all garments, including those made with synthetic fibres. This approach could also be used at a broader scale to consider manufacturing in multiple national contexts. Exploring the ideas considered in this study in other contexts could provide insight in to how lead buyers connect to ESNs that take diverse forms.
To develop a better understanding of how lead buyers play a role in governance for sustainable production with fragmented production taking place through an ESN, future research could explore local experiences of retailers’ vertical and horizontal governance approaches in more depth. Past research has looked at experiences of territorial groups of producers directly supplying global markets (Schmitz 2004; Lund- Thomsen and Nadvi 2010). However, more research is needed to understand vertical and horizontal governance experienced by lower tier ESN producers that do not sell directly to global buyers.
One approach which could be used for understanding experiences in LPSs is considering the concept of sustainability transitions. Work considering how groups of businesses can transition into using new production processes (Geels and Schot 2007; Geels 2010) could provide an alternate perspective for considering sustainability across ESNs.
A further issue which is not explored in this study is how network structures change. The existence of multiple types of businesses simultaneously being responsible for different stages of production allows for an exploration of relationships in diverse vertical pathways, which is the approach taken in this study. An alternate and complementary approach could look into understanding why different businesses forms have developed and prospered. This alternate approach could involve considering how members of the vertical pathways change. A particularly interesting future project could look at changes to forms of integration and fragmentation of production within India. This could involve building on Tewari’s (2008) exploration of how local history shapes India’s integration into global garment markets. This is an on-going and dynamic process. 332
Many of the businesses interviewed for this study were beginning to expand or were considering incorporating additional production stages.
The discussion in this thesis focuses on the governance roles played by retailers attempting to address sustainability challenges. However, retailers may have interests that are contrary to addressing some sustainability challenges. Exploring the dynamics of how retailers balance between multiple priorities and stakeholders views related to sustainability challenges involved in the early stages of production for manufactured products would provide further insight into how retailers behave in governance for sustainability roles. This study showed that retailers are expanding their use of approaches to governance for sustainable production to include more horizontal connections. Future research could include exploring the scope of these connections, how they are developed and the impacts they have.
Future research could also look at how other forms of lead buyers are addressing sustainability challenges cross their ESNs. This could include those in emerging markets. Additionally, after the fieldwork for this research was conducted, Amazon entered the top 20 UK clothing retailers. Their model is fundamentally different than the retailers considered in this case. A notable difference is that they do not produce their own brands. A future study could explore how the growth of new online retail models shapes the role played by lead buyers in governance for sustainable production.
9.5) Conclusion
Overall, this thesis finds that retailer governance for sustainable production on its own is insufficient for addressing the sustainability challenges found with production across a fragmented ESN. When looking at how retailers connect to producers at different points in the network, it is apparent that lead buyers play multiple governance roles. Vertical connections were found to be very weak or non-existent when looking at the earliest stages of production. Challenges with using the dominant Compliance model through vertical connections point to a need for alternate and complementary governance approaches. Filling this need, new forms of vertical and horizontal connections appear to be growing.
Producers’ experiences of governance pressures from retailers through vertical or horizontal governance pathways are shaped by their locations within LPSs. These LPSs 333 involve distinct local horizontal pressures for change and stability. Lead buyer governance for sustainable production using vertical or horizontal pathways can be strengthened through collaboration with actors in these LPSs. Creating these local connections is crucial to address the diverse sustainability challenges found when considering all stages of production.
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Appendix A: Evolution of Standards
Table A.1: Typology of Global Standards Geographical Regulatory Scope Function Key Drivers Forms Coverage Reach Implications • Process • National • Social • Public • Management • Generic • Legally standards • Regional • Labour • Private standards • Sector specific mandatory • Product • International • Environmental (business and • Company codes • Firm/ Value • Necessary for standards • Quality not-for-profit • Labels chain specific competition • Safety organisations) • Voluntary • Ethical • Public-Private Source: (Nadvi and Wältring 2004, p.60 )
Table A.2: Different Generations of Global Social and Environmental Standards Influence in Generation Examples/Contents Actors Involved Key Drivers Certification International Trade 1st Generation: Nike, Reebok, Karstadt TNCs and their TNCs as Existence of a large 1st party-self Company codes of Self-obligations of TNCs on the firm and suppliers lead firms of number of firm codes, monitoring; setting conduct supplier level, internal formulation and supply focused on some brand process easy, implementation chains name companies in legitimacy weak consumer near sectors and in buyer-driven chains 2nd Generation: ICC, Eco-tex, AVE: Enterprise Enterprise Sporadic, but with more 2nd party monitoring Business defined sector Sector specific Codes and labels associations, associations comprehensive through associated codes and labels formulated and implemented by enterprise Chambers, suppliers influence according to sector association: associations the sector approach setting quiet easy, still weak legitimacy
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Influence in Generation Examples/Contents Actors Involved Key Drivers Certification International Trade 3rd Generation: ISO 14000: ISO, national Business Not necessary, but gets 3rd party monitoring Business defined Environmental management standards standardisation increasing influence through market based international standards (using the model of ISO 9000) bodies, business especially in natural certification bodies, mainly from resource intensive setting more difficult. industrialised sector Legitimacy high countries 4th Generation: Transfair, FSC, Rugmark, etc.: NGOs, religious NGOs Gain increasing 3rd party monitoring Business and NGO NGO fostered sector specific codes and associations, importance according to through certification defined sector-specific labels, formulated and implemented solidarity groups, new strategies of NGOs bodies or NGOs codes and labels mainly through NGO and business minority groups, and retailers (setting difficult, partnership with independent monitoring unions, large retailers keeping legitimacy procedures and civil society participation requires constant negotiation 5th Generation: SA 8000, FLA, ETI: Social NGOs, unions, Public Sector Increasing influence 3rd party monitoring Tripartite defined Tripartite social minimum standards to TNCs (buyers and NGOs despite disagreements through certification generic social standards harmonise the diverse numbers of codes producers), between special actors bodies and to increase legitimacy, transparency certification bodies, involved in the and traceability (existence of divergent governments formulation of the approaches) standards Source: (Nadvi and Wältring 2004, pp.74–75 )
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Appendix B: Overview of Interviews and Industry Events
B.1) Interview Codes
Interview codes in the thesis are written as I##-R##-X. The digits after ‘I’ indicate the interview number. The digits after ‘R’ indicate the respondent number. The letter at the end indicates the industry level associated with the interview.
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B.2) Interview Reference List
Table B.1 Interview Reference List Industry Int. # Date Location Format Language Respondents Organisation/Business Group I1 16/12/2012 London, UK In Person English R1. Supply Chain Development Analyst Logistics Firm A R Respondent in NGO A G I2 04/01/2013 Amsterdam, Skype English R2. Research Coordinator Netherlands R3. Member of UK based team focused Retailer A R I3 10/01/2013 London, UK In Person English on code of conduct Respondent in Sourcing Firm F R I4 15/01/2013 Skype English R4. Manager Bangkok, Thailand I5 23/01/2013 London, UK In Person English R5. Prototyping and Production Manager UK Brand R Respondent in University A E I6 23/01/2013 Skype English R6. Expert A UK I7 23/01/2013 London, UK In Person English R7. Buyer’s Clerk Retailer C R I8 24/01/2013 London, UK In Person English R8. Alessandra Mezzadri SOAS E R9. Member of UK based team focused Retailer B R I9 24/01/2013 London, UK In Person English on code of conduct I10 21/02/2013 Delhi In Person English R10. Programme Head Textiles & Cotton NGO C G National Level Trade R I11 25/02/2013 Delhi In Person English R11. Chairman cum Managing Director Promotion Organisation R12. Director National Level Textile T I12 27/02/2013 Delhi In Person English R13. Economist Business Association National Level Garment G I13 28/02/2013 Delhi In Person English R14. Director of Compliance Business Association A Ministry of Agriculture and C I14 28/02/2013 Delhi In Person English R15. Government Official Cooperation National Level Trade R I15 28/02/2013 Delhi In Person English R16. Deputy General Manager Promotion Organisation 15/02/2013 University of North Carolina E I16 (multiple Delhi In Person English R17. Meenu Tewari meetings) Indian Institute of Public I17 26/02/2013 Delhi In Person English R18. Aasha Kapur Mehta Administration 356
Industry Int. # Date Location Format Language Respondents Organisation/Business Group Institute for Human E I18 26/02/2013 Delhi In Person English R19. Dev Nathan Development I19 04/03/2013 Delhi In Person English R20. Manager Garment Manufacturer A G Ahmedabad, Experience in multiple textile E I20 08/03/2013 In Person English R21. Expert B Gujarat related businesses Respondent in European Government R I21 09/03/2013 Phone English R22. Senior Technical Advisor Delhi Agency R23. Farmer Farm A C I22 10/03/2013 Limdi, Gujarat In Person English R24. Farmer Farm B C Ahmedabad, City Level Composite Mill T I23 14/03/2013 In Person English R25. President Gujarat Association I24 16/03/2013 Rural Gujarat In Person English R26. Founder and Manager NGO D C Ahmedabad, Spinner A T I25 20/03/2013 In Person English R27. Consultant Gujarat R28. Co-Owner Gin A C I26 21/03/2013 Gondal, Gujarat In Person Gujarati R29. Co-Owner R30 55 . Owner of Spinning Mill Spinner B T R31. Accountant I27 21/03/2013 Gondal, Gujarat In Person Gujarati R32. General Manager/Production Manager R30 55 . Owner of 5 Gins Gins E R33. Secretary Cotton Trade APMC C R34. Undersecretary of Cotton I28 21/03/2013 Gondal, Gujrat In Person Gujarati R36. Agronomist Specialising in Cotton Farming R35. Trader Seed Cotton Trader A I29 28/03/2013 Kadi, Gujarat In Person Gujarati R37. Partner Spinning and Ginning A T
