Why is the business case for social compliance in global value chains unpersuasive? Rethinking costs, prices and profits

Stakeholders in global value chains (GVCs) commonly argue that factory managers will choose humane working conditions if they can be persuaded that social compliance improves firm performance. Yet, despite evidence that humane conditions increase productivity, product quality and on-time delivery, inhumane conditions in GVCs persist. Evidence from a sample of factories in the Better Work programme in Indonesia, Jordan and Viet Nam indicates that achieving social compliance may be costly, offsetting productivity benefits. A positive impact on profits depends on international buyer sourcing practices, including higher output prices. The COVID-19 pandemic has confirmed the key role played by buyers in determining working conditions.