55 Respondent 30 owns a spinning mill and five gins.
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Industry Int. # Date Location Format Language Respondents Organisation/Business Group Panchayat (village level C R38. Sarpanch I30 28/03/2013 Kadi, Gujarat In Person Gujarati government) R39. Farmer Farm C Ahmedabad, Indian Institute of E I31 30/03/2013 In Person English R40. Sukhpal Singh Gujarat Management Ahmedabad, Textile Manufacturer A – T I32 31/03/2013 In Person English R41. Vice President Gujarat Weaving Ahmedabad, Composite Mill A G I33 31/03/2013 In Person English R42. Director Gujarat Ahmedabad, R43. Principle Scientific Officer & Manager Government Sponsored T I34 02/04/2013 In Person English Gujarat R122. Principle Scientific Officer Technical Support Provider Ahmedabad, State Level Cotton C I35 02/03/2013 In Person English R44. Managing Director Gujarat Cooperative Ahmedabad, City Level Textile Processors W I36 03/04/2013 In Person English R45. President Gujarat Association Ahmedabad, National Ginning Association C I37 04/04/2013 In Person English R46. President Gujarat R47. Member of India based team Retailer A R I38 11/04/2013 Delhi In Person English focused on code of conduct I39 18/04/2013 Delhi In Person English R48. Director, Quality and Client Services Auditing Firm A R I40 22/04/2013 Delhi In Person English R49. Head of Sales Dye Manufacturer W R50. Senior Merchandiser Sourcing Firm A R I41 24/04/2013 Delhi In Person English R51. Market Rep I42 25/04/2013 Delhi In Person English R52. Brand Manager Composite Mill B T Mumbai, Textile Manufacturer B – T I43 15/05/2013 In Person English R53. CEO Maharashtra Weaving R54. Merchandiser Sourcing Firm B Mumbai, I44 25/05/2013 In Person English R54 56 . Merchandiser (former Quality R Maharashtra Souring Firm C Engineer)
56 Respondent 54 spoke about his experience working for Sourcing Firm B and Sourcing Firm C.
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Industry Int. # Date Location Format Language Respondents Organisation/Business Group Mumbai, Auditing Firm A R I45 24/05/2013 In Person English R55. Social Auditor Maharashtra Mumbai, National Level Garment G I46 30/05/2013 In Person English R56. Director Maharashtra Business Association Mumbai, City Level Composite Mill T I47 10/06/2013 In Person English R57. Director Maharashtra Association B Mumbai, Bale Trader A T I48 23/05/2013 In Person English R58. Cotton Trader Maharashtra Respondent in Bale Trader E C I49 19/08/2013 Phone English R120. Cotton Trader Delhi Textile Manufacturer C – T I50 22/07/2013 Delhi In Person English R59. Founder and Manager Knitting I51 24/07/2013 Delhi In Person English R60. Assistant Merchandiser Sourcing Firm D R R61. Founder and Manager Garment Manufacturer B G I52 24/07/2013 Delhi In Person English R121. Assistant R62. Member of compliance team Sourcing Firm E R I53 25/07/2013 Delhi In Person English R63. Member of compliance team I54 26/07/2013 Delhi In Person English R64. Founder and Manager Garment Manufacturer C G I55 27/07/2013 Delhi In Person English R65. Executive Director Garment Manufacturer D G I56 30/07/2013 Delhi In Person English R66. Country Manager Auditing Firm B R I57 01/08/2013 Delhi In Person English R67. Manager of Indian operations Retailer B R I58 24/07/2013 Delhi In Person English R119. Director NGO E G Tirupur, Tamil NGO F G I59 05/08/2013 In Person English R68. Director of Sales Nadu Garment Manufacturer and G Tirupur, Tamil I60 06/08/2013 In Person English R69. Founder and Manager Knitter E Nadu Dyeing Unit D Tirupur, Tamil City Level Bleachers W I61 09/08/2013 In Person English R70. President Nadu Association Tirupur, Tamil City Level Dyers Association W I62 09/08/2013 In Person English R71.President Nadu Tirupur, Tami City Level Garment Business G I63 09/08/2013 In Person English R72. Staff Member Nadu Association
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Industry Int. # Date Location Format Language Respondents Organisation/Business Group Tirupur, Tamil Common Effluent Treatment W I64 09/08/2013 In Person Tamil R73. Assistant Manager Nadu Plant Tirupur, Tamil Dyeing Unit A - Fabric W I65 10/08/2013 In Person English R74. Production Manager Nadu Tirupur, Tamil Labour Union G I66 10/08/2013 In Person Tamil R75. Secretary Nadu Tirupur, Tamil Dyeing Unit B – Yarns W I67 12/08/2013 In Person Tamil R76. Dye Master Nadu Coimbatore, Multi-Stakeholder Initiative A C I68 15/08/2013 In Person English R77. Supply Chain Manager Tamil Nadu Bhiwandi, Power Loom A T I69 24/08/2013 In Person Hindi R78. Owner Maharashtra Bhiwandi, Power Loom B T I70 24/08/2013 In Person Hindi R79. Owner Maharashtra Bhiwandi, Power Loom C T I71 24/08/2013 In Person Hindi R80. Owner Maharashtra Bhiwandi, Power Loom D T I72 26/02/2013 In Person English R81. Staff Member Maharashtra Mumbai, Garment Manufacturer F G I73 26/08/2013 In Person English R82. Manager Maharashtra R83. Cotton Trader Bale Trader B C Ahmedabad, English & I74 27/08/2013 In Person R44. Managing Director of Farmers’ Gujarat Gujarati Cooperative A Ahmedabad, R84. Cotton Sourcing Composite Mill A G I75 27/08/2013 In Person English Gujarat R86. Sustainability Department R85. Founder and Manager Spinning and Ginning B T R44. Managing Director of Farmers’ I76 29/08/2013 Rural Gujarat In Person English Cooperative A R83. Cotton Trader Farmers’ Cooperative A Ahmedabad, Composite Mill A G I77 30/08/2013 In Person English R86. Sustainability Department Gujarat Respondent in Gin B C I78 29/08/2013 Phone Hindi R87. Staff Member Rajasthan
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Industry Int. # Date Location Format Language Respondents Organisation/Business Group Respondent in Textile Manufacturer D T I79 02/09/2013 Mumbai, Phone English R88. Manager Maharashtra Respondent in Gin C C I80 01/09/2013 Madhya Pradesh, Phone Hindi R89. Manager India Ahmedabad, Bale Trader C C I81 03/09/2013 In Person Gujarati R90. Owner and Manger India Respondent in Gin D C I82 03/09/2013 Mumbai, Phone Hindi R91. Owner Maharashtra R44. Managing Director of Farmers’ Farm D C Cooperative A I83 04/09/2013 Kadi, Gujarat In Person Gujarati R92. Farmer, Gin and Shop Owner R93. Farm Worker Farm E I84 05/09/2013 Rural Gujarat In Person English R94. Project Manager Multi-Stakeholder Initiative A C I85 05/09/2013 Velda, Gujarat In Person Gujarati R95-98. Farmers Farms F-I C R99-R102. Farmers Farms J-M C I86 05/09/2013 Modala, Gujarat In Person Gujarati R103. Field Staff Multi-Stakeholder Initiative C R104. Farmer Farm W C R105-114. Farmers and Local Farms N-V C Dhandhuka, Representatives of Farmers’ Cooperative I87 10/09/2013 In Person Gujarati Gujarat A Council State Level Cotton R104 57 . Senior Staff Cooperative Respondent in Spinner C T I88 03/09/2013 Phone English R115. Assistant General Manager Kerala, Gujarat
57 Respondent 104 is a farmer and a senior staff member at a state level cotton cooperative.
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Industry Int. # Date Location Format Language Respondents Organisation/Business Group Ahmedabad, Dyeing Unit C - Fabric W I89 11/09/2013 In Person English R116. Partner Gujarat Ahmedabad, Fabric Printer W I90 11/09/2013 In Person Gujarati R117. Owner and Manager Gujarat multiple Gujarat Institute of E meetings Development Research Ahmedabad, I91 between In Person English R114. Keshab Das Gujarat 05/03/2013- 04/04/2013 Ahmedabad, State Level Cotton C I92 04/09/2013 In Person Gujarati R44. Managing Director Gujarat Cooperative R10. Programme Head Textiles and NGO C G I93 12/04/2013 Delhi In Person English Cotton Ahmedabad, City Level Composite Mill T I94 12/03/2013 In Person English R25. President Gujarat Association I95 04/09/2013 Kadi, Gujarat In Person Gujarati R92, R44 I96 04/09/2013 Kadi, Gujarat In Person Gujarati R92, R44 State Level Cotton C I97 04/09/2013 Kadi, Gujarat In Person Gujarati R44. Managing Director Cooperative State Level Cotton C I98 04/09/2013 Kadi, Gujarat In Person Gujarati R44. Managing Director Cooperative Source: Author’s Construction
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B.3) Retail Level Interviews: Industry Group ‘R’
Table B.2.a: Retail Level ESN Member Interviews 58 Number of Business Year Founded Head Office Interviews Employees Retailer A 25000-50000 1982 UK I3-R3-R I38-R47-R Retailer B 50,000+ 1884 UK I9-R9-R I57-R67-R Retailer C 4000 1948 UK I7-R7-R Sourcing Firm A 1500 1949 China I41-R50-R I41-R51-R Sourcing Firm B 28000 1906 China I44-R54-R Sourcing Firm C 100 Unavailable UK I44-R54-R Sourcing Firm D 35 2002 India I51-R60-R Sourcing Firm E 370 1982 India I53-R62-R I53-R63-R Source: Author’s Construction
Table B.2.b: Additional Retailer Level Interviews (Industry Group ‘R’) Organisation Interview Locations Representatives Notes Auditing Firm A Delhi, Mumbai I39-R48-R For-Profit hired by UK I45-R55-R) retailers Auditing Firm B Delhi I56-R66-R NGO hired by UK retailers European Government Delhi I21-R22-R Agency National Level Trade Delhi I11-R11-R Promotion Organisation I15-R16-R Logistics Firm A London I1-R1-R Provides logistics services to UK retailers UK Brand London I5-R5-R Sells products to UK retailers Sourcing Firm F Tirupur I4-R4-R Sourcing for European Brands Source: Author’s Construction
58 In these tables, companies that perform multiple activities are listed in the highest level of the production in which they are involved.
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B.4) Garment Level Interviews: Industry Group ‘G’
Table B.3.a: Garment Manufacturing ESN Member Interviews (Industry Group ‘G’) Numbe r of Representatives Business Year Founded Head Office Employees Interviewed Garment 600 1990 Delhi I19-R20-G Manufacturer A Garment 200 2000 Delhi I52-R61-G Manufacturer B I52-R121-G Garment 300 (200 1998 Delhi I54-R64-G Manufacturer C production) Garment 2000 (350-400 1999 Delhi I55-R65-G Manufacturer D head office) Garment 500 1989 Tirupur I60-R69-G Manufacturer & Knitting E Composite Mill A 25000 1931 Ahmedabad I33-R42-G I75-R84-G I75-R86-G I77-R86-G Source: Author’s Construction
Table B.3.b: Additional Garment Level Interviews (Industry Group ‘G’) Interview Representatives Organisation Notes Locations Interviewed National Level Garment Delhi I13-R14-G Business Association A National Level Garment Mumbai I46-R56-G Business Association B City Level Garment Tirupur I63-R72-G Business Association NGO A Amsterdam I2-R2-G Focused on working conditions in garment manufacturing NGO C Delhi I10-R10-G Focused on I93-R10-G Sustainability issues across the ESN NGO E Delhi I58-R119-G Focused on supporting marginalised populations NGO F Tirupur I59-R68-G Focuses on labour issues in the textile and garment industries Labour Union Tirupur I66-R75-G Garment Manufacturer F Mumbai I73-R82-G Exporter (not to UK) Source: Author’s Construction
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B.5) Wet Processing Level Interviews: Industry Group ‘W’
Table B.4.a: Wet Processing ESN Member Interviews (Industry Group ‘W’) Number of Representatives Business Year Founded Head Office Employees Interviewed Dyeing Unit A – 95 -- Tirupur, Tamil I65-R74-W Fabric Nadu Dyeing Unit B – 60 1998 Tirupur, Tamil I67-R76-W Yarns Nadu Dyeing Unit C – 2 factories: 300 1988 Ahmedabad I89-R116-W Fabric and 250 Dyeing Unit D 70 1999 Erode, Tamil Nadu I60-R69-G59 Source: Author’s Construction
Table B.4.b: Additional Wet Processing Interviews (Industry Group ‘W’) Representatives Organisation Interview Locations Notes Interviewed Dye Manufacturer Delhi I40-R49-W Common Effluent Tirupur I64-R73-W Treatment Plant City Level Bleachers Tirupur I61-R70-W Association City Level Dyers Tirupur I62-R71-W Association City Level Textile Ahmedabad I36-R45-W Processors Association Fabric Printer Ahmedabad I90-R117-W Sarongs for Non-UK Exports Source: Author’s Construction
59 This dying unit is classified with interview code ‘G’ as the owner also owns a garment manufacturing unit and the interviews are coded according to the highest level of production covered.
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B.6) Textile Level Interviews: Industry Group ‘T’
Table B.5.a: Textile Level ESN Member Interviews (Industry Group ‘T’) Number of Year Head Office Representatives Business Employees Founded Location Interviewed Composite Mill B 25000 1961 Delhi I42-R52-T Textile 500 1997 Ahmedabad, I32-R41-T Manufacturer A – Gujarat Weaving Textile 120 1947 Mumbai, I43-R53-T Manufacturer B – Maharashtra Weaving Textile 100 2010 Delhi I50-R59-T Manufacturer C – Knitting Spinning Mill A 250 labour + 2014 Surendnagar, I25-R27-T other staff Gujarat (projected) Spinning Mill B 45 2010 Gondal, Gujarat I27-R30-T I27-R31-T I27-R32-T Spinning Mill C 700 1966 Kerala I88-R115-T Spinning and 250 for ginning, 1971 Kadi, Gujarat I29-R37-T Ginning Mill A 60 for spinning Spinning and 88 (30 for 2005 Vajapur, Gujarat I76-R85-T Ginning Mill B ginning and two shifts of 70 for spinning - maybe use the employment total of 170 instead of 88 as he said at top of interview) Source: Author’s Construction
Table B.5.b: Additional Textile Interviews Representatives Organisation Interview Locations Notes Interviewed Power Loom A Bhiwandi I69-R78-T Polyester Power Loom B Bhiwandi I70-R79-T Cotton Dupatis Power Loom C Bhiwandi I71-R80-T Cotton Fabric for Traditional Clothing for Domestic Market Power Loom D Mumbai I72-R81-T Synthetic-Cotton Blend for Domestic Market Textile Manufacturer D Mumbai I79-R88-T Cotton Textiles for Domestic Market National Level Textile Delhi I12-R12-T Business Association I12-R13-T City Level Composite Ahmedabad I23-R25-T Mill Association A I94-R25-T City Level Composite Mumbai I47-R57-T Mill Association B Government Ahmedabad I34-R43-T Sponsored Technical I34-R122-T Support Provider Source: Author’s Construction 366
B.7) Cotton Level Interviews: Industry Group ‘C’
Table B.6.a: Cotton Level ESN Member Interviews (Industry Group ‘C’) Number of Head Office Representatives Business Year Founded Employees Location Interviewed Bale Trader A 4 1988 Mumbai, I48-R58-C Maharashtra Bale Trader B 500,000 -- Ahmedabad, I74-R83-C (members of Gujarat Farmers’ Cooperative A) Bale Trader C 16 1923 Ahmedabad, I81-R90-C Gujarat Bale Trader E 26000 1850 New York City, I49-R120-C USA Gin A 15 2007 Gondal, Gujarat I26-R28-C I26-R29-C Gin B 10 2010 Rajasthan I78-R87-C Gin C 15 1988 Madhya Pradesh I80-R89-C Gin D 150 2003 Maharashtra I82-R91-C Gins E -- 1993 Sapar, I27-R30-T60 Manavadar, Dhoraji, Jamnagar- (4 locations with same owner) Seed Cotton Works with 2007 Gondal, Gujarat I28-R35-C Trader A brother and father Farm A Day Labourers 1963 Limbdi, Gujarat I22-R23-C Farm B Day Labourers -- Limbdi, Gujarat I22-R24-C Farm C 10 Day Labourers 1994 Kadi, Gujarat I30-R39-C Farm D 2-3 labourers 2001 Kadi, Gujarat I83-R92-C Farm E 5-6 labourers 2008 Kadi, Gujarat I83-R93-C Farm F 15 in season, 25+ 2010 Velda, Gujarat I85-R95-C harvesting Farm G 15 in season, 25+ 1993 Velda, Gujarat I85-R96-C harvesting Farm H 15 in season, 25+ 1988 Velda, Gujarat I85-R97-C harvesting Farm I 15 in season, 25+ 2010 Velda, Gujarat I85-R98-C harvesting Farm J Hires labourers Traditional Family Modala, Gujarat I86-R99-C when need Business Farm K Hires labourers Traditional Family Modala, Gujarat I86-R100-C when need Business Farm L Hires labourers Traditional Family Modala, Gujarat I86-R101-C when need Business Farm M Hires labourers Traditional Fa mily Modala, Gujarat I86-R102-C when need Business
60 This group of gins is classified with interview code ‘T’ as the owner also owns a spinning unit and the interviews are coded according to the highest level of production covered.
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Number of Head Office Representatives Business Year Founded Employees Location Interviewed Farm N 10-15 labourers -- Dhandhuka, I87-R105-C Gujarat Farm O 2 labourers daily -- Dhandhuka, I87-R106-C and 30-35 for Gujarat season Farm P -- -- Dhandhuka, I87-R107-C Gujarat Farm Q -- -- Dhandhuka, I87-R108-C Gujarat Farm R -- -- Dhandhuka, I87-R109-C Gujarat Farm S -- -- Dhandhuka, I87-R110-C Gujarat Farm T for cotton 2-3 -- Dhandhuka, I87-R111-C labourers Gujarat regularly, 15 to 20 for season Farm U 2 labourers, 20 in -- Dhandhuka, I87-R112-C season Gujarat Farm V 15-20 in season, 2 -- Dhandhuka, I87-R113-C not in season Gujarat Farm W -- -- Dhandhuka, I87-R104-W Gujarat Source: Author’s Construction
Table B.6.b: Additional Cotton Interviews (Industry Group ‘C’) Interview Repre sentative(s) Organisation Notes Locations Interviewed NGO D Gujarat I24-R26-C Organic Farming Multi-Stakeholder Tamil Nadu and I68-R77-C Initiative A Gujarat I84-R94-C I86-R103-C Ministry of Agriculture and Delhi I14-R15-C Cotton Specialist Cooperation APMC Gujarat I28-R33-C I28-R34-C I28-R36-C Panchayat (village level Gujarat I30-R38-C government) State Level Cotton Gujarat I35-R44 Cooperative I92-R44-C I97-R44-C I98-R44-C I87-R104-C
National Ginning Gujarat I37-R46-C Association Source: Author’s Construction
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B.8) Expert Interviews: Industry Group ‘E’
Table B.7: Expert Interviews Interview Name Interview Location Organisation Reference Alessandra Mezzadri I8-R8-E London SOAS Meenu Tewari I16-R17-E Delhi University of North Carolina Chapel Hill Keshab Das I91-R114-E Ahmedabad Gujarat Institute of Development Research Expert A I6-R6-E UK University A Expert B I20-R21-E Ahmedabad Experience in Multiple Textile Related Businesses Dev Nathan I18-R19-E Delhi Institute for Human Development Aasha Kapur Mehta I17-R18-E Delhi Indian Institute of Public Administration Sukhpal Singh I31-R40-E Ahmedabad Indian Institute of Management Source: Author’s Construction
B.9) Industry Events Attended
Table B.8: Industry Events Attended Event Name Event Location Date( s) Attended Description Marks and Spencer London June 19, 2012 Meeting for M & S Plan A Stakeholder stakeholders Event Home Expo Fair Noida April 14, 2013 Tradeshow for home products (including textiles) InDIGO Delhi April 19, 2013 Tradeshow for denim products India International Delhi July 14, 2013 Tradeshow for garments Garment Fair ATEXCON Coimbatore August 13 & 14, Textile industry 2013 conference Agritech Asia Gandhinagar September 9, 2013 Agricultural exhibition RAGS Learning and London November 28, 2013 Final meeting for the Dissemination Event DfID’s Responsible and Accountable Garment Sector challenge fund Marks and Spencer London June 24, 2014 Meeting for M & S Plan A Stakeholder stakeholders Event Author’s Construction
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Appendix C: Retailer Coalitions
BCI: The Better Cotton Initiative is a multi-stakeholder initiative focused on promoting sustainable cotton. ETI: The Ethical Trade Initiative is a multi-stakeholder initiative that promotes workers' rights. TSC: The Sustainability Consortium is multi-stakeholder initiative focused on promoting sustainability of consumer products. BSR: Business for Social Responsibility is a coalition of businesses which seeks to integrate sustainability in business strategy and operations and to promote collaboration focused on sustainability. BWG: The Brands Ethical Working Group is an informal coalition of multiple stake- holders which address challenges with non-compliance to codes of conduct in India. GSCP: The Global Social Compliance Programme’s members are buying companies seeking to promote social and environmental sustainability in supply chains. SEDEX: SEDEX is a membership based organisation focused on promoting ethical and responsible practices in supply chains with a membership base including buyers and suppliers. Sustainable Apparel Coalition (SAC): This multi-stakeholder coalition’s purpose is to design a measurement tool to understand social and environmental impacts of supply chains. Greenpeace Detox Campaign (GDC): The Detox Campaign is driven by Greenpeace and involves promoting commitments by major clothing brands to address challenges related to hazardous chemicals in their supply chains. ZDHC: Zero Discharge of Hazardous Chemicals is a coalition of brands and retailers committed to moving towards an industry that does not discharge hazardous chemical by 2020. SCAP: The Sustainable Clothing Action Plan is a multi-stakeholder initiative that involves leading clothing sector companies pledging to reduce their environmental footprints. TISP: The Textile Industry Sustainability Platform is a collaboration between apparel brand and retailers to promote energy efficiency in their supplier factories.
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Appendix D: World Production Systems
D.1) Garment Manufacturing
Table D.1: Top 10 Sources of Cotton Clothing Imports to the UK in 2013 # Country Net Value ( Million USD) 1 China 2,433 2 Bangladesh 1,782 3 Turkey 1,182 4 India 1,150 5 Sri Lanka 486 6 Italy 474 7 Pakistan 429 8 Netherlands 412 9 Cambodia 364 10 Germany 298 Source: Author’s Construction, data from (UN Statistics Division 2015 )
D.2) Textile Manufacturing
Table D.2: Woven Fabric Production for Select Countries Shuttleless Cotton (85% cotton or over) Shuttle Looms Looms Country 2012 20 13 2012 2013 2012 2013 (metric tons ) Argentina 6,500 6,500 17,500 17,500 Austria 5,288 5,657 2,100 (in million 2,650 (in million Bangladesh meters) meters) 17,250 26,807 13,500 17,326 Belgium 3,720 3,720 372 372 Brazil 420,003 412,546 45,350 46,000 26,000 25,500 China 657,000 740,000 630,000 550,000 90 (Million square metres (USA, Japan, 84 (Million square Taiwan, metres (USA, Vietnam); Japan, Taiwan, Thousand Vietnam); square metres Thousand square Chinese (Korea, India, metres (Korea, Taipei Pakistan) India, Pakistan) 8,490 8,501 264 264 90 (Million square metres (USA, Japan, 84 (Million square Taiwan, metres (USA, Vietnam); Japan, Taiwan, Thousand Vietnam); square metres Thousand square (Korea, India, metres (Korea, Pakistan) India, Pakistan) 20,181 20,126 449 459 Germany 54,920 58,421 21,000 22,000 52,000 51,000 India 21,878 22,361 (2) (2) (2) (2) 371
Shuttleless Cotton (85% cotton or over) Shuttle Looms Looms Country 2012 20 13 2012 2013 2012 2013 (metric tons ) 60,800 60,800 192,000 192,000 Indonesia 296,086 316,575 (1) (1) (1) (1) Italy 7,000 1,334 124 (includes blends; (Million 128 (includes square metres blends; (Million (USA, Japan, square metres Taiwan, (USA, Japan, Vietnam); Taiwan, Thousand Vietnam); square metres Thousand square (Korea, India, metres (Korea, 4,207 3,987 1,956 1,876 Japan Pakistan) India, Pakistan) (3) (3) (3) (3) 124 (includes blends; (Million 128 (includes square metres blends; (Million (USA, Japan, square metres Taiwan, (USA, Japan, Vietnam); Taiwan, Thousand Vietnam); square metres Thousand square (Korea, India, metres (Korea, Pakistan)) India, Pakistan)) 15,065 14,316 5,523 5,222 Nigeria 18,000 17,000 2,300 2,300 5,000 5,000 South Africa 450 440 80 75 Spain 14,075 12,978 2,850 2,800 Sri Lanka 5,760 5,280 1,100 1,200 2,500 2,700 Switzerland 550,000 570,000 (includes Turkey (includes blends) blends) 42,000 45,000 20,000 20,000 USA 27,600 27,600 1,400 1,400 Uzbekistan 108.5 120 2,100 2,100 (1)= For financial Year (2)= Mill Sector Only (3)= Excludes Towel and Cord-Fabric Looms Source: Author’s Construction, data from (ITMF 2014 )
Table D.3: Production of Knitted Fabrics for Select Countries 2012 2013 Country (metric tons) Bangladesh 3,864 10,475 Brazil 528,671 550,728 Chinese Taipei 151,201 155,753 Germany 57,226 54,423 India 14,541 15,931 Indonesia 740,768 774,348 Japan 62,351 59,943 Nigeria 3,600 4,000 Sri Lanka 43,000 54,000 Source: Author’s Construction, data from (ITMF 2014 )
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D.3) Yarn Spinning
Table D.4: Cotton Spun-Yarn Production (Including Core Yarns) for Select Countries (85% cotton or over) Ring Spindles O-E Rotors Country 2012 2013 2012 2013 2012 2013 (metric tons) Argentina -- -- 1,790,000* 1,790,000* 60,000* 60,000* Austria 3,438 4,840 125,216* 126,624* 10,696* 11,704* Bangladesh 610,780* 678,650* 9,600,000* 9,800,000* 230,000* 300,000* Belgium -- -- 24,912* 24,912* 11,326* 11,326* Brazil 681,668 670,204 5,020,000 5,070,000 368,000 376,000 China -- -- 115,000,000* 110,000,000* 2,720,000* 2,720,000* Chinese Taipei 106,252 106,871 1,375,043* 1,350,643* 64,340* 65,272* Germany 16,943 16,775 274,440 (3) (6) 274,440,6) (6) 28,190 (3) (6) 28,190 (3) (6) India 3,582,690 3,922,700 49,169,521 (5) (8) 49,437,478 (5) (8) 795,183 813,553 Indonesia 369,905* 484,839* 10,200,000* (1) 10,300,000* (1) 175,000* (1) 175,000* (1) Italy ------280,000 -- 6,000 Japan 11,221* (7) 10,815* (7) 1,146,253 1,069,596 11,744 11,744 Nigeria 19,000* 19,000* 200,000* 200,000* 12,000* 12,000* South Africa -- -- 46,000 43,000 4,900 4,900 Spain 25,724* 26,771* 67,480* 66,500* 27,000* 27,000* Sri Lanka 1,440 1,800 36,000 25,600 200 200 Turkey 1,055,000 (2) 1,095,000 (2) 6,700,000* 7,100,000* 700,000* 720,000* USA -- -- 620,000* 620,000* 294,000* (4) 294,000* (4) Uzbekistan 174,300 218,300 1,648,000 1,700,000 150,000 165,000 *Short staple (1) = For financial year (5) = Mill sector only (2) = Includes blends (6) = Data 2011 (3) = Total spinning mills (7) = Only members of Japan Spinners Association (4) = Excludes 26,000 air-jet positions in 2009 (8) = All kinds of spindles Source: Author’s Construction, data from (ITMF 2014 )
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Table D.5: Global Production Costs for Short Staple Spinning Mills Brazil China Egypt Indonesia Italy Korea Turkey USA Activity (in USD) Hourly wage for skilled personnel 6.55 3.25 1.9 2.05 31.9 19.05 7.4 17.8 Hourly wage for machine operators 3.45 2.8 1.5 1.2 25.6 9.75 4.25 14.55 Hourly wage for unskilled personnel 2.75 2.3 1.15 0.8 25.05 8.65 3.2 11.85 Operating hours (per year) 8 600 8 400 7 700 8 600 5 500 8400 7 800 7 800 Cost of electric power (per khw) 0.12 0.13 0.04 0.08 0.22 0.09 0.08 0.05 Raw material costs (Ring) (per kg of cotton 1-1/8") 1.94 2.856 3.847 2 040 2 000 2.06 2.205 1.809 Raw material costs (Rotor) (per kg of cotton 1- 1/16") 1.863 2.812 3.78 1.962 1.923 1.984 2.15 1.732 Source: Author’s Construction, data from (ITMF International Price Comparison as cited in Schindler et al. 2015 )
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D.4) Cotton Ginning
Table D.6: Global Gin-Related Factors for 2013/14 Top Global Bale Bale Cotton Feed Cylinder Conveyor Extractor Cotton Dryer Extractors Gin Stand Lint Cleaner Density, Weight, Bale Covering Entry Control Cleaner Distributor Feeder Producers kg/m3 kg Primarily Primarily 2 yes Primarily Primarily Primarily Primarily Primarily 2 Primarily >49 Primarily stage; Primarily saw; burlap-jute; Australia Module Primarily 3 Primarily 1 cylinder and saw; 7; secondary 227-250 Automatic secondarily automatic; secondary secondary Feeder extractor secondary air 336-497 none secondary roller polyethylene manual Primarily Primarily primarily Primarily Primarily 1 yes Primarily Module extractor; Primarily air; Automatic; stage; Primarily 2; Primarily Primarily 336-497; Brazil Feeder; Primarily 1 secondary secondary 1 227-250 Primarily cotton Secondary secondary secondary 3 automatic; saw secondary > secondary cylinder and saw none none secondary 497 suction pipe extractor manual Primarily yes; primarily Primarily Primarily 1 secondary Primarily Primarily Primarily 1; extractor; China Primarily none; stage; no saw; Primarily 1 Primarily burlap-jute; secondary 2 Primarily 1 secondary 182-205 (Mainland) suction pipe secondary secondary Primarily secondary saw 336-497 secondary and 3 cylinder and automatic none automatic; roller cotton extractor secondary manual Primarily primarily Primarily 2 yes Primarily air or Primarily Primarily cylinder and Primarily Primarily stage; Primarily Primarily 1 saw; 336-497; polypropylene; Greece Primarily 2 Primarily 1 extractor; 205-227 conveyor automatic secondarily automatic; saw secondary 2 secondary > secondary secondary 1 stage secondary saw 497 or <320 burlap-jute extractor manual Primarily Primarily Primarily saw; suction pipe Primarily Primarily yes; Primarily Primarily India secondary Primarily none 205-227 and hand none none secondary <320 burlap-jute roller and fed no ------churka
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Top Global Bale Bale Cotton Feed Cylinder Conveyor Extractor Cotton Dryer Extractors Gin Stand Lint Cleaner Density, Weight, Bale Covering Entry Control Cleaner Distributor Feeder Producers kg/m3 kg Primarily Primarily Primarily yes; saw; suction pipe Primarily Primarily secondary Primarily Primarily Pakistan secondary 205-227 and hand none none no <320 burlap-jute roller and fed Primarily churka -- -- manual -- -- Primarily Primarily Primarily Primarily Primarily Primarily suction pipe; Primarily one stage; yes Primarily saw; Primarily 1 Primarily burlap-jute; Turkmenistan two; Primarily 1 205-227 secondary automatic secondary Primarily cylinder secondary saw 336-497 secondary secondary 3 conveyor none manual roller cotton Primarily Primarily Primarily Primarily Primarily Primarily Primarily Module Primarily cylinder and 2 none; one stage; no; Secondary roller; 336-497; Turkey Feeder; one; Primarily 1 saw; 182-205 Primarily cotton secondary secondary secondary extractor secondary secondary > secondary secondary 2 secondary 1 automatic none yes saw 497 suction pipe saw Primarily Primarily Primarily Primarily Primarily 2 Primarily 2 yes Primarily polypropylene; Module Primarily 1; cylinder; saw; Primarily stage; saw; Primarily secondary United States Feeder; Primary 2 secondary secondary secondary 205-227 automatic secondary Primarily secondary 336-497 none, burlap- secondary two cylinder and cylinder, air, none automatic roller jute and suction pipe extractor or 1 saw polyethylene Primarily Primarily Primarily yes Primarily Primarily Module Primarily one stage; Primary 3; Primarily Primarily saw; Primarily 1 Primarily burlap-jute; Uzbekistan Feeder; Primarily 1 205-227 automatic secondary secondary 2 automatic; cylinder secondary saw 336-497 secondary secondary none secondary roller cotton suction pipe manual Source: Author’s Construction, data from (ICAC Expert Panel on Ginning Methods 2001 )
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D.5) Cotton Farming
Table D.7: Top 10 Cotton Producing Countries 2013/14 Area Harvested Production Yield # Country (Thousand hectares) (Thousand 480 lb bales) (kg/hectare) 1 China 4,800 32,750 1,486 2 India 11,700 31,000 577 3 United States 3,053 12,909 921 4 Pakistan 3,000 9,500 689 5 Brazil 1,120 8,000 1,555 6 Australia 436 4,100 2,047 7 Uzbekistan 1,285 4,100 695 8 Turkey 330 2,300 1,517 9 Turkmenistan 575 1,500 568 10 Greece 245 1,369 1,217 Source: Author’s Construction, data from (USDA 2015a )
Table D.8: Farming Practices among Top Cotton Producers # Country Harvesting Storage 1 China Primarily hand-picked, Primarily ground, secondary secondary spindle harvesting trailer and house 2 India Primarily hand-picked Primarily ground, secondary house 3 United States Primarily spindle harvested, -- secondary strip harvesting 4 Pakistan Primarily hand-picked Primarily ground, secondary house 5 Brazil Primarily spindle harvested, Primarily module, secondary secondary hand-picking trailer and house 6 Australia Primarily spindle harvested, Module secondary strip harvesting 7 Uzbekistan Primarily spindle harvesting, Ground secondary hand-picked 8 Turkey Primarily manual harvesting, House secondary spindle harvesting 9 Turkmenistan Primarily hand-picked, Primarily ground secondary spindle harvesting 10 Greece Primarily spindle harvested Primarily ground Source: Author’s Construction, data from (ICAC Expert Panel on Ginning Methods 2001 )
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Appendix E: Characteristics of LPSs Involved in Cotton Garment Production in India
E.1) Garment Manufacturing
Table E.1: Number of Firms and Employment Levels in Indian Garment Clusters Numbe r Employment Generation Cluster of Breakdown Direct Indirect Total Units 7,291 Knitting 254,700 350,000 604,700 1 Kolkata 12,291 5,000 Woven (projected) (projected) (projected) Manufacturers and 2 Mumbai 6,000 367,500 300,000 667,500 Jobbers 1,500 Jobbers 500 Domestic and 3 Tirupur 2,500 350,000 250,000 600,000 Export Manufacturers 500 Exporters 4 Ludhiana 2,500 -- 200,000 150,000 350,000 20-25 Export Manufacturers 5 Indore 2,000 450-475 Domestic 70,000 30,000 100,000 Manufacturers Jobbers 1,500 5 Big Manufacturers 6 Bellary 1,305 450 Trader Manufacturer 15,000 15,000 30,000 850 Jobbers 250 Garment 7 Jaipur 950 Manufacturing Units 35,000 65,000 100,000 700Fabricators 350 Garment Manufacturers 8 Bangalore 850 500 Jobbers and FOB 150,000 300,000 450,000 50 Exporters 100 Exporters 240,000 140,000 100,000 9 Chennai 650 400 Job Workers (projected (projected) (projected) 150 Domestic ) Manufacturers 550 Export 13,788 Manufacturers 10 Noida 750 -- -- 200 Domestic -- Manufacturers 600 Export Manufacturers 11 Gurgaon 675 79,500 20,000 99,500 75 Domestic Manufacturers All are manufacturer exporters excluding 12 Okhla 250 60,000 40,000 100,000 fabricators and embroiderers 13 Ahmedabad 500 - 8,000 12,000 20,000
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Numbe r Employment Generation Cluster of Breakdown Direct Indirect Total Units 14 Erode 500 - 3,500 NA 3,500 15 Kanpur 500 - 7,500 12,500 20,000 16 Nagpur 500 - 1,500 1,500 3,000 17 Jabalpur 400 - 5,000 25,000 30,000 18 Madurai 150 - 4,800 NA 4,800 19 Salem 100 - 5,000 7,000 12,000 Source: Author’s Construction, data from (AEPC 2009; Potter and Kumar 2004 )
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Figure E.1: Proportion of Export and Domestic Turnover in Garment Clusters 61
Source: Author’s Construction, data from (AEPC 2009 )
61 Garment manufacturers in India’s clusters sell to both export and domestic markets. However, some clusters have stronger connections with particular markets. The diversity can be seen in Figure E.1. A key difference is that 52% of the turnover for largest 12 clusters goes to export markets and only 11% of the turnover for the smaller 7 clusters goes to export markets.
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Table E.2: Export Orientation of Indian Garment Clusters Turnover (10 million Rupees ) Share of Cluster Domestic Export Total Export in Total Turnover Turnover Turnover Turnover Kolkata 11,200 1,000 12,200 8% Mumbai 1,260 840 2,100 40% Tirupur 3,500 9,950 13,450 74% Ludhiana 5,600 1,400 7,000 20% Indore 1,140 60 1,200 5% Bellary 250 25 275 9% Jaipur 50 650 700 93% Bangalore 1,000 4,000 5,000 80% Chennai 500 2,000 2,500 80% Noida 1,000 3,500 4,500 78% Gurgaon 750 4,250 5,000 85% Okhla 120 680 800 85% Ahmedabad 1,425 75 1,500 5% Erode 850 300 1,150 26% Kanpur 2,245 75 2,500 3% Nagpur 580 20 600 3% Jabalpur 300 0 300 0% Madurai 125 50 175 29% Salem 180 220 400 55% Total 32,075 29,095 61,350 47% Source: Author’s Construction, data from (AEPC 2009 )
Figure E.2: Size Breakdown of Units in Garment Clusters 62
*The AEPC estimates that at least 78% of units in Kolkata and Chennai are small. Source: Author’s Construction, data from (AEPC 2009 )
62 Small units are dominant across most clusters, with the exception of Bangalore and Okhla. Another notable feature is that Tirupur and Bangalore have a significant proportion of larger units with 20 percent and 46 percent respectively.
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Table E.3: Size Breakdown of Units in Garment Clusters Size Breakdown of Units Number Cluster Remarks Specialty Small (<40 Medium (40 -100 Large (>100 of Units machines) machines) machines) Knitting 7,291 Knitted Garments 1 Kolkata 12,291 * * * Woven 5,000 Woven Garments Knitted Garments 2 Mumbai 6,000 Manufacturers and Jobbers 5,400 570 30 Woven Garments Jobbers 1,500 3 Tirupur 2,500 Domestic and Export 500 Knitted Garments 1,500 500 500 Exporters 500 4 Ludhiana 2,500 Knitted Garments 1,700 700 100 Manufacturer and Export 20-25 5 Indore 2,000 Manufacturer for Domestic Market 450-475 Woven Garments 1,900 90 10 Jobbers 1500 5 Big Manufacturers 6 Bellary 1,305 Trader Manufacturer 450 Woven Garments 1,295 10 0 Jobbers 850 Garment Manufacturing Units 250 7 Jaipur 950 Woven Garments 790 60 100 Fabricators 700 Garment Manufacturing Units 350 8 Bangalore 850 Jobbers and FOB 500 Woven Garments 104 358 388 Exporter 50 Exporters 100 9 Chennai 650 Job Worker 400 -- * * * Manufacturer for Domestic Market 150 Export 550 10 Noida 750 Woven Garments ------Domestic 200 Export 600 11 Gurgaon 675 Woven ------Domestic 75 (All are manufacturer exporters excluding Knitted Garments 12 Okhla 250 63 175 12 fabricators & embroiderers) Woven Garments Total 30721 *The AEPC estimates that at least 78% of units in Kolkata and Chennai are small. Source: Author’s Construction, data from (AEPC 2009 ) 382
Figure E.3.a: Direct Employment of Women by Formal Sector Garment Manufacturing Firms 63
Source: Author’s Construction, data from (Central Statistics Office 2015a )
63 While this industry is often seen as one dominated by women, looking across the diverse local productive systems, some have very few women. Figure E.3.a shows a breakdown of the employment of women in formal sector garment manufacturers. Notably, Assam, Bihar, Delhi, Haryana, Jammu and Kashmir, Punjab, Uttar Pradesh, Uttarakhand and West Bengal have less than 20% of directly employed women workers.
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Figure E.3.b: Women Workers at Unincorporated Garment Manufacturers 64/65
Source: Author’s Construction, data from (National Sample Survey Office 2013 )
64 For informal sector garment manufacturers, which have an average only 1.6 workers, women play a large role. However, Arunchal Pradesh, Chattisgarh, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Maharashtra and Punjab have less than 20% female workers. 65 It must be noted that many units may be invisible in surveys. Writing about the Delhi cluster Phillips et al. (2011, p. 15) described multiple tiers of sub-contracting with the lowest tiers employing most of the workforce in often “unregistered, unorganised and unprotected” arrangements.
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Figure E.4: Employment through Contractors at Formal Sector Garment Manufacturing Firms 66
Source: Author’s Construction, data from (Central Statistics Office 2015a )
66 Figure E.4 shows the percentage of people employed through labour contractors in formal sector garment manufacturers. Being hired by an employment contractor may shape a worker’s rights.
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E.2) Textile Manufacturing
Table E.4: Operating Factories and Persons Engaged in Spinning, Weaving and Finishing No of Operating No of persons Average # of people State/UT Factories engaged engaged Tamil Nadu 3,273 240,094 73 Gujarat 1,425 211,826 149 Maharashtra 1,327 121,369 91 Rajasthan 1,165 84,151 72 Andhra Pradesh 313 61,124 195 Punjab 311 74,838 241 Uttar Pradesh 281 19,741 70 Haryana 265 13,812 52 Kerala 243 14,953 62 West Bengal 228 159,884 701 Karnataka 216 14,754 68 Dadra & N Haveli 190 36,933 194 Telangana 139 12,426 89 Madhya Pradesh 106 38,088 359 Daman & Diu 65 9,082 140 Himanchal Pradesh 51 13,767 270 Jammu & Kashmir 23 8,520 370 Odisha 22 1,743 79 Puducherry 19 4,437 234 Assam 16 1,465 92 Bihar 12 3,262 272 Delhi 12 285 24 Uttarahkand 10 3,767 377 Chattisgarh 8 1,369 171 Jharkhand 2 493 247 All India 9,722 1,152,183 119 Source: Author’s Construction, data from (Central Statistics Office 2015a )
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Table E.5: Operating Factories and Persons Engaged in Other Textiles Manufacturing No of Operating No of persons Average # of people State/UT Factories engaged engaged Tamil Nadu 982 58,619 60 Gujarat 485 54,089 112 Uttar Pradesh 350 18,080 52 Haryana 288 24,063 84 Punjab 253 22,871 90 Maharashtra 250 18,296 73 Kerala 162 7,644 47 West Bengal 160 6,823 43 Andhra Pradesh 121 142,259 1,176 Delhi 102 3,128 31 Rajasthan 100 5,277 53 Karnataka 89 6,301 71 Uttarahkand 45 5,029 112 Dadra & N Haveli 26 1,445 56 Telangana 24 833 35 Himanchal Pradesh 41 2,403 59 Madhya Pradesh 19 1,928 101 Odisha 17 1,260 74 Daman & Diu 16 1,669 104 Assam 11 524 48 Bihar 8 80 10 Goa 7 248 35 Jammu & Kashmir 7 93 13 Puducherry 7 97 14 All India 3,570 383,059 107 Source: Author’s Construction, data from (Central Statistics Office 2015a )
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Figure E.5: State-wise Characteristics of Productive Systems for Formal Sector Spinning, Weaving, Finishing and Other Textile Manufacturing
Source: Author’s Construction, data from (Central Statistics Office 2015a )
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Table E.6: State-wise Characteristics of Productive Systems for Formal Sector Spinning, Weaving, Finishing and Other Textile Manufacturing % of % Women Employed Workers Directly out of State/UT Women Workers through Employed Employed directly Contractors through employed Contractors Tamil Nadu 246,087 114,037 259,734 13,647 46% 5% Gujarat 184,774 3,439 228,515 43,742 2% 19% Maharashtra 70,709 5,766 111,799 41,090 8% 37% Rajasthan 64,071 2,172 72,235 8,163 3% 11% Andhra Pradesh 59,122 19,089 67,565 8,443 32% 13% Punjab 76,645 13,007 81,165 4,510 17% 6% Uttar Pradesh 24,116 721 28,797 4,682 3% 16% Haryana 23,672 1,227 29,070 5,399 5% 19% Kerala 17,472 8,075 18,734 1,262 46% 7% West Bengal 147,223 2,462 154,501 7,278 2% 5% Karnataka 15,625 3,828 17,190 1,566 25% 9% Dadra & N Haveli 19,643 542 31,477 11,836 3% 38% Telangana 7,907 2,350 11,299 3,392 30% 30% Madhya Pradesh 28,297 4,273 32,971 4,674 15% 14% Daman & Diu 7,398 340 9,015 1,618 5% 18% Himanchal Pradesh 12,530 1,513 13,366 837 12% 6% Jammu & Kashmir 6,551 666 7,569 1,018 10% 13% Odisha 2,202 208 2,605 403 9% 15% Puducherry 3,842 369 3,968 127 10% 3% Assam 1,426 121 1,780 354 8% 20% Bihar 2,098 14 2,976 878 1% 30% Delhi 2,362 93 2,393 31 4% 1% Uttarahkand 4,005 790 7,579 3,574 20% 47% Chattisgarh 905 20 1,104 199 2% 18% Jharkhand 395 8 395 0 2% 0% Goa 175 24 175 0 14% 0% All India 1,024,400 184,551 1,191,416 167,014 18% 14% Source: Author’s Construction, data from (Central Statistics Office 2015a )
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Table: E.7: Locations of Indian Composite Mills # of Composite State/UT Workers Average # of Workers Mills Andhra Pradesh 3 2,646 882 Assam 2 1,618 809 Bihar 1 286 286 Dadra Nagar Haveli 2 2,322 1,161 Gujarat 46 79,233 1,722 Haryana 2 2,078 1,039 Karnataka 3 4,538 1,513 Kerala 3 1,628 543 Madhya Pradesh 16 33,561 2,098 Maharashtra 36 32,607 906 Orissa 1 3,186 3,186 Pondicherry 1 1,932 1,932 Punjab 9 11,587 1,287 Rajasthan 12 37,136 3,095 Tamil Nadu 46 23,553 512 Uttar Pradesh 9 14,747 1,639 Uttaranchal 1 643 643 West Bengal 7 19,060 2,723 Total 200 272,361 1,362 Source: Author’s Construction, data from (Office of the Textile Commissioner 2015 )
Table E.8: Locations of Non-Small Scale Industry Weaving Mills State Textile Mills Workers Average # of Workers Andhra Pradesh 2 86 43 Assam 2 67 34 Dadra Nagar Haveli 2 1,349 675 Daman & Diu 1 53 53 Delhi 1 2,014 2,014 Gujarat 24 7,511 313 Haryana 6 405 68 Himachal Pradesh 2 1,145 573 Karnataka 3 45 15 Kerala 1 15 15 Madhya Pradesh 5 463 93 Maharashtra 61 7,189 118 Orissa 4 54 14 Punjab 7 4,064 581 Rajasthan 15 4395 293 Tamil Nadu 19 2,827 149 Telangana 4 195 49 Uttar Pradesh 9 1,752 195 West Bengal 7 619 88 Total 175 34,248 196 Source: Author’s Construction, data from (Office of the Textile Commissioner 2015 )
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Figure E.6: Proportion of Non-Small Scale Industry Spinning Firms 67
Source: Author’s Construction, data from (Office of the Textile Commissioner 2015 )
67 Notably, Tamil Nadu’s spinning industry, which is considered in Chapter 7, has less than 50% large firms which contributes the large number of spinners found in this state and the low average number of employees indicated in Figure 5.8 and Table E.8.
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Table E.9: Indian Spinning Mills in 2014 Total # # Small-Scale Proportion of # of Large of State/UT Industry Large Scale Spinning Mills Spinning Spinning Mills Spinning Mills Mills Andhra Pradesh 164 22 186 88% Assam 5 5 100% Bihar 3 3 100% Chhattisgarh 1 1 100% Dadra Nagar Haveli 9 1 10 90% Daman & Diu 1 1 2 50% Goa 1 0 1 100% Delhi 0 2 2 0% Gujarat 42 29 71 59% Haryana 69 101 170 41% Himachal Pradesh 16 2 18 89% Jammu & Kashmir 2 0 2 100% Jharkhand 1 0 1 100% Karnataka 36 7 43 84% Kerala 31 5 36 86% Madhya Pradesh 43 6 49 88% Maharashtra 159 26 185 86% Manipur 1 1 100% Orissa 15 3 18 83% Pondicherry 9 5 14 64% Punjab 103 36 139 74% Rajasthan 50 17 67 75% Tamil Nadu 922 1,014 1,936 48% Telangana 37 2 39 95% Uttar Pradesh 58 43 101 57% Uttaranchal 8 4 12 67% West Bengal 23 0 23 100% All India 1,809 1,326 3,135 58% Source: Author’s Construction, data from (Office of the Textile Commissioner 2015 )
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E.3) Cotton Production
Table E.10: Ginning Clusters 68 State Clusters Andhra Pradesh Adilabad, Guntur, Karimnagar Gujarat Ahmedabad, Amreli, Bharuch, Bhavnagar, Botad, Gandhinagar, Junagadh, Kheda, Kutch, Mehsana, Patan, Rajkot, Sabarkantha, Surendranagar, Vadodara Haryana Hisar, Sirsa, Fatehabad, Bhiwani, Jind Karnataka Bellary, Dharwar, Haveri), Raichur Madhya Pradesh Barwani, Chhindwada, Dhar, Khargaone Maharashtra Ahmednagar, Akola, Amravati, Aurangabad, Beed, Buldhana, Dhule, Hingol, Jalgaon, Jalna, Nagpur, Nanded, Nandurbar, Parbhani, Wardha, Sashim, Yavatmal Odisha Bolangir, Rayagada Telangana Mahaboobnagar, Medak, Nalgonda, Warangal Source: Author’s Construction, data from (Department of Agriculture Haryana 2015; Textiles Committee 2014 )
Table E.11: Ginning & Pressing Units with Completed Technology Mission on Cotton Projects 69 State/UT Complete Projects Diu (U.T.) 1 Punjab 11 Haryana 5 Rajasthan 0 Madhya Pradesh 46 Gujarat 506 Andhra Pradesh 70 22 Karnataka 13 Tamil Nadu 1 Orissa 6 Maharashtra 248 Source: Author’s Construction, data from (The Cotton Corporation of India 2010 )
68 This is only a partial list based on locations submitting three or more applications for the Textile Committee’s Assessment and Rating of Ginning and Pressing Factories. Notably missing are units in Haryana. 69 A difference between ginning across India can be seen by the different levels of government support firms have received to upgrade their facilities. Table 5.9 shows the number of firms that have been involved in completed projects supported by the Technology Mission on Cotton. This table clearly reflects the large amount of ginning conducted in Gujarat and Maharashtra. 70 Includes Telangana.
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Table E.12: Ginning Output of 6 Highest Producing States in India for 2012-2013 Output Percent of India’s State (Billion Rupees) Ginning Output Gujarat 189 32.31 Maharashtra 137 23.45 Telangana 67 11.49 Andhra Pradesh 39 6.65 Madhya Pradesh 36 6.09 Haryana 32 5.45 Source: Author’s Construction, data from (Central Statistics Office 2015b )
Table E.13: Cotton Production in India 2013-2014 2013 -14 (Fourth Advance Estimates) Production State/U Area % to All % to All Yield (Million Bales, (Million Hectares) India India (Kg/Hectare) 170 Kg each) Gujarat 2.69 23.01 10.95 29.93 692 Maharashtra 3.87 33.11 8.52 23.29 374 Andhra Pradesh 2.27 19.4 7.14 19.51 535 Haryana 0.57 4.84 2.55 6.97 766 Punjab 0.51 4.32 2.25 6.15 757 Madhya Pradesh 0.62 5.31 1.85 5.06 506 Karnataka 0.59 5.08 1.4 3.83 401 Rajasthan 0.3 2.59 1.05 2.87 589 Tamil Nadu 0.14 1.19 0.5 1.37 612 Others 0.13 1.15 0.38 1.04 -71 All India 11.69 100 36.59 100 532 Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
71 Since area/production is low in individual states, yield rate is not worked out.
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Table E.14: State-Wise Breakdown of Costs of Cotton Cultivation and Production 2010-11 Cost of Cul tivation 72 Cost of Production 73 State/UT ( ₹ / Hectare) ( ₹ / Quintal) Yield (Qtl./HA.) Cost 1 74 Cost 2 75 Cost 2 Andhra 38,772 61,634 3,557 17.32 Pradesh Gujarat 41,468 58,038 3,268 17.48 Haryana 38,803 62,330 3,229 18.64 Karnataka 29,807 44,735 2,971 14.75 Madhya 22,993 41,861 2,459 16.34 Pradesh Maharashtra 45,743 61,907 3,985 15.34 Odisha 30,855 43,434 3,378 12.58 Punjab 41,380 66,697 3,759 16.9 Rajasthan 35,821 54,296 2,413 21.51 Tamil Nadu 47,880 61,318 4,219 14.41 Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
Figure E.7: Cotton Yields 2013-2014
Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
72 “Cost of cultivation” includes factor costs up to the stage of gathering the harvest. 73 “Cost of production” includes factor costs up to the stage of marketing. 74 Cost 1 includes all actual expenses in cash and kind incurred in production by owner and rent paid for leased in land in addition to family Labour, which is imputed on the basis of statutory wage rate or the actual market rate whichever is higher. 75 Cost 2 includes all actual expenses in cash and kind incurred in production by owner, interest on value of owned fixed capital assets (including land), rental value of owned land (net of land revenue), rent paid for leased in land and imputed value of fixed capital assets.
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Table E.15: State-Wise Cotton Yields 2013-2014 76 State/UT Yield (Kg/Hectare) Gujarat 692 Maharashtra 374 Andhra Pradesh 535 Haryana 766 Punjab 757 Madhya Pradesh 506 Karnataka 401 Rajasthan 589 Tamil Nadu 612 All India 532 Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
Figure E.8: Coverage of Irrigation for Cotton Farming 2010-11*
Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
76 Fourth Advance Estimates.
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Table E.16: Coverage of Irrigation for Cotton Farming 2010-11* State/UT Area Irrigated (%) Andhra Pradesh 18..2 Chhattisgarh 92.9 Gujarat** 58.7 Haryana 99.9 Karnataka 26 Madhya Pradesh 49.8 Maharashtra** 2.7 Punjab 100 Rahasthan 93 Tamil Nadu 29.1 Tripura** 5.4 Uttarakhand 0 Uttar Pradesh** 98.1 West Bengal** 79.2 All India 35.9 * Provisional ** The figures related to irrigated area (Part-II) are either estimated based on the data for the latest available year received from the State/UT or are estimated/taken from Agriculture Census. Source: Author’s Construction, data from (Directorate of Economics and Statistics 2015 )
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Appendix F: Types of Businesses in Delhi Garment Cluster
Source: (Phillips et al. 2011, p.10 )
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Appendix G: Timeline of Key Events Related to Water Pollution Challenge in Tirupur
Date Events 1996 • Writ Petition filed by president of Karur Taluk Noyyal Canal Agriculturalists Association seeking for the Pollution Control Board to take action to against polluting dyeing and bleaching units 1997 • In March the Madras High Court required businesses to set up ETPs or CETPs within 1 to 3 months or the Tamil Nadu Pollution Control Board and the District Collector would close them down 1998 • Application for extension by dyeing and bleaching units’ association was rejected • Bleaching and dyeing units agreed to creation of Flying Squads that could inspect and gather samples without prior notice • Industry agreed to pay for costs of cleaning the Orathupalayam Dam 2003 • Noyyal River Ayacutdars Protection Association and others filed public interest litigation for preserving the Noyyal river • Farmers sent documents to pollution control board asking industry to pay for cleaning the Orathupalayam Dam. Farmers alleged: - Industrial units had not installed the necessary effluent treatment equipment - The Pollution Control Board failed to implement the Pollution Control and Environmental laws, in spite of the specific directions issued by the Madras High Court - The Pollution Control Board has issued consent to units that had not completed the installation of treatment facilities 2004 • Decision based on petition by CARE Trust, Coimbatore for government to prevent further pollution. • Tamil Nadu Pollution Control Board issued notices to all 729 bleaching and dyeing units to achieve zero discharge by March 2005 2005 • Madras High Court expressed its displeasure on the conduct of the industrial units in not installing the Reverse Osmosis Plants as agreed to reach Zero Discharge status • Madras High Court appointed committee to monitor implementation of zero discharge systems 2006 • Madras High Court passed order requiring firms to install zero liquid discharge systems by July 2007 or receive fines 2007 • Industry actors appealed order requiring fines and asked for more time to install ZLDs • Industry was given extension by Supreme Court until January 2011 2011 • In January the Tamil Nadu government shut down all bleaching and dyeing units until they could prove they were using ZLD systems After 2011 • Some businesses never reopened while other resumed operation • ZLD systems are widespread. However, reports have shown that some businesses are continuing to release contaminated effluent Sources: Author’s Construction, data from (Chauhan 2009; Mohan 2013; Kumar 2014 )
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